Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-5276
March 3, 1953
ATOK-BIG WEDGE MINING CO., INC., petitioner,
vs.
ATOK-BIG WEDGE MUTUAL BENEFIT
ASSOCIATION, respondent.
Vicente Hilado, Pedro Lopez and Artemio A. Almendral for
petitioner.
Sanidad, Ayson and Casia for respondent.
LABRADOR, J.:
This is an appeal by certiorari against a decision of the Court of
Industrial Relations. On September 4, 1950, demand was
submitted to petitioner by respondent union through its officers
for various concession, among which were (a) an increase of
P0.50 in wages, (b) commutation of sick and vacation leave if
not enjoyed during the year, (c) various privileges, such as free
medical care, medicine, and hospitalization, (d) right to a closed
shop, check off, etc., (e) no dismissal without prior just cause
and with a prior investigation, etc. Some of the demands, were
granted by the petitioner, and the other were rejected, and so
hearings were held and evidence submitted on the latter. After
the hearing the respondent court rendered a decision, the most
important provisions of which were those fixing the minimum
wage for the laborers at P3.20, declaring that additional
compensation representing efficiency bonus should not be
included as part of the wage, and making the award effective
from September 4, 1950. It is against these portion of the
decision that this appeal is taken.
On the issue of the wage, it is contended by petitioner that as
the respondent court found that the laborer and his family at
least need the amount of P2.58 for food, this should be the
basis for the determination of his wage, not what he actually
spends; that it is not justifiable to fix a wage higher than that
provided by Republic Act No. 602; and that respondent union
made the demand in accordance with a pernicious practice of
claiming more after an original demand is granted. The
respondent court found that P2.58 is the minimum amount
actually needed by the laborer and his family. That does not

mean that it is his actual expense. A person's needs increase as

his means increase. This is true not only as to food but as to
everything else education, clothing, entertainment, etc. The
law guarantees the laborer a fair and just wage. The minimum
must be fair and just. The "minimum wage" can by no means
imply only the actual minimum. Some margin or leeway must
be provided, over and above the minimum, to take care of
contingencies such as increase of prices of commodities and
desirable improvement in his mode of living. Certainly, the
amount of P0.22 a day (difference between P2.80 fixed and
P2.58 actual) is not excessive for this purpose. That the P3
minimum wage fixed in the law is still far below what is
considered a fair and just minimum is shown by the fact that
this amount is only for the year after the law takes effect, as
thereafter the law fixes it at P4. Neither may it be correctly
contended that the demand for increase is due to an alleged
pernicious practice. Frequent demands for increase are
indicative of a healthy spirit of wakefulness to the demands of a
progressing and an increasingly more expensive world. We,
therefore, find no reason or ground for disturbing the finding
contained in the decision fixing the amount of P3.20 as the
minimum wage.
It is next contended that the efficiency bonus paid the laborer
should have been included in his (minimum) wage, in the same
manner as the value of living quarters. Whether or not bonus
forms part of wages depends upon the circumstances or
condition for its payment. If it is an additional compensation
which the employer promised and agreed to give without any
conditions imposed for its payment, such as success of business
or greater production or output, then it is part of the wage. But
if it is paid only if profits are realized or a certain amount of
productivity achieved, it cannot be considered part of the
wages. In the case at bar, it is not payable to all but to laborers
only. It is also paid on the basis of actual production or actual
work accomplished. If the desired goal of production is not
obtained or the amount of actual work accomplished, the bonus
does not accrue. It is evidence that under the circumstances it
is paid only when the labor becomes more efficient or more
productive. It is only an inducement for efficiency, a prize
therefor, not a part of the wage.

The last question raised in the appeal is the grant of the

increase from September 4, 1950, the date of the presentation
of the original demand, instead of from April 5, 1951, the date
of the amended demand. The decision states:
Both parties agreed that any award should be retroactive
to the date of the presentation of the demand, which is
September 4, 1950. (Annex A, p. 5.)
The terms of the stipulation are clearly against petitioner's
contention. There being no question as to its (agreement)
existence, the same must be given force and effect.
The petition is hereby dismissed, with costs.
Paras, C.J., Feria, Pablo, Bengzon, Padilla, Tuason, Reyes, Jugo,
and Angelo, JJ., concur.
Montemayor, J., concur in the result.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-23542
January 2, 1968
JUANA T. VDA. DE RACHO, plaintiff-appellee,
vs.
MUNICIPALITY OF ILAGAN, defendant-appellant.
Teodulo E. Mirasol for defendant-appellant.
No appearance for plaintiff-appellee.
BENGZON, J.P., J.:
Plaintiff Juana T. Vda. de Racho and the decedent, Manuel
Racho, were spouses and had five minor children. On July 1,
1954 the decedent was appointed as market cleaner in the
Municipality of Ilagan, Isabela, at the rate of P660.00 per annum
(P55.00 monthly) which amount he received up to June 30,
1958. On July 1, 1958, decedent's salary was increased to
P720.00 per annum (P60.00 monthly) by virtue of a promotional
appointment extended to him by the Municipal Mayor. He
received this amount until January 6, 1960 when he tendered
his resignation effective July 7, 1960. Decedent was then paid
the money value of his accumulated leaves from January 7,
1960 to May 23, 1960 at the rate of P60.00 a month.
On October 5, 1960, decedent died intestate at Ilagan. Plaintiff
then filed on December 9, 1960 a claim for salary differentials
with the Regional Office of the Department of Labor which
dropped the case later for lack of jurisdiction.

Based on the foregoing facts, the Court of First Instance of

Isabela, in an action brought on December 5, 1961, by plaintiff,
in her own behalf and as guardian ad litem of her minor
children, ruled that defendant Municipality of Ilagan must pay
P1,766.00 to plaintiff representing the wage differentials and
adjusted terminal leave of the decedent from December 9,
1957 1 to May 23, 1960, based on the monthly wage rate of
P120.00 pursuant to the Minimum Wage Law.
Defendant municipality immediately appealed the case to Us on
the sole submission that its shortage and lack of available funds
and expected revenue validly exempted it from complying with
the Minimum Wage Law.
The appeal must be dismissed. We have already answered the
question posed in Rivera vs. Colago, L-12323, February 24,
1961, wherein We ruled that lack of funds of a municipality does
not excuse it from paying the statutory minimum wages to its
employees, which, after all, is a mandatory statutory
obligation of the municipality. To uphold such defense of lack of
available funds would render the Minimum Wage Law futile and
defeat its purpose. This also disposes of the implication
appellant is trying to make that its duty to pay minimum wages
is not a statutory obligation which would command preference
in the municipal budget and appropriation ordinance.2
Moreover, We cannot sanction appellant's proposition that it
would eventually and gradually implement the Minimum Wage
Law, "if and when its revenues can afford." The law insofar as
it affects government employees took effect in 1952. 3 It
should have been implemented or at least steps to
implement it should have been taken right then. To excuse
the defendant municipality now would be to permit it to benefit
from its non-feasance. It would also make the effectivity of the
law dependent upon the will and initiative of said municipality
without statutory sanction. Defendant's remedy, therefore, is
not to seek an excuse from implementing the law but, as the
lower court suggested, to upgrade and improve its tax
collection machinery with a view towards realizing more
revenues. Or, it could for the present forego all non-essential
expenditures.
WHEREFORE, the appealed judgment is, as it is hereby affirmed.
No costs. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar,

Sanchez, Castro, Angeles and Fernando, JJ., concur.
Footnotes
1
The cause of action for underpayments prior to this date
was already barred by the three-year limitation under
the Minimum Wage Law.
2
See: Secs. 2295 & 2296, Revised Administrative Code.
3
Sec. 3(c), Republic Act 602.

Republic of the Philippines

Supreme Court
Manila
SECOND DIVISION
C. PLANAS COMMERCIAL
and/or MARCIAL COHU,
Petitioners,

G.R. No. 144619

- versus -

*PUNO, Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
**CHICO-NAZARIO, JJ.

Present:

NATIONAL LABOR RELATIONS

COMMISSION (Second Division),
ALFREDO OFIALDA,
DIOLETO MORENTE
Promulgated:
and RUDY ALLAUIGAN,
Respondents.
November 11, 2005
x-----------------------------------------------x
DECISION
AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari filed by C.

Planas Commercial and/or Marcial Cohu, (petitioners) assailing
the Decision of the Court of Appeals (CA) dated January 19,
2000[1] which affirmed in toto the decision of the National Labor
Relations Commission (NLRC) and the Resolution dated August
15, 2000[2] denying petitioners motion for reconsideration.
On September 14, 1993, Dioleto Morente, Rudy Allauigan
and Alfredo Ofialda (private respondents) together with 5
others[3] filed a complaint for underpayment of wages,
nonpayment of overtime pay, holiday pay, service incentive
leave pay and premium pay for holiday and rest day and night
shift differential against petitioners with the Arbitration Branch
of the NLRC. The case was docketed as NLRC Case No. 00-0905804-93.[4]
In their position paper, private respondents alleged that
petitioner Cohu, owner of C. Planas Commercial, is engaged in
wholesale of plastic products and fruits of different kinds with
more than 24 employees; that private respondents were hired
by petitioners on January 14, 1990, May 14, 1990 and July 1,
1991, respectively, as helpers/laborers; that they were paid
below the minimum wage law for the past 3 years; that they
were required to work for more than 8 hours a day without
overtime pay; that they never enjoyed holiday pay and did not
have a rest day as they worked for 7 days a week; and they
were not paid service incentive leave pay although they had
been working for more than one year. Private respondent
Ofialda asked for night shift differential as he had worked from 8
p.m. to 8 a.m. the following day for more than one year.
Petitioners filed their comment admitting that private
respondents were their helpers who used to accompany the
delivery trucks and helped in the loading and unloading of
merchandise being distributed to clients; that they usually
started their work from 10 a.m. to 6 p.m.; that private
respondents stopped working with petitioners sometime in
September 1993 as they were already working in other
establishments/stalls in Divisoria; that they only worked for 6
days a week; that they were not entitled to holiday and service
incentive leave pays for they were employed in a retail and
service establishment regularly employing less than ten
workers.
On December 6, 1994, a decision[5] was rendered by the
Labor Arbiter dismissing private respondents money claims for
lack of factual and legal basis. He made the following findings:

The basic issue raised before us is

whether or not complainants are entitled to the
money claims.
The rule in this jurisdiction is that
employers who are regularly employing not more
than ten workers in retail establishments are
exempt from the coverage of the minimum wage
law.
In connection therewith and in consonance
with Sec. 1, Rule 131 of the Rules of Court, it is
incumbent upon the party to support affirmative
allegation that an employer regularly employs
more than ten (10) workers.
In the case at bar, complainants failed to
substantiate their claim that the respondent
establishment regularly employs twenty (sic) (24)
workers.
Accordingly, we have no factual basis to
grant salary differentials to complainants. In the
same context, under Sec. 1 (b), Rule IV and Sec.
1(g), Rule V of the Implementing Rules of the
Labor Code, complainants are not entitled to legal
holiday pay and service incentive leave pay.
We also do not have sufficient factual
basis to award overtime pay and premium pay for
holiday and rest day because complainants failed
to substantiate that they rendered overtime and
during rest days.[6]
Private respondents filed their appeal with the NLRC
which was opposed by petitioners. However, pending the
appeal, private respondents Morente [7] and Allauigan[8] filed
their respective motions to dismiss with release and quitclaim
before the NLRC.
[9]

On September 30, 1997, the NLRC rendered its decision,

the dispostive portion of which reads:
WHEREFORE, in view of all the foregoing
considerations, the decision appealed from
should be, as it is hereby, MODIFIED by directing

the respondent to pay Alfredo Ofialda, Diolito

Morente and Rudy Allauigan the total amount of
Seventy-Five Thousand One Hundred Twenty Five
Pesos (P75,125.00) representing their combined
salary differentials, holiday pay, and service
incentive leave pay.
The NLRC made the following ratiocinations:
On claims for underpayment/non-payment
of legally mandated wages and fringe benefits
where exemption from coverage of the minimum
wage law is put up as a defense, he who invokes
such an exemption (usually the employer) has
the burden of showing the basis for the
exemption like for instance the fact of employing
regularly less than ten workers.
In the instant case, complainants alleged
that despite employing more than twenty-four
(24) workers in his establishment, hence covered
by the minimum wage law, nevertheless the
individual respondent did not pay his workers the
legal rates and benefits due them since their
employment. By way of answer, respondents
countered that they employ less than ten (10)
persons, hence the money claims of complainants
lack factual and legal basis.
Stated differently, against complainants charge of
underpayment in wages and non-payment of
fringe benefits legally granted to them, the
respondents raised the defense of exemption
from coverage of the minimum wage law and in
support thereof alleged that they regularly
employed less than ten (10) workers to serve as
basis for their exemption under the law, they
(respondents) must prove that they employed
less than ten workers, instead of more than
twenty-four (24) workers as alleged by the
complainants.
However, apart from their allegation, respondents
presented no evidence to show the number of
workers they employed regularly. This failure is

fatal to respondents defense. This in turn brings

us to the question of whether the complainants
were underpaid and unpaid of legal holiday pay
and service incentive leave pay due them.
Stated earlier are the different amounts that each
complainant was receiving by way of salary on
certain periods of their employment with
respondents, which amounts according to
complainants are way below the minimum wage
then prevailing. Considering that respondents
failed to present the payrolls or vouchers which
could prove otherwise, the money claims deserve
favorable consideration.
Taking note of the 3 year prescription, the period
covered is from September 14, 1990 to
September 14, 1993 when the instant case was
filed, and based on a 6-day work per week, the
underpayment (salary differential), legal holiday
pay, and service incentive leave pay due to
complainants, as computed, are as follows:

Salary Diff.
Holiday Pay
1. A. OFIALDA
P14,934.00
P2,362.00
2. D. MORENTE
23,964.00
3,258.00
3. R. ALLAUIGAN
22,609.00
3,258.00
With respect to the other claims, i.e.,
overtime pay and premium pay for holiday and
rest day, We find no reason to disturb the Labor
Arbiters ruling thereon, that there is no sufficient
factual basis to award the claims because
complainants failed to substantiate that they
rendered overtime and during rest days. These
claims, unlike claims for underpayment and nonpayment of fringe benefits mandated by law,
need to be proven by the claimants.[10]
Petitioners filed a petition for certiorari[11] with prayer for
temporary restraining order and preliminary injunction before
this Court on November 26, 1997. Respondents were required
to file their Comment but only public respondent NLRC, through
the Solicitor General, complied therewith. In a Resolution dated
June 28, 1999,[12] the petition was referred to the CA pursuant to
our ruling in St. Martin Funeral Homes vs. NLRC.

SI
P1,1
1,7
1,7

On January 19, 2000,[13] the CA denied the petition for

lack of merit and affirmed in toto the NLRC decision. It said:
Having claimed exemption from the
coverage of the minimum wage laws or order, it
was incumbent upon petitioner to prove such
claim. Apart from simply denying private
respondents allegation that it employs more than
24 workers in its business, petitioner failed to
adduce evidence to prove that it is, indeed, a
retail establishment which employs less than ten
(10) employees. Its failure to present records of
its workers and their respective wages gives rise
to the presumption that these are adverse to its
claims. Indeed, it is hard to believe that petitioner
does not keep such records. More so, considering
private respondents claim that petitioner employs
more than twenty four (24) employees and
engaged in both wholesale and retail business of
fruits by volume on CONTAINER BASIS, not by
price of fruit, but by container size retail,
involving millions of pesos capital, fruits coming
from China, Australia and the United States (p.
170, Rollo).
Needless to say, the inclusion of
respondents Morente and Allauigan in the NLRC
award is in order. In its decision, public
respondent awarded P75,125.00, representing
the combined salary differentials, holiday pay and
service incentive leave pay of all three (3) private
respondents. Of this, P28,952.00 is earmarked for
respondent
Morente,
and P27,597.00
for
respondent Allauigan, both of whom executed
quitclaims
after
receiving P3,000.00
and P6,000.00 respectively, from petitioner.
On this score, the Court quotes with
approval the arguments advanced by the Solicitor
General thus:
While
a
compromise
agreement or amicable settlement
is not against public policy per se it
must be shown however that it

was voluntarily entered into and

represents
a
reasonable
settlement, and the consideration
for the quitclaim is credible and
reasonable (Santiago v. NLRC, 198
SCRA 111 [1991]). For the law
usually looks with disfavor upon
quitclaims and releases executed
by employees usually resulting
from a compromise with their
employers. (Velasco v. DOLE, 200
SCRA 201 [1991]). This is so
because the employers and the
employees obviously do not stand
on equal footing. Driven against
the wall by the employer, the
employee is in no position to resist
the money offered. (Lopez Sugar
Corp v. FFW-PLU, 189 SCRA 179
[1990]).
Thus, Fuentes v. NLRC, 167 SCRA 767
(1988) enunciates:
In the absence of any
showing that the compromise
settlement and the quitclaims and
releases entered into and made by
the employees were free, fair and
reasonable- especially as to the
amount or consideration given by
the
employer
in
exchange
therefore, the fact that they
executed the same and received
their monetary benefits thereunder
does not militate against them. The
Law does not consider as valid any
agreement
to
receive
less
compensation than what a worker
is entitled to receive.
In the case at bar, it will be
noticed that the vouchers dated
September
13,
1995
and
September 20, 1996 (pp. 194 and
197, NLRC Record), submitted by

petitioners (pp. 191-192, Record),

show that private respondent
Allauigan was only paid P6,000.00
and Morente, P3,000.00 --- when
they
are
legally
entitled
to
receive P28,952.00
and P27,597.00,
respectively.
Under the circumstances, subject
compromise settlements cannot be
considered valid and binding upon
the NLRC as they do not represent
fair and reasonable settlements,
nor
do
they
demonstrate
voluntariness on the part of private
respondents
Morente
and
Allauigan. These employees should
still be paid the full amounts of
their salary differentials, holiday
pay and service incentive leave
pay less the amounts they had
already
received
under
the
compromise
settlements
with
petitioners (pp. 174-175, Rollo).
Parenthetically, the Court notes that
petitioner availed itself of this remedy without
first seeking a reconsideration of the assailed
decision. As a general rule, certiorari will not lie
unless an inferior court, has through a motion for
reconsideration, a chance to correct the errors
imputed to it. While the rule admits of exceptions,
petitioner has not shown any reason for this Court
not to apply said rule, which would have justified
outright dismissal of the petition were it not for
the Courts desire to resolve the case not on a
technicality but on the merits.[14]
Petitioners motion for reconsideration was denied in a
Resolution dated August 15, 2000.[15]
Hence, the instant petition for review on certiorari filed
by petitioners.
Petitioners insist that C. Planas Commercial is a retail
establishment principally engaged in the sale of plastic products
and fruits to the customers for personal use, thus exempted

from the application of the minimum wage law; that it merely

leases and occupies a stall in the Divisoria Market and the level
of its business activity requires and sustains only less than ten
employees at a time. Petitioners contend that private
respondents were paid over and above the minimum wage
required for a retail establishment, thus the Labor Arbiter is
correct in ruling that private respondents claim for
underpayment has no factual and legal basis. Petitioners claim
that since private respondents alleged that petitioners
employed 24 workers, it was incumbent upon them to prove
such allegation which private respondents failed to do.
Petitioners also contend that the CA erred in applying
strictly the rules of evidence against them by holding that it was
incumbent upon them to prove that their company is exempted
from the minimum wage law. They contend that they could not
present records of their workers and their respective wages
because by the very nature of their business, the system of
management is very loose and informal, thus salaries and
wages are paid by merely handing the money to the worker
without the latter being required to sign anything as proof of
receipt. Thus, it would be unreasonable to insist upon petitioner
to present documents that they do not possess or keep in the
first place.
We are not persuaded.
R.A. No. 6727 known as the Wage Rationalization
Act provides for the statutory minimum wage rate of all workers
and employees in the private sector. Section 4 of the Act
provides for exemption from the coverage, thus:
Sec. 4.
...
(c) Exempted from the provisions of this
Act are household or domestic helpers and
persons employed in the personal service of
another, including family drivers.
Retail/service establishments regularly
employing not more than ten (10) workers may
be exempted from the applicability of this Act
upon application with and as determined by the
appropriate Regional Board in accordance with
the applicable rules and regulations issued by the
Commission. Whenever an application for

exemption has been duly filed with the

appropriate Regional Board, action on any
complaint for alleged non-compliance with this
Act shall be deferred pending resolution of the
application for exemption by the appropriate
Regional Board.
In the event that applications for
exemptions are not granted, employees shall
receive the appropriate compensation due them
as provided for by this Act plus interest of one
percent (1%) per month retroactive to the
effectivity of this Act.
Clearly, for a retail/service establishment to be
exempted from the coverage of the minimum wage law, it must
be shown that the establishment is regularly employing not
more than ten (10) workers and had applied for exemptions
with and as determined by the appropriate Regional Board in
accordance with the applicable rules and regulations issued by
the Commission. Petitioners main defense in controverting
private respondents claim for underpayment of wages is that
they are exempted from the application of the minimum wage
law, thus the burden of proving[16] such exemption rests on
petitioners. Petitioners had not shown any evidence to show
that they had applied for such exemption and if they had
applied, the same was granted.
In Murillo vs. Sun Valley Realty, Inc.[17] where the
respondents claim that petitioners therein are not entitled to
service incentive leave pay inasmuch as establishment
employing less than ten (10) employees are exempted by the
Labor Code and the Implementing Rules from paying service
incentive leave pay, we held:
..the clear policy of the Labor Code is to
include all establishments, except a few classes,
under the coverage of the provision granting
service incentive leave to workers. Private
respondents' claim is that they fell within the
exception. Hence, it was incumbent upon them to
prove that they belonged to a class excepted by
law from the general rule. Specifically, it was the
duty of respondents, not of petitioners, to prove
that there were less than ten (10) employees in
the company. Having failed to discharge its task,

private respondents must be deemed to be

covered by the general rule, notwithstanding the
failure of petitioners to allege the exact number
of employees of the corporation. In other words,
petitioners must be deemed entitled to service
incentive leave.[18]
Moreover, in C. Planas Commercial vs. NLRC,[19] where
herein petitioners are also involved in a case filed by one of its
employees, we ruled:
Petitioners invoke the exemption provided
by law for retail establishments which employ not
more than ten (10) workers to justify their nonliability for the salary differentials in question.
They insist that PLANAS is a retail establishment
leasing a very small and cramped stall in the
Divisoria market which cannot accommodate
more than ten (10) workers in the conduct of its
business.
We are unconvinced. The records disclose
de los Reyes' clear entitlement to salary
differentials. Well-settled is the rule that factual
findings of labor officials who are deemed to have
acquired expertise in matters within their
jurisdiction are generally accorded not only
respect but even finality and bind this Court when
supported by substantial evidence or that amount
of relevant evidence which a reasonable mind
might accept as adequate to justify a
conclusion. Thus, as long as their decisions are
devoid of any unfairness or arbitratriness in the
process of their deduction from the evidence
proferred by the parties before them, all that is
left is our stamp of finality by affirming the
factual findings made by them. In this case, the
award of salary differentials by the NLRC in favor
of de los Reyes was made pursuant to RA 6727
otherwise known as the Wage Rationalization Act,
and the Rules Implementing Wage Order Nos.
NCR-01 and NCR-01-A and Wage Order Nos. NCR02 and NCR-02-A.
Petitioners claim exemption under the
aforestated law. However, the best proof that
they could have adduced was their approved

application for exemption in accordance with

applicable guidelines issued by the Commission.
Section 4, subpar. (c) of RA 6727 categorically
provides:
Retail/service
establishments regularly employing
not more than ten (10) workers
may be exempted from the
applicability of this Act upon
application with and as determined
by the appropriate Regional Board
in accordance with the applicable
rules and regulations issued by the
Commission.
Whenever
an
application for exemption has been
duly filed with the appropriate
Regional Board, action on any
complaint
for
alleged
noncompliance with this Act shall be
deferred pending resolution of the
application for exemption by the
appropriate Regional Board. In the
event
that
applications
for
exemptions
are
not
granted,
employees
shall
receive
the
appropriate
compensation
due
them as provided for by this Act
plus interest of one percent (1%)
per month retroactive to the
effectivity of this Act (emphasis
supplied).
Extant in the records is the fact that
petitioners had persistently raised the matter of
their
exemption
from
any
liability
for
underpayment without substantiating it by
showing compliance with the aforecited provision
of law. It bears stressing that the NLRC affirmed
the Labor Arbiters award of salary differentials
due to underpayment on the ground that de los
Reyes' claim therefor was not even denied or
rebutted by petitioners.
More importantly, NLRC correctly upheld
the Labor Arbiter's finding that PLANAS employed

around thirty (30) workers. We have every reason

to believe that petitioners need at least thirty
(30) persons to conduct their business
considering that Manager Cohu did not submit
any employment record to prove otherwise. As
employer, Manager Cohu ought to be the keeper
of the employment records of all his workers.
Thus, it was well within his means to refute any
monetary claim alleged to be unpaid. His inability
to produce the payrolls from their files without
any satisfactory explanation can be interpreted
no less as suppression of vital evidence adverse
to PLANAS.
Petitioners aver that the CA erred in ruling that private
respondents Morente and Allauigan are still entitled to
monetary awards despite the latters execution of release and
quitclaims because the settlement was not voluntarily entered
into by private respondents. Petitioners insist that both private
respondents Morente and Allauigan voluntarily entered into an
amicable settlement with them on September 17 and 18, 1995,
respectively; that they were the ones who initiated the talks for
settlement and who pegged the amount; that they both
voluntarily appeared before the Labor Arbiter to move for the
dismissal of their case insofar as their claims are concerned as
well as submitted to the Labor Arbiter their respective
quitclaims and releases which were duly subscribed before the
Labor Arbiter and duly notarized.
We find merit in petitioners argument.
It has been held that not all quitclaims are per se invalid
or against public policy, except (1) where there is clear proof
that the waiver was wangled from an unsuspecting or gullible
person, or (2) where the terms of settlement are
unconscionable on their face. In these cases, the law will step in
to annul the questionable transactions. [20] Such quitclaim and
release agreements are regarded as ineffective to bar the
workers from claiming the full measure of their legal rights. [21]
We find these two instances not present in private
respondents Allauigan and Morentes case. They failed to refute
petitioners allegation that the settlement was voluntarily made
as they had not filed any pleadings before the CA. Notably, we
have required private respondents to file their comment on the
instant petition, however, they failed to do so. They were then
required to show cause why they should not be disciplinarily

dealt with or held in contempt.[22] However, they still failed to

file their comment, thus, they were imposed a fine
of P1,000.00[23] which was subsequently increased to P2,000.00
as there was still no compliance. In a Resolution dated July 22,
2002, the Court ordered the National Bureau of Investigation to
arrest and detain private respondents and the private
respondents to file their comment. [24] As private respondents
could not be located at their given address and they are not
known in their locality, the order of arrest and commitment was
returned unserved,[25] thus the Court required the Office of the
Solicitor General to file the comment in behalf of all the
respondents.[26] The Court finds such inaction on the part of
private respondents Allauigan and Morente an indication that
they already relented in their claims and gives credence to
petitioners claim that they had voluntarily executed the release
and quitclaim and the motion to dismiss.
The CA found that the subject compromise agreements are not
valid considering that they did not represent the fair and
reasonable settlements, i.e., that private respondent Allauigan
was only paid P6,000.00 and Morente, P3,000.00 --- when they
are legally entitled to receive P28,952.00 and P27,597.00,
respectively.
We do not agree. It bears stressing that at the time of
the execution of the release and quitclaim, the case filed by
private respondents against petitioners was already dismissed
by the Labor Arbiter and it was pending appeal before the NLRC.
Private respondents could have executed the release and
quitclaim because of a possibility that their appeal with the
NLRC may not be successful. Since there was yet no decision
rendered by the NLRC when the quitclaims were executed, it
could not be said that the amount of the settlement is
unconscionable. In any event, no deception has been
established that would justify the annulment of private
respondents quitclaims.[27] In Mercer vs. NLRC,[28] we held that:
In Samaniego v. NLRC, we ruled that: A
quitclaim executed in favor of a company by an
employee amounts to a valid and binding
compromise agreement between them."
Recently, we held that in the absence of
any showing that petitioner was "coerced or
tricked" into signing the above-quoted Quitclaim

and Release or that the consideration thereof was

very low, she is bound by the conditions thereof.
As computed by the NLRC, private respondent Alfredo Ofialda is
entitled
to
the
payment
of P14,934.00
as
salary
differential,P2,362.00 as legal holiday pay and P1,180.00 as
service incentive leave pay, all in the total amount
of P18,476.00.
WHEREFORE, the petition is PARTLY GRANTED. The Decision of
the Court of Appeals dated January 19, 2000 and its Resolution
dated
August
15,
2000
are AFFIRMED with MODIFICATION that
petitioners
are
ordered to pay private respondent Alfredo Ofialda the total
amount of P18,476.00 and the monetary awards in favor of
private respondents Rudy Allauigan and Dioleto Morente are
hereby DELETED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 91231
February 4, 1991
NESTL PHILIPPINES, INC., petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and
UNION OF FILIPRO EMPLOYEES, respondents.
Siguion Reyna, Montecillo & Ongsiako for petitioner.
Banzuela, Flores, Miralles, Raneses, Sy, Taquio & Associates for
private respondent.
GRIO-AQUINO, J.:
Nestl Philippines, Inc., by this petition for certiorari, seeks to
annul, on the ground of grave abuse of discretion, the decision
dated August 8, 1989 of the National Labor Relations
Commission (NLRC), Second Division, in Cert. Case No. 0522
entitled, "In Re: Labor Dispute of Nestl Philippines, Inc." insofar
as it modified the petitioner's existing non-contributory
Retirement Plan.
Four (4) collective bargaining agreements separately covering
the petitioner's employees in its:
1. Alabang/Cabuyao factories;

2. Makati Administration Office. (Both Alabang/Cabuyao

factories and Makati office were represented by the
respondent, Union of Filipro Employees [UFE]);
3. Cagayan de Oro Factory represented by WATU; and
4. Cebu/Davao Sales Offices represented by the Trade
Union of the Philippines and Allied Services (TUPAS),
all expired on June 30, 1987.
Thereafter, UFE was certified as the sole and exclusive
bargaining agent for all regular rank-and-file employees at the
petitioner's Cagayan de Oro factory, as well as its Cebu/Davao
Sales Office.
In August, 1987, while the parties, were negotiating, the
employees at Cabuyao resorted to a "slowdown" and walk-outs
prompting the petitioner to shut down the factory. Marathon
collective bargaining negotiations between the parties ensued.
On September 2, 1987, the UFE declared a bargaining deadlock.
On September 8, 1987, the Secretary of Labor assumed
jurisdiction and issued a return to work order. In spite of that
order, the union struck, without notice, at the Alabang/Cabuyao
factory, the Makati office and Cagayan de Oro factory on
September 11, 1987 up to December 8, 1987. The company
retaliated by dismissing the union officers and members of the
negotiating panel who participated in the illegal strike. The
NLRC affirmed the dismissals on November 2, 1988.
On January 26, 1988, UFE filed a notice of strike on the same
ground of CBA deadlock and unfair labor practices. However, on
March 30, 1988, the company was able to conclude a CBA with
the union at the Cebu/Davao Sales Office, and on August 5,
1988, with the Cagayan de Oro factory workers. The union
assailed the validity of those agreements and filed a case of
unfair labor practice against the company on November 16,
1988.
After conciliation efforts of the National Conciliation and
Mediation Board (NCMB) yielded negative results, the dispute
was certified to the NLRC by the Secretary of Labor on October
28, 1988.
After the parties had filed their pleadings, the NLRC issued a
resolution on June 5, 1989, whose pertinent disposition
regarding the union's demand for liberalization of the
company's retirement plan for its workers, provides as follows:
xxx
xxx
xxx
7. Retirement Plan
The company shall continue implementing its retirement
plan modified as follows:

a) for fifteen years of service or less an amount equal

to 100% of the employee's monthly salary for every year
of service;
b) more than 15 but less than 20 years 125% of the
employee's monthly salary for every year of service;
c) 20 years or more 150% of the employee's monthly
salary for every year of service. (pp. 58-59, Rollo.)
Both parties separately moved for reconsideration of the
decision.
On August 8, 1989, the NLRC issued a resolution denying the
motions for reconsideration. With regard to the Retirement Plan,
the NLRC held:
Anent management's objection to the modification of its
Retirement Plan, We find no cogent reason to alter our
previous decision on this matter.
While it is not disputed that the plan is non-contributory
on the part of the workers, tills does not automatically
remove it from the ambit of collective bargaining
negotiations. On the contrary, the plan is specifically
mentioned in the previous bargaining agreements
(Exhibits "R-1" and "R-4"), thereby integrating or
incorporating the provisions thereof to the agreement.
By reason of its incorporation, the plan assumes a
consensual character which cannot be terminated or
modified at will by either party. Consequently, it
becomes part and parcel of CBA negotiations.
However, We need to clarify Our resolution on this issue.
When we increased the emoluments in the plan, the
conditions for the availment of the benefits set forth
therein remain the same. (p. 32, Rollo.)
On December 14, 1989, the petitioner filed this petition
for certiorari, alleging that since its retirement plan is noncontributory, it (Nestl) has the sole and exclusive prerogative
to define the terms of the plan "because the workers have no
vested and demandable rights thereunder, the grant thereof
being not a contractual obligation but merely gratuitous. At
most the company can only be directed to maintain the same
but not to change its terms. It should be left to the discretion of
the company on how to improve or mollify the same" (p.
10, Rollo).
The Court agrees with the NLRC's finding that the Retirement
Plan was "a collective bargaining issue right from the start" (p.
109, Rollo) for the improvement of the existing Retirement Plan
was one of the original CBA proposals submitted by the UFE on
May 8, 1987 to Arthur Gilmour, president of Nestl Philippines.
The union's original proposal was to modify the existing plan by

including a provision for early retirement. The company did not

question the validity of that proposal as a collective bargaining
issue but merely offered to maintain the existing noncontributory retirement plan which it believed to be still
adequate for the needs of its employees, and competitive with
those existing in the industry. The union thereafter modified its
proposal, but the company was adamant. Consequently, the
impass on the retirement plan become one of the issues
certified to the NLRC for compulsory arbitration.
The company's contention that its retirement plan is nonnegotiable, is not well-taken.1wphi1 The NLRC correctly
observed that the inclusion of the retirement plan in the
collective bargaining agreement as part of the package of
economic benefits extended by the company to its employees
to provide them a measure of financial security after they shall
have ceased to be employed in the company, reward their
loyalty, boost their morale and efficiency and promote industrial
peace, gives "a consensual character" to the plan so that it may
not be terminated or modified at will by either party (p.
32, Rollo).
The fact that the retirement plan is non-contributory, i.e., that
the employees contribute nothing to the operation of the plan,
does not make it a non-issue in the CBA negotiations. As a
matter of fact, almost all of the benefits that the petitioner has
granted to its employees under the CBA salary increases, rice
allowances, mid-year bonuses, 13th and 14th month pay,
seniority pay, medical and hospitalization plans, health and
dental services, vacation, sick & other leaves with pay are
non-contributory benefits. Since the retirement plan has been
an integral part of the CBA since 1972, the Union's demand to
increase the benefits due the employees under said plan, is a
valid CBA issue. The deadlock between the company and the
union on this issue was resolvable by the Secretary of Labor, or
the NLRC, after the Secretary had assumed jurisdiction over the
labor dispute (Art. 263, subparagraph [i] of the Labor Code).
The petitioner's contention, that employees have no vested or
demandable right to a non-contributory retirement plan, has no
merit for employees do have a vested and demandable right
over existing benefits voluntarily granted to them by their
employer. The latter may not unilaterally withdraw, eliminate or
diminish such benefits (Art. 100, Labor Code; Tiangco, et al. vs.
Hon. Leogardo, et al., 122 SCRA 267).
This Court ruled similarly in Republic Cement Corporation vs.
Honorable Panel of Arbitrators, G.R. No. 89766, Feb. 19, 1990:
. . . Petitioner's claim that retirement benefits, being
noncontributory in nature, are not proper subjects for

voluntary arbitration is devoid of merit. The expired CBA

previously entered into by the parties included
provisions for the implementation of a "Retirement and
Separation Plan." it is only to be expected that the
parties would seek a renewal or an improvement of said
item in the new CBA. In fact, the parties themselves
expressly included retirement benefits among the
economic issues to be resolved by voluntary arbitration.
Petitioner is estopped from now contesting the validity of
the increased award granted by the arbitrators. (p.
145, Rollo.)
The NLRC's resolution of the bargaining deadlock between
Nestl and its employees is neither arbitrary, capricious, nor
whimsical. The benefits and concessions given to the
employees were based on the NLRC's evaluation of the union's
demands, the evidence adduced by the parties, the financial
capacity of the Company to grant the demands, its longterm
viability, the economic conditions prevailing in the country as
they affect the purchasing power of the employees as well as its
concommitant effect on the other factors of production, and the
recent trends in the industry to which the Company belongs (p.
57, Rollo). Its decision is not vitiated by abuse of discretion.
WHEREFORE, the petition for certiorari is dismissed, with costs
against the petitioner.
SO ORDERED.
Narvasa, Gancayco and Medialdea, JJ., concur.
Cruz, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-57636 May 16, 1983
REYNALDO TIANGCO and VICTORIA TIANGCO, petitioners,
vs.
HON. VICENTE LEOGARDO, JR., as Deputy Minister of the
Ministry of Labor and Employment, AURELIO
ILUSTRISIMO, ABRAHAM GILBUENA, ROGELIO CARABIO,
JESUS GILBUENA, PEPITO GILBUENA, DOMINADOR
LASERNA, CLEMENTE VILLARUEL, RUSTOM OFQUERIA,
ERNESTO DIONG, GRACIANO DURANA, AGUEDO MARABE,
SOLOMON CLARIN, ALCAFONE ESGANA, JUAN CASTRO,
ANTONIO GILBUENA, GREGORIO LAYLAY, DANIEL

CABRERA, ROBERTO BAYON-ON, ELIAS ESCARAN,

ERNESTO BATOY, EDDIE BATOBALANOS, TOMAS
CAPALAR, JUAN GIHAPON, JOSE OFQUERIA, FRUTO
GIHAPON, PEPITO BATOY, and SERAFIO
YADAWON, respondents.
Florencio Pineda for petitioners.
The Solicitor General for respondents.
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, 1 while the petitioner, Victoria Tiangco, is a fish
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. 3 The work of these 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. 8 Accordingly, the workers of the
petitioner Victoria Tiangco, whose business as fish broker is
capitalized at P100,000.00, 9 should receive a lesser amount of
allowance (P30.00) 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. 10 Accordingly, there was no
underpayment for this period insofar as her batillos are
concerned. The petitioner Reynaldo Tiangco, however, paid his
employees P30.00, instead of P50.00, as mandated by
law. 11 Therefore, there was an underpayment of P20.00 a
month for 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. 12 There was, therefore, an underpayment of P690.00
for everybatillo under her employ for 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, 13 or a difference of 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. 14 There was a 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, 15 and P210.00 a month for
the months of January and February, 1980. 16 There 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. 17 The petitioners, however, failed to pay the fixed
monthly allowance of their workers 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.18 Hence, there was
underpayment in their emergency 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, 19 the workers 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. 20 Hence, there was also underpayment in
their 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. 21 Hence, they should be paid the amount of P50.00,
each, for this 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. 22 Since they 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. 23 Hence, the said petitioner should pay
his workers the 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. 24 Hence, they should be
paid the amunt of P50.00 each for the month 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:
Petitioner Victoria Tiangco:

Eddie

Batobala
nos........
.....

l
,
1
7
0
.
0
0

2.

Aguedo
Morabe..
..............
.

1
,
1
6
0
.
0
0

3.

Gregorio
Laylay....
..............

1
,
1
5
0
.
0
0

4.

Fruto
Gihapon
..............
.......

1
,
1
7
0
.
0
0

5.

Solomon
Clarin ...
..............
..

1
,
1
5
0
.
0
0

6.

Pepito
Batoy.....
..............
.....

1
,
1
7
0
.
0
0

7.

Jose
Ofqueria
..............
.........

1
,
1
7
0
.
0
0

8.

Daniel
Cabrera.
..............
......

1
,
1
5
0
.
0
0

9.

Juan
Castro....
..............
........

1
,
1
6
0
.
0
0

10
.

Alcafone
Esgana..
..............
.

1
,
1
7
0
.
0
0

11
.

Tomas
Capalar
..............
......

1
,
1
7
0
.
0
0

12
.

Antonio
Gilbuena
..............
..

1
,
1
6
0
.
0
0

13
.

Ernesto
Batoy.....
..............
...

1
,
1
7
0
.
0
0

14
.

Serapio
Yadawon
..............
..

1
,
1
5
0
.
0
0

15
.

Juan
Gihapon
..............
.........

1
,
1
4
0
.
0
0

16
.

Elias
Escaran
..............
........

1
,
1
5
0
.
0
0

17
.

Roberto
Bayonon..........
....

1
,
1
3
0
.
0
0

Petitioner Reynaldo Tiangco:

Aureli
o
Ilustris
imo.....
.......

2.

Pepito
Gilbue
na......
..........
.

1
,
9
7
0
.
0
0

3.

Rogeli
o
Carabi
o........

1
,
9
1

l
,
9
2
0
.
0
0

.........

0
.
0
0

4.

Abrah
am
Gilbue
na......
.......

1
,
9
1
0
.
0
0

5.

Rusto
m
Ofquer
ia........
........

1
,
9
3
0
.
0
0

6.

Ernest
o
Diong.
..........
.........

1
,
9
3
0
.
0
0

7.

Jesus
Gilbue
na......

1
,
9

..........
...

2
0
.
0
0

8.

Emere
nciano
Villaru
el........

1
,
9
1
0
.
0
0

9.

Domin
ador
Lacern
a........
....

1
,
9
4
0
.
0
0

10.

Gracia
no
Duran
o........
.........

1
,
9
5
0
.
0
0

With this modification, the judgment appealed from is

AFFIRMED in all other respects. With costs against the
petitioners.
SO ORDERED.
Makasiar (Chairman), Aquino, Guerrero, Abad Santos, De Castro
and Escolin JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 74156 June 29, 1988
GLOBE MACKAY CABLE AND RADIO CORPORATION,
FREDERICK WHITE and JESUS SANTIAGO,petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FFW-GLOBE
MACKAY EMPLOYEES UNION and EDA
CONCEPCION, respondents.
Castillo, Laman, Tan & Pantaleon for petitioners.
Edwin D. Dellaban for private respondents.
MELENCIO-HERRERA, J.:
A special civil action for certiorari with a prayer for a Temporary
Restraining Order to enjoin respondents from enforcing the
Decision of 10 March 1986 of the National Labor Relations
Commission (NLRC), in NCR Case No. 1-168-85 entitled "FFWGlobe Mackay Employees Union, et al., vs. Globe Mackay Cable
& Radio Corporation, et al.," the dispositive portion of which
reads:
WHEREFORE, premises considered, the appealed
Decision is as it is hereby SET ASIDE and another
one issued:
1. Declaring respondents-appellees (petitioners
herein) guilty of illegal deductions of cost-of-living
allowance;
2. Ordering respondents-appellees to pay
complainants-appellants their back allowances
reckoned from the time of illegal deduction; and
3. Ordering respondents-appellees from further
illegally deducting the allowances of
complainants-appellants.
SO ORDERED.

Presiding Commissioner of the NLRC, Diego P. Atienza,

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

To compel the respondent company to use 30

days in a month to compute the allowance and
retain 22 days for vacation and sick leave,
overtime pay and other benefits is inconsistent
and palpably unjust. If 30 days is used as divisor,
then it must be used for the computation of all
benefits, not just the allowance. But this is not
fair to complainants, not to mention that it will
contravene the provision of the parties' CBA.
On appeal, the NLRC reversed the Labor Arbiter, as heretofore
stated, and held that Petitioner Corporation was guilty of illegal
deductions, upon the following considerations: (1) that the
P3.00 daily COLA under Wage Order No. 6 should be paid and
computed on the basis of thirty (30) days instead of twenty-two
(22) days since workers paid on a monthly basis are entitled to
COLA on Saturdays, Sundays and legal holidays "even if
unworked;" (2) that the full allowance enjoyed by Petitioner
Corporation's monthly-paid employees before the CBA executed
between the parties in 1982 constituted voluntary employer
practice, which cannot be unilaterally withdrawn; and (3) that
petitioners White and Santiago were properly impleaded as
respondents in the case below.
Hence, this Petition, anchored on the charge of grave abuse of
discretion by the NLRC.
We are constrained to reverse the reversal.
Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5
and 6 uniformly read as follows:
Section 5. Allowance for Unworked Days.
All covered employees shall be entitled to their
daily living allowance during the days that they
are paid their basic wage, even if
unworked. (Emphasis supplied)
The primordial consideration, therefore, for entitlement to COLA
is that basic wage is being paid. In other words, the payment of
COLA is mandated only for the days that the employees are
paid their basic wage, even if said days are unworked. So that,
on the days that employees are not paid their basic wage, the
payment of COLA is not mandated. As held in University of
Pangasinan Faculty Union vs. University of Pangasinan, L63122, February 20, 1984, 127 SCRA 691):

... it is evident that the intention of the law is to

grant ECOLA upon the payment of basic wages.
Hence, we have the principle of 'No Pay, No
ECOLA.
Applied to monthly-paid employees if their monthly salary
covers all the days in a month, they are deemed paid their basic
wages for all those days and they should be entitled to their
COLA on those days "even if unworked," as the NLRC had
opined. Peculiar to this case, however, is the circumstance that
pursuant to the Collective Bargaining Agreement (CBA) between
Petitioner Corporation and Respondent Union, the monthly basic
pay is computed on the basis of five (5) days a week, or twenty
two (22) days a month. Thus, the pertinent provisions of that
Agreement read:
Art. XV(a)Eight net working hours shall
constitute the regular work day for five days.
Art. XV(b)Forty net hours of work, 5 working
days, shall constitute the regular work week.
Art. XVI, Sec. 1(b)All overtime worked in excess
of eight net hours daily or in excess of 5 days
weekly shall be computed on hourly basis at the
rate of time and one half.
The Labor Arbiter also found that in determining the hourly rate
of monthly paid employees for purposes of computing overtime
pay, the monthly wage is divided by the number of actual work
days in a month and then, by eight (8) working hours. If a
monthly-paid employee renders overtime work, he is paid his
basic salary rate plus one-half thereof. For example, after
examining the specimen payroll of employee Jesus L. Santos,
the Labor Arbiter found:
the employee Jesus L. Santos, who worked on
Saturday and Sunday was paid base pay plus
50% premium. This is over and above his monthly
basic pay as supported by the fact that base pay
was paid. If the 6th and 7th days of the week are
deemed paid even if unworked and included in
the monthly salary, Santos should not have been
paid his base pay for Saturday and Sunday but
should have received only the 50% overtime
premium.

Similarly, the specimen payrolls of employees, Dennis Dungon

and Rene Sanvictores, showed that in computing the vacation
and sick leaves of the employees, Petitioner Corporation
consistently used twenty-two (22) days.
Under the peculiar circumstances obtaining, therefore, where
the company observes a 5-day work week, it will have to be
held that the COLA should be computed on the basis of twenty
two (22) days, which is the period during which the monthlypaid employees of Petitioner Corporation receive their basic
wage. The CBA is the law between the parties and, if not
acceptable, can be the subject of future re-negotiation.
2) Payment in full by Petitioner Corporation of the COLA before
the execution of the CBA in 1982 and in compliance with Wage
Orders Nos. 1 (26 March 1981) to 5 (11 June 1984), should not
be construed as constitutive of voluntary employer practice,
which cannot now be unilaterally withdrawn by petitioner. To be
considered as such, it should have been practiced over a long
period of time, and must be shown to have been consistent and
deliberate. Adequate proof is wanting in this respect. The test of
long practice has been enunciated thus:
... Respondent Company agreed to continue
giving holiday pay knowing fully well that said
employees are not covered by the law requiring
payment of holiday pay.' (Oceanic Pharmacal
Employees Union [FFW] vs. Inciong, L-50568,
November 7, 1979, 94 SCRA 270). (Emphasis
ours)
Moreover, before Wage Order No. 4, there was lack of
administrative guidelines for the implementation of the Wage
Orders. It was only when the Rules Implementing Wage Order
No. 4 were issued on 21 May 1984 that a formula for the
conversion of the daily allowance to its monthly equivalent was
laid down, thus:
Section 3. Application of Section 2-xxx xxx xxx
(a) Monthly rates for non-agricultural workers
covered Under PDs 1614, 1634, 1678 and 1713:
xxx xxx xxx
(3) For workers who do not work and are not
considered paid on Saturdays and Sundays:

P60 + P90 + P60 + (P2.00 x 262) divided by 12 =

P 253.70 (Emphasis ours)
As the Labor Arbiter had analyzed said formula:
Under the aforecited formula/guideline, issued for
the first time, when applied to a company like
respondent which observes a 5-day work week
(or where 2 days in a week, not necessarily
Saturday and Sunday, are not considered paid),
the monthly equivalent of a daily allowance is
arrived at by multiplying the daily allowance by
262 divided by 12. This formula results in the
equivalent of 21.8 days in a month.
Absent clear administrative guidelines, Petitioner Corporation
cannot be faulted for erroneous application of the law. Payment
may be said to have been made by reason of a mistake in the
construction or application of a "doubtful or difficult question of
law." (Article 2155, 1 in relation to Article 2154 2 of the Civil
Code). Since it is a past error that is being corrected, no vested
right may be said to have arisen nor any diminution of benefit
under Article 100 of the Labor Code 3 may be said to have
resulted by virtue of the correction.
With the conclusions thus reached, there is no further need to
discuss the liability of the officers of Petitioner Corporation.
WHEREFORE, certiorari is granted, the Decision of the National
Labor Relations Commission, dated 10 March 1986, is SET
ASIDE, and the Decision of the Labor Arbiter, dated 9 May 1985,
is hereby REINSTATED. The Temporary Restraining Order
heretofore issued is hereby made permanent.
SO ORDERED.
Yap, C.J., Paras, and Sarmiento, JJ., concur.
Padilla, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 113856 September 7, 1998

SAMAHANG MANGGAGAWA SA TOP FORM

MANUFACTURING UNITED WORKERS OF THE PHILIPPINES
(SMTFM-UWP), its officers and members, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. JOSE G.
DE VERA and TOP FORM MANUFACTURING PHIL.,
INC., respondents.
ROMERO, J.:
The issue in this petition for certiorari is whether or not an
employer committed an unfair labor practice by bargaining in
bad faith and discriminating against its employees. The charge
arose from the employer's refusal to grant across-the-board
increases to its employees in implementing Wage Orders Nos.
01 and 02 of the Regional Tripartite Wages and Productivity
Board of the National Capital Region (RTWPB-NCR). Such refusal
was aggravated by the fact that prior to the issuance of said
wage orders, the employer allegedly promised at the collective
bargaining conferences to implement any governmentmandated wage increases on an across-the-board basis.
Petitioner Samahang Manggagawa sa Top Form Manufacturing
United Workers of the Philippines (SMTFM) was the certified
collective bargaining representative of all regular rank and file
employees of private respondent Top Form Manufacturing
Philippines, Inc. At the collective bargaining negotiation held at
the Milky Way Restaurant in Makati, Metro Manila on February
27, 1990, the parties agreed to discuss unresolved economic
issues. According to the minutes of the meeting, Article VII of
the collective bargaining agreement was discussed. The
following appear in said Minutes:
Art. VII, Wages
Sect. 1. Defer
Sect. 2. Status quo
Sec. 3. Union proposed that any future wage
increase given by the government should be
implemented by the company across-the-board or
non-conditional.
Management requested the union to retain this
provision since their sincerity was already proven
when the P25.00 wage increase was granted
across-the-board. The union acknowledges

management's sincerity but they are worried that

in case there is a new set of management, they
can just show their CBA. The union decided to
defer this provision. 1
In their joint affidavit dated January 30, 1992, 2 union members
Salve L. Barnes, Eulisa Mendoza, Lourdes Barbero and Concesa
Ibaez affirmed that at the subsequent collective bargaining
negotiations, the union insisted on the incorporation in the
collective bargaining agreement (CBA) of the union proposal on
"automatic across-the-board wage increase." They added that:
11. On the strength of the representation of the
negotiating panel of the company and the above
undertaking/promise made by its negotiating
panel, our union agreed to drop said proposal
relying on the undertakings made by the officials
of the company who negotiated with us, namely,
Mr. William Reynolds, Mr. Samuel Wong and Mrs.
Remedios Felizardo. Also, in the past years, the
company has granted to us government
mandated wage increases on across-the-board
basis.
On October 15, 1990, the RTWPB-NCR issued Wage Order No.
01 granting an increase of P17.00 per day in the salary of
workers. This was followed by Wage Order No. 02 dated
December 20, 1990 providing for a P12.00 daily increase in
salary.
As expected, the union requested the implementation of said
wage orders. However, they demanded that the increase be on
an across-the-board basis. Private respondent refused to accede
to that demand. Instead, it implemented a scheme of increases
purportedly to avoid wage distortion. Thus, private respondent
granted the P17.00 increase under Wage Order No. 01 to
workers/employees receiving salary of P125.00 per day and
below. The P12.00 increase mandated by Wage Order No. 02
was granted to those receiving the salary of P140.00 per day
and below. For employees receiving salary higher than P125.00
or P140.00 per day, private respondent granted an escalated
increase ranging from P6.99 to P14.30 and from P6.00 to
P10.00, respectively. 3
On October 24, 1991, the union, through its legal counsel, wrote
private respondent a letter demanding that it should "fulfill its

pledge of sincerity to the union by granting an across-the-board

wage increases (sic) to all employees under the wage orders."
The union reiterated that it had agreed to "retain the old
provision of CBA" on the strength of private respondent's
"promise and assurance" of an across-the-board salary increase
should the government mandate salary increases. 4Several
conferences between the parties notwithstanding, private
respondent adamantly maintained its position on the salary
increases it had granted that were purportedly designed to
avoid wage distortion.
Consequently, the union filed a complaint with the NCR NLRC
alleging that private respondent's act of "reneging on its
undertaking/promise clearly constitutes act of unfair labor
practice through bargaining in bad faith." It charged private
respondent with acts of unfair labor practices or violation of
Article 247 of the Labor Code, as amended, specifically
"bargaining in bad faith," and prayed that it be awarded actual,
moral and exemplary damages. 5 In its position paper, the union
added that it was charging private respondent with "violation of
Article 100 of the Labor Code." 6
Private respondent, on the other hand, contended that in
implementing Wage Orders Nos. 01 and 02, it had avoided "the
existence of a wage distortion" that would arise from such
implementation. It emphasized that only "after a reasonable
length of time from the implementation" of the wage orders
"that the union surprisingly raised the question that the
company should have implemented said wage orders on an
across-the-board basis." It asserted that there was no
agreement to the effect that future wage increases mandated
by the government should be implemented on an across-theboard basis. Otherwise, that agreement would have been
incorporated and expressly stipulated in the CBA. It quoted the
provision of the CBA that reflects the parties' intention to "fully
set forth" therein all their agreements that had been arrived at
after negotiations that gave the parties "unlimited right and
opportunity to make demands and proposals with respect to
any subject or matter not removed by law from the area of
collective bargaining." The same CBA provided that during its
effectivity, the parties "each voluntarily and unqualifiedly
waives the right, and each agrees that the other shall not be

obligated, to bargain collectively, with respect to any subject or

matter not specifically referred to or covered by this Agreement,
even though such subject or matter may not have been within
the knowledge or contemplation of either or both of the parties
at the time they negotiated or signed this Agreement." 7
On March 11, 1992, Labor Arbiter Jose G. de Vera rendered a
decision dismissing the complaint for lack of merit. 8 He
considered two main issues in the case: (a) whether or not
respondents are guilty of unfair labor practice, and (b) whether
or not the respondents are liable to implement Wage Orders
Nos. 01 and 02 on an across-the-board basis. Finding no basis to
rule in the affirmative on both issues, he explained as follows:
The charge of bargaining in bad faith that the
complainant union attributes to the respondents
is bereft of any certitude inasmuch as based on
the complainant union's own admission, the latter
vacillated on its own proposal to adopt an acrossthe-board stand or future wage increases. In fact,
the union acknowledges the management's
sincerity when the latter allegedly implemented
Republic Act 6727 on an across-the-board basis.
That such union proposal was not adopted in the
existing CBA was due to the fact that it was the
union itself which decided for its deferment. It is,
therefore, misleading to claim that the
management undertook/promised to implement
future wage increases on an across-the-board
basis when as the evidence shows it was the
union who asked for the deferment of its own
proposal to that effect.
The alleged discrimination in the implementation
of the subject wage orders does not inspire belief
at all where the wage orders themselves do not
allow the grant of wage increases on an acrossthe-board basis. That there were employees who
were granted the full extent of the increase
authorized and some others who received less
and still others who did not receive any increase
at all, would not ripen into what the complainants
termed as discrimination. That the

implementation of the subject wage orders

resulted into an uneven implementation of wage
increases is justified under the law to prevent any
wage distortion. What the respondents did under
the circumstances in order to deter an eventual
wage distortion without any arbitral proceedings
is certainly commendable.
The alleged violation of Article 100 of the Labor
Code, as amended, as well as Article XVII, Section
7 of the existing CBA as herein earlier quoted is
likewise found by this Branch to have no basis in
fact and in law. No benefits or privileges
previously enjoyed by the employees were
withdrawn as a result of the implementation of
the subject orders. Likewise, the alleged company
practice of implementing wage increases
declared by the government on an across-theboard basis has not been duly established by the
complainants' evidence. The complainants
asserted that the company implemented Republic
Act No. 6727 which granted a wage increase of
P25.00 effective July 1, 1989 on an across-theboard basis. Granting that the same is true, such
isolated single act that respondents adopted
would definitely not ripen into a company
practice. It has been said that "a sparrow or two
returning to Capistrano does not a summer
make."
Finally, on the second issue of whether or not the
employees of the respondents are entitled to an
across-the-board wage increase pursuant to
Wage Orders Nos. 01 and 02, in the face of the
above discussion as well as our finding that the
respondents correctly applied the law on wage
increases, this Branch rules in the negative.
Likewise, for want of factual basis and under the
circumstances where our findings above are
adverse to the complainants, their prayer for
moral and exemplary damages and attorney's
fees may not be granted.

Not satisfied, petitioner appealed to the NLRC that, in turn,

promulgated the assailed Resolution of April 29,
19939 dismissing the appeal for lack of merit. Still dissatisfied,
petitioner sought reconsideration which, however, was denied
by the NLRC in the Resolution dated January 17, 1994. Hence,
the instant petition for certiorari contending that:
-ATHE PUBLIC RESPONDENTS GROSSLY ERRED IN
NOT DECLARING THE PRIVATE RESPONDENTS
GUILTY OF ACTS OF UNFAIR LABOR PRACTICES
WHEN, OBVIOUSLY, THE LATTER HAS BARGAINED
IN BAD FAITH WITH THE UNION AND HAS
VIOLATED THE CBA WHICH IT EXECUTED WITH
THE HEREIN PETITIONER UNION.
-BTHE PUBLIC RESPONDENTS SERIOUSLY ERRED IN
NOT DECLARING THE PRIVATE RESPONDENTS
GUILTY OF ACTS OF DISCRIMINATION IN THE
IMPLEMENTATION OF NCR WAGE ORDER NOS. 01
AND 02.
-CTHE PUBLIC RESPONDENTS SERIOUSLY ERRED IN
NOT FINDING THE PRIVATE RESPONDENTS GUILTY
OF HAVING VIOLATED SECTION 4, ARTICLE XVII
OF THE EXISTING CBA.
-DTHE PUBLIC RESPONDENTS GRAVELY ERRED IN
NOT DECLARING THE PRIVATE RESPONDENTS
GUILTY OF HAVING VIOLATED ARTICLE 100 OF
THE LABOR CODE OF THE PHILIPPINES, AS
AMENDED.
-EASSUMING, WITHOUT ADMITTING THAT THE
PUBLIC RESPONDENTS HAVE CORRECTLY RULED
THAT THE PRIVATE RESPONDENTS ARE GUILTY OF
ACTS OF UNFAIR LABOR PRACTICES, THEY
COMMITTED SERIOUS ERROR IN NOT FINDING
THAT THERE IS A SIGNIFICANT DISTORTION IN
THE WAGE STRUCTURE OF THE RESPONDENT
COMPANY.
-F-

THE PUBLIC RESPONDENTS ERRED IN NOT

AWARDING TO THE PETITIONERS HEREIN ACTUAL,
MORAL, AND EXEMPLARY DAMAGES AND
ATTORNEY'S FEES.
As the Court sees it, the pivotal issues in this petition can be
reduced into two, to wit: (a) whether or not private respondent
committed an unfair labor practice in its refusal to grant acrossthe-board wage increases in implementing Wage Orders Nos. 01
and 02, and (b) whether or not there was a significant wage
distortion of the wage structure in private respondent as a
result of the manner by which said wage orders were
implemented.
With respect to the first issue, petitioner union anchors its
arguments on the alleged commitment of private respondent to
grant an automatic across-the-board wage increase in the event
that a statutory or legislated wage increase is promulgated. It
cites as basis therefor, the aforequoted portion of the Minutes of
the collective bargaining negotiation on February 27, 1990
regarding wages, arguing additionally that said Minutes forms
part of the entire agreement between the parties.
The basic premise of this argument is definitely untenable. To
start with, if there was indeed a promise or undertaking on the
part of private respondent to obligate itself to grant an
automatic across-the-board wage increase, petitioner union
should have requested or demanded that such "promise or
undertaking" be incorporated in the CBA. After all, petitioner
union has the means under the law to compel private
respondent to incorporate this specific economic proposal in the
CBA. It could have invoked Article 252 of the Labor Code
defining "duty to bargain," thus, the duty includes "executing a
contract incorporating such agreements if requested by either
party." Petitioner union's assertion that it had insisted on the
incorporation of the same proposal may have a factual basis
considering the allegations in the aforementioned joint affidavit
of its members. However, Article 252 also states that the duty
to bargain "does not compel any party to agree to a proposal or
make any concession." Thus, petitioner union may not validly
claim that the proposal embodied in the Minutes of the
negotiation forms part of the CBA that it finally entered into
with private respondent.

The CBA is the law between the contracting parties 10 the

collective bargaining representative and the employer-company.
Compliance with a CBA is mandated by the expressed policy to
give protection to labor. 11 In the same vein, CBA provisions
should be "construed liberally rather than narrowly and
technically, and the courts must place a practical and realistic
construction upon it, giving due consideration to the context in
which it is negotiated and purpose which it is intended to
serve." 12 This is founded on the dictum that a CBA is not an
ordinary contract but one impressed with public interest. 13 It
goes without saying, however, that only provisions embodied in
the CBA should be so interpreted and complied with. Where a
proposal raised by a contracting party does not find print in the
CBA, 14 it is not a part thereof and the proponent has no claim
whatsoever to its implementation.
Hence, petitioner union's contention that the Minutes of the
collective bargaining negotiation meeting forms part of the
entire agreement is pointless. The Minutes reflects the
proceedings and discussions undertaken in the process of
bargaining for worker benefits in the same way that the minutes
of court proceedings show what transpired therein. 15 At the
negotiations, it is but natural for both management and labor to
adopt positions or make demands and offer proposals and
counter-proposals. However, nothing is considered final until the
parties have reached an agreement. In fact, one of
management's usual negotiation strategies is to ". . . agree
tentatively as you go along with the understanding that nothing
is binding until the entire agreement is reached." 16 If indeed
private respondent promised to continue with the practice of
granting across-the-board salary increases ordered by the
government, such promise could only be demandable in law if
incorporated in the CBA.
Moreover, by making such promise, private respondent may not
be considered in bad faith or at the very least, resorting to the
scheme of feigning to undertake the negotiation proceedings
through empty promises. As earlier stated, petitioner union had,
under the law, the right and the opportunity to insist on
the foreseeable fulfillment of the private respondent's promise
by demanding its incorporation in the CBA. Because the
proposal was never embodied in the CBA, the promise has

remained just that, a promise, the implementation of which

cannot be validly demanded under the law.
Petitioner's reliance on this Court's pronouncements 17 in Kiok
Loy v. NLRC 18 is, therefore, misplaced. In that case, the
employer refused to bargain with the collective bargaining
representative, ignoring all notices for negotiations and
requests for counter proposals that the union had to resort to
conciliation proceedings. In that case, the Court opined that "(a)
Company's refusal to make counter-proposal, if considered in
relation to the entire bargaining process, may indicate bad
faith and this is specially true where the Union's request for a
counter-proposal is left unanswered." Considering the facts of
that case, the Court concluded that the company was "unwilling
to negotiate and reach an agreement with the Union." 19
In the case at bench, however, petitioner union does not deny
that discussion on its proposal that all government-mandated
salary increases should be on an across-the-board basis was
"deferred," purportedly because it relied upon the "undertaking"
of the negotiating panel of private respondent. 20 Neither does
petitioner union deny the fact that "there is no provision of the
1990 CBA containing a stipulation that the company will grant
across-the-board to its employees the mandated wage
increase." They simply assert that private respondent
committed "acts of unfair labor practices by virtue of
its contractual commitment made during the collective
bargaining process." 21 The mere fact, however, that the
proposal in question was not included in the CBA indicates that
no contractual commitment thereon was ever made by private
respondent as no agreement had been arrived at by the parties.
Thus:
Obviously the purpose of collective bargaining is
the reaching of an agreement resulting in a
contract binding on the parties; but the failure to
reach an agreement after negotiations continued
for a reasonable period does not establish a lack
of good faith. The statutes invite and contemplate
a collective bargaining contract, but they do not
compel one. The duty to bargain does not include
the obligation to reach an agreement. . . . 32
With the execution of the CBA, bad faith bargaining can no
longer be imputed upon any of the parties thereto. All

provisions in the CBA are supposed to have been jointly and

voluntarily incorporated therein by the parties. This is not a
case where private respondent exhibited an indifferent attitude
towards collective bargaining because the negotiations were
not the unilateral activity of petitioner union. The CBA is proof
enough that private respondent exerted "reasonable effort at
good faith bargaining." 23
Indeed, the adamant insistence on a bargaining position to the
point where the negotiations reach an impasse does not
establish bad faith. Neither can bad faith be inferred from a
party's insistence on the inclusion of a particular substantive
provision unless it concerns trivial matters or is obviously
intolerable. 24
The question as to what are mandatory and what
are merely permissive subjects of collective
bargaining is of significance on the right of a
party to insist on his position to the point of
stalemate. A party may refuse to enter into a
collective bargaining contract unless it includes a
desired provision as to a matter which is a
mandatory subject of collective bargaining; but a
refusal to contract unless the agreement covers a
matter which is not a mandatory subject is in
substance a refusal to bargain about matters
which are mandatory subjects of collective
bargaining, and it is no answer to the charge of
refusal to bargain in good faith that the insistence
on the disputed clause was not the sole cause of
the failure to agree or that agreement was not
reached with respect to other disputed clauses. 25
On account of the importance of the economic issue proposed
by petitioner union, it could have refused to bargain and to
enter into a CBA with private respondent. On the other hand,
private respondent's firm stand against the proposal did not
mean that it was bargaining in bad faith. It had the right "to
insist on (its) position to the point of stalemate." On the part of
petitioner union, the importance of its proposal dawned on it
only after the wage orders were issued after the CBA had been
entered into. Indeed, from the facts of this case, the charge of
bad faith bargaining on the part of private respondent was

nothing but a belated reaction to the implementation of the

wage orders that private respondent made in accordance with
law. In other words, petitioner union harbored the notion that its
members and the other employees could have had a better
deal in terms of wage increases had it relentlessly pursued the
incorporation in the CBA of its proposal. The inevitable
conclusion is that private respondent did not commit the unfair
labor practices of bargaining in bad faith and discriminating
against its employees for implementing the wage orders
pursuant to law.
The Court likewise finds unmeritorious petitioner union's
contention that by its failure to grant across-the-board wage
increases, private respondent violated the provisions of Section
5, Article VII of the existing CBA 26 as well as Article 100 of the
Labor Code. The CBA provision states:
Sec. 5. The COMPANY agrees to comply with all
the applicable provisions of the Labor Code of the
Philippines, as amended, and all other laws,
decrees, orders, instructions, jurisprudence, rules
and regulations affecting labor.
Art. 100 of the Labor Code on prohibition against
elimination or diminution of benefits provides that
"(n)othing in this Book shall be construed to eliminate or
in any way diminish supplements, or other employee
benefits being enjoyed at the time of promulgation of
this Code."
We agree with the Labor Arbiter and the NLRC that no benefits
or privileges previously enjoyed by petitioner union and the
other employees were withdrawn as a result of the manner by
which private respondent implemented the wage orders.
Granted that private respondent had granted an across-theboard increase pursuant to Republic Act No. 6727, that single
instance may not be considered an established company
practice. Petitioner union's argument in this regard is actually
tied up with its claim that the implementation of Wage Orders
Nos. 01 and 02 by private respondent resulted in wage
distortion.
The issue of whether or not a wage distortion exists is a
question of
fact 27 that is within the jurisdiction of the quasi-judicial
tribunals below. Factual findings of administrative agencies are

accorded respect and even finality in this Court if they are

supported by substantial evidence. 28 Thus, in Metropolitan
Bank and Trust Company, Inc. v. NLRC, the Court said:
The issue of whether or not a wage distortion
exists as a consequence of the grant of a wage
increase to certain employees, we agree, is, by
and large, a question of fact the determination of
which is the statutory function of the NLRC.
Judicial review of labor cases, we may add, does
not go beyond the evaluation of the sufficiency of
the evidence upon which the labor officials'
findings rest. As such, the factual findings of the
NLRC are generally accorded not only respect but
also finality provided that its decisions are
supported by substantial evidence and devoid of
any taint of unfairness or arbitrariness. When,
however, the members of the same labor tribunal
are not in accord on those aspects of a case, as in
this case, this Court is well cautioned not to be as
so conscious in passing upon the sufficiency of
the evidence, let alone the conclusions derived
therefrom. 29
Unlike in above-cited case where the Decision of the NLRC was
not unanimous, the NLRC Decision in this case which was
penned by the dissenter in that case, Presiding Commissioner
Edna Bonto-Perez unanimously ruled that no wage distortions
marred private respondent's implementation of the wage
orders. The NLRC said:
On the issue of wage distortion, we are satisfied
that there was a meaningful implementation of
Wage Orders Nos. 01 and 02. This debunks the
claim that there was wage distortion as could be
shown by the itemized wages implementation
quoted above. It should be noted that this
itemization has not been successfully traversed
by the appellants. . . . . 30
The NLRC then quoted the labor arbiter's ruling on wage
distortion.
We find no reason to depart from the conclusions of both the
labor arbiter and the NLRC. It is apropos to note, moreover, that
petitioner's contention on the issue of wage distortion and the

resulting allegation of discrimination against the private

respondent's employees are anchored on its dubious position
that private respondent's promise to grant an across-the-board
increase in government-mandated salary benefits reflected in
the Minutes of the negotiation is an enforceable part of the CBA.
In the resolution of labor cases, this Court has always been
guided by the State policy enshrined in the Constitution that the
rights of workers and the promotion of their welfare shall be
protected. 31 The Court is likewise guided by the goal of
attaining industrial peace by the proper application of the law. It
cannot favor one party, be it labor or management, in arriving
at a just solution to a controversy if the party has no valid
support to its claims. It is not within this Court's power to rule
beyond the ambit of the law.
WHEREFORE, the instant petition for certiorari is hereby
DISMISSED and the questioned Resolutions of the NLRC
AFFIRMED. No costs.
SO ORDERED.
Narvasa, C.J., Kapunan and Purisima, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 166647
March 31, 2006
PAG-ASA STEEL WORKS, INC., Petitioner,
vs.
COURT OF APPEALS, FORMER SIXTH DIVISION and PAGASA STEEL WORKERS UNION (PSWU),Respondent.
DECISION
CALLEJO, SR., J.:
This is a Petition for Review on Certiorari of the Decision 1 of the
Court of Appeals (CA) in CA-G.R. SP No. 65171 ordering Pag-Asa
Steel Works, Inc. to pay the members of Pag-Asa Steel Workers
Union (Union) the wage increase prescribed under Wage Order
No. NCR-08. Also assailed in this petition is the CA Resolution
denying the corporations motion for reconsideration.
Petitioner Pag-Asa Steel Works, Inc. is a corporation duly
organized and existing under Philippine laws and is engaged in
the manufacture of steel bars and wire rods. Pag-Asa Steel

Workers Union is the duly authorized bargaining agent of the

rank-and-file employees of petitioner.
On January 8, 1998, the Regional Tripartite Wages and
Productivity Board (Wage Board) of the National Capital Region
(NCR) issued Wage Order No. NCR-06.2 It provided for an
increase of P13.00 per day in the salaries of employees
receiving the minimum wage, and a consequent increase in the
minimum wage rate to P198.00 per day. Petitioner and the
Union negotiated on how to go about the wage adjustments.
Petitioner forwarded a letter3dated March 10, 1998 to the Union
with the list of the salary adjustments of the rank-and-file
employees after the implementation of Wage Order No. NCR-06,
and the notation that said "adjustments [were] in accordance
with the formula [they] have discussed and [were] designed so
as no distortion shall result from the implementation of Wage
Order No. NCR-06."
NAME

DATE
REGULAR

PRESENT
RATE

1. PEPINO EMMANUEL

08.01.97

191.00

2. SEVANDRA RODOLFO

01.17.98

192.00

3. BERNABE ALFREDO

10.24.97

200.00

4. UMBAL ADOLFO

08.18.97

215.00

5. AQUINO JONAS

08.25.97

215.00

6. AGCAOILI JAIME

01.08.98

220.00

7. BERMEJO JIMMY JR.

04.01.97

221.00

8. EDRADAN ELDEMAR P.

04.17.97

221.00

9. REBOTON RONILO

05.14.97

221.00

10. TABAOG ALBERT

04.10.97

221.00

11. SALEN EDILBERTO

02.10.97

221.00

13. PAEZ REYNALDO

02.27.97.

235.00

14. HERNANDEZ ALFREDO

03.23.96

246.00

15. BANIA LUIS JR.

12.08.95

246.00

16. MAGBOO VICTOR

05.25.96

246.00

17. NINORA BONIFACIO

03.22.96

246.00

18. ALANCADO RODERICK

11.10.95

246.00

19. PUTONG PASCUAL

06.23.96

246.00

20. PAR EULOGIO JR.

08.16.95

246.00

21. SALON FONDADOR

11.16.95

246.00

22. RODA GEORGE

10.11.95

246.00

23. RIOJA JOSEPH

12.28.95

246.00

24. RAYMUNDO ANTONIO

06.05.96

246.00

25. BUGTAI ROBERTO

04.10.96

246.00

26. RELATO RAMON

07.07.96

265.00

27. REGACHUELO DENNIS

11.30.95

265.00

28. ORNOPIA REYNALDO

08.09.94

268.00

29. PULPULAAN JAIME

01.18.96

275.00

30. PANLAAN FERDINAND

01.18.96

275.00

[Link] EULOGIO JR.

01.18.96

275.00

32. ALEJANDRO OLIVER

12.03.95

275.00

33. PRIELA DANILO

11.30.95

280.00

34. NOBELJAS EDGAR

07.10.95

283.00

35. SAJOT RONNIE

10.02.93

288.00

36. WHITING JOEL

09.30.93

288.00

37. SURINGA FRANKLIN

12.19.93

288.00

38. SIBOL MICHAEL

12.11.93

288.00

39. SOLO JOSE

02.20.94

288.00

40. TIZON JOEL

12.23.93

288.00

41. SABATIN GILBERT

04.19.94

288.00

42. REYES RONALDO

04.14.94

288.00

43. AMANIA WILFREDO

01.06.94

288.00

44. QUIDATO ARISTON

12.12.93

288.00

45. LAROGA CLAUDIO JR.

10.13.93

288.00

46. MORALES LUIS

09.30.93

288.00

47. ANTOLO DANILO

12.26.93

288.00

48. EXMUNDO HERCULES

05.13.94

288.00

49. AMPER VALENTINO

08.02.93

288.00

50. BAYO-ANG ALDEN JR.

07.14.93

288.00

51. BASCONES NELSON

02.26.94

288.00

52. DECENA LAURO

09.18.93

288.00

53. CHUA MARLONITO

10.20.93

288.00

54. CATACUTAN JUNE

03.02.94

288.00

[Link] LOS SANTOS REYNALDO

12.23.93

288.00

56. REYES EFREN

10.23.93

288.00

57. CAGOMOC DANILO

01.13.94

288.00

58. DOROL ERWIN

09.16.93

288.00

59. CURAMBAO TIRSO

09.23.93

288.00

60. VENTURA FERDINAND

09.20.94

292.00

61. ALBANO JESUS

01.06.94

297.00

62. CALLEJA JOSEPH

05.10.93

303.00

63. PEREZ DANILO

03.01.93

303.00

64. BATOY ERNIE

06.15.93

305.00

65. SAMPAGA EDGARDO

06.07.93

307.00

66. SOLON ROBINSON

05.10.94

315.00

67. ELEDA FULGENIO

06.07.93

322.00

68. CASCARA RODRIGO

06.07.93

322.00

69. ROMANOS ARNULFO

06.07.93

322.00

70. LUMANSOC MARIANO

06.07.93

322.00

71. RAMOS GRACIANO

06.07.93

322.00

72. MAZON NESTOR

07.24.90

330.00

73. BRIN LUCENIO

07.26.90

330.00

74. SE FREDIE

03.25.90

340.00

75. RONCALES DIOSDADO

04.30.90

340.00

76. DISCAYA EDILBERTO

09.06.89

340.00

77. SUAREZ LUISTO

06.10.92

347.00

78. CASTRO PEDRO

10.30.92

348.00

79. CLAVECILLA AMBROSIO

09.09.88

351.00

80. YSON ROMEO

09.11.88

351.00

81. JUMAWAN URBANO JR.

12.20.87

354.00

82. MARASIGAN GRACIANO

05.20.88

354.00

83. MAGLENTE ROLANDO

09.03.87

354.00

84. NEBRIA CALIX

02.25.88

354.00

85. BARBIN DANIEL

09.03.87

354.00

86. CAMAING CARLITO

12.22.87

354.00

87. BUBAN JONATHAN

10.22.87

354.00

88. GUEVARRA ARNOLD

10.04.87

354.00

89. MALAPO MARCOS JR.

08.04.87

354.00

90. ZUNIEGA CARLOS

02.19.88

354.00

91. SABORNIDO JULITO

12.20.87

354.00

92. DALUYO LOTERIO

04.02.88

354.00

93. AGUILLON GRACIANO

05.27.87

359.00

94. CRISTY EMETERIO

04.06.87

359.50

95. FULGUERAS DOMINGO

01.25.87

362.00

96. ZIPAGAN NELSON

02.07.84

370.00

97. LAURIO JESUS

06.01.82

371.00

98. ACASIO PEDRO

11.21.79

372.00

99. MACALISANG EPIFANIO

02.01.88

372.00

100. OFILAN ANTONIO

03.12.79

374.50

101. SEVANDRA ALFREDO

05.02.69

374.50

102. VILLAMER JOEY

11.04.81

374.50

103. GRIPON GIL

01.17.76

374.75

104. CARLON HERMINIGILDO, JR.

04.17.87

375.00

105. MANLABAO HEROHITO

04.14.81

375.00

106. VILLANUEVA DOMINGO

12.01.77

375.50

107. APITAN NAZARIO

09.04.79

376.00

108. SALAMEDA EDUARDO

02.13.79

377.00

109. ARNALDO LOPE

05.02.69

378.50

110. SURIGAO HERNANDO

12.29.79

379.00

111. DE LA CRUZ CHARLIE

07.14.76

379.00

112. ROSAURO JUAN

07.15.76

379.50

113 HILOTIN ARLEN

10.10.77

383.00

On September 23, 1999, petitioner and the Union entered into a

Collective Bargaining Agreement (CBA), effective July 1, 1999
until July 1, 2004. Section 1, Article VI (Salaries and Wage) of
said CBA provides:
Section 1. WAGE ADJUSTMENT - The COMPANY agrees to grant
all the workers, who are already regular and covered by this

AGREEMENT at the effectivity of this AGREEMENT, a general

wage increase as follows:
July 1, 1999 . . . . . . . . . . . P15.00 per day per employee
July 1, 2000 . . . . . . . . . . . P25.00 per day per employee
July 1, 2001 . . . . . . . . . . . P30.00 per day per employee
The aforesaid wage increase shall be implemented across the
board. Any Wage Order to be implemented by the Regional
Tripartite Wage and Productivity Board shall be in addition to
the wage increase adverted to above. However, if no wage
increase is given by the Wage Board within six (6) months from
the signing of this AGREEMENT, the Management is willing to
give the following increases, to wit:
July 1, 1999 . . . . . . . . . . . P20.00 per day per employee
July 1, 2000 . . . . . . . . . . . P25.00 per day per employee
July 1, 2001 . . . . . . . . . . . P30.00 per day per employee
The difference of the first year adjustment to retroact to July 1,
1999.
The across-the-board wage increase for the 4th and 5th year of
this AGREEMENT shall be subject for a re-opening or
renegotiation as provided for by Republic Act No. 6715.5
For the first year of the CBAs effectivity, the salaries of Union
members were increased as follows:
NAME

dro Acasio

derick Alancado
sus Albano
ver Alejandro
elfredo Amania
lentino Amper
anilo Antolo
azario Apitan
nas Aquino
ulogio Bagasbas, Jr.
uis Bania, Jr.
Daniel Barbin
Nelson Bascones
lden Bayo-ang, Jr.
mmy Bermejo
lfredo Bernabe
ucenio Brin

WAGE
P427.00
301.00
352.00
330.00
343.00
343.00
343.00
431.00
272.00
330.00
301.00
409.00
343.00
343.00
277.00
258.00
385.00

NAME
53. Nestor Mazon
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.

Luis Morales
Calix Nebria
Bonifacio Ninora Jr.
Edgar Noblejas
Antonio Ofilan
Reynaldo Ornopia
Reynaldo Paez
Ferdinand Panlaan
Eulogio Par Jr.
Marvin Peco
Emmanuel Pepino
Danilo Perez
Jaime Pulpulaan
Ariston Quidato
Graciano Ramos Jr.
Antonio Raymundo

WAG

P38

34
40
30
33
42
32
29
33
30
22
24
35
33
34
37
30

onathan Buban
oberto Bugtai
Danilo Cagomoc
oseph Calleja
arlito Camaing
Hermenigildo Carlon,

409.00
301.00
343.00
358.00
409.00

70.
71.
72.
73.
74.

Ronilo Reboton
Ramon Relato
Efren Reyes
Ronaldo Reyes
Joseph Rioja

430.00

75. George Roda

une Catacutan
Marlonito Chua
mbrocio Clavecilla
meterio Cristy
irso Curambao
oterio Daluyo
auro Decena
harlie dela Cruz
aynaldo delos Santos
dilberto Discaya
rwin Dorol
ldemar Edradan
ulgencio Eleda
Hercules Exmundo
Domingo Fulgueras
ederico Garcia
Gil Gripon
rnold Guevarra
rlen Hilotin
Urbano Jumawan, Jr.
onilo Lacandoze
laudio Laroga, Jr.
esus Laurio
Mariano Lumansoc
ictor Magboo
olando Maglente
Marcos Malapo Jr.
Herohito Manlabao
Graciano Marasigan

343.00
343.00
406.00
414.50
343.00
409.00
343.00
434.00
343.00
395.00
343.00
277.00
377.00
343.00
417.00
277.00
429.75
409.00
438.00
409.00
265.00
343.00
426.00
377.00
301.00
409.00
409.00
430.00
409.00

76. Diosdado Roncales

77. Gilbert Sabatin
78. Julito Sabornido
79. Ronnie Sajot
80. Eduardo Salameda
81. Edilberto Salen
82. Fundador Salon
83. Edgar Sampaga
84. Fredie Se
85. Rodolfo Sevandra
86. Jose Solo
87. Robinson Solon
88. Luisito Suarez
89. Jeriel Suico
90. Hernando Surigao
91. Franklin Suringa
92. Albert Tabaog
93. Joel Tizon
94. Alfredo Umbal
95. Ferdinand Ventura
96. Joey Villamer
[Link] Villanueva
98. Joel Whiting
99. Romeo Yson
100. Carlos Zuniega
101. Nelson Zipagan
102. Michael Sibol
103. Renante Tangian
104. Rodrigo Cascara

On October 14, 1999, Wage Order No. NCR-077 was issued, and
on October 26, 1999, its Implementing Rules and Regulations. It
provided for a P25.50 per day increase in the salary of
employees receiving the minimum wage and increased the

27
32
34
34
30

30

39
34
40
34
43
27
30
36
39
25
34
37
40
22
43
34
27
34
27
34
42
43
34
40
40
42
34
22
37

minimum wage to P223.50 per day. Petitioner paid the P25.50

per day increase to all of its rank-and-file employees.
On July 1, 2000, the rank-and-file employees were granted the
second year increase provided in the CBA in the amount
of P25.00 per day.8
On November 1, 2000, Wage Order No. NCR-089 took effect.
Section 1 thereof provides:
Section 1. Upon the effectivity of this Wage Order, private
sector workers and employees in the National Capital Region
receiving the prescribed daily minimum wage rate of P223.50
shall receive an increase of TWENTY SIX PESOS and FIFTY
CENTAVOS (P26.50) per day, thereby setting the new minimum
wage rate in the National Capital Region at TWO HUNDRED
FIFTY PESOS (P250.00) per day.10
Then Union president Lucenio Brin requested petitioner to
implement the increase under Wage Order No. NCR-08 in favor
of the companys rank-and-file employees. Petitioner rejected
the request, claiming that since none of the employees were
receiving a daily salary rate lower than P250.00 and there was
no wage distortion, it was not obliged to grant the wage
increase.
The Union elevated the matter to the National Conciliation and
Mediation Board. When the parties failed to settle, they agreed
to refer the case to voluntary arbitration. In the Submission
Agreement, the parties agreed that the sole issue is "[w]hether
or not the management is obliged to grant wage increase under
Wage Order No. NCR #8 as a matter of practice,"11 and that the
award of the Voluntary Arbitrator (VA) shall be final and
binding.12
In its Position Paper, the Union alleged that it has been the
companys practice to grant a wage increase under a
government-issued wage order, aside from the yearly wage
increases in the CBA. It averred that petitioner paid the salary
increases provided under the previous wage orders in full (aside
from the yearly CBA increases), regardless of whether there was
a resulting wage distortion, or whether Union members salaries
were above the minimum wage rate. Wage Order No. NCR-06,
where rank-and-file employees were given different wage
increases ranging from P10.00 to P13.00, was an exception
since the adjustments were the result of the formula agreed
upon by the Union and the employer after negotiations. The
Union averred that all of their CBAs with petitioner had a
"collateral agreement" where petitioner was mandated to pay
the equivalent of the wage orders across-the-board, or at least
to negotiate how much will be paid. It pointed out that an
established practice cannot be discontinued without running

afoul of Article 100 of the Labor Code on non-diminution of

benefits.13
For its part, petitioner alleged that there is no such company
practice and that it complied with the previous wage orders
(Wage Order Nos. NCR-01-05) because some of its employees
were receiving wages below the minimum prescribed under said
orders. As for Wage Order No. NCR-07, petitioner alleged that its
compliance was in accordance with its verbal commitment to
the Union during the CBA negotiations that it would implement
any wage order issued in 1999. Petitioner further averred that it
applied the wage distortion formula prescribed under Wage
Order Nos. NCR-06 and NCR-07 because an actual distortion
occurred as a result of their implementation. It asserted that at
present, all its employees enjoy regular status and that none
receives a daily wage lower than the P250.00 minimum wage
rate prescribed under Wage Order No. NCR-08.14
In reply to the Unions position paper, petitioner contended that
the full implementation of the previous wage orders did not give
rise to a company practice as it was not given to the workers
within the bargaining unit on a silver platter, but only per
request of the Union and after a series of negotiations. In fact,
during CBA negotiations, it steadfastly rejected the following
proposal of the Unions counsel, Atty. Florente Yambot, to
include an across-the-board implementation of the wage
orders:15
x x x To supplement the above wage increases, the parties
agree that additional wage increases equal to the wage orders
shall be paid across-the-board whenever the Regional Tripartite
Wage and Productivity Board issues wage orders. It is
understood that these additional wage increases will be paid
not as wage orders but as agreed additional salary increases
using the wage orders merely as a device to fix or determine
how much the additional wage increases shall be paid.16
The Union, however, insisted that there was such a company
practice. It pointed out that despite the fact that all the
employees were already receiving salaries above the minimum
wage, the CBA still provided for the payment of a wage increase
using wage orders as the yardstick. It claimed that the parties
intended that petitioner-employer would pay the additional
increases apart from those in the CBA.17 The Union further
asserted that the CBA did not include all the agreements of the
parties; hence, to determine the true intention of the parties,
parol evidence should be resorted to. Thus, Atty. Yambots
version of the wage adjustment provision should be
considered.18

On June 6, 2001, the VA rendered judgment in favor of the

company and ordered the case dismissed.19 It held that there
was no company practice of granting a wage order increase to
employees across-the-board, and that there is no provision in
the CBA that would oblige petitioner to grant the wage increase
under Wage Order No. NCR08 across-the-board.20
The Union filed a petition for review with the CA under Rule 43
of the Rules of Court. It defined the issue for resolution as
follows:
The principal issue in the present petition is whether or not the
wage increase of P26.50 under Wage Order No. NCR-08 must be
paid to the union members as a matter of practice and whether
or not parol evidence can be resorted to in proving or explaining
or elucidating the existence of a collateral agreement/company
practice for the payment of the wage increase under the wage
order despite that the employees were already receiving wages
way above the minimum wage of P250.00/day as prescribed by
Wage Order No. NCR-08 and irrespective of whether wage
distortion exists.21
On September 23, 2004, the CA rendered judgment in favor of
the Union and reversed that of the VA. The fallo of the decision
reads:
WHEREFORE, the assailed Decision dated June 6, 2001 of public
respondent Voluntary Arbitrator is REVERSED and SET ASIDE.
Private respondent Pag-Asa Steel Works, Inc. is ordered to pay
the members of the petitioner union the P26.50 daily wage by
applying the wage increase prescribed under Wage Order No.
NCR-08. Costs against private respondent.
SO ORDERED.22
The CA stressed that the CBA constitutes the law between the
employer and the Union. It held that the CBA is plain and clear,
and leaves no doubt as to the intention of the parties, that is, to
grant a wage increase that may be ordered by the Wage Board
in addition to the CBA-mandated salary increases regardless of
whether the employees are already receiving wages way above
the minimum wage. The appellate court further held that the
employer has no valid reason not to implement the wage
increase mandated by Wage Order No. NCR-08 because prior
thereto, it had been paying the wage increase provided for in
the CBA even though the employees concerned were already
receiving wages way above the applicable minimum
wage.23 Petitioner filed a motion for reconsideration which the
CA denied for lack of merit on January 11, 2005.24
Petitioner then filed the instant petition in which it raises the
following issues:

I. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED

A GRAVE REVERSIBLE ERROR IN NOT FINDING THAT THE
INCREASES PROVIDED FOR UNDER WAGE ORDER NO. 8 CANNOT
BE DEMANDED AS A MATTER OF RIGHT BY THE RESPONDENT
UNDER THE 1999 CBA, in that:
a) Issue not averred in the complaint nor raised
during the trial cannot be raised for the first time
on appeal; and
b) The Rules of Statutory Construction, in relation
to Article 1370 and 1374 of the New Civil Code,
as well as Section 11 of the Rules of Court,
requires that contract must be read in its entirety
and the various stipulations in a contract must be
read together to give effect to all.
II. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED
A GRAVE REVERSIBLE ERROR IN NOT FINDING THAT THE
INCREASES PROVIDED FOR UNDER WAGE ORDER NO. 8 CANNOT
BE DEMANDED BY THE RESPONDENT UNION AS A MATTER OF
PRACTICE.25
Petitioner points out that the only issue agreed upon during the
voluntary arbitration proceedings was whether or not the
company was obliged to grant the wage increase under Wage
Order No. NCR-08 as a matter of practice. It posits that the
respondent did not anchor its claim for such wage increase on
the CBA but on an alleged company practice of granting the
increase pursuant to a wage order. According to petitioner,
respondent Union changed its theory on appeal when it claimed
before the CA that the CBA is ambiguous.26 Petitioner contends
that respondent Union was precluded from raising this issue as
it was not raised during the voluntary arbitration. It insists that
an issue cannot be raised for the first time on appeal.27
Petitioner further argues that there is no ambiguity in the CBA.
It avers that Section 1, Article VI of the CBA should be read in its
entirety.28 From the said provision, it is clear that the CBA
contemplated only the implementation of a wage order issued
within six months from the execution of the CBA, and not every
wage order issued during its effectivity. Hence, petitioner
complied with Wage Order No. NCR-07 which was issued 28
days from the execution of the CBA. Petitioner emphasizes that
this was implemented not because it was a matter of practice
but because it was agreed upon in the CBA.29 It alleges that
respondent Union in fact realized that it could not invoke the
provisions of the CBA to enforce Wage Order No. NCR-08, which
is why it agreed to limit the issue for voluntary arbitration to
whether respondent Union is entitled to the wage increase as a
matter of practice. The fact that the "Yambot proposals" were

left out in the final document simply means that the parties
never agreed to them.30
In any case, petitioner avers that respondent Union is not
entitled to the wage increase provided under Wage Order No.
NCR-08 as a matter of practice. There is no company practice of
granting a wage-order-mandated increase in addition to the
CBA-mandated wage increase. It points out that, as admitted by
respondent Union, the previous wage orders were not
automatically implemented and were made applicable only
after negotiations. Petitioner argues that the previous wage
orders were implemented because at that time, some
employees were receiving salaries below the minimum wage
and the resulting wage distortion had to be remedied.31
For its part, respondent Union avers that the provision "[a]ny
Wage Order to be implemented by the Regional Tripartite Wage
and Productivity Board shall be in addition to the wage increase
adverted to above" referred to a company practice of paying a
wage increase whenever the government issues a wage order
even if the employees salaries were above the minimum wage
and there is no resulting wage distortion. According to
respondent, the CBA contemplated all the salary increases that
may be mandated by wage orders to be issued in the future.
Since the wage order was only a device to determine exactly
how much and when the increase would be given, these
increases are, in effect, CBA-mandated and not wage order
increases. 32 Respondent further avers that the ambiguity in the
wage adjustment provision of the CBA can be clarified by
resorting to parol evidence, that is, Atty. Yambots version of
said provision.33
The petition is meritorious. We rule that petitioner is not obliged
to grant the wage increase under Wage Order No. NCR-08 either
by virtue of the CBA, or as a matter of company practice.
On the procedural issue, well-settled is the rule, also applicable
in labor cases, that issues not raised below cannot be raised for
the first time on appeal.34 Points of law, theories, issues and
arguments not brought to the attention of the lower court need
not be, and ordinarily will not be, considered by the reviewing
court, as they cannot be raised for the first time at that late
stage. Basic considerations of due process impel this rule. 35
We agree with petitioners contention that the issue on the
ambiguity of the CBA and its failure to express the true
intention of the parties has not been expressly raised before the
voluntary arbitration proceedings. The parties specifically
confined the issue for resolution by the VA to whether or not the
petitioner is obliged to grant an increase to its employees as a
matter of practice. Respondent did not anchor its claim for an

across-the-board wage increase under Wage Order No. NCR-08

on the CBA. However, we note that it raised before the CA two
issues, namely:
x x x whether or not the wage increase of P26.50 under Wage
Order No. NCR-08 must be paid to the union members as a
matter of practice and whether or not parol evidence can be
resorted to in proving or explaining or elucidating the existence
of a collateral agreement/company practice for the payment of
the wage increase under the wage order despite that the
employees were already receiving wages way above the
minimum wage ofP250.00/day as prescribed by Wage Order No.
NCR-08 and irrespective of whether wage distortion exists. 36
Petitioner, in its Comment on the petition, delved into these
issues and elaborated on its contentions. By so doing, it thereby
agreed for the CA to take cognizance of such issues as defined
by respondent (petitioner therein). Moreover, a perusal of the
records shows that the issue of whether or not the CBA is
ambiguous and does not reflect the true agreement of the
parties was, in fact, raised before the voluntary arbitration
proceedings. Despite the submission agreement confining the
issue to whether petitioner was obliged to grant an increase
pursuant to Wage Order No. NCR-08 as a matter of practice,
respondent Union nevertheless raised the same issues in its
pleadings. In its Position Paper, it asserted that the CBA
consistently contained a collateral agreement to pay the
equivalent of the wage orders across-the-board; in its Reply, it
claimed that such provision clearly provided that petitioner
would pay the additional increases apart from the CBA and that
the wage order serves only as a measure of said increase.
These assertions indicate that respondent Union also relied on
the CBA to support its claim for the wage increase.
Central to the substantial issue is Article VI, Section I, of the
CBA of the parties, dated September 23, 1999, viz:
SALARIES AND WAGE
Section 1. WAGE ADJUSTMENT The COMPANY agrees to grant
to all workers who are already regular and covered by this
AGREEMENT at the effectivity of this AGREEMENT a general
wage increase as follows:
July 1, 1999 . P15.00 per day per employee
July 1, 2000 . P25.00 per day per employee
July 1, 2001 . P 30.00 per day per employee
The aforesaid wage increase shall be implemented across the
board. Any Wage Order to be implemented by the Regional
Tripartite Wage and Productivity Board shall be in addition to
the wage increase adverted to above. However, if no wage
increase is given by the Wage Board within six (6) months from

the signing of this AGREEMENT, the Management is willing to

give the following increases, to wit:
July 1, 1999 . P 20.00 per day per employee
July 1, 2000 . P 25.00 per day per employee
July 1, 2001 P 30.00 per day per employee
The difference of the first year adjustment to retroact to July 1,
1999.
The across-the-board wage increase for the 4th and 5th year of
this AGREEMENT shall be subject for a reopening or
renegotiation as provided for by Republic Act No. 6715.37
On the other hand, Wage Order No. NCR-08 specifically provides
that only those in the private sector in the NCR receiving the
prescribed daily minimum wage rate of P223.00 per day would
receive an increase of P26.50 a day, thereby setting the new
minimum wage rate in said region to P250.00 per day. There is
no dispute that, when the order was issued, the lowest paid
employee of petitioner was receiving a wage higher
than P250.00 a day. As such, its employees had no right to
demand for an increase under said order. As correctly ruled by
the VA:
We now come to the core of this case. Is [petitioner] under an
obligation to grant wage increase to its workers under W.O. No.
NCR-08 as a matter of practice? It is submitted that employers
(unless exempt) in Metro Manila (including the [petitioner]) are
mandated to implement the said wage order but limited to
those entitled thereto. There is no legal basis to implement the
same across-the-board. A perusal of the record shows that the
lowest paid employee before the implementation of Wage Order
#8 is P250.00/day and none was receiving belowP223.50
minimum. This could only mean that the union can no longer
demand for any wage distortion adjustment. Neither could they
insist for an adjustment of P26.50 increase under Wage Order
#8. The provision of wage order #8 and its implementing rules
are very clear as to who are entitled to the P26.50/day increase,
i.e., "private sector workers and employees in the National
Capital Region receiving the prescribed daily minimum wage
rate of P223.50 shall receive an increase of Twenty-Six Pesos
and Fifty Centavos (P26.50) per day," and since the lowest paid
is P250.00/day the company is not obliged to adjust the wages
of the workers.
With the above narration of facts and with the union not having
effectively controverted the same, we find no merit to the
complainants assertion of such a company practice in the grant
of wage order increase applied across-the-board. The fact that it
was shown the increases granted under the Wage Orders were
obtained thru request and negotiations because of the

existence of wage distortion and not as company practice as

what the union would want.
Neither do we find merit in the argument that under the CBA,
such increase should be implemented across-the-board. The
provision in the CBA that "Any Wage Order to be implemented
by the Regional Tripartite Wage and Productivity Board shall be
in addition to the wage increase adverted above" cannot be
interpreted in support of an across-the-board increase. If such
were the intentions of this provision, then the company could
have simply accepted the original demand of the union for such
across-the-board implementation, as set forth in their original
proposal (Annex "2" union[]s counsel proposal). The fact that
the company rejected this proposal can only mean that it was
never its intention to agree, to such across-the-board
implementation. Thus, the union will have to be contented with
the increase of P30.00 under the CBA which is due on July 31,
2001 barely a month from now.38
The error of the CA lies in its considering only the CBA in
interpreting the wage adjustment provision, without taking into
account Wage Order No. NCR-08, and the fact that the members
of respondent Union were already receiving salaries higher
than P250.00 a day when it was issued. The CBA cannot be
considered independently of the wage order which respondent
Union relied on for its claim.
Wage Order No. NCR-08 clearly states that only those
employees receiving salaries below the prescribed minimum
wage are entitled to the wage increase provided therein, and
not all employees across-the-board as respondent Union would
want petitioner to do. Considering therefore that none of the
members of respondent Union are receiving salaries below
the P250.00 minimum wage, petitioner is not obliged to grant
the wage increase to them.
The ruling of the Court in Capitol Wireless, Inc. v. Bate 39 is
instructive on how to construe a CBA vis--vis a wage order. In
that case, the company and the Union signed a CBA with a
similar provision: "[s]hould there be any government mandated
wage increases and/or allowances, the same shall be over and
above the benefits herein granted."40 Thereafter, the Wage
Board of the NCR issued several wage orders providing for an
across-the-board increase in the minimum wage of all
employees in the private sector. The company implemented the
wage increases only to those employees covered by the wage
orders - those receiving not more than the minimum wage. The
Union protested, contending that, pursuant to said provision,
any and all government-mandated increases in salaries and

allowance should be granted to all employees across-the-board.

The Court held as follows:
x x x The wage orders did not grant across-the-board increases
to all employees in the National Capital Region but limited such
increases only to those already receiving wage rates not more
than P125.00 per day under Wage Order Nos. NCR-01 and NCR01-A and P142.00 per day under Wage Order No. NCR-02. Since
the wage orders specified who among the employees are
entitled to the statutory wage increases, then the increases
applied only to those mentioned therein. The provisions of the
CBA should be read in harmony with the wage orders, whose
benefits should be given only to those employees covered
thereby. (Emphasis added)41
In this case, as gleaned from the pleadings of the parties,
respondent Union relied on a collateral agreement between it
and petitioner, an agreement extrinsic of the CBA based on an
alleged established practice of the latter as employer. The VA
rejected this claim:
Complainant Pag-Asa Steel Workers Union additionally advances
the arguments that "there exist a collateral agreement to pay
the equivalent of wage orders across the board or at least to
negotiate how much will be paid" and that "parol evidence is
now applicable to show or explain what the unclean provisions
of the CBA means regarding wage adjustment." The respondent
cites Article XXVII of the CBA in effect, as follows:
"The parties acknowledged that during the negotiation which
resulted in this AGREEMENT, each had the unlimited right &
opportunity to make demands, claims and proposals of every
kind and nature with respect to any subject or matter not
removed by law from the Collective Bargaining and the
understanding and agreements arrived at by the parties after
the exercise of that right & opportunity are set forth in this
AGREEMENT. Therefore, the COMPANY and the UNION, for the
life of this AGREEMENT, agrees that neither party shall not be
obligated to bargain collectively with respect to any subject
matter not specifically referred to or covered in this
AGREEMENT, and furthermore, that each party voluntarily &
unqualifiedly waives such right even though such subject may
not have been within the knowledge or contemplation of either
or both of the parties at the time they signed this AGREEMENT."
From the said CBA provision and upon an appreciation of the
entire CBA, we find it to have more than amply covered all
aspects of the collective bargaining. To allow alleged collateral
agreements or parol/oral agreements would be violative of the
CBA provision afore-quoted.42

We agree with petitioners contention that the rule excluding

parol evidence to vary or contradict a written agreement, does
not extend so far as to preclude the admission of extrinsic
evidence, to show prior or contemporaneous collateral parol
agreements between the parties. Such evidence may be
received regardless of whether or not the written agreement
contains reference to such collateral agreement. 43 As the Court
ruled in United Kimberly-Clark Employees Union, et al. v.
Kimberly-Clark Philippines, Inc.:44
A CBA is more than a contract; it is a generalized code to
govern a myriad of cases which the draftsmen cannot wholly
anticipate. It covers the whole employment relationship and
prescribes the rights and duties of the parties. It is a system of
industrial self-government with the grievance machinery at the
very heart of the system. The parties solve their problems by
molding a system of private law for all the problems which may
arise and to provide for their solution in a way which will
generally accord with the variant needs and desires of the
parties.
If the terms of a CBA are clear and have no doubt upon the
intention of the contracting parties, the literal meaning of its
stipulation shall prevail. However, if, in a CBA, the parties
stipulate that the hirees must be presumed of employment
qualification standards but fail to state such qualification
standards in said CBA, the VA may resort to evidence extrinsic
of the CBA to determine the full agreement intended by the
parties. When a CBA may be expected to speak on a matter,
but does not, its sentence imports ambiguity on that subject.
The VA is not merely to rely on the cold and cryptic words on
the face of the CBA but is mandated to discover the intention of
the parties. Recognizing the inability of the parties to anticipate
or address all future problems, gaps may be left to be filled in
by reference to the practices of the industry, and the step which
is equally a part of the CBA although not expressed in it. In
order to ascertain the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally
considered. The VA may also consider and rely upon negotiating
and contractual history of the parties, evidence of past
practices interpreting ambiguous provisions. The VA has to
examine such practices to determine the scope of their
agreement, as where the provision of the CBA has been loosely
formulated. Moreover, the CBA must be construed liberally
rather than narrowly and technically and the Court must place a
practical and realistic construction upon it.45

However, just like any other fact, habits, customs, usage or

patterns of conduct must be proved. Thus was the ruling of the
Court in Bank of Commerce v. Manalo, et al.:46
Habit, custom, usage or pattern of conduct must be proved like
any other facts. Courts must contend with the caveat that,
before they admit evidence of usage, of habit or pattern of
conduct, the offering party must establish the degree of
specificity and frequency of uniform response that ensures
more than a mere tendency to act in a given manner but rather,
conduct that is semi-automatic in nature. The offering party
must allege and prove specific, repetitive conduct that might
constitute evidence of habit. The examples offered in evidence
to prove habit, or pattern of evidence must be numerous
enough to base on inference of systematic conduct. Mere
similarity of contracts does not present the kind of sufficiently
similar circumstances to outweigh the danger of prejudice and
confusion.
In determining whether the examples are numerous enough,
and sufficiently regular, the key criteria are adequacy of
sampling and uniformity of response. After all, habit means a
course of behavior of a person regularly represented in like
circumstances. It is only when examples offered to establish
pattern of conduct or habit are numerous enough to lose an
inference of systematic conduct that examples are admissible.
The key criteria are adequacy of sampling and uniformity of
response or ratio of reaction to situations.
We have reviewed the records meticulously and find no
evidence to prove that the grant of a wage-order-mandated
increase to all the employees regardless of their salary rates on
an agreement collateral to the CBA had ripened into company
practice before the effectivity of Wage Order No. NCR-08.
Respondent Union failed to adduce proof on the salaries of the
employees prior to the issuance of each wage order to establish
its allegation that, even if the employees were receiving salaries
above the minimum wage and there was no wage distortion,
they were still granted salary increase. Only the following lists
of salaries of respondent Unions members were presented in
evidence: (1) before Wage Order No. NCR-06 was issued; (2)
after Wage Order No. NCR-06 was implemented; (3) after the
grant of the first year increase under the CBA; (4) after Wage
Order No. NCR-07 was implemented; and (5) after the second
year increase in the CBA was implemented.
The list of the employees salaries before Wage Order No. NCR06 was implemented belie respondent Unions claim that the
wage-order-mandated increases were given to employees
despite the fact that they were receiving salaries above the

minimum wage. This list proves that some employees were in

fact receiving salaries below theP198.00 minimum wage rate
prescribed by the wage order two rank-and-file employees in
particular. As petitioner explains, a wage distortion occurred as
a result of granting the increase to those employees who were
receiving salaries below the prescribed minimum wage. The
wage distortion necessitated the upward adjustment of the
salaries of the other employees and not because it was a matter
of company practice or usage. The situation of the employees
before Wage Order No. NCR-08, however, was different. Not one
of the members of respondent Union was then receiving less
than P250.00 per day, the minimum wage requirement in said
wage order.
The only instance when petitioner admittedly implemented a
wage order despite the fact that the employees were not
receiving salaries below the minimum wage was under Wage
Order No. NCR-07. Petitioner, however, explains that it did so
because it was agreed upon in the CBA that should a wage
increase be ordered within six months from its signing,
petitioner would give the increase to the employees in addition
to the CBA-mandated increases. Respondents isolated act
could hardly be classified as a "company practice" or company
usage that may be considered an enforceable obligation.
Moreover, to ripen into a company practice that is demandable
as a matter of right, the giving of the increase should not be by
reason of a strict legal or contractual obligation, but by reason
of an act of liberality on the part of the employer. Hence, even if
the company continuously grants a wage increase as mandated
by a wage order or pursuant to a CBA, the same would not
automatically ripen into a company practice. In this case,
petitioner granted the increase under Wage Order No. NCR-07
on its belief that it was obliged to do so under the CBA.
WHEREFORE, premises considered, the petition is GRANTED.
The Decision of the Court of Appeals in CA-G.R. SP No. 65171
and Resolution dated January 11, 2005 are REVERSED and SET
ASIDE. The Decision of the Voluntary Arbitrator is REINSTATED.
No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-24632
October 26, 1968
LEXAL LABORATORIES and/or JOSE ANGELES,
Manager, petitioners,
vs.

NATIONAL CHEMICAL INDUSTRIES WORKERS UNIONPAFLU (Lexal Laboratories Chapter) and THE COURT OF
INDUSTRIAL RELATIONS, respondents.
Matias, Liboro & Benitez for petitioners.
F. M. de los Reyes for respondents.
SANCHEZ, J.:
Condensed, the question before us is this: Are per
diems included in backpay? This problem came about because
of the implementation of the decision of the Court of Industrial
Relations (CIR) of June 29, 19631directing petitioner Lexal
Laboratories (Lexal) to reinstate Guillermo Ponseca, a dismissed
employee, to his former position "with full back wages from the
day of his dismissal up to the time he is actually reinstated
without loss of his seniority rights and of such other rights and
privileges enjoyed by him prior to his lay-off."
CIR, confirming the report of its Chief Examiner and Economist,
ruled in its order of February 16, 1965 that Ponseca was entitled
to back wages from November 5, 1958 when he ceased
reporting for work, to November 24, 1963 a day prior to his
reinstatement on November 25, 1963; and that for the number
of days that he was supposed to be in Manila, he was to earn
P4.50 a day, and during the periods when he should have been
in the provinces, P4.50 a day plus a per diem of P4.00 or a total
of P8.50 daily. This order was subsequently modified by CIR's
resolution of May 22, 1965 which directed the deduction of
P5,000.00 previously paid Ponseca under the judgment and
P610.00 which Ponseca earned from other sources during his
lay-off.
Petitioners vigorously objected to the inclusion of the P4.00 per
diem in the computation of Ponseca's back wages because the
latter "did not actually spend for his meals and lodgings for he
was all the time in Manila, his station." CIR brushed this
contention aside. Whereupon, petitioners appealed to this Court
from the order of February 16, 1965 and the resolution of May
22, 1965.2
1. Our attention has not been drawn to a rule of law or
jurisprudence which holds that per diems are integral parts of
regular wages or salaries. Neither is it suggested in the record
that per diems formed part of the terms of employment
between petitioners and respondent union (of which Ponseca is
a member), or with Ponseca himself for that matter. Nor was
pronouncement made either in the original decision or in the
questioned order and resolution of CIR that per diems are part
of back wages. CIR simply hit upon the idea that per
diems should be paid as part of the back wages because they
were "paid to him regularly."

Per diem, the dictionary definition tells us, is "a daily allowance"
given "for each day he (an officer or employee) was away from
his home base".3 It would seem to us that per diem is intended
to cover the cost of lodging and subsistence of officers and
employees when the latter are on duty outside of their
permanent station.4 Lexal concedes that whenever its
employee, Guillermo Ponseca, was out of Manila, he was
allowed a per diem of P4.00 broken down as follows: P1.00 for
breakfast; P1.00 for lunch; P1.00 for dinner; and P1.00 for
lodging. Ponseca during the period involved did not leave
Manila. Therefore, he spent nothing for meals and lodging
outside of Manila. Because he spent nothing, there is nothing to
be reimbursed. Since per diems are in the nature of
reimbursement, Ponseca should not be entitled to per diems.
Besides, back wages are what an employee has lost "in the way
of wages" due to his dismissal. So that, because Ponseca
earned P4.50 a day, "then that is the amount which he lost daily
by reason of his dismissal, nothing more nothing less:"5
We, accordingly, rule that CIR erred in including per diems in
the back wages due and payable to Guillermo Ponseca.
2. The rest is a matter of mathematical computation but first to
the facts. The union's evidence is that since the last part of
October, 1958 Ponseca had been reporting everyday to the
bodega of respondents.6 Anyway, prior to Ponseca's dismissal,
he worked daily either in Manila or in the provinces.7
But the order of February 15, 1965 credits Ponseca with 1,856
days for the period from November 5, 1958 to November 24,
1963. We checked the accuracy of this figure. We found that
there should only be 1,846 days from November 5, 1958 to
November 24, 1963, viz:

November 5, 1958 to December 31,

1958

57 days

January 1, 1959 to December 31, 1959

365 days

January 1, 1960 to December 31, 1960

366 days

January 1, 1961 to December 31, 1961

365 days

January 1, 1962 to December 31, 1962

365 days

January 1, 1963 to November 24, 1963

328 days

TOTAL

1,846 days

This brings us to the total amount due from Lexa1 to Guillermo

Ponseca, as follows: .

1,846 days
P4.50

Less:
Advance
payment

Earnings from other

sources

P8,307.00

P5,000.00

P610.00

P5,610.00
8

NET BACKPAY

P2,697.00
.

For the foregoing reasons, the order of February 16, 1965, and
the resolution of May 22, 1965, both of the Court of Industrial
Relations, in its Case No. 2002-ULP, entitled "National Chemical
Industries Workers Union-PAFLU (Lexal Laboratories Chapter),
Complainant, versus Lexal Laboratories and Jose Angeles, its
Manager, Respondents", are hereby modified; and
Judgment is hereby rendered ordering petitioner Lexal
Laboratories to pay Guillermo Ponseca, by way of net backpay,
the sum of P2,697.00.
No costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Castro,
Angeles, Fernando and Capistrano, JJ., concur.
Zaldivar, J., is on leave.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 101761. March 24, 1993.

NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION and NBSR
SUPERVISORY UNION, (PACIWU) TUCP, respondents.
Jose Mario C. Bunag for petitioner.
The Solicitor General and the Chief Legal Officer, NLRC, for
public respondent.
Zoilo V. de la Cruz for private respondent.
DECISION
REGALADO, J p:
The main issue presented for resolution in this original petition
for certiorari is whether supervisory employees, as defined in
Article 212 (m), Book V of the Labor Code, should be considered
as officers or members of the managerial staff under Article 82,
Book III of the same Code, and hence are not entitled to
overtime rest day and holiday pay.
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. The Batangas refinery was
privatized on April 11, 1992 pursuant to Proclamation No. 50. 1
Private respondent union represents the former supervisors of
the NASUREFCO Batangas Sugar Refinery, namely, the
Technical Assistant to the Refinery Operations Manager, Shift

Sugar Warehouse Supervisor, Senior Financial/Budget Analyst,

General Accountant, Cost Accountant, Sugar Accountant, Junior
Financial/Budget Analyst, Shift Boiler Supervisor,, Shift
Operations Chemist, Shift Electrical Supervisor, General
Services Supervisor, Instrumentation Supervisor, Community
Development Officer, Employment and Training Supervisor,
Assistant Safety and Security Officer, Head and Personnel
Services, Head Nurse, Property Warehouse Supervisor, Head of
Inventory Control Section, Shift Process Supervisor, Day
Maintenance Supervisor and Motorpool Supervisor.
On June 1, 1988, petitioner implemented a Job Evaluation (JE)
Program affecting all employees, from rank-and-file to
department heads. The JE Program was designed to rationalized
the duties and functions of all positions, reestablish levels of
responsibility, and recognize both wage and operational
structures. Jobs were ranked according to effort, responsibility,
training and working conditions and relative worth of the job. As
a result, all positions were re-evaluated, and all employees
including the members of respondent union were granted salary
adjustments and increases in benefits commensurate to their
actual duties and functions.
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, the
following adjustments were made: (1) the 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; (2) there was an increase in basic
pay of the average of 50% of their basic pay prior to the JE
Program, with the union members now enjoying a wide gap
(P1,269.00 per month) in basic pay compared to the highest
paid rank-and-file employee; (3) longevity pay was increased on
top of alignment adjustments; (4) they were entitled to
increased company COLA of P225.00 per month; (5) there was a
grant of P100.00 allowance for rest day/holiday work.
On May 11, 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.
Two years after the implementation of the JE Program,
specifically on June 20, 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.
On January 7, 1991, Executive Labor Arbiter Antonio C. Pido
rendered a decision 2 disposing as follows:
"WHEREFORE, premises considered, respondent National Sugar
refineries Corporation is hereby directed to
1. pay the individual members of complainant union the usual
overtime pay, rest day pay and holiday pay enjoyed by them
instead of the P100.00 special allowance which was
implemented on June 11, 1988; and
2. pay the individual members of complainant union the
difference in money value between the P100.00 special
allowance and the overtime pay, rest day pay and holiday pay
that they ought to have received from June 1, 1988.
All other claims are hereby dismissed for lack of merit.
SO ORDERED."
In finding for the members therein respondent union, the labor
ruled that the along span of time during which the benefits were
being paid to the supervisors has accused the payment thereof
to ripen into contractual obligation; at the complainants cannot
be estopped from questioning the validity of the new
compensation package despite the fact that they have been
receiving the benefits therefrom, considering that respondent
union was formed only a year after the implementation of the
Job Evaluation Program, hence there was no way for the
individual supervisors to express their collective response
thereto prior to the formation of the union; and the comparative
computations presented by the private respondent union
showed that the P100.00 special allowance given NASUREFCO
fell short of what the supervisors ought to receive had the
overtime pay rest day pay and holiday pay not been
discontinued, which arrangement, therefore, amounted to a
diminution of benefits.
On appeal, in a decision promulgated on July 19, 1991 by its
Third Division, 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, as defined under Article 212 (m) of the Labor Code
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; their responsibilities do not require the
exercise of discretion and independent judgment; they do not
participate in the formulation of management policies nor in the
hiring or firing of employees; and their main function is to carry

out the ready policies and plans of the corporation. 3

Reconsideration of said decision was denied in a resolution of
public respondent dated August 30, 1991. 4
Hence this petition for certiorari, with petitioner NASUREFCO
asseverating that public respondent commission committed a
grave abuse of discretion in refusing to recognized the fact that
the members of respondent union are members of the
managerial staff who are not entitled to overtime, rest day and
holiday pay; and in making petitioner assume the "double
burden" of giving the benefits due to rank-and-file employees
together with those due to supervisors under the JE Program.
We find creditable merit in the petition and that the
extraordinary writ of certiorari shall accordingly issue.
The primordial issue to be resolved herein is whether the
members of respondent union are entitled to overtime, rest day
and holiday pay. Before this can be resolved, however it must of
necessity be ascertained first whether or not the union
members, as supervisory employees, are to be considered as
officers or members of the managerial staff who are exempt
from the coverage of Article 82 of the Labor Code.
It is not disputed that the members of respondent union are
supervisory employees, as defined employees, as defined under
Article 212(m), Book V of the Labor Code on Labor Relations,
which reads:
"(m) 'Managerial employee' is one who is vested with powers or
prerogatives to lay down and execute management policies
and/or to hire, transfer, suspend, lay-off, recall, discharged,
assign or discipline employees. Supervisory employees are
those who, in the interest of the employer effectively
recommend such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but
requires the use of independent judgment. All employees not
falling within any of those above definitions are considered
rank-and-file employees of this Book."
Respondent NLRC, in holding that the union members are
entitled to overtime, rest day and holiday pay, and in ruling that
the latter are not managerial employees, adopted the definition
stated in the aforequoted statutory provision.
Petitioner, however, avers that for purposes of determining
whether or not the members of respondent union are entitled to
overtime, rest day and holiday pay, said employees should be
considered as "officers or members of the managerial staff" as
defined under Article 82, Book III of the Labor Code on "Working
Conditions and Rest Periods" and amplified in Section 2, Rule I,
Book III of the Rules to Implement the Labor Code, to wit:

"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.)
xxx xxx xxx
'Sec. 2. Exemption. The provisions of this rule shall not apply
to the following persons if they qualify for exemption under the
condition set forth herein:
xxx xxx xxx
(b) Managerial employees, if they meet all of the following
conditions, namely:
(1) Their primary duty consists of the management of the
establishment in which they are employed or of a department
or subdivision thereof:
(2) They customarily and regularly direct the work of two or
more employees therein:
(3) They have the authority to hire or fire other employees of
lower rank; or their suggestions and recommendations as to the
hiring and firing and as to the promotion or any other change of
status of other employees are given particular weight.
(c) Officers or members of a managerial staff if they perform the
following duties and responsibilities:
(1) The primary duty consists of the performance of work
directly related to management policies of their employer;
(2) Customarily and regularly exercise discretion and
independent judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial
employee whose primary duty consists of the management of
the establishment in which he is employed or subdivision
thereof; or (ii) execute under general supervision work along
specialized or technical lines requiring special training,
experience, or knowledge; or (iii) execute under general
supervision special assignments and tasks; and
(4) Who do not devote more 20 percent of their hours worked in
a work-week to activities which are not directly and closely
related to the performance of the work described in paragraphs
(1), (2), and above."

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 and supervisory employees under Article 212 (m)
should be made to apply only to the provisions on Labor
Relations, while the right of said employees to the questioned
benefits should be considered in the light of the meaning of a
managerial employee and of the officers or members of the
managerial staff, as contemplated under Article 82 of the Code
and Section 2, Rule I Book III of the implementing rules. In other
words, for purposes of forming and joining unions, certification
elections, collective bargaining, and so forth, the union
members are supervisory employees. In terms of working
conditions and rest periods and entitlement to the questioned
benefits, however, they are officers or members of the
managerial staff, hence they are not entitled thereto.
While the Constitution is committed to the policy of social
justice and the protection of the working class, it should not be
supposed that every labor dispute will be automatically decided
in favor of labor. Management also has its own rights which, as
such, are entitled to respect and enforcement in the interest of
simple fair play. Out of its concern for those with less privileges
in life, this Court has inclined more often than not toward the
worker and upheld his cause in his conflicts with the employer.
Such favoritism, however, has not blinded us to the rule that
justice is in every case for the deserving, to be dispensed in the
light of the established facts and the applicable law and
doctrine. 5
This is one such case where we are inclined to tip the scales of
justice in favor of the employer.
The question whether a given employee is exempt from the
benefits of the law is a factual one dependent on the
circumstances of the particular case, In determining whether an
employee is within the terms of the statutes, the criterion is the
character of the work performed, rather than the title of the
employee's position. 6
Consequently, while generally this Court is not supposed to
review the factual findings of respondent commission,
substantial justice and the peculiar circumstances obtaining
herein mandate a deviation from the rule.
A cursory perusal of the Job Value Contribution Statements 7 of
the union members will readily show that these supervisory
employees are under the direct supervision of their respective
department superintendents and that generally they assist the

latter in planning, organizing, staffing, directing, controlling

communicating and in making decisions in attaining the
company's set goals and objectives. These supervisory
employees are likewise responsible for the effective and
efficient operation of their respective departments. More
specifically, their duties and functions include, among others,
the following operations whereby the employee:
1) assists the department superintendent in the following:
a) planning of systems and procedures relative to department
activities;
b) organizing and scheduling of work activities of the
department, which includes employee shifting scheduled and
manning complement;
c) decision making by providing relevant information data and
other inputs;
d) attaining the company's set goals and objectives by giving
his full support;
e) selecting the appropriate man to handle the job in the
department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at all
times and recommends disciplinary action on erring
subordinates;
3) trains and guides subordinates on how to assume
responsibilities and become more productive;
4) conducts semi-annual performance evaluation of his
subordinates and recommends necessary action for their
development/advancement;
5) represents the superintendent or the department when
appointed and authorized by the former;
6) coordinates and communicates with other inter and intra
department supervisors when necessary;
7) recommends disciplinary actions/promotions;
8) recommends measures to improve work methods, equipment
performance, quality of service and working conditions;
9) sees to it that safety rules and regulations and procedure and
are implemented and followed by all NASUREFCO employees,
recommends revisions or modifications to said rules when
deemed necessary, and initiates and prepares reports for any
observed abnormality within the refinery;
10) supervises the activities of all personnel under him and
goes to it that instructions to subordinates are properly
implemented; and
11) performs other related tasks as may be assigned by his
immediate superior.

From the foregoing, it is apparent that the members of

respondent union discharge duties and responsibilities which
ineluctably qualify them as officers or members of the
managerial staff, as defined in Section 2, Rule I Book III of the
aforestated Rules to Implement the Labor Code, viz.: (1) their
primary duty consists of the performance of work directly
related to management policies of their employer; (2) they
customarily and regularly exercise discretion and independent
judgment; (3) they regularly and directly assist the managerial
employee whose primary duty consist of the management of a
department of the establishment in which they are employed
(4) they execute, under general supervision, work along
specialized or technical lines requiring special training,
experience, or knowledge; (5) they execute, under general
supervision, special assignments and tasks; and (6) they do not
devote more than 20% of their hours worked in a work-week to
activities which are not directly and clearly related to the
performance of their work hereinbefore described.
Under the facts obtaining in this case, we are constrained to
agree with petitioner that the union members should be
considered as officers and members of the managerial staff and
are, therefore, exempt from the coverage of Article 82. Perforce,
they are not entitled to overtime, rest day and holiday.
The distinction made by respondent NLRC on the basis of
whether or not the union members are managerial employees,
to determine the latter's entitlement to the questioned benefits,
is misplaced and inappropriate. It is admitted that these union
members are supervisory employees and this is one instance
where the nomenclatures or titles of their jobs conform with the
nature of their functions. Hence, to distinguish them from a
managerial employee, as defined either under Articles 82 or
212 (m) of the Labor Code, is puerile and in efficacious. The
controversy actually involved here seeks a determination of
whether or not these supervisory employees ought to be
considered as officers or members of the managerial staff. The
distinction, therefore, should have been made along that line
and its corresponding conceptual criteria.
II. We likewise no not subscribe to the finding of the labor
arbiter that the payment of the questioned benefits to the union
members has ripened into a contractual obligation.
A. Prior to the JE Program, the union members, while being
supervisors, received benefits similar to the rank-and-file
employees such as overtime, rest day and holiday pay, simply
because they were treated in the same manner as rank-and-file
employees, and their basic pay was nearly on the same level as
those of the latter, aside from the fact that their specific

functions and duties then as supervisors had not been properly

defined and delineated from those of the rank-and-file. Such
fact is apparent from the clarification made by petitioner in its
motion for reconsideration 8 filed with respondent commission
in NLRC Case No. CA No. I-000058, dated August 16, 1991,
wherein, it lucidly explained:
"But, complainants no longer occupy the same positions they
held before the JE Program. Those positions formerly classified
as 'supervisory' and found after the JE Program to be rank-andfile were classified correctly and continue to receive overtime,
holiday and restday pay. As to them, the practice subsists.
"However, those whose duties confirmed them to be
supervisory, were re-evaluated, their duties re-defined and in
most cases their organizational positions re-designated to
confirm their superior rank and duties. Thus, after the JE
program, complainants cannot be said to occupy the same
positions." 9
It bears mention that this positional submission was never
refuted nor controverted by respondent union in any of its
pleadings filed before herein public respondent or with this
Court. Hence, it can be safely concluded therefrom that the
members of respondent union were paid the questioned
benefits for the reason that, at that time, they were rightfully
entitled thereto. Prior to the JE Program, they could not be
categorically classified as members or officers of the
managerial staff considering that they were then treated merely
on the same level as rank-and-file. Consequently, the payment
thereof could not be construed as constitutive of voluntary
employer practice, which cannot be now be unilaterally
withdrawn by petitioner. To be considered as such, it should
have been practiced over a long period of time, and must be
shown to have been consistent and deliberate. 10
The test or rationale of this rule on long practice requires an
indubitable showing that the employer agreed to continue
giving the benefits knowingly fully well that said employees are
not covered by the law requiring payment thereof. 11 In the
case at bar, respondent union failed to sufficiently establish that
petitioner has been motivated or is wont to give these benefits
out of pure generosity.
B. It remains undisputed that the implementation of the JE
Program, the members of private respondent union were reclassified under levels S-5 S-8 which were considered under the
program as managerial staff purposes of compensation and
benefits, that they occupied re-evaluated positions, and that
their basic pay was increased by an average of 50% of their
basic salary prior to the JE Program. In other words, after the JE

Program there was an ascent in position, rank and salary. This in

essence is a promotion which is defined as the advancement
from one position to another with an increase in duties and
responsibilities as authorized by law, and usually accompanied
by an increase in salary. 12
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 sating goes by, they cannot have their cake and
eat it too or, as petitioner suggests, 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 jurisprudentiallyrecognized 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.
Not so long ago, on this particular score, we had the occasion to
hold that:
". . . it is the prerogative of the management to regulate,
according to its discretion and judgment, all aspects of
employment. This flows from the established rule that labor law
does not authorize the substitution of the judgment of the
employer in the conduct of its business. Such management
prerogative may be availed of without fear of any liability so
long as it is exercised in good faith for the advancement of the
employer's interest and not for the purpose of defeating on
circumventing the rights of employees under special laws or
valid agreement and are not exercised in a malicious, harsh,
oppressive, vindictive or wanton manner or out of malice or
spite." 13
WHEREFORE, the impugned decision and resolution of
respondent National Labor Relations Commission promulgated

on July 19, 1991 and August 30, 1991, respectively, are hereby
ANNULLED and SET ASIDE for having been rendered and
adopted with grave abuse of discretion, and the basic complaint
of private respondent union is DISMISSED.
Narvasa, C . J ., Padilla, Nocon and Campos, Jr., JJ., concur.

SECOND DIVISION
[G.R. No. 155059. April 29, 2005]
AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES
UNION, petitioner, vs. AMERICAN WIRE AND CABLE
CO.,
INC.
and
THE
COURT
OF
APPEALS, respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a special civil action for certiorari, assailing the
Decision[1] of the Special Eighth Division of the Court of Appeals
dated 06 March 2002. Said Decision upheld the Decision [2] and
Order[3] of Voluntary Arbitrator Angel A. Ancheta of the National
Conciliation and Mediation Board (NCMB) dated 25 September
2001 and 05 November 2001, respectively, which declared the
private respondent herein not guilty of violating Article 100 of
the Labor Code, as amended. Assailed likewise, is the
Resolution[4] of the Court of Appeals dated 12 July 2002, which
denied the motion for reconsideration of the petitioner, for lack
of merit.
THE FACTS
The facts of this case are quite simple and not in dispute.
American Wire and Cable Co., Inc., is a corporation engaged
in the manufacture of wires and cables. There are two unions in
this company, the American Wire and Cable Monthly-Rated
Employees Union (Monthly-Rated Union) and the American Wire
and Cable Daily-Rated Employees Union (Daily-Rated Union).

On 16 February 2001, an original action was filed before the

NCMB of the Department of Labor and Employment (DOLE) by
the two unions for voluntary arbitration. They alleged that the
private respondent, without valid cause, suddenly and
unilaterally withdrew and denied certain benefits and
entitlements which they have long enjoyed. These are the
following:
a. Service Award;
b. 35% premium pay of an employees basic pay for the
work rendered during Holy Monday, Holy Tuesday,
Holy Wednesday, December 23, 26, 27, 28 and
29;
c. Christmas Party; and
d. Promotional Increase.
A promotional increase was asked by the petitioner for
fifteen (15) of its members who were given or assigned new job
classifications. According to petitioner, the new job
classifications were in the nature of a promotion, necessitating
the grant of an increase in the salaries of the said 15 members.
On 21 June 2001, a Submission Agreement was filed by the
parties before the Office for Voluntary Arbitration. Assigned as
Voluntary Arbitrator was Angel A. Ancheta.
On 04 July 2001, the parties simultaneously filed their
respective position papers with the Office of the Voluntary
Arbitrator, NCMB, and DOLE.
On 25 September 2001, a Decision[5] was rendered by
Voluntary Arbitrator Angel A. Ancheta in favor of the private
respondent. The dispositive portion of the said Decision is
quoted hereunder:
WHEREFORE, with all the foregoing considerations, it is hereby
declared that the Company is not guilty of violating Article 100
of the Labor Code, as amended, or specifically for withdrawing
the service award, Christmas party and 35% premium for work
rendered during Holy Week and Christmas season and for not
granting any promotional increase to the alleged fifteen (15)
Daily-Rated Union Members in the absence of a promotion. The
Company however, is directed to grant the service award to
deserving employees in amounts and extent at its discretion, in

consultation with the Unions on grounds of equity and fairness.

[6]

A motion for reconsideration was filed by both

unions[7] where they alleged that the Voluntary Arbitrator
manifestly erred in finding that the company did not violate
Article 100 of the Labor Code, as amended, when it unilaterally
withdrew the subject benefits, and when no promotional
increase was granted to the affected employees.
On 05 November 2001, an Order[8] was issued by Voluntary
Arbitrator Angel A. Ancheta. Part of the Order is quoted
hereunder:
Considering that the issues raised in the instant case were
meticulously evaluated and length[i]ly discussed and explained
based on the pleadings and documentary evidenc[e] adduced
by the contending parties, we find no cogent reason to change,
modify, or disturb said decision.
WHEREFORE, let the instant MOTION[S] FOR RECONSIDERATION
be, as they are hereby, denied for lack of merit. Our decision
dated 25 September 2001 is affirmed en toto.[9]
An appeal under Rule 43 of the 1997 Rules on Civil
Procedure was made by the Daily-Rated Union before the Court
of Appeals[10] and docketed as CA-G.R. SP No. 68182. The
petitioner averred that Voluntary Arbitrator Angel A. Ancheta
erred in finding that the company did not violate Article 100 of
the Labor Code, as amended, when the subject benefits were
unilaterally withdrawn. Further, they assert, the Voluntary
Arbitrator erred in adopting the companys unaudited Revenues
and Profitability Analysis for the years 1996-2000 in justifying
the latters withdrawal of the questioned benefits.[11]
On 06 March 2002, a Decision in favor of herein respondent
company was promulgated by the Special Eighth Division of the
Court of Appeals in CA-G.R. SP No. 68182. The decretal portion
of the decision reads:
WHEREFORE, premises considered, the present petition is
hereby DENIED DUE COURSE and accordingly DISMISSED, for
lack of merit. The Decision of Voluntary Arbitrator Angel A.

Ancheta dated September 25, 2001 and his Order dated

November 5, 2001 in VA Case No. AAA-10-6-4-2001 are hereby
AFFIRMED and UPHELD.[12]
A motion for reconsideration[13] was filed by the petitioner,
contending that the Court of Appeals misappreciated the facts
of the case, and that it committed serious error when it ruled
that the unaudited financial statement bears no importance in
the instant case.
The Court of Appeals denied the motion in its Resolution
dated 12 July 2002[14] because it did not present any new matter
which had not been considered in arriving at the decision. The
dispositive portion of the Resolution states:
WHEREFORE, the motion for reconsideration is
hereby DENIED for lack of merit.[15]
Dissatisfied with the court a quos ruling, petitioner
instituted the instant special civil action for certiorari,[16] citing
grave abuse of discretion amounting to lack of jurisdiction.
ASSIGNMENT OF ERRORS
The petitioner assigns as errors the following:
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THE
COMPANY DID NOT VIOLATE ARTICLE 100 OF THE LABOR CODE,
AS AMENDED, WHEN IT UNILATERALLY WITHDREW THE
BENEFITS OF THE MEMBERS OF PETITIONER UNION, TO WIT: 1)
35% PREMIUM PAY; 2) CHRISTMAS PARTY AND ITS INCIDENTAL
BENEFITS; AND 3) SERVICE AWARD, WHICH IN TRUTH AND IN
FACT SAID BENEFITS/ENTITLEMENTS HAVE BEEN GIVEN THEM
SINCE TIME IMMEMORIAL, AS A MATTER OF LONG ESTABLISHED
COMPANY PRACTICE, WITH THE FURTHER FACT THAT THE SAME
NOT BEING DEPENDENT ON PROFITS.
II

THE COURT OF APPEALS ERRED WHEN IT JUST ACCEPTED HOOK,

LINE AND SINKER, THE RESPONDENT COMPANYS SELF SERVING
AND UNAUDITED REVENUES AND PROFITABILITY ANALYSIS FOR
THE YEARS 1996-2000 WHICH THEY SUBMITTED TO FALSELY
JUSTIFY THEIR UNLAWFUL ACT OF UNILATERALLY AND
SUDDENLY WITHDRAWING OR DENYING FROM THE PETITIONER
THE SUBJECT BENEFITS/ENTITLEMENTS.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
YEARLY SERVICE AWARD IS NOT DEPENDENT ON PROFIT BUT ON
SERVICE AND THUS, CANNOT BE UNILATERALLY WITHDRAWN BY
RESPONDENT COMPANY.
ISSUE
Synthesized, the solitary issue that must be addressed by
this Court is whether or not private respondent is guilty of
violating Article 100 of the Labor Code, as amended, when the
benefits/entitlements given to the members of petitioner union
were withdrawn.
THE COURTS RULING
Before we address the sole issue presented in the instant
case, it is best to first discuss a matter which was raised by the
private respondent in its Comment. The private respondent
contends that this case should have been dismissed outright
because of petitioners error in the mode of appeal. According to
it, the petitioner should have elevated the instant case to this
Court through a petition for review oncertiorari under Rule 45,
and not through a special civil action for certiorari under Rule
65, of the 1997 Rules on Civil Procedure.[17]
Assuming arguendo that the mode of appeal taken by the
petitioner is improper, there is no question that the Supreme
Court has the discretion to dismiss it if it is defective. However,
sound policy dictates that it is far better to dispose the case on
the merits, rather than on technicality.[18]

The Supreme Court may brush aside the procedural barrier

and take cognizance of the petition as it raises an issue of
paramount importance. The Court shall resolve the solitary
issue on the merits for future guidance of the bench and bar.[19]
With that out of the way, we shall now resolve whether or
not the respondent company is guilty of violating Article 100 of
the Labor Code, as amended.
Article 100 of the Labor Code provides:
ART. 100. PROHIBITION AGAINST ELIMINATION OR
DIMINUTION OF BENEFITS. Nothing in this Book shall be
construed to eliminate or in any way diminish supplements, or
other employee benefits being enjoyed at the time of
promulgation of this Code.
The petitioner submits that the withdrawal of the private
respondent of the 35% premium pay for selected days during
the Holy Week and Christmas season, the holding of the
Christmas Party and its incidental benefits, and the giving of
service awards violated Article 100 of the Labor Code. The grant
of these benefits was a customary practice that can no longer
be unilaterally withdrawn by private respondent without the
tacit consent of the petitioner. The benefits in question were
given by the respondent to the petitioner consistently,
deliberately, and unconditionally since time immemorial. The
benefits/entitlements were not given to petitioner due to an
error in interpretation, or a construction of a difficult question of
law, but simply, the grant has been a practice over a long
period of time. As such, it cannot be withdrawn from the
petitioner at respondents whim and caprice, and without the
consent of the former. The benefits given by the respondent
cannot be considered as a bonus as they are not founded on
profit. Even assuming that it can be treated as a bonus, the
grant of the same, by reason of its long and regular concession,
may be regarded as part of regular compensation.[20]
With respect to the fifteen (15) employees who are
members of petitioner union that were given new job
classifications, it asserts that a promotional increase in their
salaries was in order. Salary adjustment is a must due to their
promotion.[21]

On respondent companys Revenues and Profitability

Analysis for the years 1996-2000, the petitioner insists that
since the former was unaudited, it should not have justified the
companys sudden withdrawal of the benefits/entitlements. The
normal and/or legal method for establishing profit and loss of a
company is through a financial statement audited by an
independent auditor.[22]
The petitioner cites our ruling in the case of Saballa v.
NLRC,[23] where we held that financial statements audited by
independent auditors constitute the normal method of proof of
the profit and loss performance of the company. Our ruling in
the case of Bogo-Medellin Sugarcane Planters Association, Inc.,
et al. v. NLRC, et al.[24] was likewise invoked. In this case, we
held:
The Court has previously ruled that financial statements audited
by independent external auditors constitute the normal method
of proof of the profit and loss performance of a company.
On the matter of the withdrawal of the service award, the
petitioner argues that it is the employees length of service
which is taken as a factor in the grant of this benefit, and not
whether the company acquired profit or not.[25]
In answer to all these, the respondent corporation avers
that the grant of all subject benefits has not ripened into
practice that the employees concerned can claim a demandable
right over them. The grant of these benefits was conditional
based upon the financial performance of the company and that
conditions/circumstances that existed before have indeed
substantially changed thereby justifying the discontinuance of
said grants. The companys financial performance was affected
by the recent political turmoil and instability that led the entire
nation to a bleeding economy. Hence, it only necessarily follows
that the companys financial situation at present is already very
much different from where it was three or four years ago.[26]
On the subject of the unaudited financial statement
presented by the private respondent, the latter contends that
the cases cited by the petitioner indeed uniformly ruled that
financial statements audited by independent external auditors
constitute the normal method of proof of the profit and loss

performance of a company. However, these cases do not require

that the only legal method to ascertain profit and loss is through
an audited financial statement. The cases only provide that an
audited financial statement is the normal method.[27]
The respondent company likewise asseverates that the 15
members of petitioner union were not actually promoted. There
was only a realignment of positions.[28]
From the foregoing contentions, it appears that for the
Court to resolve the issue presented, it is critical that a
determination must be first made on whether the
benefits/entitlements are in the nature of a bonus or not, and
assuming they are so, whether they are demandable and
enforceable obligations.
In the case of Producers Bank of the Philippines v.
NLRC[29] we have characterized what a bonus is, viz:
A bonus is an amount granted and paid to an employee for his
industry and loyalty which contributed to the success of the
employers business and made possible the realization of profits.
It is an act of generosity granted by an enlightened employer to
spur the employee to greater efforts for the success of the
business and realization of bigger profits. The granting of a
bonus is a management prerogative, something given in
addition to what is ordinarily received by or strictly due the
recipient. Thus, a bonus is not a demandable and enforceable
obligation, except when it is made part of the wage, salary or
compensation of the employee.
Based on the foregoing pronouncement, it is obvious that
the benefits/entitlements subjects of the instant case are all
bonuses which were given by the private respondent out of its
generosity and munificence. The additional 35% premium pay
for work done during selected days of the Holy Week and
Christmas season, the holding of Christmas parties with raffle,
and the cash incentives given together with the service awards
are all in excess of what the law requires each employer to give
its employees. Since they are above what is strictly due to the
members of petitioner-union, the granting of the same was a
management prerogative, which, whenever management sees

necessary, may be withdrawn, unless they have been made a

part of the wage or salary or compensation of the employees.
The consequential question therefore that needs to be
settled is if the subject benefits/entitlements, which are
bonuses, are demandable or not. Stated another way, can these
bonuses be considered part of the wage or salary or
compensation making them enforceable obligations?
The Court does not believe so.
For a bonus to be enforceable, it must have been promised
by the employer and expressly agreed upon by the parties, [30] or
it must have had a fixed amount[31] and had been a long and
regular practice on the part of the employer.[32]
The benefits/entitlements in question were never subjects
of any express agreement between the parties. They were
never incorporated in the Collective Bargaining Agreement
(CBA). As observed by the Voluntary Arbitrator, the records
reveal that these benefits/entitlements have not been subjects
of any express agreement between the union and the company,
and have not yet been incorporated in the CBA. In fact, the
petitioner has not denied having made proposals with the
private respondent for the service award and the additional
35% premium pay to be made part of the CBA.[33]
The Christmas parties and its incidental benefits, and the
giving of cash incentive together with the service award cannot
be said to have fixed amounts. What is clear from the records is
that over the years, there had been a downtrend in the amount
given as service award.[34] There was also a downtrend with
respect to the holding of the Christmas parties in the sense that
its location changed from paid venues to one which was free of
charge,[35] evidently to cut costs. Also, the grant of these two
aforementioned bonuses cannot be considered to have been
the private respondents long and regular practice. To be
considered a regular practice, 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. [36] The downtrend in the
grant of these two bonuses over the years demonstrates that
there is nothing consistent about it. Further, as held by the
Court of Appeals:
Anent the Christmas party and raffle of prizes, We agree with
the Voluntary Arbitrator that the same was merely sponsored by

the respondent corporation out of generosity and that the same

is dependent on the financial performance of the company for a
particular year[37]
The additional 35% premium pay for work rendered during
selected days of the Holy Week and Christmas season cannot
be held to have ripened into a company practice that the
petitioner herein have a right to demand. Aside from the
general averment of the petitioner that this benefit had been
granted by the private respondent since time immemorial, there
had been no evidence adduced that it had been a regular
practice. As propitiously observed by the Court of Appeals:
. . . [N]otwithstanding that the subject 35% premium pay was
deliberately given and the same was in excess of that provided
by the law, the same however did not ripen into a company
practice on account of the fact that it was only granted for two
(2) years and with the express reservation from respondent
corporations owner that it cannot continue to rant the same in
view of the companys current financial situation.[38]
To hold that an employer should be forced to distribute
bonuses which it granted out of kindness is to penalize him for
his past generosity.[39]
Having thus ruled that the additional 35% premium pay for
work rendered during selected days of the Holy Week and
Christmas season, the holding of Christmas parties with its
incidental benefits, and the grant of cash incentive together
with the service award are all bonuses which are neither
demandable nor enforceable obligations of the private
respondent, it is not necessary anymore to delve into the
Revenues and Profitability Analysis for the years 1996-2000
submitted by the private respondent.
On the alleged promotion of 15 members of the petitioner
union that should warrant an increase in their salaries, the
factual finding of the Voluntary Arbitrator is revealing, viz:
Considering that the Union was unable to adduce proof that a
promotion indeed occur[ed] with respect to the 15 employees,
the Daily Rated Unions claim for promotional increase likewise

fall[s] there being no promotion established under the records

at hand.[40]
WHEREFORE, in view of all the foregoing, the assailed
Decision and Resolution of the Court of Appeals dated 06 March
2002 and 12 July 2002, respectively, which affirmed and upheld
the decision of the Voluntary Arbitrator, are hereby AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga,
JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 111744 September 8, 1995
LOURDES G. MARCOS, ALEJANDRO T. ANDRADA,
BALTAZARA J. LOPEZ AND VILMA L. CRUZ, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and INSULAR
LIFE ASSURANCE CO., LTD., respondents.
REGALADO, J.:
This petition for certiorari seeks the nullification of the
decision 1 of the National Labor Relations Commission (NLRC)
promulgated on May 31, 1992 in NLRC NCR CA No. 004120-92,
and its resolution dated August 27, 1993 denying petitioner's
motion for reconsideration thereof. The said decision set aside
on appeal, the decision of Labor Arbiter Alex Arcadio Lopez
ordering private respondent to pay petitioners their service
awards, anniversary bonus and prorated performance bonus in
the amount of P144,579.00 and 10% attorney's fees in the
amount of P14,457.90. 2
First, the undisputed facts.
Petitioners were regular employees of private respondent
Insular Life Assurance Co:, Ltd., but they were dismissed on
November 1, 1990 when their positions were declared

redundant. A special redundancy benefit was paid to them,

which included payment of accrued vacation leave and fifty
percent (50%) of unused current sick leave, special redundancy
benefit, equivalent to three (3) months salary for every year of
service; and additional cash benefits, in lieu of other benefits
provided by the company or required by law. 3
Before the termination of their services, petitioner Marcos had
been in the employ of private respondent for more than twenty
(20) years, from August 26, ]970; petitioner Andrada, more than
twenty-five (25) years, from July 26, 1965; petitioner Lopez,
exactly thirty (30) years, from October 31, 1960; and petitioner
Cruz, more than twenty (20) years, from March 1, 1970. 4
Petitioners, particularly Baltazara J. Lopez, sent a letter dated
October 23, 1990 to respondent company questioning the
redundancy package, She claimed that they should receive their
respective service awards and other prorated bonuses which
they had earned at the time they were dismissed. In addition,
Lopez argued that "the cash service awards have already been
budgeted in a fund distinct and apart from redundancy fund. 5
Thereafter, private respondent required petitioners to execute a
"Release and Quitclaim," 6 and petitioners complied but with a
written protest reiterating their previous demand that they were
nonetheless entitled to receive their service awards.
On March 21, 1991, petitioners inquired from the Legal Service
of the Department of Labor and Employment 7whether
respondent corporation could legally refuse the payment of
their service awards as mandated in their Employee's Manual.
About three months later the labor department issued its
opinion, with pertinent authorities, responding to petitioners'
query as follows:
xxx xxx xxx
This Department believes that your query
presents several issues. These shall be addressed
point by point, thus:
First, the Department deems the
service award to be part of the
benefits of the employees of
Insular Life. Company policies and
practices are fertile sources of
employee's rights. These must be
applied uniformly as interpretation

cannot vary from one employee to

another. . . .
xxx xxx xxx
While it may be argued that the above-cited case
applies only to retirement benefits, we find solace
in the cases of Liberation Steamship Co., Inc. vs.
CIR and National Development Company vs.
Unlicensed Crew members of Three Dons vessels
(23 SCRA 1105) where the Supreme Court held
that a gratuity or bonus, by reason of its long and
regular concession indicating company practice,
may become regarded as part of regular
compensation and thus demandable.
xxx xxx xxx
Second, the award is earned at the pertinent
anniversary date. At this time, entitlement to the
award becomes vested. The anniversary date is
the only crucial determining factor. Since the
award accrues on that date, it is of no moment
that the entitled employee is separated from
service (for whatever cause) before the awards
are physically handed out.
xxx xxx xxx
Third, even if the award has not accrued as
when an employee is separated from service
because of redundancy before the applicable 5th
year anniversary, the material benefits of the
award must be given, prorated, by Insular Life.
This is especially true (in) redundancy, wherein
he/she had no control.
xxx xxx xxx
Fourth, the fact that you were required to sign
"Release and Quitclaim" does not affect your right
to the material benefits of the service award. . . . 8
Meanwhile, in the same year, private respondent celebrated its
80th anniversary wherein the management approved the grant
of an anniversary bonus equivalent to one (1) month salary only
to permanent and probationary employees as of November 15,
1990. 9
On March 26, 1991, respondent company announced the grant
of performance bonus to both rank and file employees and

supervisory specialist grade and managerial staff equivalent to

two (2) months salary and 2.75 basic salary, respectively, as of
December 30, 1990. The performance bonus, however, would
be given only to permanent employees as of March 30, 1991. 10
Despite the aforequoted opinion of the Department of Labor
and Employment, private respondent refused to pay petitioners
service awards. This prompted the latter to file a consolidated
complaint, which was assigned to NLRC Labor Arbiter Lopez, for
payment of their service awards, including performance and
anniversary bonuses.
In their complaint, petitioners contended that they are likewise
entitled to the performance and anniversary bonuses because,
at the time the performance bonus was announced to be given,
they were only short of two (2) months service to be entitled to
the full amount thereof as they had already served the
company for ten (10) months prior to the declaration of the
grant of said benefit. Also, they lacked only fifteen (15) days to
be entitled to the full amount of the anniversary bonus when it
was announced to be given to employees as of November 15,
1990.
In a decision dated October 8, 1992, the labor arbiter ordered
respondent company to pay petitioners their service awards,
anniversary bonuses and prorated performance bonuses,
including ten percent (10%) thereof as attorney's fees.
Respondent company appealed to public respondent NLRC
claiming grave abuse of discretion committed by the labor
arbiter in holding it liable to pay said service award,
performance and anniversary bonuses, and in not finding that
petitioners were estopped from claiming the same as said
benefits had already been given to them.
In setting aside the decision of the labor arbiter, respondent
NLRC upheld the validity of the quitclaim document executed by
petitioners. For this conclusion, it rationalized that "(c)ertainly,
before complainants signed the quitclaim and release, they are
aware of the nature of such document. In fact, they never
assailed the genuineness and due execution of the same.
Hence, we can safely say that they were not placed under
duress or were compelled by means of force to sign the
document." 11
Furthermore, the NLRC held that "(n)either was there any
unwritten agreement between complainants and respondent

upon separation, which entitled the former to other

renumerations or benefits. On the contrary, they voluntarily
accepted the redundancy benefit package, otherwise, they
would not have been separated from employment." 12
Hence, this petition wherein it is postulated that the basic issue
is whether or not respondent NLRC committed reversible error
or grave abuse of discretion in affirming the validity of the
"Release and Quitclaim" and, consequently, that petitioners are
not entitled to payment of service awards and other
bonuses. 13 The Solicitor General public respondent NLRC and
private respondent company duly filed their respective
comments. 14
In their petition, petitioners stress that they have actually
devoted much, if not all, of their employable life with private
respondent; that given their length of service, their loyalty to
the latter is easily demonstrable; and that the same length of
service had rendered slim, if not eliminated, their chances of
getting employed somewhere else."15
On the other hand, respondent company reiterates its basic
contention that the consideration for the settlement of
petitioners' claim is credible and reasonable, more than satisfies
the legal requirement therefor, and that petitioners, in
executing the release and quitclaim, did so voluntarily and with
full knowledge of the consequences thereof. 16
The petition being meritorious, we find for petitioners.
Under prevailing jurisprudence, the fact that an employee has
signed a satisfaction receipt for his claims does not necessarily
result in the waiver thereof. The law does not consider as valid
any agreement whereby a worker agrees to receive less
compensation than what he is entitled to recover. A deed of
release or quitclaim cannot bar an employee from demanding
benefits to which he is legally entitled. 17
We have heretofore explained that the reason why quitclaims
commonly frowned upon as contrary to public policy, and why
they are held to be ineffective to bar claims for the full measure
of the workers' legal rights, is the fact that the employer and
the employee obviously do not stand on the same footing. The
employer drove the employee to the wall. The latter must have
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 on their claim. They pressed it. They are deemed not
have waived any of their rights. Renuntiatio non praesumitur. 18
Along this line, we have more trenchantly declared that
quitclaims and/or complete releases executed by the employees
do not estop them from pursuing their claims arising from unfair
labor practices 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 does not divest a laborer of the right to prosecute
his employer for unfair labor practice acts. 19 While there maybe
possible exceptions to this holding, we do not perceive any in
the case at bar.
Furthermore, in the instant case, it is an undisputed fact that
when petitioners signed the instrument of release and
quitclaim, they made a written manifestation reserving their
right to demand the payment of their service awards. 20 The
element of total voluntariness in executing that instrument is
negated by the fact that they expressly stated therein their
claim for the service awards, a manifestation equivalent to a
protest and a disavowal of any waiver thereof.
As earlier stated, petitioners even sought the opinion of the
Department of Labor and Employment to determine where and
how they stood in the controversy. This act only shows their
adamant desire to obtain their service awards and to
underscore their disagreement with the "Release and Quitclaim"
they were virtually forced to sign in order to receive their
separation pay.
We have pointed out in Veloso, et al., vs. Department of Labor
and Employment, et al., 21 that:
While rights may be waived, the same must not
be contrary to law, public order, public policy,
morals or good customs or prejudicial to a third
person with a right recognized by law.
Article 6 of the Civil Code renders a quitclaim
agreement void ab initio where the quitclaim
obligates the workers concerned to forego their
benefits while at the same time exempting the
employer from any liability that it may choose to
reject. This runs counter to Art. 22 of the Civil
Code which provides that no one shall be unjustly
enriched at the expense of another.

We agree with the further observations of the

Solicitor General who, in recommending the
setting aside of the decision of respondent NLRC,
called attention to the fact that "contrary to
private respondent's contention, the "additional"
redundancy package does not and could not have
covered the payment of the service awards,
performance and anniversary bonuses since the
private respondent company has initially
maintained the position that petitioners are not
legally entitled to the same. . . . Surprisingly, in a
sudden turnabout, private respondent now claims
. . . that the subject awards and bonuses are
integrated in the redundancy package. It is
evident, therefore, that private respondent has
not truly consolidated the payment of the subject
awards and bonuses in the redundancy package
paid to the petitioners. 22
We are likewise in accord with the findings of the
labor arbiter that petitioners are indeed entitled
to receive service awards and other benefits,
thus:
Since each of the complainants have rendered
services to respondent in multiple(s) of five years
prior to their separation from employment,
respondent should be paid their service awards
for 1990.
We are not impressed with the contention of the
respondent that service award is a bonus and
therefore is an act of gratuity which the
complainants have no right to demand. Service
awards are governed by respondent's employee's
manual and (are) therefore contractual in nature.
On the matter of anniversary and performance
bonuses, it is not disputed that it is respondent's
practice to give an anniversary bonus every five
years from its incorporation; that pursuant to this
practice, respondent declared an anniversary
bonus for its 80th Anniversary in 1990; that per
terms of this declaration, only the employees of
respondent as of 15 November 1990 will be given

the bonus; and that complainants were separated

from respondent only 25 days before :the
respondent's anniversary. On the other hand, it is
also (not) disputed that respondent regularly
gives performance bonuses; that for its
commendable performance in 1990, respondent
declared a performance bonus; that per terms of
this declaration, only permanent employees of
respondent as of March 30, 1991 will be given
this bonus; and that complainants were
employees of respondents for the first 10 months
of 1990.
We cannot see any cogent reason why an
anniversary bonus which respondent gives only
once in every five years were given to all
employees of respondent as of 15 November
1990 (pro rata even to probationary employees;
Annex 9) and not to complainants who have
rendered service to respondent for most of the
five year cycle. This is also true in the case of
performance bonus which were given to
permanent employees of respondent as of 30
March 1991 and not to employees who have been
connected with respondent for most of 1990 but
were separated prior to 30 March 1991.
We believe that the prerogative of the employer
to determine who among its employee shall be
entitled to receive bonuses which are, as a matter
of practice, given periodically cannot be exercised
arbitrarily. 23 (Emphasis and corrections in
parentheses supplied.)
The grant of service awards in favor of petitioners is more
importantly underscored in the precedent case ofInsular Life
Assurance Co., Ltd., et al. vs. NLRC, et al., 24 where this Court
ruled that "as to the service award differentials claimed by
some respondent union members, the company policy shall
likewise prevail, the same being based on the employment
contracts or collective bargaining agreements between the
parties. As the petitioners had explained, pursuant to their
policies on the matter, the service award differential is given at

the end of the year to an employee who has completed years of

service divisible by 5.
A bonus is not a gift or gratuity, but is paid for some services or
consideration and is in addition to what would ordinarily be
given. 25 The term "bonus" as used in employment contracts,
also conveys an idea of something which is gratuitous, or which
may be claimed to be gratuitous, over and above the prescribed
wage which the employer agrees to pay.
While there is a conflict of opinion as to the validity of an
agreement to pay additional sums for the performance of that
which the promisee is already under obligation to perform, so as
to give the latter the right to enforce such promise after
performance, the authorities hold that if one enters into a
contract of employment under an agreement that he shall be
paid a certain salary by the week or some other stated period
and, in addition, a bonus, in case he serves for a specified
length of time, there is no reason for refusing to enforce the
promise to pay the bonus, if the employee has served during
the stipulated time, on the ground that it was a promise of a
mere gratuity.
This is true if the contract contemplates a continuance of the
employment for a definite term, and the promise of the bonus is
made at the time the contract is entered into. If no time is fixed
for the duration of the contract of employment, but the
employee enters upon or continues in service under an offer of
a bonus if he remains therein for a certain time, his service, in
case he remains for the required time, constitutes an
acceptance of the offer of the employer to pay the bonus and,
after that acceptance, the offer cannot be withdrawn, but can
be enforced by the employee. 26
The weight of authority in American jurisprudence, with which
we are persuaded to agree, is that after the acceptance of a
promise by an employer to pay the bonus, the same cannot be
withdrawn, but may be enforced by the employee. 27 However,
in the case at bar, equity demands that the performance and
anniversary bonuses should be prorated to the number of
months that petitioners actually served respondent company in
the year 1990. This observation should be taken into account in
the computation of the amounts to be awarded to petitioners.

WHEREFORE, the assailed decision and resolution of respondent

National Labor Relations Commission are hereby SET ASIDE and
the decision of Labor Arbiter Alex Arcadio Lopez is REINSTATED.
SO ORDERED.
Narvasa, C.J., Puno, Mendoza and Francisco, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 88168 August 30, 1990
TRADERS ROYAL BANK, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION & TRADERS
ROYAL BANK EMPLOYEES UNION, respondents.
San Juan, Gonzalez, San Agustin & Sinense for petitioner.
E.N.A. Cruz, Enfero & Associates for private respondent.
GRIO-AQUINO, J.:
This petition for certiorari seeks to nullify or set aside the
decision dated September 2, 1988 of the National Labor
Relations Commission, which found the petitioner, Traders Royal
Bank (or TRB), guilty of diminution of benefits due the private
respondents and ordered it to pay the said employees' claims
for differentials in their holiday, mid-year, and year-end
bonuses.
On November 18, 1986, the Union, through its president, filed a
letter-complaint against TRB with the Conciliation Division of the
Bureau of Labor Relations claiming that:
First, the management of TRB per memo dated
October 10, 1986 paid the employees their
HOLIDAY PAY, but has withheld from the Union the
basis of their computation.
Second, the computation in question, has
allegedly decreased the daily salary rate of the
employees. This diminution of existing benefits
has decreased our overtime rate and has affected
the employees' take home pay.

Third, the diminution of benefits being enjoyed by

the employees since time immemorial, e.g. midyear bonus, from two (2) months gross pay to two
(2) months basic and year-end bonus from three
(3) months gross to only two (2) months.
Fourth, the refusal by management to recall
active union members from the branches which
were being transferred without prior notice, solely
at the instance of the branch manager. (p.
26, Rollo.)
In its answer to the union's complaint, TRB pointed out that the
NLRC, not the Bureau of Labor Relations, had jurisdiction over
the money claims of the employees.
On March 24, 1987, the Secretary of Labor certified the
complaint to the NLRC for resolution of the following issues
raised by the complainants:
l) The Management of TRB per memo dated
October 10, 1986 paid the employees their
holiday pay but has withheld from the union the
basis of their computation.
2) The computation in question has allegedly
decreased the daily salary rate of the employees.
This diminution of existing benefits has decreased
our overtime rate and has affected the
employees' take home pay.
3) The diminution of benefits being enjoyed by
the employees since the (sic) immemorial, e.g.
mid-year bonus, from two (2) months gross pay
to two (2) months basic and year-end bonus from
three (3) months gross to only two (2) months.
4) The refusal by management to recall active
union members from the branches which were
being transferred without prior notice, solely at
the instance of the branch, manager. (p.
28, Rollo.)
In the meantime, the parties who had been negotiating for a
collective bargaining agreement, agreed on the terms of the
CBA, to wit:
1. The whole of the bonuses given in previous
years is not demandable, i.e., there is no

diminution, as to be liable for a differential, if the

bonus given is less than that in previous years.
2. Since only two months bonus is guaranteed,
only to that extent are bonuses deemed part of
regular compensation.
3. As regards the third and fourth bonuses, they
are entirely dependent on the income of the
bank, and not demandable as part of
compensation. (pp. 67-68, Rollo.)
Despite the terms of the CBA, however, the union insisted on
pursuing the case, arguing that the CBA would apply
prospectively only to claims arising after its effectivity.
Petitioner, on the other hand, insisted that it had paid the
employees holiday pay. The practice of giving them bonuses at
year's end, would depend on how profitable the operation of the
bank had been. Generally, the bonus given was two (2) months
basic mid-year and two (2) months gross end-year.
On September 2, 1988, the NLRC rendered a decision in favor of
the employees, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in
favor of the petitioner and ordering respondent
bank to pay petitioner members-employees the
following:
1. Holiday differential for the period covering
l983-1986 as embodied in Resolution No. 49841986 of respondent's Board of Directors but to
start from November 11, 1983 and using the
Divisor 251 days in determining the daily rate of
the employees;
2. Mid-year bonus differential representing the
difference between two (2) months gross pay and
two (2) months basic pay and end-year bonus
differential of one (1) month gross pay for 1986.
The claim for holiday differential for the period
earlier than November 11, 1983 is hereby
dismissed, the same having prescribed.
Likewise, the charge of unfair labor practice
against the respondent company is hereby
dismissed for lack of merit. (pp. 72-73, Rollo.)
A motion for reconsideration was filed by TRB but it was denied.
Hence, this petition for certiorari.

There is merit in the petitioner's contention that the NLRC

gravely abused its discretion in ordering it to pay mid-year/yearend bonus differential for 1986 to its employees.
A bonus is "a gratuity or act of liberality of the giver which the
recipient has no right to demand as a matter of right" (Aragon
vs. Cebu Portland Cement Co., 61 O.G. 4597). "It is something
given in addition to what is ordinarily received by or strictly due
the recipient." The granting of a bonus is basically a
management prerogative which cannot be forced upon the
employer "who may not be obliged to assume the onerous
burden of granting bonuses or other benefits aside from the
employee's basic salaries or wages" . . . (Kamaya Point Hotel vs.
National Labor Relations Commission, Federation of Free
Workers and Nemia Quiambao, G.R. No. 75289, August 31,
1989).
It is clear from the above-cited rulings that the petitioner may
not be obliged to pay bonuses to its employees. The matter of
giving them bonuses over and above their lawful salaries and
allowances is entirely dependent on the profits, if any, realized
by the Bank from its operations during the past year.
From 1979-1985, the bonuses were less because the income of
the Bank had decreased. In 1986, the income of the Bank was
only 20.2 million pesos, but the Bank still gave out the usual
two (2) months basic mid-year and two months gross year-end
bonuses. The petitioner pointed out, however, that the Bank
weakened considerably after 1986 on account of political
developments in the country. Suspected to be a Marcos-owned
or controlled bank, it was placed under sequestration by the
present administration and is now managed by the Presidential
Commission on Good Government (PCGG).
In the light of these submissions of the petitioner, the
contention of the Union that the granting of bonuses to the
employees had ripened into a company practice that may not
be adjusted to the prevailing financial condition of the Bank has
no legal and moral bases. Its fiscal condition having declined,
the Bank may not be forced to distribute bonuses which it can
no longer afford to pay and, in effect, be penalized for its past
generosity to its employees.
Private respondent's contention, that the decrease in the
midyear and year-end bonuses constituted a diminution of the
employees' salaries, is not correct, for bonuses are not part of

labor standards in the same class as salaries, cost of living

allowances, holiday pay, and leave benefits, which are provided
by the Labor Code.
WHEREFORE, the petition for certiorari is granted. The decision
of the National Labor Relations Commission is modified by
deleting the award of bonus differentials to the employees for
1986. In other respects, the decision is affirmed. Costs against
the respondent union.
SO ORDERED.
Narvasa (Chairman), Cruz, Gancayco and Medialdea, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-59743 May 31 1982
NATIONAL FEDERATION OF SUGAR WORKERS
(NFSW), petitioner,
vs.
ETHELWOLDO R. OVEJERA, CENTRAL AZUCARERA DE LA
CARLOTA (CAC), COL. ROGELIO DEINLA, as Provincial
Commander, 3311st P.C. Command, Negros
Occidental, respondents.
PLANA, J:
This is a petition for prohibition seeking to annul the decision
dated February 20, 1982 of Labor Arbiter Ethelwoldo R. Ovejera
of the National Labor Relations Commission (NLRC) with station
at the Regional Arbitration Branch No. VI-A, Bacolod City, which,
among others, declared illegal the ongoing strike of the National
Federation of Sugar Workers (NFSW) at the Central Azucarera de
la Carlota (CAC), and to restrain the implementation thereof.
I. FACTS
1. NFSW has been the bargaining agent of CAC rank and file
employees (about 1200 of more than 2000 personnel) and has
concluded with CAC a collective bargaining agreement effective
February 16, 1981 February 15, 1984. Under Art. VII, Sec. 5 of
the said CBA
Bonuses The parties also agree to maintain the
present practice on the grant of Christmas bonus,

milling bonus, and amelioration bonus to the

extent as the latter is required by law.
The Christmas and milling bonuses amount to 1- months'
salary.
2. On November 28, 1981, NFSW struck allegedly to compel the
payment of the 13th month pay under PD 851, in
addition to the Christmas, milling and amelioration bonuses
being enjoyed by CAC workers.
3. To settle the strike, a compromise agreement was concluded
between CAC and NFSW on November 30,1981. Under
paragraph 4 thereof
The parties agree to abide by the final decision of
the Supreme Court in any case involving the 13th
Month Pay Law if it is clearly held that the
employer is liable to pay a 13th month pay
separate and distinct from the bonuses already
given.
4. As of November 30, 1981, G.R. No. 51254 (Marcopper Mining
Corp. vs. Blas Ople and Amado Inciong, Minister and Deputy
Minister of Labor, respectively, and Marcopper Employees Labor
Union, Petition for certiorari and Prohibition) was still pending in
the Supreme Court. The Petition had been dismissed on June 11,
1981 on the vote of seven Justices. 1 A motion for
reconsideration thereafter filed was denied in a resolution dated
December 15, 1981, with only five Justices voting for denial. (3
dissented; 2 reserved their votes: 4 did not take part.)
On December 18, 1981 the decision of June 11, 1981 having
become final and executory entry of judgment was made.
5. After the Marcopper decision had become final, NFSW
renewed its demand that CAC give the 13th month pay. CAC
refused.
6. On January 22, 1982, NFSW filed with the Ministry of Labor
and Employment (MOLE) Regional Office in Bacolod City a
notice to strike based on non-payment of the 13th month pay.
Six days after, NFSW struck.
7. One day after the commencement of the strike, or on January
29, 1982, a report of the strike-vote was filed by NFSW with
MOLE.
8. On February 8, 1982, CAC filed a petition (R.A.B. Case No.
0110-82) with the Regional Arbitration Branch VI-A, MOLE, at
Bacolod City to declare the strike illegal, principally for being

violative of Batas Pambansa Blg. 130, that is, the strike was
declared before the expiration of the 15-day cooling-off period
for unfair labor practice (ULP) strikes, and the strike was staged
before the lapse of seven days from the submission to MOLE of
the result of the strike-vote.
9. After the submission of position papers and hearing, Labor
Arbiter Ovejera declared the NFSW strike illegal. The dispositive
part of his decision dated February 20, 1982 reads:
Wherefore, premises considered, judgment is
hereby rendered:
1. Declaring the strike commenced by NFSW on
January 28, 1982, illegal,
2. Directing the Central to resume operations
immediately upon receipt hereof;
3. Directing the Central to accept back to work all
employees appearing in its payroll as of January
28, 1982 except those covered by the February 1,
1982 memorandum on preventive suspension but
without prejudice to the said employees'
instituting appropriate actions before this Ministry
relative to whatever causes of action they may
have obtained proceeding from said
memorandum;
4. Directing the Central to pay effective from the
date of resumption of operations the salaries of
those to be placed on preventive suspension as
per February 1, 1982 memorandum during their
period of preventive suspension; and
5. Directing, in view of the finding that the
subject strike is illegal, NFSW, its officers,
members, as well as sympathizers to immediately
desist from committing acts that may impair or
impede the milling operations of the Central
The law enforcement authorities are hereby
requested to assist in the peaceful enforcement
and implementation of this Decision.
SO ORDERED.
10. On February 26, 1982, the NFSW by passing the NLRC
filed the instant Petition for prohibition alleging that Labor
Arbiter Ovejera, CAC and the PC Provincial Commander of
Negros Occidental were threatening to immediately enforce the

February 20, 1982 decision which would violate fundamental

rights of the petitioner, and praying that
WHEREFORE, on the foregoing considerations, it
is prayed of the Honorable Court that on the
Petition for Preliminary Injunction, an order, after
hearing, issue:
1. Restraining implementation or enforcement of
the Decision of February 20, 1982;
2. Enjoining respondents to refrain from the
threatened acts violative of the rights of strikers
and peaceful picketers;
3. Requiring maintenance of the status quo as of
February 20, 1982, until further orders of the
Court;
and on the Main Petition, judgment be rendered after hearing.
1. Declaring the Decision of February 2O, l982
null and void;
2. Making the preliminary injunction permanent;
3. Awarding such other relief as may be just in
the premises.
11. Hearing was held, after which the parties submitted their
memoranda. No restraining order was issued.
II ISSUES
The parties have raised a number of issues, including some
procedural points. However, considering their relative
importance and the impact of their resolution on ongoing labor
disputes in a number of industry sectors, we have decided in
the interest of expediency and dispatch to brush aside nonsubstantial items and reduce the remaining issues to but two
fundamental ones:
1. Whether the strike declared by NFSW is illegal, the resolution
of which mainly depends on the mandatory or directory
character of the cooling-off period and the 7-day strike ban after
report to MOLE of the result of a strike-vote, as prescribed in the
Labor Code.
2. Whether under Presidential Decree 851 (13th Month Pay
Law), CAC is obliged to give its workers a 13th month salary in
addition to Christmas, milling and amelioration bonuses, the
aggregate of which admittedly exceeds by far the disputed 13th
month pay. (See petitioner's memorandum of April 12, 1982, p.
2; CAC memorandum of April 2, 1982, pp. 3-4.) Resolution of

this issue requires an examination of the thrusts and application

of PD 851.
III. DISCUSSION
1. Articles 264 and 265 of the Labor Code, insofar as pertinent,
read:
Art. 264, Strikes, picketing and lockouts. ...
(c) In cases of bargaining deadlocks, the certified
or duly recognized bargaining representative may
file a notice of strike with the Ministry (of Labor
and Employment) at least thirty (30) days before
the intended date thereof. In cases of unfair labor
practices, the period of notice shall be shortened
tofifteen (15) days; ...
(d) During the cooling-off period, it shall be the
duty of the voluntary sttlement. Should the
dispute remain unsettled until the lapse of the
requisite number of days from the mandatory
filing of the notice, the labor union may strike or
the employer may declare a lockout.
(f) A decision to declae a strike must be approved
by at least two-thirds (2/3) of the total union
membership in the bargaining unit concerened by
secret ballots in meetings or referenda. A
decision to declae a lockout must be approved by
at least two-thirds (2/3) of the board of direcotrs
of the employer corporation or association or of
the partners in a partnership obtained by secret
ballot in a meeting called for the purpose. the
decision shall be valid for the duration of the
dispute based on substantially the same grounds
considered when the strike or lockout vote was
taken . The Ministry, may at its own intitiative or
upon the request of any affected party, supervise
the conduct of the secret balloting. In every
case, the union of the employer shall furnish the
Ministry the results of the voting at least seven
(7) days before the intended strike or
lockout, subject to the cooling-off periodherein
provided. (Emphasis supplied).
ART. 265. Prohibited activities. It shall be
unlawful for any labor organization or employer to

declare a strike or lockout without first having

bargained collectively in accordance with Title VII
of this Book or without first having filed the notice
required in the preceding Article or without the
necessary strike or lockout vote first having been
obtained and reported to the Ministry.
It shall likewise be unlawful to declare a strike or
lockout after assumption of jurisdiction by the
President or the Minister or after certification or
submission of the dispute to compulsory or
voluntary arbitration or during the pendency of
cases involving the same grounds for the strike or
lockout. (Emphasis supplied.)
(a) Language of the law. The foregoing provisions hardly
leave any room for doubt that the cooling-off period in Art.
264(c) and the 7-day strike ban after the strike-vote report
prescribed in Art. 264(f) were meant to be, and should be
deemed, mandatory.
When the law says "the labor union may strike" should the
dispute "remain unsettled until the lapse of the requisite
number of days (cooling-off period) from the filing of the
notice," the unmistakable implication is that the union may not
strike before the lapse of the cooling-off period. Similarly, the
mandatory character of the 7-day strike ban after the report on
the strike-vote is manifest in the provision that "in every case,"
the union shall furnish the MOLE with the results of the
voting "at least seven (7) days before the intended
strike, subject to the (prescribed) cooling-off period." It must be
stressed that the requirements of cooling-off period and 7-day
strike ban must both be complied with, although the labor union
may take a strike vote and report the same within the statutory
cooling-off period.
If only the filing of the strike notice and the strike-vote report
would be deemed mandatory, but not the waiting periods so
specifically and emphatically prescribed by law,
the purposes (hereafter discussed) for which the filing of the
strike notice and strike-vote report is required would not be
achieved, as when a strike is declaredimmediately after a strike
notice is served, or when as in the instant case the strikevote report is filed with MOLE after the strike had actually
commenced Such interpretation of the law ought not and

cannot be countenanced. It would indeed be self-defeating for

the law to imperatively require the filing on a strike notice and
strike-vote report without at the same time making the
prescribed waiting periods mandatory.
(b) Purposes of strike notice and strike-vote report. In
requiring a strike notice and a cooling-off period, the avowed
intent of the law is to provide an opportunity for mediation and
conciliation. It thus directs the MOLE "to exert all efforts at
mediation and conciliation to effect a voluntary settlement"
during the cooling-off period . As applied to the CAC-NFSW
dispute regarding the 13th month pay, MOLE intervention could
have possibly induced CAC to provisionally give the 13th month
pay in order to avert great business loss arising from the project
strike,without prejudice to the subsequent resolution of the
legal dispute by competent authorities; or
mediation/conciliation could have convinced NFSW to at least
postpone the intended strike so as to avoid great waste and
loss to the sugar central, the sugar planters and the sugar
workers themselves, if the strike would coincide with the mining
season.
So, too, the 7-day strike-vote report is not without a purpose. As
pointed out by the Solicitor General
Many disastrous strikes have been staged in the
past based merely on the insistence of minority
groups within the union. The submission of the
report gives assurance that a strike vote has
been taken and that, if the report concerning it is
false, the majority of the members can take
appropriate remedy before it is too late. (Answer
of public respondents, pp. 17-18.)
If the purpose of the required strike notice and strike-vote report
are to be achieved, the periods prescribed for their attainment
must, as aforesaid, be deemed mandatory.,
... when a fair interpretation of the statute, which
directs acts or proceedings to be done in a
certain way, shows the legislature intended a
compliance with such provision to be essential to
the validity of the act or proceeding, or when
some antecedent and prerequisite conditions
must exist prior to the exercise of power or must
be performed before certain other powers can be

exercised, the statute must be regarded as

mandatory. So it has been held that, when a
statute is founded on public policy [such as the
policy to encourage voluntary settlement of
disputes without resorting to strikes], those to
whom it applies should not be permitted to waive
its provisions. (82 C.J.S. 873-874. Emphasis
supplied.)
(c) Waiting period after strike notice and strike-vote report, valid
regulation of right to strike. To quote Justice Jackson in
International Union vs. Wisconsin Employment Relations Board,
336 U.S. 245, at 259
The right to strike, because of its more serious
impact upon the public interest, is more
vulnerable to regulation than the right to organize
and select representatives for lawful purposes of
collective bargaining ...
The cooling-off period and the 7-day strike ban after the filing of
a strike- vote report, as prescribed in Art. 264 of the Labor
Code, are reasonable restrictions and their imposition is
essential to attain the legitimate policy objectives embodied in
the law. We hold that they constitute a valid exercise of the
police power of the state.
(d) State policy on amicable settlement of criminal liability.
Petitioner contends that since the non-compliance (with PD 851)
imputed to CAC is an unfair labor practice which is an offense
against the state, the cooling-off period provided in the Labor
Code would not apply, as it does not apply to ULP strikes. It is
argued that mediation or conciliation in order to settle a
criminal offense is not allowed.
In the first place, it is at best unclear whether the refusal of CAC
to give a 13th month pay to NFSW constitutes a criminal act.
Under Sec. 9 of the Rules and regulations Implementing
Presidential Decree No. 851
Non-payment of the thirteenth-month pay
provided by the Decree and these rules shall be
treated as money claims cases and shall be
processed in accordance with the Rules
Implementing the Labor Code of the Philippines
and the Rules of the National Labor Relations
Commission.

Secondly, the possible dispute settlement, either

permanent or temporary, could very well be
along legally permissible lines, as indicated in (b)
above or assume the form of measures designed
to abort the intended strike, rather than
compromise criminal liability, if any. Finally,
amicable settlement of criminal liability is not
inexorably forbidden by law. Such settlement is
valid when the law itself clearly authorizes it. In
the case of a dispute on the payment of the 13th
month pay, we are not prepared to say that its
voluntary settlement is not authorized by the
terms of Art. 264(e) of the Labor Code, which
makes it the duty of the MOLE to exert all efforts
at mediation and conciliation to effect a voluntary
settlement of labor disputes.
(e) NFSW strike is illegal. The NFSW declared
the strike six (6) days after filing a strike notice,
i.e., before the lapse of the mandatory cooling-off
period. It also failed to file with the
MOLE beforelaunching the strike a report on the
strike-vote, when it should have filed such report
"at least seven (7) days before the intended
strike." Under the circumstances, we are perforce
constrained to conclude that the strike staged by
petitioner is not in conformity with law. This
conclusion makes it unnecessary for us to
determine whether the pendency of an
arbitration case against CAC on the same issue of
payment of 13th month pay [R.A.B No. 512-81,
Regional Arbitration Branch No. VI-A, NLRC,
Bacolod City, in which the National Congress of
Unions in the Sugar Industry of the Philippines
(NACUSIP) and a number of CAC workers are the
complainants, with NFSW as Intervenor seeking
the dismissal of the arbitration case as regards
unnamed CAC rank and file employees] has
rendered illegal the above strike under Art. 265 of
the Labor Code which provides:

It shall likewise be unlawful to declare a strike or

lockout after assumption of jurisdiction by the
President or the Minister, or after certification or
submission of the dispute to compulsory or
voluntary arbitration or during the pendency of
cases involving the same grounds for the strike or
lockout. (Emphasis supplied.)
(2) The Second Issue. At bottom, the NFSW strike arose from
a dispute on the meaning and application of PD 851, with NFSW
claiming entitlement to a 13th month pay on top of bonuses
given by CAC to its workers, as against the diametrically
opposite stance of CAC. Since the strike was just an offshoot of
the said dispute, a simple decision on the legality or illegality of
the strike would not spell the end of the NFSW-CAC labor
dispute. And considering further that there are other disputes
and strikes actual and impending involving the
interpretation and application of PD 851, it is important for this
Court to definitively resolve the problem: whether under PD
851, CAC is obliged to give its workers a 13th month salary in
addition to Christmas, milling and amelioration bonuses
stipulated in a collective bargaining agreement amounting to
more than a month's pay.
Keenly sensitive to the needs of the workingmen, yet mindful of
the mounting production cost that are the woe of capital which
provides employment to labor, President Ferdinand E. Marcos
issued Presidential Decree No. 851 on 16 December 1975.
Thereunder, "all employers are hereby required to pay salary of
not more than all their employees receiving a basic P1,000 a
month, regardless of the nature of their employment, a 13th
month pay not later than December 24 of every year."
Exempted from the obligation however are:
Employers already paying their employees a 13th
month pay or its equivalent ...
(Section 2.)
The evident intention of the law, as revealed by the law itself,
was to grant an additional income in the form of a 13th month
pay to employees not already receiving the same. Otherwise
put, the intention was to grant some relief not to all workers
but only to the unfortunate ones not actually paid a 13th
month salary or what amounts to it, by whatever name called;
but it was not envisioned that a double burden would be

imposed on the employer already paying his employees a 13th

month pay or its equivalent whether out of pure generosity or
on the basis of a binding agreement and, in the latter ease,
regardless of the conditional character of the grant (such as
making the payment dependent on profit), so long as there is
actual payment. Otherwise, what was conceived to be a 13th
month salary would in effect become a 14th or possibly 15th
month pay.
This view is justified by the law itself which makes no distinction
in the grant of exemption: "Employers already paying their
employees a 13th month pay or its equivalent are not covered
by this Decree." (P.D. 851.)
The Rules Implementing P.D. 851 issued by MOLE immediately
after the adoption of said law reinforce this stand. Under
Section 3(e) thereof
The term "its equivalent" ... shall
include Christmas bonus, mid-year bonus, profitsharing payments and other cash
bonuses amounting to not less than 1/12th of the
basic salary but shall not include cash and stock
dividends, cost of living allowances and all other
allowances regularly enjoyed by the employee, as
well as non-monetary benefits. Where an
employer pays less than 1/12th of the employee's
basic salary, the employer shall pay the
difference." (Italics supplied.)
Having been issued by the agency charged with the
implementation of PD 851 as its contemporaneous
interpretation of the law, the quoted rule should be accorded
great weight.
Pragmatic considerations also weigh heavily in favor of crediting
both voluntary and contractual bonuses for the purpose of
determining liability for the 13th month pay. To require
employers (already giving their employees a 13th month salary
or its equivalent) to give a second 13th month pay would be
unfair and productive of undesirable results. To the employer
who had acceded and is already bound to give bonuses to his
employees, the additional burden of a 13th month pay would
amount to a penalty for his munificence or liberality. The
probable reaction of one so circumstance would be to withdraw
the bonuses or resist further voluntary grants for fear that if and

when a law is passed giving the same benefits, his prior

concessions might not be given due credit; and this negative
attitude would have an adverse impact on the employees.
In the case at bar, the NFSW-CAC collective bargaining
agreement provides for the grant to CAC workers of Christmas
bonus, milling bonus and amelioration bonus, the aggregate of
which is very much more than a worker's monthly pay. When a
dispute arose last year as to whether CAC workers receiving the
stipulated bonuses would additionally be entitled to a 13th
month pay, NFSW and CAC concluded a compromise agreement
by which they
agree(d) to abide by the final decision of the
Supreme Court in any case involving the 13th
Month Pay Law if it is clearly held that the
employer is liable to pay a 13th month pay
separate and distinct from the bonuses already
given.
When this agreement was forged on November 30,1981, the
original decision dismissing the petition in the
aforecited Marcopper case had already been promulgated by
this Court. On the votes of only 7 Justices, including the
distinguished Chief Justice, the petition of Marcopper Mining
Corp. seeking to annul the decision of Labor Deputy Minister
Amado Inciong granting a 13th month pay to Marcopper
employees (in addition to mid- year and Christmas bonuses
under a CBA) had been dismissed. But a motion for
reconsideration filed by Marcopper was pending as of November
30, 1981. In December 1981, the original decision was affirmed
when this Court finally denied the motion for reconsideration.
But the resolution of denial was supported by the votes of only
5 Justices. The Marcopper decision is therefore a Court decision
but without the necessary eight votes to be doctrinal. This
being so, it cannot be said that the Marcopper decision "clearly
held" that "the employer is liable to pay a 13th month pay
separate and distinct from the bonuses already given," within
the meaning of the NFSW-CAC compromise agreement. At any
rate, in view of the rulings made herein, NFSW cannot insist on
its claim that its members are entitled to a 13th month pay in
addition to the bonuses already paid by CAC. WHEREFORE, the
petition is dismissed for lack of merit. No costs.
SO ORDERED.

Aquino, Guerrero, Escolin, Vasquez, Relova and Gutierrez, JJ.,

concur.
Concepcion, J., is on leave.
Teehankee, J., concurs in the result.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-60337 August 21, 1987
UNIVERSAL CORN PRODUCTS (A DIVISION OF UNIVERSAL
ROBINA CORPORATION), petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and JOSE
ARMAS, ENGRACIO ASIS, AUSTERINAO ELEUTERIO,
FAUSTINO ATIENZA, MARIO ALTARES, JAIME ALTARES,
ISIDRO ARANO, LEONILO ARANO, ALFREDO ANCHETA,
DOMINGO ANCHETA, RIZALITO, ABANTO, RIZALITO,
CRESENCIO ASCUTIA, JESUS ASCUTIA, FELICIANO
ABORQUE, WILFREDO ARMENIO, ALEJANDRO ABAGAT,
PABLO ADLAWAN, FILEMON ABADINES, ROMEO AREVALO,
PABLO BUTIAL, BANAAG REMIGIO, LUCIO BERDIJO,
ANTONIO BIONSON, ABELARDO BRACAMONTE, SAMSON
BORDEOS, TEODORO, BARBIANA, FRANCISCO BABOR,
HERCULANO BARRAMEDA, RODRIGO BONGAIS, JAIME
BERANA, EDUARDO, BUENAVENTURA, RODRIGO
BAUTISTA, FELEMON BAUTISTA, DIONISIO BERNALES,
MARIANO BALAGTAS, ALFREDO BERNADAS, EPIGENIO
BORDEOS, BRIGIDO BAER, OSCAR BONDOC, JOSE
BONDOC, ROMEO BUCAYAN, VITALIANO BATOBATO,
DOMINGO BALLON, JOSE BORLEO, JOSE BORJA, RUFINO
CLEMENTE, JUAN CABALLERO, TRANQUILINA CAUSON,
AUGORIO CALNEA, LEOPOLDO CUARTERO, ALBERTO
CATBAGAN, ROMEO CALIVO, ANDRES CUNTAPAY,
ALBERTO CASTRO, CASTOR RODRIGO, SIMPLICIO
CACATIAN, NILO DALANON, BIENVENIDO DUMAGAT, SR.,
BIENVENIDO DUMAGAT, JR., DOMINADOR DUMANTAY,
TEODORO DULOMBAL, RODOLFO DANDAN, SALVADOR

DASIGO, ELIAS DASIGO, FRANCISCO ESTOLANO,

LEOPOLDO ESTIOCO, ROGELIO ESTANISLAO, MONTANO
ESTANISLAO, ELIAS ESTRADA, ERNESTO ESTABALLIO,
FERNANDO FERNANDEZ, PEDRO GETEZO, ALFONSO DE
GUZMAN, LORENZO DE GUZMAN, MODESTO DE GUZMAN,
ARELLANO GARCIA, ALFREDO GARCIA, MANUEL
GOROSPE, RAYMUNDO GELLIDO, RODOLFO GALEON,
ROMEO GONZALES, GERARDO GERMEDIA, BENITO GALE,
ROBERTO HASAL, EDILBERTO HERNANDEZ, RAFAEL
IGUIZ, MARGARITO JAVIER, PABLO JOSE, PEDRO JOVE,
CELEDONIO JACA, REYNALDO JALLA, EDUARDO
JUMAQUIO, DOMINGO JUANO, AGUSTIN KHO, ANTONIO
LAMERA, RODOLFO LINEZO, MANUEL LAMBATIN, MANUEL
LOPEZ, BENEDICTO LOPEZ, MARIANO LARA, ELINO MISA,
FRANCISCO MINA, RODOLFO MIRABEL, ROGER MIRABEL,
ROLANDO MIRABEL, OSCAR MARTINEZ, MIGUEL
MANACIO, PEDRO MANALO, LEOPOLDO MARQUEZ,
ANTONIO, MEDINA, SALVADOR MARAINAN, NAPOLEON
MAGAYA, ALFREDO MAQUI, EDUARDO MILLET, PABLO
MENDEZ, DULCISIMO NATIVIDAD, ROMEO NAGTALON,
ALFONSO NOQUEZ, ALEJANDRO NOQUEZ, ANASTACIO
NIVAL, EMILIO ORTIZ, PONCIANO ORLANDA, GERARDO
POSADAS, ATICO PEDRIGOZA, ALFREDO PASCUA,
LEONARDO PATRON, MIGUEL PACHECO, DOMINGO
PACHECO, FELIMON POLICARPIO, ERNESTO QUIJANO,
EFREN QUIBOTE, SIMEON RESCO, FERNANDO REYNOSO,
EMILIO RIVERA, GRACIANO RAMOS, REYNALDO RAMIREZ,
PAQUITO RAMIREZ, THOMAS ROSARIO, JR., ROMULO
REYES, REYNALDO RAPSING, ALFREDO DEL ROSARIO,
FLORENCIO SASAN, ALFONSO SAMSON, LUIS SUAREZ,
GREGORIO SOMODO, FRANCISCO SAPLAN, LUCIANO
SARNO, RICARDO SOREL, CRESENCIO SANTOS, ARSENIO
SERGA JR., BALTAZAR TALATO, DIOSDADO TULANG,
EUGENIO TOLENTINO, AMADOR TABULOG, LAZARO
TORRES, JAIME TRAJANO, GENEROSO TANTE, SERGIO
TABUAC, ANASTACIO TIMOG, DANIEL UDAN,
HERMENIGILDO VITO, VICENTE VITO, BENJAMIN
VILLAMOR, ARTURO VALIENTE, ERNESTO VALIENTE,
FELICISIMO VERA, respondents.

SARMIENTO, J.:
The petitioner invokes National Federation of Sugar Workers
(NFSW) v. Ovejera, 1 in which we held that Presidential Decree
No. 851, 2 the 13th-month pay law, does not cover employers
already paying their employees an "equivalent" to the 13th
month pay.
There is no dispute as to the facts.
Sometime in May, 1972, the petitioner and the Universal Corn
Products Workers Union entered into a collective bargaining
agreement in which it was provided, among other things, that:
xxx xxx xxx
The COMPANY agrees to grant all regular workers
within the bargaining unit with at least one (1)
year of continuous service, a Christmas bonus
equivalent to the regular wages for seven (7)
working days, effective December, 1972. The
bonus shall be given to the workers on the
second week of December.
In the event that the service of a worker is not
continuous due to factory shutdown, machine
breakdown or prolonged absences or leaves, the
Christmas bonus shall be prorated in accordance
with the length of services that worker concerned
has served during the year . 3
xxx xxx xxx
The agreement had a duration of three years, effective June 1,
1971, or until June 1, 1974.
On account however of differences between the parties with
respect to certain economic issues, the collective bargaining
agreement in question expired without being renewed. On June
1, 1979, the parties entered into an "addendum" stipulating
certain wage increases covering the years from 1974 to 1977.
Simultaneously, they entered into a collective bargaining
agreement for the years from 1979 to 1981. Like the
"addendum," the new collective bargaining agreement did not
refer to the "Christmas bonus" theretofore paid but dealt only
with salary adjustments. According to the petitioner, the new
agreements deliberately excluded the grant of Christmas bonus
with the enactment of Presidential Decree No. 851 4 on
December 16, 1975. It further claims that since 1975, it had

been paying its employees 13th-month pay pursuant to the

Decree. 5
For failure of the petitioner to pay the seven-day Christmas
bonus for 1975 to 1978 inclusive, in accordance with the 1972
CBA, the union went to the labor arbiter for relief. In his
decision, 6 the labor arbiter ruled that the payment of the 13th
month pay precluded the payment of further Christmas bonus.
The union appealed to the National Labor Relations Commission
(NLRC). The NLRC set aside the decision of the labor arbiter
appealed from and entered another one, "directing respondent
company [now the petitioner] to pay the members concerned of
complainants [sic] union their 7-day wage bonus in accordance
with the 1972 CBA from 1975 to 1978." Justifying its reversal of
the arbiter's decision, the NLRC held:
xxx xxx xxx
It is clear that the company implemented the
aforequoted provision of the CBA in 1972, 1973
and 1974. In view thereof it is our considered
opinion that the crediting of said benefit to the
13th month pay cannot be sanctioned on the
ground that it is contrary to Section 10 of the
Rules and Regulations Implementing Presidential
Decree No. 85 1, which provides, to wit;
Section 10. Prohibition against
reduction or elimination of benefits.
Nothing herein shall be
construed to authorize any
employer to eliminate, or diminish
in any way, supplements, or other
employee benefits or favorable
practice being enjoyed by the
employee at the time of
promulgation of this issuance.
More so because the benefit involved was not
magnanimously extended by the company to its
employees but was obtained by the latter thru
bargaining negotiations. The aforementioned CBA
was the law between the parties and the
provisions thereof must be faithfully observed by
them during its effectivity. In this connection, it
should be noted that the same parties entered

into another 3-year CBA on June 11, 1979, which

no longer provides for a 7-day wage Christmas
bonus. In effect, therefore, the parties agreed to
discontinue the privilege, which agreement
should also be respected.7
xxx xxx xxx
We hold that in the case at bar, Ovejera (La Carlota) case does
not apply.
We apply instead, United CMC Textile Workers Union v.
Valenzuela 8 a recent decision. In that case this Court, speaking
through Mr. Justice Edgardo Paras, held:
xxx xxx xxx
... If the Christmas bonus was included in the
13th month pay, then there would be no need for
having a specific provision on Christmas bonus in
the CBA. But it did not provide for a bonus in
graduated amounts depending on the length of
service of the employee. The intention is clear
therefore that the bonus provided in the CBA was
meant to be in addition to the legal requirement.
Moreover, why exclude the payment of the 1978
Christmas bonus and pay only the 1979-1980
bonus. The classification of the company's
workers in the CBA according to their years of
service supports the allegation that the reason for
the payment of bonus was to give bigger award
to the senior employees-a purpose which is not
found by P.D. 851. A bonus under the CBA is an
obligation created by the contract between the
management and workers while the 13th month
pay is mandated by the law (P. D. 851). 9
xxx xxx xxx
In the same vein, we consider the seven-day bonus here
demanded "to be in addition to the legal requirement."
Although unlike the Valenzuela CBA, which took effect after the
promulgation of Presidential Decree No. 851 in 1975, the
subject agreement was entered into as early as 1972, that is no
bar to our application of [Link] is significant for us is
the fact that, like the Valenzuela, agreement, the Christmas
bonus provided in the collective bargaining agreement accords
a reward, in this case, for loyalty, to certain employees. This is

evident from the stipulation granting the bonus in question to

workers "with at least one (1) year of continuous service." As we
said in Valenzuela" this is "a purpose not found in P.D. 851." 10
It is claimed, however, that as a consequence of the impasse
between the parties beginning 1974 through 1979, no collective
bargaining agreement was in force during those intervening
years. Hence, there is allegedly no basis for the money award
granted by the respondent labor body. But it is not disputed that
under the 1972 collective bargaining agreement, [i]f no
agreement and negotiations are continued, all the provisions of
this Agreement shall remain in full force up to the time a new
agreement is executed." 11 The fact, therefore, that the new
agreements are silent on the seven-day bonus demanded
should not preclude the private respondents' claims thereon.
The 1972 agreement is basis enough for such claims for the
whole writing is " "instinct with an obligation," imperfectly
express." 12
WHEREFORE, premises considered, the petition is hereby
DISMISSED. The Decision of the public respondent NLRC
promulgated on February 11, 1982, and its Resolution dated
March 23, 1982, are hereby AFFIRMED. The temporary
restraining order issued on May 19, 1982 is LIFTED.
This Decision is IMMEDIATELY EXECUTORY.
No pronouncement as to costs.
SO ORDERED.
Yap (Chairman), Paras and Padilla, JJ., concur.
Melencio-Herrera, J., is on leave.

THIRD DIVISION
[G.R. No. 114280. July 26, 1996]
PHILIPPINE
AIRLINES,
INC.
(PAL), petitioner,
vs. NATIONAL LABOR RELATIONS COMMISSION and
AIRLINE PILOTS ASSOCIATION OF THE PHILIPPINES
(ALPAP), respondents.
[G.R. No. 115224. July 26, 1996]

AIRLINE PILOTS ASSOCIATION OF THE PHILIPPINES

(ALPAP), petitioner,
vs. NATIONAL
LABOR
RELATIONS
COMMISSION
and
PHILIPPINE
AIRLINES, INC. (PAL), respondents.
DECISION
FRANCISCO, J.:
For refusing to pay its pilots their thirteenth (13th)month
pay, a complaint [docketed as NLRC Case No. 00-09-005598-91]
for unfair labor practice was filed against Philippine Airlines, Inc.
(PAL) by the Airline Pilots Association of the Philippines
(ALPAP). The Labor Arbiter ruled in favor of ALPAP and ordered
PAL to pay its pilots belonging to ALPAP their thirteenth month
pay from 1988 to 1990. Both parties appealed to the National
Labor Relations Commission which in turn affirmed with
modifications the decision of the Labor Arbiter. Their motions for
reconsideration having been denied, PAL and ALPAP proceeded
to
this
Court
with
their
respective
petitions
for certiorariassailing the Resolutions promulgated by the NLRC
on November 23, 1993 and February 28, 1994 in NLRC Case No.
003480-92.
In G.R. No. 114280, petitioner PAL takes exception to the
findings of the NLRC holding it liable to the members of ALPAP
for non-payment of their thirteenth month pay from 1988 to
1990. On the other hand, in G. R. No. 115224, petitioner ALPAP
disputes the deletion of the award of moral and exemplary
damages in its favor, as well as the non-imposition of legal
interest in the payment of the amounts due them from
PAL. Upon motion of ALPAP's counsel, the court ordered the
consolidation of both petitions.[1]
ALPAP filed its complaint[2] on September, 1991, charging
PAL of violating Presidential Decree No. 851, its Implementing
Rules and Regulations and Memorandum Order No. 28 issued by
then President Corazon C. Aquino, for unlawfully refusing and
failing to pay the pilots their thirteenth month pay from 1988 to
1990. Aside from their accumulated thirteenth month pay,
ALPAP prayed for an award of P500,000.00 as moral damages
and P100,000.00 as exemplary damages to each of their pilots,

plus attorney's fees equivalent to ten percent (10%) of the total

awards adjudged. Subsequently however, ALPAP expanded the
coverage of its claim from 1986 to 1990 upon filing its position
paper.[3]
In answer to the complaint, PAL denied any liability to
ALPAP and maintained that it was not obliged to give its pilots a
thirteenth month pay under P.D. 851 as it was already paying
said employees the equivalent of a thirteenth month pay in the
form of a year-end bonus. PAL invokes that under Section 2 of
P.D. 851 and its Implementing Rules and Regulations,
"employers already paying their employees a 13th month pay
or more in a calendar year or its equivalent at the time of this
issuance," are not covered by P.D. 851. [4] Additionally, PAL
contends that there is no demandable obligation in the absence
of any contractual stipulation or a legal provision requiring it to
give its pilots a thirteenth month pay aside from the year-end
bonus that the latter are already receiving.[5]
Disputing PAL's contention, ALPAP argued that the payment
of the year-end bonus cannot be equated with the thirteenth
month pay since the payment of the former is conditional in
character and not fixed in its amount, while that of the
thirteenth month pay is mandatory in character and definite in
its amount.[6]
On May 29, 1992, judgment was rendered by the Labor
Arbiter in ALPAP's favor and ordered PAL to pay the following
amounts:
"WHEREFORE, judgment is hereby rendered in this case,
declaring respondent Philippine Airlines (PAL) guilty of nonpayment of the 13th month [Link] is therefore
ordered to pay members of complainant Airlines Pilots
Association of the Philippines (ALPAP) the following sums of
money:
13th month payP69,167,244.00
Moral and Exemplary
Damages............ 6,948,000.00
Attorney's fees .. 7,611,524.00
Grand Total..P83,726,768.00
All other claims are denied for lack of legal or factual basis. [7]

In the aforecited decision, the Labor Arbiter discarded PAL's

contentions and took note of the fact that the payment of the
year-end bonus is conditional and uncertain. PAL's argument
that it is exempted from the coverage of P.D. 851 was ruled out
because it was shown that except for the pilots, all other
employees of PAL were receiving both the thirteenth month pay
and the year-end bonus. However, the coverage of the award
for thirteenth month pay was confined to 1988 until 1990,
excluding those from 1986 and 1987, due to ALPAP's failure to
amend its complaint.
Not satisfied, both parties appealed to the NLRC which in
turn promulgated the assailed resolution on November 23,
1993[8] and ruled in this wise:
WHEREFORE, premises considered, the decision of (sic) dated
29 May 1992 is hereby AFFIRMED with the modification that
respondent PAL also pay the 13th month pay to the ALPAP pilots
for the years 1986 and 1987; the dismissal of the claim for
moral and exemplary damages; the payment of PAL of legal
interest from the dates the 13th-month pay of the ALPAP pilots
accrued up to the time of actual payment; and the payment of
attorney's fees of 10% of the total award.
SO ORDERED.[9]
Still dissatisfied, the parties sought reconsideration which,
however, were both denied by the NLRC in its resolution dated
February 28, 1994.[10] The NLRC also reduced the award of
attorney's fees to five percent (5%) and deleted the payment of
legal interest for lack of basis.[11]
Hence, these petitions.
The pivotal issue in this petition is whether or not the NLRC
committed grave abuse of discretion in holding PAL liable to the
members of ALPAP for non-payment of their thirteenth month
pay from 1988 to 1990, notwithstanding that, as claimed by
PAL, there is no legal basis for the said finding.
PAL's contention is premised on the following arguments:
1) Payment of the thirteenth month pay under P.D. 851 and
Memorandum Order No. 28 covers only rank and file
employees. Pilots are excluded from the coverage because they
are not rank and file employees but rather supervisory

employees. Hence, they are not entitled to any thirteenth

month pay.
2) There is no contractual obligation to pay the pilots any
thirteenth month pay in the absence of any provision in their
CBA. And even assuming that they are entitled to a thirteenth
month pay, the payment of a year-end bonus is already
equivalent to a thirteenth month pay.
Anent the first argument, PAL cites Memorandum Order No.
28 which provides as follows:
"Section 1 of Presidential Decree No. 851 is hereby modified to
the extent that all employers are hereby required to pay all
their rank and file employees a 13th month pay not later than
December 24 of every year.
PAL maintains that pilots cannot be classified as rank and
file employees since the nature of their job includes the exercise
of supervision over the cabin crew and the power to
recommend disciplinary actions over the latter.[12]
Interestingly, however, the contention was raised by PAL
rather belatedly and invoked for the first time on appeal. Worse,
this issue was not even discussed in PAL's original Memorandum
and was raised only much later when PAL filed a Supplemental
Memorandum on Appeal through a new counsel. In fact, in
denying PAL's appeal, the NLRC did not even bother to consider
the new issue raised by PAL. This precludes us from taking
cognizance of and resolving the aforementioned issue with
respect to the employment status of the pilots as it would be
violative of the proscription against the presentation of new
issues on appeal. The rule is well-settled that points of law,
theories, issues and arguments not adequately brought to the
attention of the trial court need not be, and ordinarily will not be
considered by a reviewing court as they cannot be raised for
the first time on appeal[13] because this would be offensive to
the basic rules of fair play, justice and due process. [14] By
invoking the alleged supervisory status of the pilots only during
the pendency of its appeal and raising the issue only later in
their Supplemental Memorandum, it was evident that this was a
last ditch effort to shift to a new theory and raise a new matter

in the hope of a favorable result. This, however, is the

pernicious practice that has consistently been rejected. Thus,
PAL is now barred from claiming that their pilots are not rank
and file employees.
The other argument of PAL is that there is no provision in
the CBA of ALPAP which obligates the former to pay the
members of the latter any thirteenth month pay. PAL contends
that it is of no moment that its other employees, namely, the
flight attendants belonging to the Flight Attendants and
Stewards Association of the Philippines (FASAP) and the other
rank and file employees belonging to Philippine Airlines
Employees Association (PALEA), are being granted both the
thirteenth month pay and the year-end bonus because the
payment of the said benefits were the result of contractual
negotiations in their respective CBAs. The absence of such
contractual grant to the members of ALPAP only shows that
there was no intention to give the pilots the same
benefits. Furthermore, PAL argues that even assuming that the
pilots are legally entitled to a thirteenth month pay, the law
exempts them from compliance with the same because the
payment of a year-end/Christmas bonus is already equivalent to
the thirteenth month pay. To bolster this claim, PAL relies on the
doctrine laid down by this Court in the cases of National
Federation of Sugar Workers (NFSW) vs. Ovejera, [114 SCRA 354
(1982)], Dole Philippines, Inc. [Link], Jr., [117 SCRA 938
(1982)] and Brokenshire Memorial Hospital vs. NLRC [143 SCRA
564 (1986)], which was crystallized as follows:
"Clearly, from the discussions in National Federation of Sugar
Workers (NFSW), Dole and Brokenshire, what the law wants to
prevent is the imposition of a 'double burden' upon the
employer who is already paying the equivalent of a 13th month
pay. The law exempts from the payment of the 13th month pay
employers who are already giving its equivalent. Otherwise the
goal of uniformly providing employees with additional income
will not be [Link] inequity will result; while most
employees will be paid thirteen (13) months salary, some by
virtue of P.D. No. 851, will be receiving salary for fourteen (14)
months.[15]

ALPAP however disputes the abovementioned contentions

of PAL and maintains that the grant of a thirteenth month pay
being statutory, the same is mandatory in character and need
not be embodied in any written agreement because it is
deemed incorporated therein. It is therefore inconsequential if
the payment of the thirteenth month pay is not expressly
provided in the CBA. ALPAP also doubts the applicability of the
cases invoked by PAL considering the difference in the factual
background of this case. According to ALPAP what is squarely
applicable herein are the pronouncements in the cases of
United CMC Textile Workers Union vs. Labor Arbiter, 149 SCRA
424 (1987), Universal Corn Products v. NLRC, 153 SCRA 191
(1987) and UST Faculty Union vs. NLRC, 190 SCRA 215 (1990),
which uniformly ruled that where the purpose for the giving of a
Christmas bonus is not the same as the reasons for the granting
of a thirteenth month pay under P.D. 851, which is to uniformly
provide employees with additional income, then the employer is
still obligated to give the thirteenth month pay in addition to
the bonus. ALPAP also decries the fact that it is only their pilots
who are deprived of both the thirteenth month pay and the
year-end bonus, as opposed to the rest of PAL's employees
belonging to FASAP and PALEA who are enjoying both benefits.
The absence of an express provision in the CBA between
PAL and ALPAP obligating the former to pay the members of the
latter a thirteenth month pay is immaterial. It cannot be
disputed that the tenor of P.D. 851 as amended by
Memorandum Order No. 28 is mandatory in so providing that
"all employers are hereby required to pay all their rank and file
employees a thirteenth month pay not later than December 24
of every year. Non-compliance with this mandate cannot be
excused by the simple expedient of pointing to the absence of a
similar provision in the CBA for this would contravene the basic
rule that an existing law enters into and forms part of a valid
contract without the need for the parties to expressly make
reference to it.[16] Notwithstanding therefore the absence of any
contractual agreement, the payment of a thirteenth month pay
being a statutory grant, compliance with the same is mandatory
and is deemed incorporated in the CBA.
But whether or not PAL can claim the exemption provided
under the law by equating the year-end bonus with the

payment of the thirteenth month pay deserves a very close

scrutiny in this case.
Although P.D. 851 as amended by Memorandum Order No.
28 requires all employers to pay all their rank and file
employees a thirteenth month pay, the rule is subject to certain
exceptions. Excluded from the coverage are employers already
paying their employees a thirteenth month pay or more in a
calendar year or its equivalent at the time of the issuance of the
law.[17] Construing the term "Its equivalent", the same was
defined as inclusive of Christmas bonus, mid-year bonus, profitsharing payments and other cash bonuses amounting to not
less than 1/12th of the basic salary but shall not include cash
and stock dividend, cost of living allowances and all other
allowances regularly enjoyed by the employee, as well as nonmonetary benefits. When an employer pays less than 1/12th of
the employee's basic salary, the employer shall pay the
difference.[18]
The term "bonus" was in turn interpreted to mean:
[A] bonus is an amount granted and paid to an employee for his
industry and loyalty which contributed to the success of the
employer's business and made possible the realization of
profits. It is an act of generosity of the employer . . . It is also
granted by an enlightened employer to spur the employee to
greater efforts for the success of the business and realization of
bigger profits.[19]
Applying the aforecited definitions, it would seem that the
year-end bonus being granted by PAL to the employees may be
considered as an equivalent of the thirteenth month pay
considering the similarity in the purpose for granting the
same. As advanced by ALPAP, the rationale for PAL's grant of a
year-end bonus was to give regard for the loyalty, dedication
and hardwork of the employee.[20] Confirming this purpose is the
declaration made by then PAL President, Feliciano Belmonte, Jr.
in his letter addressed to the employees of the PAL dated
October 30, 1991, announcing the granting of a Christmas
bonus equivalent to 125% of the employee's monthly pay for a
"job well done" to wit:

xxx xxx xxx

In simple terms, we made a profit from our efforts to increase
revenues and cut costs. I believe it is only proper that
appreciation for a job well done should be expressed in a
tangible manner.
I am therefore pleased to announce that for this year,
management has decided to award a Christmas bonus
equivalent to 125% of your monthly basic pay.x x x x x x.[21]
From the foregoing, it appears that the rationale for the
grant of the year-end bonus by PAL coincides with the nature of
the bonus which can be equated with the payment of a
thirteenth month pay.
However, notwithstanding the above disquisitions, the
peculiar circumstances in this case wavers against the outright
application of the rule preventing the imposition of a double
burden upon the employer who is already paying the equivalent
of the thirteenth month pay, and thereby exempt PAL from
granting both benefits of a year-end bonus and a thirteenth
month pay to its pilots.
It bears to stress that this Court is not precluded from going
into a meticulous scrutiny of the attendant facts and
circumstances from which we could extract the real intention
and purpose behind the grant by PAL of the year-end bonus to
its employees. In previous cases, we denied the claim for an
exemption under the guise of paying the equivalent of a
thirteenth month pay under P.D. 851, where it has been shown
that the true purpose for the grant of the bonus to the
employees is different from the avowed intention of P.D. 851,
that is to uniformly provide the low paid employee with
additional income.[22]
In the instant case, it is beyond dispute that except for the
pilots belonging to ALPAP, all other employees of PAL who are
either members of FASAP or PALEA are enjoying both benefits of
a thirteenth month pay and a year-end bonus.
Explaining this discrepancy, PAL argues that whatever
benefits are being enjoyed by the members of the FASAP and
PALEA resulted from negotiations in their respective CBA's. The
absence of a provision granting both benefits to the members of
ALPAP confirms that there was no intention on the part of the

PAL to extend additional benefits to the former over and above

that required by law.
We find no merit in PAL's assertion. The inclusion of a
provision for the continued payment of the year-end bonus in
the 1988-1991 CBA of ALPAP and PAL belies the latter's
contention that the grant of the year-end bonus was intended to
be credited as compliance with the mandate to pay the pilots a
thirteenth month pay. Memorandum Order No. 28 which
amended P.D. 851, requiring all employers to pay all rank and
file employees, regardless of the amount of their salaries, a
thirteenth month pay, was issued on August 13, 1986. As early
as said date, PAL was therefore fully aware that it was legally
obliged to grant all its rank and file employees a thirteenth
month pay. Thus, if PAL really intended to equate the year-end
bonus with the thirteenth month pay, then the same should
have been expressly declared in their 1988-1991 CBA, or the
provision on the year-end bonus should have been deleted
because it would only be a mere superfluity. But as it is, the
provision for the continued payment of a year-end bonus was
incorporated in the CBA without any qualification, from which
the only logical conclusion that could be derived is that PAL
intended to give the members of ALPAP a year-end bonus in
addition to its obligation to grant a thirteenth month pay.
Moreover, there is no rational basis for withholding from the
members of ALPAP the benefit of a year-end bonus in addition
to the thirteenth month pay, while the same is being granted to
the other rank and file employees of PAL. PAL's failure to extend
the same benefits to its pilots is a blatant act of discrimination
and is grossly unfair to the latter considering the heavy and
delicate responsibilities that they bear in the airline business,
particularly in ensuring the safety and comfort of thousands of
passengers. In fact, it cannot be discounted that pilots are the
lifeblood of every airline company. This makes it imperative that
due regard must be exercised in safeguarding their rights and
welfare as employees. Finally, it is worth mentioning that herein
pilots of ALPAP are not even seeking more benefits than what
the other employees of PAL are already enjoying, rather, they
simply seek to be accorded the same benefits and treatment
already being extended by PAL's management to the other

employees. In this regard, we must therefore uphold their

claims.
With respect however to the deletion of the award of moral
and exemplary damages, the non-imposition of legal interest on
the awards, and the award of attorney's fees, we find no cogent
reason to reverse the conclusion reached by respondent NLRC,
bearing in mind that the award of these items are subject to the
sound discretion of the court, which if properly exercised will not
be disturbed on appeal.[23] The claim for moral and exemplary
damages was properly dismissed in this case due to the
absence of clear and convincing evidence to merit the
same. For moral damages to be awarded, it is essential that the
claimant must have satisfactorily proved during the trial the
existence of the factual basis of the damages and its causal
connection with the adverse party's acts. [24] If the court has no
proof or evidence upon which the claim for moral damages
could be based, such indemnity could not be outrightly
awarded.[25] The same holds true with respect to the award of
exemplary damages where it must be shown that the party
acted in a wanton, oppressive or malevolent manner.[26]
The award of attorney's fees on the basis of quantum
meruit at the rate of five percent (5%) of the total monetary
award is reasonable in this case considering the explicit
provisions laid out in Article III of the Labor Code and in Rule
VIII, Sec. II, Book III of the Omnibus Rules Implementing the
Labor Code,[27] to wit:
Art. III. Attorney's fees. - (a) In cases of unlawful withholding of
wages the culpable party may be assessed attomey's fees
equivalent to ten percent of the amount of wages recovered.
xxx xxx xxx
Sec. 11, Attorney's fees. - Attorney's fees in any judicial or
administrative proceedings for the recovery of wages shall not
exceed 10% of the amount awarded. The fees may be deducted
from the total amount due the winning party.
WHEREFORE, finding no merit in the petitions, the same
are hereby DENIED and the Resolutions of public respondent

NLRC promulgated on November 23, 1993 and February 28,

1994 are hereby AFFIRMED.
SO ORDERED.
Narvasa,
C.J.,
(Chairman),
Melo, and Panganiban, JJ, concur.

Davide,

Jr.,

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 72616-17 March 8, 1989
FRAMANLIS FARMS, INC., ELOISA SYCIP and LINCOLN
SYCIP, petitioners
vs.
HON. MINISTER OF LABOR, MANILA, PAFLU SEPTEMBER
CONVENTION, ZOILO ESTANISLAO, EMILIO ANITO, JAIME
ARNEJO, CASIMIRO ARRABIS, RENATO BACONADOR
,VICENTE BACONADOR, ROMEO BACONADOR, ROGELIO
BAYONITA ,RODOLFO BAYONITA, ROGELIO BONDOCIO,
NAPOLEON BONDOCIO, TEODORO BLANCAFLOR, PANFILO
BROOLA, ALFREDO DICHOSA, EDGARDO ENOPOSA,
WILSON ENOPOSA, SANCHO GALAGATE, GERARDO
GALAGATE, NELITO GALLEGO, FRANCISCO INDORES,
EDUARDO LOZADA, JESUS LABRADOR, PANFILO
LAORENTE, ROGELIO MITRA, FERNANDO MATTE,
EDUARDO MARONE, ROSELLER MARONE, IGLESERIO
PANOGOT ,SILVERIO PANOGOT, ARTURO PANOGOT
,ARMANDO SAGAYA ERNESTO TAGAMTAM, ROMEO
GARCIA, TEODORICO ATANGAN, LOURDES DE LA CRUZ,
CLARITA DELORIA ,DANILO MENDOZA, WILLIAM
GONZALES, RAFAEL PADRANES, JUAN PADRANES, JUAN
PANOGOT, MAGDALENA PANOGOT, JOSE SAGAYA, PABLO
TUNDAG, VIVENCIO NABAY, RAFAEL MARONE, RODOLFO
ENOPOSA, BALODOY ACADEMIA and GERARDO
GALLEGO, respondents.
Rodolfo B. Garbanzos, Jr. for petitioners.

The Solicitor General for public respondent.

GRIO-AQUINO, J.:
In April 1980, eighteen (18) employees of the petitioners filed
against their employer, and the other petitioners two labor
standard cases which were docketed in the Regional Office of
the Ministry of Labor in Bacolod City as FAD Cases Nos. 179180
and 0792-80 ("PAFLU SEPTEMBER CONVENTION VS. FRAMANLIS
FARMS"), alleging that in 1977 to 1979 they were not paid
emergency cost of living allowance (ECOLA) minimum wage,
13th month pay, holiday pay, and service incentive leave pay.
In their answer to the amended complaint, petitioners alleged
that the private respondents were not regular workers on their
hacienda but were migratory (sacadas) or pakyaw workers who
worked on-and-off and were hired seasonally, or only during the
milling season, to do piece-work on the farms, hence, they were
not entitled to the benefits claimed by them. They also alleged
that under the decrees, the living allowance shall be paid on a
monthly, not percentage, basis depending on the total assets or
authorized capital stock of the employer, whichever is higher
and applicable. They admitted that their total assets and
authorized capital stock exceeded P2 million. However, in 1977
they had applied for exemption under PDs 525 and 1123 but no
ruling has been issued by the Ministry of Labor on their
application.
The claims for holiday pay, service incentive leave pay, social
amelioration bonus and underpayment of minimum wage were
not controverted. With respect to the complainants' other
claims, the petitioners submitted only random payrolls which
showed that the women workers were underpaid as they were
receiving an average daily wage of P5.94 only, although the
male workers received P10 more or less, per day.
In an Order November 10, 1980, the Minister of Labor, through
Assistant Regional Director Dante Ardivilia adopting the
recommendations of the Chief of the Labor Regulation Section,
Bacolod District Office, directed the respondents (now
petitioners) to pay the following:
1. Deficiency payment of P2.00 per day to female
workers under PD 925 ** from May 1, 1976 to
April 30, 1979;

2. Deficiency payment of P3.00 per day to female

workers and Pl -00 per day to male workers,
under PD 1614 from April 1, 1979 to August 17,
1980;
3. Deficiency payment of P5.50 per day to female
workers and P3.50 to male workers under Ministry
Order No. 5 effective at the start of grinding (sic)
for the crop year 1979-80;
4. Effective August 18, 1980, P6.50 per day to
female workers and P4.50 to male workers up to
the date of restitution;
5. Deficiency payment of emergency living
allowance at P60 per month under PD 1678 and
another P60 per month under Ministry Order No.
5;
6. Service incentive leave pay, holiday pay and
social amelioration bonus for 3 years for 1977 to
1979;
7. The claims for 13th month pay for 1977 and
emergency living allowance under PD 1123 and
525 are held in abeyance due to the application
for exemption which is unacted up to the present.
Compliance must be made within ten (10) days
from receipt of the Order." (p. 34, Rollo.)
Upon the petitioners' appeal of that Order, the Deputy Minister
of Labor Vicente Leogardo, Jr. modified it on January 18, 1983 by
ordering the employer to pay:
1. all non-pakyaw workers their claim for holiday
and incentive leave pay for the years 1977, 1978
and 1979;
2. all complainants their 13th month pay for the
years 1978 and 1979;
3. all 'pakyaw' workers for the same period on
days they worked for at least eight (8) hours and
earned below P8.06 daily, their pay differentials.
The claims for 13th month pay for 1977, as well
as for ECOLA under PD Nos. 525 and 1123 shall,
pending outcome of respondent's application for
exemption therefrom, be held in abeyance."
(Annex H, p. 55, Rollo.)

The Deputy Minister clarified that pakyaw workers were

excluded from holiday and service incentive leave pay (p. 54,
Rollo).
Upon the denial of its motion for reconsideration, Framanlis
Farms, Inc. filed this petition for certiorari alleging that the
Deputy Minister erred:
1. in awarding pay differentials, holiday and
service incentive leave for pakyaw workers who
are not regular employees but are merely paid on
piece-rate, contrary to Art. 82 of the Labor Code;
2. in requiring the petitioners to pay 13th month
pay despite the fact that they (petitioners) had
substantially complied with the requirement by
extending yearly bonuses and other benefits in
kind and in cash to the complainants, pursuant to
Section 3(c) of PD 851 which exempts the
employer from paying 13th month pay when its
equivalent has already been given; and
3. in not precisely stating who among the private
respondents are pakyaw and non-pakyaw
workers.
The petition is not impressed with merit.
In 1976, PD No. 928 fixed a minimum wage of P7.00 for
agricultural workers in any plantation or agricultural enterprise
irrespective of whether or not the worker was paid on a piecerate basis. However, effective July 1, 1978, the minimum wage
was increased to P8.00 (Sec. 1, PD 1389). Subsequently, PD
1614 provided for a P2.00 increase in the daily wage of all
workers effective April 1, 1979. The petitioners admit that those
were the minimum rates prevailing then. Therefore, the
respondent Minister did not err in requiring the petitioners to
pay wage differentials to their pakyaw workers who worked for
at least eight hours daily and earned less than P8.00 per day in
1978 to 1979.
With regard to the 13th month pay, petitioners admitted that
they failed to pay their workers 13th month pay in 1978 and
1979. However, they argued that they substantially complied
with the law by giving their workers a yearly bonus and other
non-monetary benefits amounting to not less than 1/12th of
their basic salary, in the form of:

1. a weekly subsidy of choice pork meat for only

P9.00 per kilo and later increased to P11 per kilo
in March 1980, instead of the market price of P10
to P15 per kilo;
2. free choice pork meat in May and December of
every year; and
3. free light or electricity.
4. all of which were allegedly "the equivalent" of
the 13th month pay.
Unfortunately, under Section 3 of PD No. 851, such benefits in
the form of food or free electricity, assuming they were given,
were not a proper substitute for the 13th month pay required by
law. PD 851 provides:
Section 3. Employees covered The Decree shall
apply to all employees except to:
x x x. x x x x x x
The term 'its equivalent' as used in paragraph (c)
hereof shall include Christmas bonus, mid-year
bonus, profit-sharing payments and other cash
bonuses amounting to not less than 1/12 of the
basic salary but shall not include cash and stock
dividends, cost of living allowances and all other
allowances regularly enjoyed by the employee, as
well as non-monetary benefits.
Where an employer pays less than 1/12 of the
employee's basic salary, the employer shall pay
the difference."
Neither may year-end rewards for loyalty and service be
considered in lieu of 13th month pay. Section 10 of the Rules
and Regulations Implementing Presidential Decree No. 851
provides:
Section 10. Prohibition against reduction or
elimination of benefits-Nothing herein shall be
construed to authorize any employer to eliminate,
or diminish in any way, supplements, or other
employee benefits or favorable practice being
enjoyed by the employee at the time of
promulgation of this issuance."
The failure of the Minister's decision to identify the pakyaw and
non-pakyaw workers does not render said decision invalid. The

workers may be identified or determined in the proceedings for

execution of the judgment.
WHEREFORE, the petition for certiorari is dismissed with costs
against the petitioners.
SO ORDERED.
Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.
Footnotes

** Should be PD 928.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 110068 February 15, 1995

PHILIPPINE DUPLICATORS, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
PHILIPPINE DUPLICATORS EMPLOYEES UNIONTUPAS,respondents.
RESOLUTION
FELICIANO, J.:
On 11 November 1993, this Court, through its Third Division,
rendered a decision dismissing the Petition forCertiorari filed by
petitioner Philippine Duplicators, Inc. (Duplicators) in G.R. No.
110068. The Court upheld the decision of public respondent
National Labor Relations Commission (NLRC), which affirmed
the order of Labor Arbiter Felipe T. Garduque II directing
petitioner to pay 13th month pay to private respondent
employees computed on the basis of their fixed wages plus
sales commissions. The Third Division also denied with finality
on 15 December 1993 the Motion for Reconsideration filed (on
12 December 1993) by petitioner.
On 17 January 1994, petitioner Duplicators filed (a) a Motion for
Leave to Admit Second Motion for Reconsideration and (b) a
Second Motion for Reconsideration. This time, petitioner
invoked the decision handed down by this Court, through its
Second Division, on 10 December 1993 in the two (2)
consolidated cases of Boie-Takeda Chemicals,
Inc. vs. Hon. Dionisio de la Serna and Philippine Fuji Xerox
Corp. vs. Hon. Cresenciano [Link], in G.R. Nos. 92174 and

102552, respectively. In its decision, the Second Division inter

alia declared null and void the second paragraph of Section 5
(a) 1 of the Revised Guidelines issued by then Secretary of Labor
Drilon. Petitioner submits that the decision in
the Duplicators case should now be considered as having been
abandoned or reversed by the Boie-Takeda decision,
considering that the latter went "directly opposite and contrary
to" the conclusion reached in the former. Petitioner prays that
the decision rendered in Duplicators be set aside and another
be entered directing the dismissal of the money claims of
private respondent Philippine Duplicators' Employees' Union.
In view of the nature of the issues raised, the Third Division of
this Court referred the petitioner's Second Motion for
Reconsideration, and its Motion for Leave to Admit the Second
Motion for Reconsideration, to the Court en banc en consulta.
The Court en banc, after preliminary deliberation, and inorder to
settle the condition of the relevant case law, accepted G.R. No.
110068 as a banc case.
Deliberating upon the arguments contained in petitioner's
Second Motion for Reconsideration, as well as its Motion for
Leave to Admit the Second Motion for Reconsideration, and
after review of the doctrines embodied, respectively,
in Duplicators and Boie-Takeda, we consider that these Motions
must fail.
The decision rendered in Boie-Takeda cannot serve as a
precedent under the doctrine of stare decisis. The BoieTakeda decision was promulgated a month after this Court,
(through its Third Division), had rendered the decision in the
instant case. Also, the petitioner's (first) Motion for
Reconsideration of the decision dated 10 November 1993 had
already been denied, with finality, on 15 December
1993, i.e.; before the Boie-Takeda decision became final on 5
January 1994.
Preliminarily, we note that petitioner Duplicators did not put in
issue the validity of the Revised Guidelines on the
Implementary on of the 13th Month Pay Law, issued on
November 16, 1987, by then Labor Secretary Franklin M. Drilon,
either in its Petition for Certiorari or in its (First) Motion for
Reconsideration. In fact, petitioner's counsel relied upon these
Guidelines and asserted their validity in opposing the decision
rendered by public respondent NLRC. Any attempted change in

petitioner's theory, at this late stage of the proceedings, cannot

be allowed.
More importantly, we do not agree with petitioner that the
decision in Boie-Takeda is "directly opposite or contrary to" the
decision in the present (Philippine Duplicators). To the contrary,
the doctrines enunciated in these two (2) cases in fact co-exist
one with the other. The two (2) cases present quite different
factual situations (although the same word "commissions" was
used or invoked) the legal characterizations of which must
accordingly differ.
The Third Division in Durplicators found that:
In the instant case, there is no question that the
sales commission earned by the salesmen who
make or close a sale of duplicating machines
distributed by petitioner corporation, constitute
part of the compensation or remuneration paid to
salesmen for serving as salesmen, and hence as
part of the "wage" or salary of petitioner's
salesmen. Indeed, it appears that petitioner pays
its salesmen a small fixed or guaranteed wage;
the greater part of the salesmen's wages or
salaries being composed of the sales or incentive
commissions earned on actual sales closed by
them. No doubt this particular galary structure
was intended for the benefit of the petitioner
corporation, on the apparent assumption that
thereby its salesmen would be moved to greater
enterprise and diligence and close more sales in
the expectation of increasing their sales
commissions. This, however, does not detract
from the character of such commissions as part
of the salary or wage paid to each of its salesmen
for rendering services to petitioner corporation.
In other words, the sales commissions received for every
duplicating machine sold constituted part of the basic
compensation or remuneration of the salesmen of Philippine
Duplicators for doing their job. The portion of the salary
structure representing commissions simply comprised an
automatic increment to the monetary value initially assigned to
each unit of work rendered by a salesman. Especially significant
here also is the fact that the fixed or guaranteed portion of the

wages paid to the Philippine Duplicators' salesmen represented

only 15%-30% of an employee's total earnings in a year. We
note the following facts on record:
Salesmen's Total Earnings and 13th Month Pay
For the Year 1986 2
Name of Total Amount Paid Montly Fixed
Salesman Earnings as 13th Month Pay Wages x
12 3
Baylon, P76,610.30 P1,350.00 P16,200.00
Benedicto
Bautista 90,780.85 1,182.00 14,184.00
Salvador
Brito, 64,382.75 1,238.00 14,856.00
Tomas
Bunagan, 89,287.75 1,266.00 15,192.00
Jorge
Canilan, 74,678.17 1,350.00 16,200.00
Rogelio
Dasig, 54,625.16 1,378,00 16,536.00
Jeordan
Centeno, 51,854.15 1,266.04 15,192.00
Melecio, Jr.
De los Santos 73,551.39 1,322.00 15,864.00
Ricardo
del Mundo, 108,230.35 1,406.00 16,872.00
Wilfredo
Garcia, 93,753.75 1,294.00 15,528.00
Delfin
Navarro, 98,618.71 1,266.00 15,192.00
Ma. Teresa
Ochosa, 66,275.65 1,406.00 16,872.00
Rolano
Quisumbing, 101,065.75 1,406.00 16,872.00
Teofilo
Rubina, 42,209.73 1,266.00 15,192.00
Emma
Salazar, 64,643.65 1,238.00 14,856.00
Celso
Sopelario, 52,622.27 1,350.00 16,200.00
Ludivico
Tan, 30,127.50 1,238.00 14,856.00
Leynard

Talampas, 146,510.25 1,434.00 17,208.00

Pedro
Villarin, 41,888.10 1,434.00 17,208.00
Constancio
Carrasco, 50,201.20 403.75*
Cicero
Punzalan, 24,351.89 1,266.00 15,192.00
Reynaldo
Poblador, 25,516.75 323.00*
Alberto
Cruz, 32,950.45 323.00*
Danilo
Baltazar, 15,681.35 323.00*
Carlito
Considering the above circumstances, the Third Division held,
correctly, that the sales commissions were an integral part of
the basic salary structure of Philippine Duplicators' employees
salesmen. These commissions are not overtime
payments, nor profit-sharing payments nor any other fringe
benefit. Thus, the salesmen's commissions, comprising a predetermined percent of the selling price of the goods sold by
each salesman, were properly included in the term "basic
salary" for purposes of computing their 13th month pay.
In Boie-Takeda the so-called commissions "paid to or received
by medical representatives of Boie-Takeda Chemicals or by the
rank and file employees of Philippine Fuji Xerox Co.," were
excluded from the term "basic salary" because these were paid
to the medical representatives and rank-and-file employees as
"productivity bonuses." 4 The Second Division characterized
these payments as additional monetary benefits not properly
included in the term "basic salary" in computing their 13th
month pay. We note that productivity bonuses are generally tied
to the productivity, or capacity for revenue production, of a
corporation; such bonuses closely resemble profit-sharing
payments and have no clear director necessary relation to the
amount of work actually done by each individual employee.
More generally, a bonus is an amount granted and paid ex
gratia to the employee; its payment constitutes an act of
enlightened generosity and self-interest on the part of the
employer, rather than as a demandable or enforceable
obligation. In Philippine Education Co. Inc. (PECO) v. Court of

Industrial Relations, 5 the Court explained the nature of a bonus

in the following general terms:
As a rule a bonus is an amount granted and paid
to an employee for his industry loyalty which
contributed to the success of the employer's
business and made possible the realization of
profits. It is an act of generosity of the employer
for which the employee ought to be thankful and
grateful. It is also granted by an enlightened
employer to spur the employee to greater efforts
for the success of the business and realization of
bigger profits. . . . . From the legal point of view a
bonus is not and mandable and enforceable
obligation. It is so when It is made part of the
wage or salary or compensation. In such a case
the latter would be a fixed amount and the
former would be a contingent one dependent
upon the realization of profits. . . . 6 (Emphasis
supplied)
In Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual
Benefit Association, 7 the Court amplified:
. . . . Whether or not [a] bonus forms part of
waqes depends upon the circumstances or
conditions for its payment. If it is an additional
compensation which the employer promised and
agreed to give without any conditions imposed
for its payment, such as success of business or
greater production or output, then it is part of the
wage. But if it is paid only if profits are realized or
a certain amount of productivity achieved, it
cannot be considered part of wages. . . . It is also
paid on the basis of actual or actual work
accomplished. If the desired goal of production is
not obtained, or the amount of actual work
accomplished, the bonus does not
accrue. . . . 8 (Emphasis supplied)
More recently, the non-demandable character of a bonus was
stressed by the Court in Traders Royal Bank [Link] Labor
Relations Commission: 9
A bonus is a "gratuity or act of liberality of the
giver which the recipient has no right to demand

as a matter of right." (Aragon v. Cebu Portland

Cement Co., 61 O.G. 4567). "It is something given
in addition to what is ordinarily received by or
strictly due the recipient." The granting of a
bonus is basically a management prerogative
which cannot be forced upon the employer "who
may not be obliged to assume the onerous
burden of granting bonuses or other benefits
aside from the employee's basic salaries or
wages . . ." (Kamaya Point Hotel v. NLRC, 177
SCRA 160 [1989]). 10(Emphasis supplied)
If an employer cannot be compelled to pay a productivity bonus
to his employees, it should follow that such productivity bonus,
when given, should not be deemed to fall within the "basic
salary" of employees when the time comes to compute their
13th month pay.
It is also important to note that the purported "commissions"
paid by the Boie-Takeda Company to its medical representatives
could not have been "sales commissions" in the same sense
that Philippine Duplicators paid its salesmen Sales commissions.
Medical representatives are not salesmen; they do not effect
any sale of any article at all. In common commercial practice, in
the Philippines and elsewhere, of which we take judicial notice,
medical representatives are employees engaged in the
promotion of pharmaceutical products or medical devices
manufactured by their employer. They promote such products
by visiting identified physicians and inform much physicians,
orally and with the aid of printed brochures, of the existence
and chemical composition and virtues of particular products of
their company. They commonly leave medical samples with
each physician visited; but those samples are not "sold" to the
physician and the physician is, as a matter of professional
ethics, prohibited from selling such samples to their patients.
Thus, the additional payments made to Boie-Takeda's medical
representatives were not in fact sales commissions but rather
partook of the nature of profit-sharing bonuses.
The doctrine set out in the decision of the Second Division is,
accordingly, that additional payments made to employees, to
the extent they partake of the nature of profit-sharing
payments, are properly excluded from the ambit of the term

"basic salary" for purposes of computing the 13th month pay

due to employees. Such additional payments
are not "commissions" within the meaning of the second
paragraph of Section 5 (a) of the Revised Guidelines
Implementing 13th Month Pay.
The Supplementary Rules and Regulations Implementing P.D.
No. 851 subsequently issued by former Labor Minister Ople
sought to clarify the scope of items excluded in the computation
of the 13th month pay; viz.:
Sec. 4. Overtime pay, earnings and other
remunerations which are not part of the basic
salary shall not be included in the computation of
the 13th month pay.
We observe that the third item excluded from the term "basic
salary" is cast in open ended and apparently circular terms:
"other remunerations which are not part of the basic salary."
However, what particular types of earnings and remuneration
are or are not properly included or integrated in the basic salary
are questions to be resolved on a case to case basis, in the light
of the specific and detailed facts of each case. In principle,
where these earnings and remuneration are closely akin to
fringe benefits, overtime pay or profit-sharing payments, they
are properly excluded in computing the 13th month pay.
However, sales commissions which are effectively an integral
portion of the basic salary structure of an employee, shall
be included in determining his 13th month pay.
We recognize that both productivity bonuses and sales
commissions may have an incentive effect. But there is reason
to distinguish one from the other here. Productivity bonuses are
generally tied to the productivity or profit generation of the
employer corporation. Productivity bonuses are not directly
dependent on the extent an individual employee exerts himself.
A productivity bonus is something extra for which no specific
additional services are rendered by any particular employee
and hence not legally demandable, absent a contractual
undertaking to pay it. Sales commissions, on the other hand,
such as those paid in Duplicators, are intimately related to or
directly proportional to the extent or energy of an employee's
endeavors. Commissions are paid upon the specific results
achieved by a salesman-employee. It is a percentage of the

sales closed by a salesman and operates as an integral part of

such salesman's basic pay.
Finally, the statement of the Second Division in BoieTakeda declaring null and void the second paragraph of Section
5(a) of the Revised Guidelines Implementing the 13th Month
Pay issued by former Labor Secretary Drilon, is properly
understood as holding that that second paragraph provides no
legal basis for including within the term "commission" there
used additional payments to employees which are, as a matter
of fact, in the nature of profit-sharing payments or bonuses. If
and to the extent that such second paragraph is so interpreted
and applied, it must be regarded as invalid as having been
issued in excess of the statutory authority of the Secretary of
Labor. That same second paragraph however, correctly
recognizes that commissions, like those paid inDuplicators, may
constitute part of the basic salary structure of salesmen and
hence should be included in determining the 13th month pay;
to this extent, the second paragraph is and remains valid.
ACCORDINGLY, the Motions for (a) Leave to File a Second Motion
for Reconsideration and the (b) aforesaid Second
Reconsideration are DENIED for lack of merit. No further
pleadings will be entertained.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero,
Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan, Mendoza and
Francisco, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 100167 March 2, 1995
ISALAMA MACHINE WORKS CORPORATION, petitioner,
vs.
HON. LABOR RELATIONS COMMISSION, FIFTH DIVISION
and ISALAMA MACHINE WORKS CORPORATION LABOR
UNION-WORKERS ALLIANCE TRADE UNION AND/OR
HENRY BAYGAN, NATHAN PURACAN, GREGORIO LAYSON,
JR., NANDY VIRTUDAZO, JIMMY SACRO, CHARITO
ESTRERA, DENISON AMBOAYEN, BIENVENIDO CABIL,

MELCHOR MARTINEZ, FLORIDAN BILAR, NOEL LAYSON,

EDISON ALMORADES, MA. CELESTINA CLEMEN, LEONCIO
CUIZON, VENNIE OPORTO, RODOLFO IGNACIO and
ALMIRANTE ZAGADO, respondents.
VITUG, J.:
This petition for certiorari assails the Decision, 1 dated 09 June
1989, of the National Labor Relations Commission ("NLRC"),
Fifth Division, Cagayan de Oro City, ordering the reinstatement,
without back salaries, of private respondents, with the
exception of Henry Baygan, and the Resolution 2 of 30 April
1991 of the same division denying the motion for
reconsideration and, consistent with the decision, requiring
petitioner corporation to pay private respondents, in case the
latter have not been reinstated actually or by payroll, back
salaries, without qualification or deductions, from 25 July 1989
until their reinstatement (RABX Case No. 10-02-00107-88).
On 25 March 1987, petitioner Isalama Machine Works
Corporation and private respondent Isalama Machine Works
Corporation Labor Union-Workers Alliance Trade Union entered
into a collective bargaining agreement ("CBA") covering the
period from 01 November 1986 to 03 October 1989. Following
the signing of the CBA, the union made repeated demands on
the corporation, allegedly to no avail, for it to comply with the
CBA provisions,i.e., to furnish the workers with safety shoes and
free company laminated IDs and, in general, to improve the
employees' working conditions.
On 21 December 1987, the corporation paid the workers the
13th month pay based on the average number of days actually
worked during the year. The union, through its president,
private respondent Henry Baygan, demanded that the 13th
month pay should, instead, be made on the basis of a full one
month basic salary. The corporation countered that its own
computation of the 13th month pay accorded with the CBA
provisions and Presidential Decree No. 851.
On 05 January 1988, the union filed a notice of strike with the
Department of Labor and Employment, Region X, Cagayan de
Oro, alleging the commission of unfair labor practice and CBA
violation by the corporation. After several conferences, the
National Conciliation and Mediation Board ("NCMB") succeeded
in having the dispute amicably settled except for the 13th

month pay differential which remained in contention. The union

insisted that the failure of the corporation to implement fully
the 13th month pay provision of the CBA amounted to unfair
labor practice. The corporation argued that the 13th month pay
was a mere money claim and therefore not a "strikeable issue."
The case was ultimately indorsed to the NLRC for compulsory
arbitration.
The above notwithstanding, the union still went on strike on 15
February 1988. The wide publicity accorded the strike,
according to petitioner, had caused a dearth of work orders and
withdrawal of existing job orders that forced it to adopt a
rotation system of work. On 22 February 1988, it also filed with
the Regional Arbitration Branch 10 of the NLRC a petition
charging the union with conducting an illegal strike and
engaging in an unfair labor practice (RABX Case No. 10-0200107-88).
On 16 May 1988, the Executive Labor Arbiter rendered a
decision holding the strike to be illegal and declaring Baygan
and the "participating" union members 3 to have thereby lost
their employment status. The dismissed employees appealed
the decision of the Executive Labor Arbiter to the NLRC which,
on 09 June 1989, promulgated its herein questioned decision
ordering, except for Baygan, the reinstatement, without back
salaries, of the dismissed union members.
The corporation filed a motion for reconsideration of the NLRC
decision. On 30 April 1991, the NLRC resolved said motion
thusly:
ACCORDINGLY, the Motion for Reconsideration is
DENIED for lack of merit. No further motion for
reconsideration shall henceforth be entertained.
Consistent with the disposition in the challenged
resolution of June 9, 1989, the immediate
reinstatement without backwages of the 16 aforenamed respondents to their former positions sans
loss of seniority rights is hereby ordered. The cutoff date for the forbearance in the payment of
backwages is up to July 24, 1989 which on record
is the date of receipt of said disputed Resolution.
Henceforth, in the event the afore-named
respondents have not been reinstated actually or
by payroll, appellee is directed to pay backwages

without qualifications or deductions from July 25,

1989 until they are reinstated.

SO ORDERED. 4
On 23 May 1991, the union filed with the NLRC a motion for
execution of the judgment, asserting additionally that the
corporation was operating under the new trade name, "Golden
Engineering," owned and managed by the same family, of
which change neither the employees nor the NLRC had been
formally notified.
On 03 June 1991, before the motion for execution could be
acted upon by the NLRC, the corporation filed the instant
petition. The Court issued, on 01 July 1991, a temporary
restraining order enjoining respondent NLRC from implementing
its 09 June 1989 decision and 30 April 1991 resolution.
Petitioner submits that private respondents cannot claim good
faith in staging their strike since the attention of both parties
had been called by the conciliator at the hearings before the
NCMB to the "non-strikeable" character of the 13th month pay.
Private respondents continue to claim, however, that the
questioned 13th month pay should be considered a "strikeable
issue." They have averred that the illegal work rotation scheme
employed by petitioner has pushed them to the honest belief
that the latter has, once again, perpetrated an unfair labor
practice.
Section 3 of the "Omnibus Rules and Regulations Implementing
Presidential Decree No. 851" generally states that all employees
(subject to its exclusionary clauses) shall be entitled to the 13th
month pay. Its Section 4 provides that employees "who are
receiving not more than P1,000.00 a month" shall enjoy the
13th month pay "regardless of their position, designation or
employment status, and irrespective of the method by which
their wages are paid, provided that they have worked for at
least one month during the calendar year." If an employee has
worked for an employer for less than a year, he may still be
entitled to the full 13th month pay provided his monthly wage is
P1,000.00 or less and he has worked for the employer for at
least one month.
The CBA contains, among other things, a "no strike" clause;
thus
During the term of this Agreement, the Company
stipulates and agrees that there shall be no

lockouts, and the Union in turn, as well as its

officers and agents, stipulate and agree that
there shall be no strike or will they authorize,
instigate or engage in any work stoppage
slowdown or any other form of interruption of
work by the employees and laborers that may
hamper or impede the operations of the business
of the Company. 5
Parenthetically, the CBA likewise specifies that the
company "agrees to grant one (1) month basic salary to
all employees-workers as Christmas bonus" in
compliance with Presidential Decree No. 851 but that a
violation thereof will not constitute an unfair labor
practice by an employer.
Article 248 of the Labor Code, in turn, provides:
Art. 248. Unfair labor practices of employers. It
shall be unlawful for an employer to commit any
of the following unfair labor practice:
xxx xxx xxx
(i) To violate a collective bargaining agreement.
The above provision, however, must be read together with
Article 261 of the Labor Code; viz.:
Art. 261. Jurisdiction of Voluntary Arbitrators or
panel of Voluntary Arbitrators. The Voluntary
Arbitrator or panel of Voluntary Arbitrators shall
have original and exclusive jurisdiction to hear
and decide all unresolved grievances arising from
the interpretation or implementation of the
Collective Bargaining Agreement and those
arising from the interpretation or enforcement of
company personnel policies referred to in the
immediately preceding article. Accordingly,
violations of a Collective Bargaining Agreement,
except those which are gross in character, shall
no longer be treated as unfair labor practice and
shall be resolved as grievances under the
Collective Bargaining Agreement. For purposes of
this article, gross violations of Collective
Bargaining Agreement shall mean flagrant and/or
malicious refusal to comply with the other

economic provisions of such agreement.

(Emphasis supplied.)
Hence, Section 1, Rule XIII, Book V, of the Omnibus Rules
Implementing the Labor Code expresses:
Sec. 1. Grounds for strike and lockout. A strike
or lockout may be declared in cases of bargaining
deadlocks and unfair labor practices. Violations of
collective bargaining agreements, except flagrant
and/or malicious refusal to comply with its
economic provisions, shall not be considered
unfair labor practice and shall not be
strikeable. . . .
In this case, the real reason for the strike is clearly traceable to
the unresolved dispute between the parties on 13th month
pay differentials under Presidential Decree No. 851, i.e., the
proper manner of its application and computation. The Court
does not see this issue, given the aforequoted provisions of the
law and its implementing rules, to be constitutive of unfair labor
practice. Section 9 of Rules and Regulations Implementing
Presidential Decree No. 851, in fact, specifically states that
"(n)onpayment of the thirteenth-month pay provided by the
Decree and (the) rules shall be treated as money claims
cases and shall be processed in accordance with the Rules
Implementing the Labor Code of the Philippines and the Rules of
the National Labor Relations Commission."
Private respondents, indeed, showed little prudence, if at all, in
their precipitate and ill-considered strike. The NLRC likewise
found private respondents to have violated Art. 264 (e) 6 of the
Labor Code when they blocked and barricaded the entrance of
petitioner's premises preventing free ingress and egress.
Unfortunately for petitioner, however, the identity of those who
committed those illegal acts during the strike, except for
Baygan, had not been adequately established. Specifically, the
NLRC said that no sufficient evidence could be found "to pin
down the afore-named 16 respondents as having committed
illegal acts during the strike," 7 that could warrant a loss of their
employment status. 8The dismissal of Baygan, however, was
warranted. Being the union president and leader of the strike,
his liability was greater than that of mere members, 9 and he
had the responsibility to ensure that his followers respected the
law. 10

Petitioner tells us that it can no longer accept the strikers due to

its decision to close down its operations on account of damages
and losses it has incurred because of the strike, and that Golden
Engineering, which has taken over the business, is presently
owned by one Alfredo Chan and not Charlie Chan of petitioner
corporation.11 This claim raises factual issues which evidently
are still awaiting resolution by the NLRC in the motion for
execution now pending before it. It is there, not here, where
these issues can be finally resolved.
This case arose in 1988 or prior to the effectivity of Republic Act
No. 6715; accordingly, the back salaries of the dismissed
employee should be limited to three years, without deduction or
qualification, following the rule inMaranaw Hotels and Resorts
Corporation vs. Court of Appeals. 12
WHEREFORE, the questioned decision and resolution of the
NLRC are AFFIRMED subject to the MODIFICATION that the back
salaries ordered to be paid should be limited, without deduction
or qualification, to only three (3) years. No costs.
SO ORDERED.
Feliciano, Romero, Melo and Francisco, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-60403 August 3, 1983
ALLIANCE OF GOVERNMENT WORKERS (AGW); PNB-FEMA
BANK EMPLOYEES ASSOCIATION (AGW); KAISAHAN AT
KAPATIRAN NG MGA MANGAGAWA AT KAWANI NG MWSS
(AGW); BALARA EMPLOYEES ASSOCIATION (AGW); GSIS
WORKERS ASSOCIATION (AGW); SSS EMPLOYEES
ASSOCIATION (AGW); PVTA EMPLOYEES ASSOCIATION
(AGW); NATIONAL ALLIANCE OF TEACHERS AND OFFICE
WORKERS (AGW); , petitioners,
vs.
THE HONORABLE MINISTER OF LABOR and EMPLOYMENT,
PHILIPPINE NATIONAL BANK (PNB); METROPOLITAN
WATERWORKS and SEWERAGE SYSTEM (MWSS);
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS);

SOCIAL SECURITY SYSTEM (SSS); PHILIPPINE VIRGINIA

TOBACCO ADMINISTRATION (PVTA) PHILIPPINE NORMAL
COLLEGE (PNC); POLYTECHNIC UNIVERSITY OF THE
PHILIPPINES (PUP),respondents.
The Solicitor General for MOLE, PNB, SSS, PNC and PUP.
Oliver Gesmundo for petitioners.
Jesus C. Gentiles for petitioner SSSEA-AGW.
GUTIERREZ, JR., J.:
Are the branches, agencies, subdivisions, and instrumentalities
of the Government, including government owned or controlled
corporations included among the 4 "employers"" under
Presidential Decree No. 851 which are required to pay an their
employees receiving a basic salary of not more than P1,000.00
a month, a thirteenth (13th) month pay not later than
December 24 of every year?
Petitioner Alliance of Government Workers (AGW) is a registered
labor federation while the other petitioners are its affiliate
unions with members from among the employees of the
following offices, schools, or government owned or controlled
corporations:
1. Philippine National Bank (PNB) Escolta Street,
Manila
2. Metropolitan Waterworks and Sewerage
System (MWSS) Katipunan Road, Balara, Quezon
City
3. Government Service Insurance System (GSIS)
Arroceros Street, Manila
4. Social Security System (SSS) East Avenue,
Quezon City
5. Philippine Virginia Tobacco Administration
(PVTA) Consolacion Building, Cubao, Quezon City
6. Philippine Normal College (PNC) Ayala
Boulevard, Manila
7. Polytechnic University of the Philippines (PUP)
Hippodromo Street, Sta. Mesa, Manila
On February 28, 1983, the Philippine Government Employees
Association (PGEA) filed a motion to come in as an additional
petitioner.
Presidential Decree No. 851 provides in its entirety:

WHEREAS, it is necessary to further protect the

level of real f wages from the ravage of worldwide inflation;
WHEREAS, there has been no increase case in the
legal minimum wage rates since 1970;
WHEREAS, the Christmas season is an opportune
time for society to show its concern for the plight
of the working masses so they may properly
celebrate Christmas and New Year.
NOW, THEREFORE, I, FERDINAND E. MARCOS, by
virtue of the powers vested in me by the
Constitution do hereby decree as follows:
SECTION 1. All employers are hereby required to
pay all their employees receiving a basic salary of
not more than Pl,000 a month, regardless of the
nature of their employment, a 13th-month pay
not later than December 24 of every year.
SECTION 2. Employers already paying their
employees a 13th-month pay or its equivalent are
not covered by this Decree.
SECTION 3. This Decree shall take effect
immediately. Done in the City of Manila, this 16th
day of December 1975.
According to the petitioners, P.D. No. 851 requires all
employers to pay the 13th-month pay to their employees with
one sole exception found in Section 2 which states that
"(E)mployers already paying their employees a 13th month pay
or its equivalent are not covered by this Decree. " The
petitioners contend that Section 3 of the Rules and Regulations
Implementing Presidential Decree No. 851 included other types
of employers not exempted by the decree. They state that
nowhere in the decree is the secretary, now Minister of Labor
and Employment, authorized to exempt other types of
employers from the requirement.
Section 3 of the Rules and Regulations Implementing
Presidential Decree No. 851 provides:
Section 3. Employers covered The Decree shall
apply to all employers except to:
a) Distressed employers, such as (1) those which
are currently incurring substantial losses or 112)
in the case of non-profit institutions and

organizations, where their income, whether from

donations, contributions, grants and other
earnings from any source, has consistently
declined by more than forty (40%) per cent of
their normal income for the last two (2) )years,
subject to the provision of Section 7 of this
issuance.
b) The Government and any of its political
subdivisions, including government-owned and
controlled corporations, except)t those
corporation, operating essentially as private,
,subsidiaries of the government;
c) Employers already paying their employees
13th-month pay or more in a calendar year or its
equivalent at the of this issuance;
d) Employers of household helpers and persons in
the personal service of another in relation to such
workers: and
e) Employers of those who are paid on purely
commission, boundary, or task basis and those
who are paid a fixed for performing a specific
work, irrespective of the time consumed in the
performance thereof, except where the workers
are paid an piece- rate basis in which case the
employer shall be covered by this issuance
:insofar ab such workers are concerned ...
The petitioners assail this rule as ultra vires and void. Citing
Philippine Apparel Workers'Union v. NIRC et al., (106 SCRA
444); Teoxon v. Members of the Board of' Administators (33
SCRA 585); Santos u. Hon. Estenzo et al., (109 Phil. 419); Hilado
u. Collector of Internal Revenue (100 Phil. 288), and Olsen & Co.
Inc. v. Aldanese and Trinidad (43 Phil. 259), the petitioners
argue that regulations adopted under legislative authority must
be in harmony with the provisions of the law and for the sole
purpose of carrying into effect its general provisions. They state
that a legislative act cannot be amended by a rule and an
administrative officer cannot change the law. Section 3 is
challenged as a substantial modification by rule of a Presidential
Decree and an unlawful exercise of legislative power.
Our initial reaction was to deny due course to the petition in a
minute resolution, however, considering the important issues

propounded and the fact, that constitutional principles are

involved, we have now decided to give due course to the
petition, to consider the various comments as answers and to
resolve the questions raised through a full length decision in the
exercise of this Court's symbolic function as an aspect of the
power of judicial review.
At the outset, the petitioners are faced with a procedural
barrier. The petition is one for declaratory relief, an action not
embraced within the original jurisdiction of the Supreme Court.
(Remotigue v. Osmena,, Jr., 21 SCRA 837; Rural Bank of
Olongapo v. Commission of Land Registration, 102 SCRA
794; De la Llana v. Alba, 112 SCRA 294). There is no statutory or
jurisprudential basis for the petitioners' statement that the
Supreme Court has original and exclusive jurisdiction over
declaratory relief suits where only questions of law are involved.
Jurisdiction is conferred by law. The petitioners have not pointed
to any provision of the Constitution or statute which sustains
their sweeping assertion. On this ground alone, the petition
could have been dismissed outright.
Following similar action taken in Nacionalista Party v. Angelo
Bautista (85 Phil. 101) and Aquino v. Commission on
Elections (62 SCRA 275) we have, however, decided to treat the
petition as one for mandamus. The petition has far reaching
implications and raises questions that should be resolved. Have
the respondents unlawfully excluded the petitioners from the
use and enjoyment of rights to which they are entitled under
the law?
An analysis of the "whereases" of P.D. No. 851 shows that the
President had in mind only workers in private employment when
he issued the decree. There was no intention to cover persons
working in the government service. The decree states:
xxx xxx xxx
WHEREAS, there has been no increase in the
legal minimum wage rates since 1970;
xxx xxx xxx
As pointed out by the Solicitor General in his comment for the
Minister of Labor and Employment, the Social Security System
the Philippine Normal College, and Polytechnic University, the
contention that govermment owned and controlled corporations
and state colleges and universities are covered by the term "all

employers" is belied by the nature of the 13- month pay and the
intent behind the decree.
The Solicitor General states:
"Presidential Decree No. 851 is a labor standard law which
requires covered employers to pay their employees receiving
not more than P1,000.00 a month an additional thirteenthmonth pay. Its purpose is to increase the real wage of the
worker (Marcopper Mining Corp. v. Ople, 105 SCRA 75; and
National Federation of Sugar Workers v. Ovejera, G.R. No.
59743, May 31, 1982) as explained in the'whereas'clause which
read:
WHEREAS, it is necessary to further
protect the level of real wages from
the ravage of world-wide inflation;
WHEREAS, there has been no
increase in the legal minimum
wage rates since 1970; 11
WHEREAS, the Christmas season is
an opportune time for society to
show its concern for the plight of
the working masses so they may
celebrate the Christmas and New
Year.
xxx xxx xxx
What the P.D. No. 851 intended to cover, as
explained in the prefatory statement of the
Decree, are only those in the private sector
whose real wages require protection from worldwide inflation. This is emphasized by the
"whereas" clause which states that 'there has
been no increase in the legal minimum wage
rates since 1970'. This could only refer to the
private sector, and not to those in the
government service because at the time of the
enactment of Presidential Decree No. 851 in
1975, only the employees in the private sector
had not been given any increase in their
minimum wage. The employees in the
government service had already been granted in
1974 a ten percent across-the-board increase on
their salaries as stated in P.D. No. 525, Section 4.

Moreover, where employees in the government

service were to benefit from labor standard laws,
their coverage is explicitly stated in the statute or
presidential enactment. This is evident in (a)
Presidential Decree No. 390, Sec. 1 which granted
emergency cost of living allowance to employees
in the national government; (b) Republic Act No.
6111, Sec. 10 on medicare benefits; (c)
Presidential Decree No -442, Title II, Article 97 on
the applicable minimum wage rates; (d)
Presidential Decree No. 442, Title 11, Article 167
(g) on workmen's compensation; (e) Presidential
Decree No. 1123 which provides for increases in
emergency allowance to employees in the private
sector and in salary to government employees in
Section 2 thereof; and (f) Executive Order No. 752
granting government employees a year-end
bonus equivalent to one week's pay. Thus, had
the intention been to include government
employees under the coverage of Presidential
Decree No. 851, said Decree should have
expressly so provided and there should have
been accompanying yearly appropriation
measures to implement the same. That no such
express provision was provided and no
accompanying appropriation measure to was
passed clearly show the intent to exclude
government employees from the coverage of P. D.
No. 85 1.
We agree.
It is an old rule of statutory construction that restrictive statutes
and acts which impose burdens on the public treasury or which
diminish rights and interests, no matter how broad their terms
do not embrace the Sovereign, unless the Sovereign is
specifically mentioned. (See Dollar Savings Bank v. United
States, 19 Wall (U.S.) 227; United States v. United Mine Workers
of America, 330 U.S. 265). The Republic of the Philippines, as
sovereign, cannot be covered by a general term like "employer"
unless the language used in the law is clear and specific to that
effect.

The issue raised in this petition, however, is more basic and

fundamental than a mere ascertainment of intent or a
construction of statutory provisions. It is concerned with a
revisiting of the traditional classification of government
employment into governmental functions and proprietary
functions and of the many ramifications that this dichotomous
treatment presents in the handling of concerted activities,
collective bargaining, and strikes by government employees to
wrest concessions in compensation, fringe benefits, hiring and
firing, and other terms and conditions of employment.
The workers in the respondent institutions have not directly
petitioned the heads of their respective offices nor their
representatives in the Batasang Pambansa. They have acted
through a labor federation and its affiliated unions. In other
words, the workers and employees of these state firms, college,
and university are taking collective action through a labor
federation which uses the bargaining power of organized labor
to secure increased compensation for its members.
Under the present state of the law and pursuant to the express
language of the Constitution, this resort to concerted activity
with the ever present threat of a strike can no longer be
allowed.
The general rule in the past and up to the present is that "the
terms and conditions of employment in the Government,
including any political subdivision or instrumentality thereof are
governed by law" (Section 11, the Industrial Peace Act, R.A. No.
875, as amended and Article 277, the Labor Code, P.D. No. 442,
as amended). Since the terms and conditions of government
employment are fixed by law, government workers cannot use
the same weapons employed by workers in the private sector to
secure concessions from their employers. The principle behind
labor unionism in private industry is that industrial peace
cannot be secured through compulsion by law. Relations
between private employers and their employees rest on an
essentially voluntary basis. Subject to the minimum
requirements of wage laws and other labor and welfare
legislation, the terms and conditions of employment in the
unionized private sector are settled through the process of
collective bargaining. In government employment, however, it is
the legislature and, where properly given delegated power, the

administrative heads of government which fix the terms and

conditions of employment. And this is effected through statutes
or administrative circulars, rules, and regulations, not through
collective bargaining agreements.
At the same time, the old Industrial Peace Act excepted
employees and workers in proprietary functions of government
from the above compulsion of law. Thus, in the past,
government employees performing proprietary functions could
belong to labor organizations imposing the obligation to join in
strikes or engage in other concerted action. (Section 11, R.A.
875, as amended). They could and they did engage in
concerted activities and various strikes against government
owned and controlled corporations and other government
institutions discharging proprietary functions. Among the
institutions as falling under the exception in Section 11 of the
Industrial Peace Act were respondents Government Service
Insurance System (GSISEA v. Alvendia, 108 Phil. 505) and Social
Security System (SSSEA v. Soriano, 7 SCRA 1016). And this
Court has supported labor completely in the various strikes and
concerted activities in firms and agencies discharging
proprietary functions because the Constitution and the laws
allowed these activities.
The exception, however belongs to the past.
The petitioners state in their counter comment filed July 23,
1982 that the 1973 Constitution is categorical about the grant
of the rights to self- organization and collective bargaining to all
workers and that no amount of stretched interpretation of lesser
laws like the Labor Code and the Civil Service Act can overturn
the clear message of the Constitution with respect to these
rights to self-organization and collective bargaining.
These statements of the petitioners are error insofar as
government workers are now concerned.
Under the present Constitution, govemment-owned or
controlled corporations are specifically mentioned as embraced
by the civil service. (Section 1, Article XII-B, Constitution). The
inclusion of the clause "including every government owned or
controlled corporation" in the 1973 amendments to the
Constitution was a deliberate amendment for an express
purpose. There may be those who disagree with the intent of
the framers of the amendment but because it is fundamental
law, we are all bound by it. The amendment was intended to

correct the situation where more favored employees of the

government could enjoy the benefits of two worlds. They were
protected by the laws governing government employment. They
could also engage in collective bargaining and join in strikes to
secure higher wages and fringe benefits which equally
hardworking employees engaged in government functions could
only envy but not enjoy.
Presidential Decree No. 807, the Civil Service Decree of the
Philippines has implemented the 1973 Constitutional
amendment. It is categorical about the inclusion of personnel of
government-owned or controlled corporations in the civil
service and their being subject to civil service requirements:
SECTION 56. Government- owned or Controlled
Corporations [Link] permanent
personnel of government- owned or controlled
corporations whose positions are now embraced
in the civil service shall continue in the service
until they have been given a chance to qualify in
an appropriate examination, but in the meantime,
those who do not possess the appropriate civil
service eligibility shall not be promoted until they
qualify in an appropriate civil service
examination. Services of temporary personnel ma
be y terminated any time.
Personnel of government-owned or controlled corporations are
now part of the civil service. It would not be fair to allow them
to engage in concerted activities to wring higher salaries or
fringe benefits from Government even as other civil service
personnel such as the hundreds of thousands of public school
teachers, soldiers, policemen, health personnel, and other
government workers are denied the right to engage in similar
activities.
To say that the words "all employers" in P.D. No. 851 includes
the Government and all its agencies, instrumentalities, and
government-owned or controlled corporations would also result
in nightmarish budgetary problems.
For instance, the Supreme Court is trying its best to alleviate
the financial difficulties of courts, judges, and court personnel in
the entire country but it can do so only within the limits of
budgetary appropriations. Public school teachers have been
resorting to what was formerly unthinkable, to mass leaves and

demonstrations, to get not a 13th-month pay but promised

increases in basic salaries and small allowances for school
uniforms. The budget of the Ministry of Education, Culture and
Sports has to be supplemented every now and then for this
purpose. The point is, salaries and fringe benefits of those
embraced by the civil service are fixed by law. Any increases
must come from law, from appropriations or savings under the
law, and not from concerted activity.
The Government Corporate Counsel, Justice Manuel Lazaro, in
his consolidated comment * for respondents GSIS, MWSS, and
PVTA gives the background of the amendment which
includes every government-owned or controlled corporation in
the embrace of the civil service:
Records of the 1971 Constitutional Convention
show that in the deliberations held relative to
what is now Section 1(1) Article XII-B, supra the
issue of the inclusion of government-owned or
controlled corporations figured prominently.
The late delegate Roberto S. Oca, a recognized
labor leader, vehemently objected to the
inclusion of government-owned or controlled
corporations in the Civil Service. He argued that
such inclusion would put asunder the right of
workers in government corporations, recognized
in jurisprudence under the 1935 Constitution, to
form and join labor unions for purposes of
collective bargaining with their employers in the
same manner as in the private section (see:
records of 1971 Constitutional Convention).
In contrast, other labor experts and delegates to
the 1971 Constitutional Convention enlightened
the members of the Committee on Labor on the
divergent situation of government workers under
the 1935 Constitution, and called for its
rectification. Thus, in a Position Paper dated
November-22, 1971, submitted to the Committee
on Labor, 1971 Constitutional Convention, then
Acting Commissioner of Civil Service Epi Rev
Pangramuyen declared:
It is the stand, therefore, of this
Commission that by reason of the

nature of the public employer and

the peculiar character of the public
service, it must necessarily regard
the right to strike given to unions in
private industry as not applying to
public employees and civil service
employees. It has been stated that
the Government, in contrast to the
private employer, protects the
interests of all people in the public
service, and that accordingly, such
conflicting interests as are present
in private labor relations could not
exist in the relations between
government and those whom they
employ.
Moreover, determination of
employment conditions as well as
supervision of the management of
the public service is in the hands of
legislative bodies. It is further
emphasized that government
agencies in the performance of
their duties have a right to demand
undivided allegiance from their
workers and must always maintain
a pronounced esprit de corps or
firm discipline among their staff
members. It would be highly
incompatible with these
requirements of the public service,
if personnel took orders from union
leaders or put solidarity with
members of the working class
above solidarity with the
Government. This would be inimical
to the public interest.
Moreover, it is asserted that public
employees by joining labor unions
may be compelled to support

objectives which are political in

nature and thus jeopardize the
fundamental principle that the
governmental machinery must be
impartial and non-political in the
sense of party politics.' (see:
Records of 1971 Constitutional
Convention).
Similarly, Delegate Leandro P. Garcia, expressing
support for the inclusion of government-owned or
controlled corporations in the Civil Service,
argued:
It is meretricious to contend that
because Govermnent owned or
controlled corporations yield
profits, their employees are
entitled to better wages and fringe
benefits than employees of
Government other than
Government- owned and controlled
cor orations which are not making
profits. There is no gainsaying the
fact that the capital they use is the
people's (see Records of the 1971
Constitutional Convention).
Summarizing the deliberations of the 1971
Constitutional Convention on the inclusion of
Government owned or controlled corporations,
Dean Joaquin G. Bernas, SJ., of the Ateneo de
Manila University Professional School of Law,
stated that government-owned corporations
came under attack as milking cows of a privileged
few enjoying salaries far higher than their
counterparts in the various branches of
government, while the capital of these
corporations belongs to the Government and
government money is pumped into them
whenever on the brink of disaster, and they
should therefore come under the strick
surveillance of the Civil Service System. (Bernas,

The 1973 Philippine Constitution, Notes and

Cases, 1974 ed., p. 524).
The Government Corporate Counsel cites the precedent setting
decision in Agricultural- Credit and Cooperative Financing
Administration (ACCFA v. Confederation of Unions in
Government Corporations and Offtces CUGCO et al., 30 SCRA
649) as giving the rationale for coverage of government-owned
or controlled corporations by the civil service. We stated ACCFA
v. CUGCO that:
... The ACA is a government office or agency
engaged in governmental, not proprietary
functions. These functions may not be strictly
what President Wilson described as "constituent"
(as distinguished from 'ministrant'), [Bacani vs.
National Coconut Corporation, G.R. No. L-9657,
Nov. 29,1956, 53 O.G. p. 2800] such as those
relating to the maintenance of peace and the
prevention of crime, those regulating property
and property rights, those relating to the
administration of justice and the determination of
political duties of citizens, and those relating to
national defense and foreign relations. Under this
traditional classification, such constituent
functions are exercised by the State as attributes
of sovereignty, and not merely to promote the
welfare, progress and prosperity of the people
these latter functions being ministrant, the
exercise of which is optional on the part of the
government.
The growing complexities of modern society,
however, have rendered this traditional
classification of the functions of government quite
unrealistic, not to say obsolete. The areas which
used to be left to private enterprise and initiative
and which the government was called upon to
enter optionally, and only "because it was better
equipped to administer for the public welfare
than is any private individual or group of
individuals," (Malcolm, The Government of the
Philippines, pp. 19-20; Bacani vs. National

Coconut Corporation, supra) continue to lose their

well- defined boundaries and to be absorbed
within activities that the government must
undertake in its sovereign capacity if it is to meet
the increasing social challenges of the times.
Here as almost everywhere else the tendency is
undoubtedly towards a greater socialization of
economic forces, Here of course this development
was envisioned, indeed adopted as a national
policy, by the Constitution itself in its declaration
of principle concerning the promotion of social
justice.
Chief Justice Fernando, then an Associate Justice of this Court,
observed in a concurring opinion that the traditional
classification into constituent and ministrant functions reflects
the primacy at that time of the now discredited and
repudiated laissez faire concept carried over into government.
He stated:
The influence exerted by American constitutional
doctrines unavoidable when the Philippines was
still under American rule notwithstanding, an
influence that has not altogether vanished even
after independence, the laissez faire principle
never found fun acceptance in this jurisdiction,
even during the period of its full flowering in the
United States. Moreover, to erase any doubts, the
Constitutional Convention saw to it that our
fundamental law embodies a policy of the
responsibility thrust on government to cope with
social and economic problems and an earnest
and sincere commitment to the promotion of the
general welfare through state action. It would
thus follow that the force of any legal objection to
regulatory measures adversely affecting property
rights or to statutes organizing public
corporations that may engage in competition with
private enterprise has been blunted. Unless there
be a clear showing of any invasion of rights
guaranteed by the Constitution, their validity is a
foregone conclusion. No fear need be entertained

that thereby spheres hitherto deemed outside

government domain have been encroached upon.
With our explicit disavowal of the 'constituentministrant' test, the ghost of the laissez-faire
concept no longer stalks the juridical stage."
Our dismissal of this petiti/n should not, by any means, be
interpreted to imply that workers in government-owned and
controlled corporations or in state colleges and universities may
not enjoy freedom of association. The workers whom the
petitioners purport to represent have the right, which may not
be abridged, to form associations or societies for purposes not
contrary to law. (Constitution, Article IV, Section 7). This is a
right which share with all public officers and employees and, in
fact, by everybody living in this country. But they may not join
associations which impose the obligation to engage in
concerted activities in order to get salaries, fringe benefits, and
other emoluments higher than or different frm that provided by
law and regulation.
The very Labor Code, P.D. No. 442 as amended,, which governs
the registration and provides for the rights of legitimate labor
organizations states:
ART. 277. Government employees. The terms
and conditions of employment of all government
employees, including employees of governmentowned and controlled corporations, shall be
governed by the Civil Service Law, rules and
regulations. Their salaries shall be standardized
by the National Assembly as provided for in the
new constitution. However, there shall be no
reduction of existing wages, benefits, and other
terms and conditions of employment being
enjoyed by them at the time of the adoption of
this code.
Section 6, Article XII-B of the Constitution gives added reasons
why the government employees represented by the petitioners
cannot expect treatment in matters of salaries different from
that extended to all others government personnel. The
provision states:
SEC. 6. The National Assembly shall provide for
the standardization of compensation of
government officials and employees, including

those in government-owned or controlled

corporations, taking into account the nature of
the responsibilities pertaining to, and the
qualifications required for the positions
concerned.
It is the legislature or, in proper cases, the administrative heads
of government and not the collective bargaining process nor the
concessions wrung by labor unions from management that
determine how much the workers in government-owned or
controlled corporations may receive in terms of salaries, 13th
month pay, and other conditions or terms of employment. There
are government institutions which can afford to pay two weeks,
three weeks, or even 13th-month salaries to their personnel
from their budgetary appropriations. However, these payments
must be pursuant to law or regulation. Presidential Decree No.
985 as amended provides:
xxx xxx xxx
SEC. 2. Declaration of Policy. It is hereby
declared to be the policy, of the national
government to provide equal pay for
substantially, equal work and to base differences
in pay upon substantive differences in duties and
responsibilities, and qualification requirements of
the positions. In determining rates of pay, due
regard shall be given to, among others, prevailing
rates in private industry for comparable work. For
this purpose, there is hereby established a
system of compensation standardization and
position classification in the national government
for all departments, bureaus, agencies, and
officers including government-owned or
controlled corporations and financial institutions:
Provided, That notwithstanding a standardized
salary system established for all employees,
additional financial incentives may be established
by government corporations and financial
institutions for their employees to be supported
fully from their corporate funds and for such
technical positions as may be approved by the
President in critical government agencies.

The Solicitor-General correctly points out that to interpret P.D.

No. 851 as including government employees would upset the
compensation levels of government employees in violation of
those fixed according to P.D. No. 985.
Here as in other countries, government salaries and wages have
always been lower than salaries, wages, and bonuses in the
private sector. However, civil servants have no cause for
despair. Service in the government may at times be a sacrifice
but it is also a welcome privilege. Apart from the emotional and
psychic satisfactions, there are various material advantages.
The security of tenure guaranteed to those in the civil service
by the Constitution and statutes, the knowledge that one is
working for the most stable of employers and not for private
persons, the merit system in appointments and promotions, the
scheme of vacation, sick, and maternity leave privileges, and
the prestige and dignity associated with public office are only a
few of the joys of government employment.
Section 3 of the Rules and Regulations Implementing
Presidential Decree No. 851 is, therefore, a correct
interpretation of the decree. It has been implemented and
enforced from December 22, 1975 to the present, The
petitioners have shown no valid reason why it should be
nullified because of their petition filed six and a half years after
the issuance and implementation of the rule.
WHEREFORE, the petition is hereby DISMISSED for lack of merit.
SO ORDERED.
Concepcion, Jr., Guerrero Relova, JJ., concur.
Aquino, Melencio-Herrera and Plana, JJ., concur in the result.

SECOND DIVISION
[G.R. No. 151228. August 15, 2002]
ROLANDO Y. TAN, petitioner, vs. LEOVIGILDO LAGRAMA
and
THE
HONORABLE
COURT
OF
APPEALS,respondents.
DECISION
MENDOZA, J.:

This is a petition for review on certiorari of the decision,

dated May 31, 2001, and the resolution, [2] dated November
27, 2001, of the Court of Appeals in C.A.-G.R. SP. No. 63160,
annulling the resolutions of the National Labor Relations
Commission (NLRC) and reinstating the ruling of the Labor
Arbiter which found petitioner Rolando Tan guilty of illegally
dismissing private respondent Leovigildo Lagrama and ordering
him to pay the latter the amount of P136,849.99 by way of
separation pay, backwages, and damages.
The following are the facts.
Petitioner Rolando Tan is the president of Supreme Theater
Corporation and the general manager of Crown and Empire
Theaters in Butuan City. Private respondent Leovigildo Lagrama
is a painter, making ad billboards and murals for the motion
pictures shown at the Empress, Supreme, and Crown Theaters
for more than 10 years, from September 1, 1988 to October 17,
1998.
On October 17, 1998, private respondent Lagrama was
summoned by Tan and upbraided: Nangihi na naman ka sulod
sa imong drawinganan. (You again urinated inside your work
area.) When Lagrama asked what Tan was saying, Tan told
him, Ayaw daghang [Link] ko gusto nga mo-drawing ka
pa. Guikan karon, wala nay drawing. Gawas. (Dont say anything
further. I dont want you to draw [Link] now on, no more
drawing. Get out.)
Lagrama denied the charge against him. He claimed that
he was not the only one who entered the drawing area and that,
even if the charge was true, it was a minor infraction to warrant
his
dismissal. However,
everytime
he
spoke,
Tan
shouted Gawas (Get out), leaving him with no other choice but
to leave the premises.
Lagrama filed a complaint with the Sub-Regional Arbitration
Branch No. X of the National Labor Relations Commission
(NLRC) in Butuan City. He alleged that he had been illegally
dismissed and sought reinvestigation and payment of 13th
month pay, service incentive leave pay, salary differential, and
damages.
Petitioner Tan denied that Lagrama was his employee. He
asserted that Lagrama was an independent contractor who did
his work according to his methods, while he (petitioner) was
only interested in the result thereof. He cited the admission of
[1]

Lagrama during the conferences before the Labor Arbiter that

he was paid on a fixed piece-work basis, i.e., that he was paid
for every painting turned out as ad billboard or mural for the
pictures shown in the three theaters, on the basis of a no
mural/billboard drawn, no pay policy. He submitted the
affidavits of other cinema owners, an amusement park owner,
and those supervising the construction of a church to prove that
the services of Lagrama were contracted by them. He denied
having dismissed Lagrama and alleged that it was the latter
who refused to paint for him after he was scolded for his habits.
As no amicable settlement had been reached, Labor Arbiter
Rogelio P. Legaspi directed the parties to file their position
papers. On June 17, 1999, he rendered a decision, the
dispositive portion of which reads:
WHEREFORE, premises considered judgment is hereby ordered:
1. Declaring complainants [Lagramas] dismissal illegal
and
2. Ordering respondents [Tan] to pay complainant the
following:
A. Separation Pay - P 59,000.00
B. Backwages - 47,200.00
(from 17 October 1998 to 17 June 1999)
C. 13th month pay (3 years) - 17,700.00
D. Service Incentive Leave
Pay (3 years) - 2, 949.99
E. Damages - 10,000.00
TOTAL [P136,849.99]
Complainants other claims are dismissed for lack of merit.[3]
Petitioner Rolando Tan appealed to the NLRC Fifth Division,
Cagayan de Oro City, which, on June 30, 2000, rendered a
decision[4]finding Lagrama to be an independent contractor, and
for this reason reversing the decision of the Labor Arbiter.
Respondent Lagrama filed a motion for reconsideration, but
it was denied for lack of merit by the NLRC in a resolution of
September 29, 2000. He then filed a petition for certiorari under
Rule 65 before the Court of Appeals.

The Court of Appeals found that petitioner exercised control

over Lagramas work by dictating the time when Lagrama
should submit his billboards and murals and setting rules on the
use of the work area and rest room. Although it found that
Lagrama did work for other cinema owners, the appeals court
held it to be a mere sideline insufficient to prove that he was
not an employee of Tan. The appeals court also found no
evidence of any intention on the part of Lagrama to leave his
job or sever his employment relationship with Tan. Accordingly,
on May 31, 2001, the Court of Appeals rendered a decision, the
dispositive portion of which reads:
IN THE LIGHT OF ALL THE FOREGOING, the Petition is hereby
GRANTED. The Resolutions of the Public Respondent issued on
June 30, 2000 and September 29, 2000 are ANNULLED. The
Decision of the Honorable Labor Arbiter Rogelio P. Legaspi on
June 17, 1999 is hereby REINSTATED.
Petitioner moved for a reconsideration, but the Court of
Appeals found no reason to reverse its decision and so denied
his motion for lack of merit. [5] Hence, this petition for review on
certiorari based on the following assignments of errors:
I. With all due respect, the decision of respondent Court of
Appeals in CA-G.R. SP NO. 63160 is bereft of any finding that
Public Respondent NLRC, 5th Division, had no jurisdiction or
exceeded it or otherwise gravely abused its discretion in its
Resolution of 30 June 2000 in NLRC CA-NO. M-004950-99.
II. With all due respect, respondent Court of Appeals, absent any
positive finding on its part that the Resolution of 30 June 2000
of the NLRC is not supported by substantial evidence, is without
authority to substitute its conclusion for that of said NLRC.
III. With all due respect, respondent Court of Appeals discourse
on freelance artists and painters in the decision in question is
misplaced or has no factual or legal basis in the record.
IV. With all due respect, respondent Court of Appeals opening
statement in its decision as to employment, monthly salary of
P1,475.00 and work schedule from Monday to Saturday, from
8:00 oclock in the morning up to 5:00 oclock in the afternoon as
facts is not supported by the evidence on record.

V. With all due respect, the case of Lambo, et al., v. NLRC, et al.,
317 SCRA 420 [G.R. No. 111042 October 26, 1999] relied upon
by respondent Court of Appeals is not applicable to the peculiar
circumstances of this case.[6]
The issues raised boil down to whether or not an employeremployee relationship existed between petitioner and private
respondent, and whether petitioner is guilty of illegally
dismissing private respondent. We find the answers to these
issues to be in the affirmative.
I.
In determining whether there is an employer-employee
relationship, we have applied a four-fold test, to wit: (1) whether
the alleged employer has the power of selection and
engagement of employees; (2) whether he has control of the
employee with respect to the means and methods by which
work is to be accomplished; (3) whether he has the power to
dismiss; and (4) whether the employee was paid wages. [7] These
elements of the employer-employee relationship are present in
this case.
First. The existence in this case of the first element is
undisputed. It was petitioner who engaged the services of
Lagrama without the intervention of a third party. It is the
existence of the second element, the power of control, that
requires discussion here.
Of the four elements of the employer-employee
relationship, the control test is the most important. Compared
to an employee, an independent contractor is one who carries
on a distinct and independent business and undertakes to
perform the job, work, or service on its own account and under
its own responsibility according to its own manner and method,
free from the control and direction of the principal in all matters
connected with the performance of the work except as to the
results thereof.[8] Hence, while an independent contractor enjoys
independence and freedom from the control and supervision of
his principal, an employee is subject to the employers power to
control the means and methods by which the employees work is
to be performed and accomplished.

In the case at bar, albeit petitioner Tan claims that private

respondent Lagrama was an independent contractor and never
his employee, the evidence shows that the latter performed his
work as painter under the supervision and control of petitioner.
Lagrama worked in a designated work area inside the Crown
Theater of petitioner, for the use of which petitioner prescribed
rules. The rules included the observance of cleanliness and
hygiene and a prohibition against urinating in the work area and
any place other than the toilet or the rest rooms. [9] Petitioners
control over Lagramas work extended not only to the use of the
work area, but also to the result of Lagramas work, and the
manner and means by which the work was to be accomplished.
Moreover, it would appear that petitioner not only provided
the workplace, but supplied as well the materials used for the
paintings, because he admitted that he paid Lagrama only for
the latters services.[10]
Private respondent Lagrama claimed that he worked daily,
from 8 oclock in the morning to 5 oclock in the afternoon.
Petitioner disputed this allegation and maintained that he paid
Lagrama P1,475.00 per week for the murals for the three
theaters which the latter usually finished in 3 to 4 days in one
week.[11] Even assuming this to be true, the fact that Lagrama
worked for at least 3 to 4 days a week proves regularity in his
employment by petitioner.
Second. That petitioner had the right to hire and fire was
admitted by him in his position paper submitted to the NLRC,
the pertinent portions of which stated:
Complainant did not know how to use the available comfort
rooms or toilets in and about his work premises. He was
urinating right at the place where he was working when it was
so easy for him, as everybody else did and had he only wanted
to, to go to the comfort rooms. But no, the complainant had to
make a virtual urinal out of his work place! The place then stunk
to high heavens, naturally, to the consternation of respondents
and everyone who could smell the malodor.
...
Given such circumstances, the respondents had every right, nay
all the compelling reason, to fire him from his painting job upon
discovery and his admission of such acts. Nonetheless, though

thoroughly scolded, he was not fired. It was he who stopped to

paint for respondents.[12]
By stating that he had the right to fire Lagrama, petitioner
in effect acknowledged Lagrama to be his employee. For the
right to hire and fire is another important element of the
employer-employee relationship.[13] Indeed, the fact that, as
petitioner himself said, he waited for Lagrama to report for work
but the latter simply stopped reporting for work reinforces the
conviction that Lagrama was indeed an employee of petitioner.
For only an employee can nurture such an expectancy, the
frustration of which, unless satisfactorily explained, can bring
about some disciplinary action on the part of the employer.
Third. Payment of wages is one of the four factors to be
considered in determining the existence of employer-employee
relation. Wages are defined as remuneration or earnings,
however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same,
which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to
be done, or for services rendered or to be rendered. [14] That
Lagrama worked for Tan on a fixed piece-work basis is of no
moment. Payment by result is a method of compensation and
does not define the essence of the relation.[15] It is a method of
computing compensation, not a basis for determining the
existence or absence of employer-employee relationship. One
may be paid on the basis of results or time expended on the
work, and may or may not acquire an employment status,
depending on whether the elements of an employer-employee
relationship are present or not.[16]
The Rules Implementing the Labor Code require every
employer to pay his employees by means of payroll. [17] The
payroll should show among other things, the employees rate of
pay, deductions made, and the amount actually paid to the
employee. In the case at bar, petitioner did not present the
payroll to support his claim that Lagrama was not his employee,
raising speculations whether his failure to do so proves that its
presentation would be adverse to his case.[18]

The primary standard for determining regular employment

is the reasonable connection between the particular activity
performed by the employee in relation to the usual trade or
business of the employer.[19] In this case, there is such a
connection between the job of Lagrama painting billboards and
murals and the business of petitioner. To let the people know
what movie was to be shown in a movie theater requires
billboards. Petitioner in fact admits that the billboards are
important to his business.[20]
The fact that Lagrama was not reported as an employee to
the SSS is not conclusive on the question of whether he was an
employee of petitioner.[21] Otherwise, an employer would be
rewarded for his failure or even neglect to perform his
obligation.[22]
Neither does the fact that Lagrama painted for other
persons affect or alter his employment relationship with
petitioner. That he did so only during weekends has not been
denied by petitioner. On the other hand, Samuel Villalba, for
whom Lagrama had rendered service, admitted in a sworn
statement that he was told by Lagrama that the latter worked
for petitioner.[23]
Lagrama had been employed by petitioner since 1988.
Under the law, therefore, he is deemed a regular employee and
is thus entitled to security of tenure, as provided in Art. 279 of
Labor Code:
ART. 279. Security of Tenure. In cases of regular employment,
the employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled
to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances,
and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from
him up to the time of his actual reinstatement.
This Court has held that if the employee has been
performing the job for at least one year, even if not
continuously but intermittently, the repeated and continuing
need for its performance is sufficient evidence of the necessity,

if not indispensability, of that activity to the business of his

employer. Hence, the employment is also considered regular,
although with respect only to such activity, and while such
activity exists.[24]
It is claimed that Lagrama abandoned his work. There is no
evidence to show this. Abandonment requires two elements: (1)
the failure to report for work or absence without valid or
justifiable reason, and (2) a clear intention to sever the
employer-employee relationship, with the second element as
the more determinative factor and being manifested by some
overt acts.[25] Mere absence is not sufficient. What is more, the
burden is on the employer to show a deliberate and unjustified
refusal on the part of the employee to resume his employment
without any intention of returning.[26] In the case at bar, the
Court of Appeals correctly ruled:
Neither do we agree that Petitioner abandoned his job. In order
for abandonment to be a just and valid ground for dismissal, the
employer must show, by clear proof, the intention of the
employee to abandon his job. . . .
In the present recourse, the Private Respondent has not
established clear proof of the intention of the Petitioner to
abandon his job or to sever the employment relationship
between him and the Private Respondent. On the contrary, it
was Private Respondent who told Petitioner that he did not want
the latter to draw for him and thereafter refused to give him
work to do or any mural or billboard to paint or draw on.
More, after the repeated refusal of the Private Respondent to
give Petitioner murals or billboards to work on, the Petitioner
filed, with the Sub-Regional Arbitration Branch No. X of the
National Labor Relations Commission, a Complaint for Illegal
Dismissal and Money Claims. Such act has, as the Supreme
Court declared, negate any intention to sever employment
relationship. . . .[27]
II.
The second issue is whether private respondent Lagrama
was illegally dismissed. To begin, the employer has the burden
of proving the lawfulness of his employees dismissal. [28] The

validity of the charge must be clearly established in a manner

consistent with due [Link] Implementing Rules of the
Labor Code[29] provide that no worker shall be dismissed except
for a just or authorized cause provided by law and after due
process. This provision has two aspects: (1) the legality of the
act of dismissal, that is, dismissal under the grounds provided
for under Article 282 of the Labor Code and (2) the legality in
the manner of dismissal. The illegality of the act of dismissal
constitutes discharge without just cause, while illegality in the
manner of dismissal is dismissal without due process.[30]
In this case, by his refusal to give Lagrama work to do and
ordering Lagrama to get out of his sight as the latter tried to
explain his side, petitioner made it plain that Lagrama was
dismissed. Urinating in a work place other than the one
designated for the purpose by the employer constitutes
violation of reasonable regulations intended to promote a
healthy environment under Art. 282(1) of the Labor Code for
purposes of terminating employment, but the same must be
shown by evidence. Here there is no evidence that Lagrama did
urinate in a place other than a rest room in the premises of his
work.
Instead of ordering his reinstatement as provided in Art.
279 of the Labor Code, the Labor Arbiter found that the
relationship between the employer and the employee has been
so strained that the latters reinstatement would no longer serve
any purpose. The parties do not dispute this finding. Hence, the
grant of separation pay in lieu of reinstatement is appropriate.
This is of course in addition to the payment of backwages
which, in accordance with the ruling in Bustamante v. NLRC,
[31]
should be computed from the time of Lagramas dismissal up
to the time of the finality of this decision, without any deduction
or qualification.
The Bureau of Working Conditions[32] classifies workers paid
by results into two groups, namely; (1) those whose time and
performance is supervised by the employer, and (2) those
whose time and performance is unsupervised by the
employer. The first involves an element of control and
supervision over the manner the work is to be performed, while
the second does not. If a piece worker is supervised, there is an
employer-employee relationship, as in this case. However, such

an employee is not entitled to service incentive leave pay since,

as pointed out in Makati Haberdashery v. NLRC[33] and Mark
Roche International v. NLRC,[34] he is paid a fixed amount for
work done, regardless of the time he spent in accomplishing
such work.
WHEREFORE, based on the foregoing, the petition is
DENIED for lack of showing that the Court of Appeals committed
any reversible error. The decision of the Court of Appeals,
reversing the decision of the National Labor Relations
Commission and reinstating the decision of the Labor Arbiter, is
AFFIRMED with the MODIFICATION that the backwages and
other benefits awarded to private respondent Leovigildo
Lagrama should be computed from the time of his dismissal up
to the time of the finality of this decision, without any deduction
and qualification. However, the service incentive leave pay
awarded to him is DELETED.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, and Corona, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 111042 October 26, 1999
AVELINO LAMBO and VICENTE BELOCURA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and J.C.
TAILOR SHOP and/or JOHNNY CO, respondents.
MENDOZA, J.:
This is a petition for certiorari to set aside the decision 1 of the
National Labor Relations Commission (NLRC) which reversed the
awards made by the Labor Arbiter in favor of petitioners, except
one for P4,992.00 to each, representing 13th month pay.
The facts are as follows.
Petitioners Avelino Lambo and Vicente Belocura were employed
as tailors by private respondents J.C. Tailor Shop and/or Johnny
Co on September 10, 1985 and March 3, 1985, respectively.

They worked from 8:00 a.m. to 7:00 p.m. daily, including

Sundays and holidays. As in the case of the other 100
employees of private respondents, petitioners were paid on a
piece-work basis, according to the style of suits they made.
Regardless of the number of pieces they finished in a day, they
were each given a daily pay of at least P64.00.
On January 17, 1989, petitioners filed a complaint against
private respondents for illegal dismissal and sought recovery of
overtime pay, holiday pay, premium pay on holiday and rest
day, service incentive leave pay, separation pay, 13th month
pay, and attorneys [Link]
After hearing, Labor Arbiter Jose G. Gutierrez found private
respondents guilty of illegal dismissal and accordingly ordered
them to pay petitioners claims. The dispositive portion of the
Labor Arbiters decision reads:
WHEREFORE, in the light of the foregoing,
judgment is hereby rendered declaring the
complainants to have been illegally
dismissed and ordering the respondents to
pay the complainants the following
monetary awards:
AVELINO LAMBO VICENTE BELOCURA
I. BACKWAGES P64,896.00 P64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MONTH PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00

TOTAL P94,719.20 P96,383.20 =
P191,102.40
Add: 10% Attorney's Fees 19,110.24

GRAND TOTAL P210,212.64

=========
or a total aggregate amount of TWO
HUNDRED TEN THOUSAND TWO HUNDRED
TWELVE AND 64/100 (P210,212.64).
All other claims are dismissed for lack of merit.
SO ORDERED. 2
On appeal by private respondents, the NLRC reversed the
decision of the Labor Arbiter. It found that petitioners had not
been dismissed from employment but merely threatened with a

closure of the business if they insisted on their demand for a

"straight payment of their minimum wage," after petitioners, on
January 17, 1989, walked out of a meeting with private
respondents and other employees. According to the NLRC,
during that meeting, the employees voted to maintain the
company policy of paying them according to the volume of work
finished at the rate of P18.00 per dozen of tailored clothing
materials. Only petitioners allegedly insisted that they be paid
the minimum wage and other benefits. The NLRC held
petitioners guilty of abandonment of work and accordingly
dismissed their claims except that for 13th month pay. The
dispositive portion of its decision reads:
WHEREFORE, in view of the foregoing, the
appealed decision is hereby vacated and a new
one entered ordering respondents to pay each of
the complainants their 13th month pay in the
amount of P4,992.00. All other monetary awards
are hereby deleted.
SO ORDERED. 3
Petitioners allege that they were dismissed by private
respondents as they were about to file a petition with the
Department of Labor and Employment (DOLE) for the payment
of benefits such as Social Security System (SSS) coverage, sick
leave and vacation leave. They deny that they abandoned their
work.
The petition is meritorious.
First. There is no dispute that petitioners were employees of
private respondents although they were paid not on the basis of
time spent on the job but according to the quantity and the
quality of work produced by them. There are two categories of
employees paid by results: (1) those whose time and
performance are supervised by the employer. (Here, there is an
element of control and supervision over the manner as to how
the work is to be performed. A piece-rate worker belongs to this
category especially if he performs his work in the company
premises.); and (2) those whose time and performance are
unsupervised. (Here, the employers control is over the result of
the work. Workers on pakyao and takay basis belong to this
group.) Both classes of workers are paid per unit accomplished.
Piece-rate payment is generally practiced in garment factories
where work is done in the company premises, while payment

on pakyao and takay basis is commonly observed in the

agricultural industry, such as in sugar plantations where the
work is performed in bulk or in volumes difficult to
quantify. 4 Petitioners belong to the first category, i.e.,
supervised employees.
In determining the existence of an employer-employee
relationship, the following elements must be considered: (1) the
selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control
the employees conduct. 5 Of these elements, the most
important criterion is whether the employer controls or has
reserved the right to control the employee not only as to the
result of the work but also as to the means and methods by
which the result is to be accomplished. 6
In this case, private respondents exercised control over the
work of petitioners. As tailors, petitioners worked in the
companys premises from 8:00 a.m. to 7:00 p.m. daily,
including Sundays and holidays. The mere fact that they were
paid on a piece-rate basis does not negate their status as
regular employees of private respondents. The term "wage" is
broadly defined in Art. 97 of the Labor Code as remuneration or
earnings, capable of being expressed in terms of money
whether fixed or ascertained on a time, task, piece or
commission basis. Payment by the piece is just a method of
compensation and does not define the essence of the
relations. 7 Nor does the fact that petitioners are not covered by
the SSS affect the employer-employee relationship.
Indeed, the following factors show that petitioners, although
piece-rate workers, were regular employees of private
respondents: (1) within the contemplation of Art. 280 of the
Labor Code, their work as tailors was necessary or desirable in
the usual business of private respondents, which is engaged in
the tailoring business; (2) petitioners worked for private
respondents throughout the year, their employment not being
dependent on a specific project or season; and, (3) petitioners
worked for private respondents for more than one year. 8
Second. Private respondents contend, however, that petitioners
refused to report for work after learning that the J.C. Tailoring
and Dress Shop Employees Union had demanded their
(petitioners) dismissal for conduct unbecoming of employees.
In support of their claim, private respondents presented the

affidavits 9 of Emmanuel Y. Caballero, president of the union,

and Amado Cabaero, member, that petitioners had not been
dismissed by private respondents but that practically all
employees of the company, including the members of the union
had asked management to terminate the services of petitioners.
The employees allegedly said they were against petitioners
request for change of the mode of payment of their wages, and
that when a meeting was called to discuss this issue, a petition
for the dismissal of petitioners was presented, prompting the
latter to walk out of their jobs and instead file a complaint for
illegal dismissal against private respondents on January 17,
1989, even before all employees could sign the petition and
management could act upon the [Link]
To justify a finding of abandonment of work, there must be proof
of a deliberate and unjustified refusal on the part of an
employee to resume his employment. The burden of proof is on
the employer to show an unequivocal intent on the part of the
employee to discontinue employment. 10 Mere absence is not
sufficient. It must be accompanied by manifest acts unerringly
pointing to the fact that the employee simply does not want to
work anymore. 11
Private respondents failed to discharge this burden. Other than
the self-serving declarations in the affidavits of their two
employees, private respondents did not adduce proof of overt
acts of petitioners showing their intention to abandon their
work. On the contrary, the evidence shows that petitioners lost
no time in filing the case for illegal dismissal against private
respondent. This fact negates any intention on their part to
sever their employment relationship. 12 Abandonment is a
matter of intention; it cannot be inferred or presumed from
equivocal acts. 13
Third. Private respondents invoke the compromise
agreement, 14 dated March 2, 1993, between them and
petitioner Avelino Lambo, whereby in consideration of the sum
of P10,000.00, petitioner absolved private respondents from
liability for money claims or any other obligations.
To be sure, not all quitclaims are per se invalid or against public
policy. But those (1) where there is clear proof that the waiver
was wangled from an unsuspecting or gullible person or (2)
where the terms of settlement are unconscionable on their face
are invalid. In these cases, the law will step in to annul the

questionable transaction.15 However, considering that the Labor

Arbiter had given petitioner Lambo a total award of P94,719.20,
the amount of P10,000.00 to cover any and all monetary claims
is clearly unconscionable. As we have held in another
case, 16 the subordinate position of the individual employee visa-vis management renders him especially vulnerable to its
blandishments, importunings, and even intimidations, and
results in his improvidently waiving benefits to which he is
clearly entitled. Thus, quitclaims, waivers or releases are looked
upon with disfavor for being contrary to public policy and are
ineffective to bar claims for the full measure of the workers
legal rights. 17 An employee who is merely constrained to
accept the wages paid to him is not precluded from recovering
the difference between the amount he actually received and
that amount which he should have received.
Fourth. The Labor Arbiter awarded backwages, overtime pay,
holiday pay, 13th month pay, separation pay and attorneys
fees, corresponding to 10% of the total monetary awards, in
favor of petitioners.
As petitioners were illegally dismissed, they are entitled to
reinstatement with backwages. Considering that petitioners
were dismissed from the service on January 17, 1989, i.e., prior
to March 21, 1989, 18 the Labor Arbiter correctly applied the rule
in the Mercury Drug case, 19 according to which the recovery of
backwages should be limited to three years without
qualifications or deductions. Any award in excess of three years
is null and void as to the excess. 20
The Labor Arbiter correctly ordered private respondents to give
separation pay. Considerable time has lapsed since petitioners
dismissal, so that reinstatement would now be impractical and
hardly in the best interest of the parties. In lieu of
reinstatement, separation pay should be awarded to petitioners
at the rate of one month salary for every year of service, with a
fraction of at least six (6) months of service being considered as
one (1) year. 21
The awards for overtime pay, holiday pay and 13th month pay
are in accordance with our finding that petitioners are regular
employees, although paid on a piece-rate basis. 22 These
awards are based on the following computation of the Labor
Arbiter:
AVELINO LAMBO

I. BACKWAGES: Jan. 17/89 - Jan.

17/92 = 36 mos.
P 64.00/day x 26 days =
1,664.00/mo. x 36 mos. = P59,904.00
13th Mo. Pay:
P1,664.00/yr. x 3 yrs. = 4,992.00
P64,896.00

II. OVERTIME PAY: Jan. 17/86 - Jan. 17/89

Jan. 17/86 - April 30/87 = 15 mos. & 12 day =
(15 mos. x 26 days + 12 days) = 402 days
*2 hours = 25%
402 days x 2 hrs./days = 804 hrs.
P 32.00/day 8 hrs. =
4.00/hr. x 25% =
1.00/hr. + P4.00/hr. =
5.00/hr. x 804 hrs. = 4,020.00
May 1/87 - Sept. 30/87 = 4 mos. & 26 days =
(4 mos. x 26 days + 26 days) =
130 days
130 days x 2 hrs./day = 260 hrs.
P 41.00/day 8 hrs. =
5.12/hr. x 25% =
1.28/hr. + P5.12/hr. =
6.40/hr. x 260 hrs. = P1,664.00
Oct. 1/87 - Dec. 13/87 = 2 mos. & 11 days =
(2 mos. x 26 days + 11 days) = 63 days
63 days x 2 hrs./day = 126 hrs.
P 49.00/day 8 hrs. =
6.12/hr. x 25% =
1.53/hr. + P6.12/hr. =
7.65/hr. x 126 hrs. = P963.90
Dec. 14/87 - Jan. 17/89 = 13 mos. & 2 days =
(13 mos. x 26 days + 2 days) = 340 days
340 days x 2 hrs./day = 680 hrs.
P 64.00/day 8 hrs. =
8.00/hr. x 25% =
2.00/hr. + P8.00/hr =
10.00/hr. x 680 hrs. = P6,800.00 P13,447.90
III. HOLIDAY PAY: Jan. 17/86 - Jan. 17/89
Jan. 17/86 - April 30/87 = 12 RHs; 8 SHs
P 32.00/day x 200% =
64.00/day x 12 days = 768.00
32.00/day x 12 days = (384.00) P384.00
32.00/day x 30% =

9.60/day x 8 days = 76.80 460.80

May 1/87 - Sept. 30/87 = 3 RHs; 3 SHs

P 41.00/day x 200% =
82.00/day 3 days = 246.00
41.00/day x 3 days = (123.00) P123.00
41.00/day x 30% =
12.30/day x 3 days = 36.90 159.90

Oct. 1/87 - Dec. 13/87 = 1 RH

P 49.00/day x 200% =
98.00/day x 1 day = P98.00
49.00/day x 1 day = (49.00) 49.00

Dec. 14/87 - Jan. 17/89 = 9 RHs; 8 SHs

P 64.00/day x 200% =
128.00/day x 9 days = P1,152.00
64.00/day x 9 days = (576.00)
P576.00
64.00/day x 30% =
19.20/day x 8 days = 153.60 729.60 1,399.30

IV. 13TH MO. PAY: Jan. 17/86 - Jan. 17/89 = 3 yrs.
P 64.00/day x 26 days =
1,664.00/yr. x 3 yrs. = 4,992.00
V. SEPARATION PAY: Sept. 10/85 - Jan. 17/92 = 6
yrs.
P1,664.00/mo. x 6 yrs. = 9,984.00

TOTAL AWARD OF AVELINO

LAMBO P94,719.20
========
VICENTE BELOCURA
I. BACKWAGES: Jan. 17/89 - Jan. 17/92 = 36 mos.
Same computation as A. Lambo
P64,896.00
II. OVERTIME PAY: Jan. 17/86 - Jan. 17/89
Same computation as A. Lambo
13,447.90
III. HOLIDAY PAY: Jan. 17/86 - Jan. 17/89
Same computation as A. Lambo
1,399.30
IV. 13TH MO. PAY: Jan. 17/86 - Jan. 17/89
Same computation as A. Lambo
4,992.00

V. SEPARATION PAY: March 3/85 - Jan. 17/92 = 7

yrs.
P1,664.00/mo. x 7 yrs. = 11,648.00

TOTAL AWARD OF VICENTE

BELOCURA P96,383.20
=========
SUMMARY
AVELINO LAMBO VICENTE BELOCURA

I. BACKWAGES P64,896.00 P64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MO. PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00

TOTAL P94,719.20 P96,383.20
= P191,102.40
ADD: 10% Attorney's Fees 19,110.24

GRAND TOTAL P210,212.64

=========
Except for the award of attorneys fees in the amount of
P19,110.24, the above computation is affirmed. The award of
attorneys fees should be disallowed, it appearing that
petitioners were represented by the Public Attorneys Office.
With regard to petitioner Avelino Lambo, the amount of
P10,000.00 paid to him under the compromise agreement
should be deducted from the total award of P94,719.20.
Consequently, the award to each petitioner should be as
follows:
AVELINO LAMBO VICENTE BELOCURA

I. BACKWAGES P64,896.00 P64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MONTH PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00

P 94,719.20
Less 10,000.00

TOTAL P84,719.20 P96,383.20

GRAND TOTAL P181,102.40

=========
WHEREFORE, the decision of the National Labor Relations
Commission is SET ASIDE and another one is RENDERED
ordering private respondents to pay petitioners the total
amount of One Hundred Eighty-One Thousand One Hundred Two
Pesos and 40/100 (P181,102.40), as computed
[Link]
SO ORDERED.
Buena and De Leon, Jr., JJ., concur.
Bellosillo and Quisumbing, JJ., are on official leave.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 123938 May 21, 1998
LABOR CONGRESS OF THE PHILIPPINES (LCP) for and in
behalf of its members, ANA MARIE OCAMPO, MARY
INTAL, ANNABEL CARESO, MARLENE MELQIADES, IRENE
JACINTO, NANCY GARCIA, IMELDA SARMIENTO, LENITA
VIRAY, GINA JACINTO, ROSEMARIE DEL ROSARIO,
CATHERINE ASPURNA, WINNIE PENA, VIVIAN BAA, EMILY
LAGMAN, LILIAN MARFIL, NANCY DERACO, JANET
DERACO, MELODY JACINTO, CAROLYN DIZON, IMELDA
MANALOTO, NORY VIRAY, ELIZA SALAZAR, GIGI
MANALOTO, JOSEFINA BASILIO, MARY ANN MAYATI,
ZENAIDA GARCIA, MERLY CANLAS, ERLINDA MANALANG,
ANGELINA QUIAMBAO, LANIE GARCIA, ELVIRA PIEDRA,
LOURDES PANLILIO, LUISA PANLILIO, LERIZA PANLILIO,
ALMA CASTRO, ALDA DAVID, MYRA T. OLALIA, MARIFE
PINLAC, NENITA DE GUZMAN, JULIE GACAD, EVELYN
MANALO, NORA PATIO, JANETH CARREON, ROWENA
MENDOZA, ROWENA MANALO, LENY GARCIA, FELISISIMA
PATIO, SUSANA SALOMON, JOYDEE LANSANGAN,
REMEDIOS AGUAS, JEANIE LANSANGAN, ELIZABETH
MERCADO, JOSELYN MANALESE, BERNADETH RALAR,
LOLITA ESPIRITU, AGNES SALAS, VIRGINIA MENDIOLA,
GLENDA SALITA, JANETH RALAR, ERLINDA BASILIO, CORA
PATIO, ANTONIA CALMA, AGNES CARESO, GEMMA
BONUS, MARITESS OCAMPO, LIBERTY GELISANGA,

JANETH MANARANG, AMALIA DELA CRUZ, EVA CUEVAS,

TERESA MANIAGO, ARCELY PEREZ, LOIDA BIE, ROSITA
CANLAS, ANALIZA ESGUERRA, LAILA MANIAGO, JOSIE
MANABAT, ROSARIO DIMATULAC, NYMPA TUAZON, DAIZY
TUASON, ERLINDA NAVARRO, EMILY MANARANG,
EMELITA CAYANAN, MERCY CAYANAN, LUZVIMINDA
CAYANAN, ANABEL MANALO, SONIA DIZON, ERNA
CANLAS, MARIAN BENEDICTA, DOLORES DOLETIN, JULIE
DAVID, GRACE VILLANUEVA, VIRGINIA MAGBAG,
CORAZON RILLION, PRECY MANALILI, ELENA RONOZ,
IMELDA MENDOZA, EDNA CANLAS and ANGELA
CANLAS, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, EMPIRE
FOOD PRODUCTS, its Proprietor/President & Manager,
MR. GONZALO KEHYENG and MRS. EVELYN
KEHYENG, respondents.
DAVIDE, JR., J.:
In this special civil action for certiorari under Rule 65,
petitioners seek to reverse the 29 March 1995 resolution 1of the
National Labor Relations Commission (NLRC) in NLRC RAB III
Case No. 01-1964-91 which affirmed the Decision 2 of Labor
Arbiter Ariel C. Santos dismissing their complaint for utter lack
of merit.
The antecedents of this case, as summarized by the Office of
the Solicitor General in its Manifestation and Motion in Lieu of
Comment, 3 are as follows:
The 99 persons named as petitioners in this
proceeding were rank-and-file employees of
respondent Empire Food Products, which hired
them on various dates (Paragraph 1, Annex "A" of
Petition, Annex "B;" Page 2, Annex "F" of Petition).
Petitioners filed against private respondents a
complaint for payment of money claim[s] and for
violation of labor standard[s] laws (NLRC Case No.
RAB-111-10-1817-90). They also filed a petition
for direct certification of petitioner Labor
Congress of the Philippines as their bargaining
representative (Case No. R0300-9010-RU-005).

On October 23, 1990, petitioners represented by

LCP President Benigno B. Navarro, Sr. and private
respondents Gonzalo Kehyeng and Evelyn
Kehyeng in behalf of Empire Food Products, Inc.
entered into a Memorandum of Agreement which
provided, among others, the following:
1. That in connection with the pending Petition for
Direct Certification filed by the Labor Congress
with the DOLE, Management of the Empire Food
Products has no objection [to] the direct
certification of the LCP Labor Congress and is now
recognizing the Labor Congress of the Philippines
(LCP) and its Local Chapter as the SOLE and
EXCLUSIVE Bargaining Agent and Representative
for all rank and file employees of the Empire Food
Products regarding "WAGES, HOURS Of WORK,
AND OTHER TERMS AND CONDITIONS OF
EMPLOYMENT;"
2. That with regards [sic] to NLRC CASE NO. RABIII-10-1817-90 pending with the NLRC parties
jointly and mutually agreed that the issues
thereof, shall be discussed by the parties and
resolve[d] during the negotiation of the Collective
Bargaining Agreement;
3. That Management of the Empire Food Products
shall make the proper adjustment of the
Employees Wages within fifteen (15) days from
the signing of this Agreement and further agreed
to register all the employees with the SSS;
4. That Employer, Empire Food Products thru its
Management agreed to deduct thru payroll
deduction UNION DUES and other Assessment[s]
upon submission by the LCP Labor Congress
individual Check-Off Authorization[s] signed by
the Union Members indicating the amount to be
deducted and further agreed all deduction[s]
made representing Union Dues and
Assessment[s] shall be remitted immediately to
the LCP Labor Congress Treasurer or authorized
representative within three (3) or five (5) days
upon deductions [sic], Union dues not deducted

during the period due, shall be refunded or

reimbursed by the Employer/Management.
Employer/Management further agreed to deduct
Union dues from non-union members the same
amount deducted from union members without
need of individual Check-Off Authorizations [for]
Agency Fee;
5. That in consideration [of] the foregoing
covenant, parties jointly and mutually agreed that
NLRC CASE NO. RAB-III-10-1817-90 shall be
considered provisionally withdrawn from the
Calendar of the National Labor Relations
Commission (NLRC), while the Petition for direct
certification of the LCP Labor Congress parties
jointly move for the direct certification of the LCP
Labor Congress;
6. That parties jointly and mutually agreed that
upon signing of this Agreement, no Harassments
[sic], Threats, Interferences [sic] of their
respective rights under the law, no Vengeance or
Revenge by each partner nor any act of ULP
which might disrupt the operations of the
business;
7. Parties jointly and mutually agreed that
pending negotiations or formalization of the
propose[d] CBA, this Memorandum of Agreement
shall govern the parties in the exercise of their
respective rights involving the Management of
the business and the terms and condition[s] of
employment, and whatever problems and
grievances may arise by and between the parties
shall be resolved by them, thru the most cordial
and good harmonious relationship by
communicating the other party in writing
indicating said grievances before taking any
action to another forum or government agencies;
8. That parties [to] this Memorandum of
Agreement jointly and mutually agreed to
respect, abide and comply with all the terms and
conditions hereof. Further agreed that violation by

the parties of any provision herein shall constitute

an act of ULP. (Annex "A" of Petition).
In an Order dated October 24, 1990, Mediator
Arbiter Antonio Cortez approved the
memorandum of agreement and certified LCP "as
the sole and exclusive bargaining agent among
the rank-and-file employee of Empire Food
Products for purposes of collective bargaining
with respect to wages, hours of work and other
terms and conditions of employment" (Annex "B"
of Petition).
On November 9, 1990, petitioners through LCP
President Navarro submitted to private
respondents a proposal for collective bargaining
(Annex "C" of Petition).
On January 23, 1991, petitioners filed a complaint
docketed as NLRC Case No. RAB-III-01-1964-91
against private respondents for:
a. Unfair Labor Practice by way of Illegal Lockout
and/or Dismissal;
b. Union busting thru Harassments [sic], threats,
and interfering with the rights of employees to
self-organization;
c. Violation of the Memorandum of Agreement
dated October 23, 1990;
d. Underpayment of Wages in violation of R.A. No.
6640 and R.A. No. 6727, such as Wages
promulgated by the Regional Wage Board;
e. Actual, Moral and Exemplary Damages. (Annex
"D" of Petition)
After the submission by the parties of their
respective position papers and presentation of
testimonial evidence, Labor Arbiter Ariel C.
Santos absolved private respondents of the
charges of unfair labor practice, union busting,
violation of the memorandum of agreement,
underpayment of wages and denied petitioners'
prayer for actual, moral and exemplary damages.
Labor Arbiter Santos, however, directed the
reinstatement of the individual complainants:

The undersigned Labor Arbiter is

not oblivious to the fact that
respondents have violated a
cardinal rule in every
establishment that a payroll and
other papers evidencing hours of
work, payments, etc. shall always
be maintained and subjected to
inspection and visitation by
personnel of the Department of
Labor and Employment. As such
penalty, respondents should not
escape liability for this technicality,
hence, it is proper that all
individual complainants except
those who resigned and executed
quitclaim[s] and releases prior to
the filing of this complaint should
be reinstated to their former
position[s] with the admonition to
respondents that any harassment,
intimidation, coercion or any form
of threat as a result of this
immediately executory
reinstatement shall be dealt with
accordingly.
SO ORDERED. (Annex "G" of petition)
On appeal, the National Labor Relations Commission vacated
the Decision dated April 14, 1972 [sic] and remanded the case
to the Labor Arbiter for further proceedings for the following
reasons:
The Labor Arbiter, through his decision, noted
that ". . . complainant did not present any single
witness while respondent presented four (4)
witnesses in the persons of Gonzalo Kehyeng,
Orlando Cairo, Evelyn Kehyeng and Elvira
Bulagan . . ." (p. 183, Records), that ". . .
complainant before the National Labor Relations
Commission must prove with definiteness and
clarity the offense charged. . . ." (Record, p. 183);

that ". . . complainant failed to specify under what

provision of the Labor Code particularly Art. 248
did respondents violate so as to constitute unfair
labor practice . . ." (Record, p. 183); that
"complainants failed to present any witness who
may describe in what manner respondents have
committed unfair labor practice . . ." (Record, p.
185); that ". . . complainant LCP failed to present
anyone of the so-called 99 complainants in order
to testify who committed the threats and
intimidation . . ." (Record, p. 185).
Upon review of the minutes of the proceedings
on record, however, it appears that complainant
presented witnesses, namely, BENIGNO
NAVARRO, JR. (28 February 1991, RECORD,
p. 91; 8 March 1991, RECORD, p. 92, who
adopted its POSITION PAPER AND CONSOLIDATED
AFFIDAVIT, as Exhibit "A" and the annexes
thereto as Exhibit "B", "B-1" to "B-9",
inclusive. Minutes of the proceedings on record
show that complainant further presented other
witnesses, namely: ERLINDA BASILIO (13 March
1991, RECORD, p. 93; LOURDES PANTILLO,
MARIFE PINLAC, LENIE GARCIA (16 April 1991,
Record, p. 96, see back portion thereof ; 2 May
1991, Record, p. 102; 16 May 1991, Record,
p. 103, 11 June 1991, Record, p. 105). Formal
offer of Documentary and Testimonial Evidence
was made by complainant on June 24, 1991
(Record, p. 106-109)
The Labor Arbiter must have overlooked the
testimonies of some of the individual
complainants which are now on record. Other
individual complainants should have been
summoned with the end in view of receiving their
testimonies. The complainants should be afforded
the time and opportunity to fully substantiate
their claims against the respondents. Judgment
should be rendered only based on the conflicting
positions of the parties. The Labor Arbiter is

called upon to consider and pass upon the issues

of fact and law raised by the parties.
Toward this end, therefore, it is Our considered
view [that] the case should be remanded to the
Labor Arbiter of origin for further proceedings.
(Annex "H" of Petition)
In a Decision dated July 27, 1994, Labor Arbiter Santos made
the following determination:
Complainants failed to present with definiteness
and clarity the particular act or acts constitutive
of unfair labor practice.
It is to be borne in mind that a declaration of
unfair labor practice connotes a finding of prima
facieevidence of probability that a criminal
offense may have been committed so as to
warrant the filing of a criminal information before
the regular court. Hence, evidence which is more
than a scintilla is required in order to declare
respondents/employers guilty of unfair labor
practice. Failing in this regard is fatal to the cause
of complainants. Besides, even the charge of
illegal lockout has no leg to stand on because of
the testimony of respondents through their guard
Orlando Cairo (TSN, July 31, 1991 hearing; p. 535) that on January 21, 1991, complainants
refused and failed to report for work, hence guilty
of abandoning their post without permission from
respondents. As a result of complainants['] failure
to report for work, the cheese curls ready for
repacking were all spoiled to the prejudice of
respondents. Under cross-examination,
complainants failed to rebut the authenticity of
respondents' witness testimony.
As regards the issue of harassments [sic], threats
and interference with the rights of employees to
self-organization which is actually an ingredient of
unfair labor practice, complainants failed to
specify what type of threats or intimidation was
committed and who committed the same. What
are the acts or utterances constitutive of
harassments [sic] being complained of? These

are the specifics which should have been proven

with definiteness and clarity by complainants who
chose to rely heavily on its position paper through
generalizations to prove their case.
Insofar as violation of [the] Memorandum of
Agreement dated October 23, 1990 is concerned,
both parties agreed that:
2 That with regards [sic] to the
NLRC Case No. RAB III-10-1817-90
pending with the NLRC, parties
jointly and mutually agreed that
the issues thereof shall be
discussed by the parties and
resolve[d] during the negotiation of
the CBA.
The aforequoted provision does not speak of [an]
obligation on the part of respondents but on a
resolutory condition that may occur or may not
happen. This cannot be made the basis of an
imposition of an obligation over which the
National Labor Relations Commission has
exclusive jurisdiction thereof.
Anent the charge that there was underpayment
of wages, the evidence points to the contrary. The
enumeration of complainants' wages in their
consolidated Affidavits of merit and position
paper which implies underpayment has no leg to
stand on in the light of the fact that
complainants' admission that they are piece
workers or paid on a pakiao [basis] i.e. a certain
amount for every thousand pieces of cheese curls
or other products repacked. The only limitation
for piece workers or pakiao workers is that they
should receive compensation no less than the
minimum wage for an eight (8) hour work [sic].
And compliance therewith was satisfactorily
explained by respondent Gonzalo Kehyeng in his
testimony (TSN, p. 12-30) during the July 31,
1991 hearing. On cross-examination,
complainants failed to rebut or deny Gonzalo
Kehyeng's testimony that complainants have

been even receiving more than the minimum

wage for an average workers [sic]. Certainly, a
lazy worker earns less than the minimum wage
but the same cannot be attributable to
respondents but to the lazy workers.
Finally, the claim for moral and exemplary
damages has no leg to stand on when no malice,
bad faith or fraud was ever proven to have been
perpetuated by respondents.
WHEREFORE, premises considered, the complaint
is hereby DISMISSED for utter lack of merit.
(Annex "I" of Petition). 4
On appeal, the NLRC, in its Resolution dated 29 March
1995, 5 affirmed in toto the decision of Labor Arbiter Santos. In
so doing, the NLRC sustained the Labor Arbiter's findings that:
(a) there was a dearth of evidence to prove the existence of
unfair labor practice and union busting on the part of private
respondents; (b) the agreement of 23 October 1990 could not
be made the basis of an obligation within the ambit of the
NLRC's jurisdiction, as the provisions thereof, particularly
Section 2, spoke of a resolutory condition which could or could
not happen; (c) the claims for underpayment of wages were
without basis as complainants were
admittedly "pakiao" workers and paid on the basis of their
output subject to the lone limitation that the payment
conformed to the minimum wage rate for an eight-hour
workday; and (d) petitioners were not underpaid.
Their motion for reconsideration having been denied by the
NLRC in its Resolution of 31 October 1995, 6petitioners filed the
instant special civil action for certiorari raising the following
issues:
I
WHETHER OR NOT THE PUBLIC RESPONDENT
NATIONAL LABOR RELATIONS COMMISSION
GRAVELY ABUSED ITS DISCRETION WHEN IT
DISREGARDED OR IGNORED NOT ONLY THE
EVIDENCE FAVORABLE TO HEREIN PETITIONERS,
APPLICABLE JURISPRUDENCE BUT ALSO ITS OWN
DECISIONS AND THAT OF THIS HONORABLE
HIGHEST TRIBUNAL WHICH [WAS] TANTAMOUNT
NOT ONLY TO THE DEPRIVATION OF PETITIONERS'

RIGHT TO DUE PROCESS BUT WOULD RESULT [IN]

MANIFEST INJUSTICE.
II
WHETHER OR NOT THE PUBLIC RESPONDENT
GRAVELY ABUSED ITS DISCRETION WHEN IT
DEPRIVED THE PETITIONERS OF THEIR
CONSTITUTIONAL RIGHT TO SELF-ORGANIZATION,
SECURITY OF TENURE, PROTECTION TO LABOR,
JUST AND HUMANE CONDITIONS OF WORK AND
DUE PROCESS.
III
WHETHER OR NOT THE PETITIONERS WERE
ILLEGALLY EASED OUT [OF] OR CONSTRUCTIVELY
DISMISSED FROM THEIR ONLY MEANS OF
LIVELIHOOD.
IV
WHETHER OR NOT PETITIONERS SHOULD BE
REINSTATED FROM THE DATE OF THEIR
DISMISSAL UP TO THE TIME OF THEIR
REINSTATEMENT, WITH BACKWAGES, STATUTORY
BENEFITS, DAMAGES AND ATTORNEY'S FEES. 7
We required respondents to file their respective
Comments.
In their Manifestation and Comment, private respondents
asserted that the petition was filed out of time. As petitioners
admitted in their Notice to File Petition for Review
on Certiorari that they received a copy of the resolution
(denying their motion for reconsideration) on 13 December
1995, they had only until 29 December 1995 to file the petition.
Having failed to do so, the NLRC thus already entered judgment
in private respondents' favor.
In their Reply, petitioners averred that Mr. Navarro, a nonlawyer who filed the notice to file a petition for review on their
behalf, mistook which reglementary period to apply. Instead of
using the "reasonable time" criterion forcertiorari under Rule
65, he used the 15-day period for petitions for review
on certiorari under Rule 45. They hastened to add that such was
a mere technicality which should not bar their petition from
being decided on the merits in furtherance of substantial
justice, especially considering that respondents neither denied
nor contradicted the facts and issues raised in the petition.

In its Manifestation and Motion in Lieu of Comment, the Office of

the Solicitor General (OSG) sided with petitioners. It pointed out
that the Labor Arbiter, in finding that petitioners abandoned
their jobs, relied solely on the testimony of Security Guard
Rolando Cairo that petitioners refused to work on 21 January
1991, resulting in the spoilage of cheese curls ready for
repacking. However, the OSG argued, this refusal to report for
work for a single day did not constitute abandonment, which
pertains to a clear, deliberate and unjustified refusal to resume
employment, and not mere absence. In fact, the OSG stressed,
two days after allegedly abandoning their work, petitioners filed
a complaint for, inter alia, illegal lockout or illegal dismissal.
Finally, the OSG questioned the lack of explanation on the part
of Labor Arbiter Santos as to why he abandoned his original
decision to reinstate petitioners.
In view of the stand of the OSG, we resolved to require the
NLRC to file its own Comment.
In its Comment, the NLRC invokes the general rule that factual
findings of an administrative agency bind a reviewing court and
asserts that this case does not fall under the exceptions. The
NLRC further argues that grave abuse of discretion may not be
imputed to it, as it affirmed the factual findings and legal
conclusions of the Labor Arbiter only after carefully reviewing,
weighing and evaluating the evidence in support thereof, as
well as the pertinent provisions of law and jurisprudence.
In their Reply, petitioners claim that the decisions of the NLRC
and the Labor Arbiter were not supported by substantial
evidence; that abandonment was not proved; and that much
credit was given to self-serving statements of Gonzalo Kehyeng,
owner of Empire Foods, as to payment of just wages.
On 7 July 1997, we gave due course to the petition and required
the parties to file their respective memoranda. However, only
petitioners and private respondents filed their memoranda, with
the NLRC merely adopting its Comment as its Memorandum.
We find for petitioners.
Invocation of the general rule that factual findings of the NLRC
bind this Court is unavailing under the circumstances. Initially,
we are unable to discern any compelling reason justifying the
Labor Arbiter's volte facefrom his 14 April 1992 decision
reinstating petitioners to his diametrically opposed 27 July 1994
decision, when in both instances, he had before him

substantially the same evidence. Neither do we find the 29

March 1995 NLRC resolution to have sufficiently discussed the
facts so as to comply with the standard of substantial evidence.
For one thing, the NLRC confessed its reluctance to inquire into
the veracity of the Labor Arbiter's factual findings, staunchly
declaring that it was "not about to substitute [its] judgment on
matters that are within the province of the trier of facts." Yet, in
the 21 July 1992 NLRC resolution, 8 it chastised the Labor
Arbiter for his errors both in judgment and procedure; for which
reason it remanded the records of the case to the Labor Arbiter
for compliance with the pronouncements therein.
What cannot escape from our attention is that the Labor Arbiter
did not heed the observations and pronouncements of the NLRC
in its resolution of 21 July 1992, neither did he understand the
purpose of the remand of the records to him. In said resolution,
the NLRC summarized the grounds for the appeal to be:
1. that there is a prima facie evidence of abuse of
discretion and acts of gross incompetence
committed by the Labor Arbiter in rendering the
decision.
2. that the Labor Arbiter in rendering the decision
committed serious errors in the findings of facts.
After which, the NLRC observed and found:
Complainant alleged that the Labor Arbiter
disregarded the testimonies of the 99
complainants who submitted their Consolidated
Affidavit of Merit and Position Paper which was
adopted as direct testimonies during the hearing
and cross-examined by respondents' counsel.
The Labor Arbiter, through his decision, noted
that ". . . complainant did not present any single
witness while respondent presented four (4)
witnesses in the persons of Gonzalo Kehyeng,
Orlando Cairo, Evelyn Kehyeng and Elvira
Bulagan . . ." (Records, p. 183), that ". . .
complainant before the National Labor Relations
Commission must prove with definiteness and
clarity the offense charged. . . ." (Record, p. 183;
that ". . . complainant failed to specify under what
provision of the Labor Code particularly Art. 248
did respondents violate so as to constitute unfair

labor practice . . ." (Record, p. 183); that

"complainants failed to present any witness who
may describe in what manner respondents have
committed unfair labor practice . . ." (Record, p.
185); that ". . . complainant a [sic] LCP failed to
present anyone of the so called 99 complainants
in order to testify who committed the threats and
intimidation . . ." (Record, p.185).
Upon review of the minutes of the proceedings on
record, however, it appears that complainant
presented witnesses, namely BENIGNO NAVARRO,
JR. (28 February 1991, RECORD, p. 91; 8 March
1991, RECORD, p. 92), who adopted its POSITION
PAPER AND CONSOLIDATED AFFIDAVIT as Exhibit
A and the annexes thereto as Exhibit B, B-1 to B9, inclusive. Minutes of the proceedings on record
show that complainant further presented other
witnesses, namely: ERLINDA BASILIO (13 March
1991, RECORD, p. 93; LOURDES PANTILLO,
MARIFE PINLAC, LENI GARCIA (16 April 1991,
Record, p. 96, see back portion thereof; 2 May
1991, Record, p. 102; 16 May 1991, Record, p.
103; 11 June 1991, Record, p. 105). Formal offer
of Documentary and Testimonial Evidence was
made by the complainant on June 24, 1991
(Record, p.106-109).
The Labor Arbiter must have overlooked the
testimonies of some of the individual
complainants which are now on record. Other
individual complainants should have been
summoned with the end in view of receiving their
testimonies. The complainants should [have
been] afforded the time and opportunity to fully
substantiate their claims against the
respondents. Judgment should [have been]
rendered only based on the conflicting positions
of the parties. The Labor Arbiter is called upon to
consider and pass upon the issues of fact and law
raised by the parties.

Toward this end, therefore, it is Our considered

view the case should be remanded to the Labor
Arbiter of origin for further proceedings.
Further, We take note that the decision does not
contain a dispositive portion or fallo. Such being
the case, it may be well said that the decision
does not resolve the issues at hand. On another
plane, there is no portion of the decision which
could be carried out by way of execution.
It may be argued that the last paragraph of the
decision may be categorized as the dispositive
portion thereof:
xxx xxx xxx
The undersigned Labor Arbiter is
not oblivious [to] the fact that
respondents have violated a
cardinal rule in every
establishment that a payroll and
other papers evidencing hour[s] of
work, payment, etc. shall always be
maintained and subjected to
inspection and visitation by
personnel of the Department of
Labor and Employment. As such
penalty, respondents should not
escape liability for this technicality,
hence, it is proper that all the
individual complainants except
those who resigned and executed
quitclaim[s] and release[s] prior to
the filing of this complaint should
be reinstated to their former
position with the admonition to
respondents that any harassment,
intimidation, coercion or any form
of threat as a result of this
immediately executory
reinstatement shall be dealt with
accordingly.
SO ORDERED.

It is Our considered view that even assuming

arguendo that the respondents failed to maintain
their payroll and other papers evidencing hours of
work, payment etc., such circumstance, standing
alone, does not warrant the directive to reinstate
complainants to their former positions. It is [a]
well settled rule that there must be a finding of
illegal dismissal before reinstatement be
mandated.
In this regard, the LABOR ARBITER is hereby
directed to include in his clarificatory decision,
after receiving evidence, considering and
resolving the same, the requisite dispositive
portion. 9
Apparently, the Labor Arbiter perceived that if not for
petitioners, he would not have fallen victim to this stinging
rebuke at the hands of the NLRC. Thus does it appear to us that
the Labor Arbiter, in concluding in his 27 July 1994 Decision that
petitioners abandoned their work, was moved by, at worst,
spite, or at best, lackadaisically glossed over petitioner's
evidence. On this score, we find the following observations of
the OSG most persuasive:
In finding that petitioner employees abandoned
their work, the Labor Arbiter and the NLRC relied
on the testimony of Security Guard Rolando Cairo
that on January 21, 1991, petitioners refused to
work. As a result of their failure to work, the
cheese curls ready for repacking on said date
were spoiled.
The failure to work for one day, which resulted in
the spoilage of cheese curls does not amount to
abandonment of work. In fact two (2) days after
the reported abandonment of work or on January
23, 1991, petitioners filed a complaint for, among
others, unfair labor practice, illegal lockout and/or
illegal dismissal. In several cases, this Honorable
Court held that "one could not possibly abandon
his work and shortly thereafter vigorously pursue
his complaint for illegal dismissal (De Ysasi III v.
NLRC, 231 SCRA 173; Ranara v. NLRC, 212 SCRA
631; Dagupan Bus Co. v. NLRC, 191 SCRA 328;

Atlas Consolidated Mining and Development Corp.

v. NLRC, 190 SCRA 505; Hua Bee Shirt Factory v.
NLRC, 186 SCRA 586; Mabaylan v. NLRC, 203
SCRA 570 and Flexo Manufacturing v. NLRC, 135
SCRA 145). In Atlas Consolidated, supra, this
Honorable Court explicitly stated:
It would be illogical for Caballo, to
abandon his work and then
immediately file an action seeking
for his reinstatement. We can not
believe that Caballo, who had
worked for Atlas for two years and
ten months, would simply walk
away from his job unmindful of the
consequence of his act. i.e. the
forfeiture of his accrued
employment benefits. In opting to
finally to [sic] contest the legality
of his dismissal instead of just
claiming his separation pay and
other benefits, which he actually
did but which proved to be futile
after all, ably supports his sincere
intention to return to work, thus
negating Atlas' stand that he had
abandoned his job.
In De Ysasi III v. NLRC (supra), this Honorable
Court stressed that it is the clear, deliberate and
unjustified refusal to resume employment and not
mere absence that constitutes abandonment. The
absence of petitioner employees for one day on
January 21, 1991 as testified [to] by Security
Guard Orlando Cairo did not constitute
abandonment.
In his first decision, Labor Arbiter Santos
expressly directed the reinstatement of the
petitioner employees and admonished the private
respondents that "any harassment, intimidation,
coercion or any form of threat as a result of this

immediately executory reinstatement shall be

dealt with accordingly.
In his second decision, Labor Arbiter Santos did
not state why he was abandoning his previous
decision directing the reinstatement of petitioner
employees.
By directing in his first decision the reinstatement
of petitioner employees, the Labor Arbiter
impliedly held that they did not abandon their
work but were not allowed to work without just
cause.
That petitioner employees are "pakyao" or piece
workers does not imply that they are not regular
employees entitled to reinstatement. Private
respondent Empire Food Products, Inc. is a food
and fruit processing company. In Tabas
v. California Manufacturing Co., Inc. (169 SCRA
497), this Honorable Court held that the work of
merchandisers of processed food, who coordinate
with grocery stores and other outlets for the sale
of the processed food is necessary in the day-today operation[s] of the company. With more
reason, the work of processed food repackers is
necessary in the day-to-day operation[s] of
respondent Empire Food Products. 10
It may likewise be stressed that the burden of proving the
existence of just cause for dismissing an employee, such as
abandonment, rests on the employer, 11 a burden private
respondents failed to discharge.
Private respondents, moreover, in considering petitioners'
employment to have been terminated by abandonment,
violated their rights to security of tenure and constitutional right
to due process in not even serving them with a written notice of
such termination. 12 Section 2, Rule XIV, Book V of the Omnibus
Rules Implementing the Labor Code provides:
Sec. 2. Notice of Dismissal Any employer who
seeks to dismiss a worker shall furnish him a
written notice stating the particular acts or
omission constituting the grounds for his
dismissal. In cases of abandonment of work, the

notice shall be served at the worker's last known

address.
Petitioners are therefore entitled to reinstatement with full back
wages pursuant to Article 279 of the Labor Code, as amended
by R.A. No. 6715. Nevertheless, the records disclose that taking
into account the number of employees involved, the length of
time that has lapsed since their dismissal, and the perceptible
resentment and enmity between petitioners and private
respondents which necessarily strained their relationship,
reinstatement would be impractical and hardly promotive of the
best interests of the parties. In lieu of reinstatement then,
separation pay at the rate of one month for every year of
service, with
a fraction of at least six (6) months of service considered as one
(1) year, is in order. 13
That being said, the amount of back wages to which each
petitioner is entitled, however, cannot be fully settled at this
time. Petitioners, as piece-rate workers having been paid by the
piece, 14 there is need to determine the varying degrees of
production and days worked by each worker. Clearly, this issue
is best left to the National Labor Relations Commission.
As to the other benefits, namely, holiday pay, premium pay,
13th month pay and service incentive leave which the labor
arbiter failed to rule on but which petitioners prayed for in their
complaint, 15 we hold that petitioners are so entitled to these
benefits. Three (3) factors lead us to conclude that petitioners,
although piece-rate workers, were regular employees of private
respondents. First, as to the nature of petitioners' tasks, their
job of repacking snack food was necessary or desirable in the
usual business of private respondents, who were engaged in the
manufacture and selling of such food products; second,
petitioners worked for private respondents throughout the year,
their employment not having been dependent on a specific
project or season; and third, the length of time 16 that
petitioners worked for private respondents. Thus, while
petitioners' mode of compensation was on a "per piece basis,"
the status and nature of their employment was that of regular
employees.
The Rules Implementing the Labor Code exclude certain
employees from receiving benefits such as nighttime pay,
holiday pay, service incentive leave 17 and 13th month

pay, 18 inter alia, "field personnel and other employees whose

time and performance is unsupervised by the employer,
including those who are engaged on task or contract basis,
purely commission basis, or those who are paid a fixed amount
for performing work irrespective of the time consumed in the
performance thereof." Plainly, petitioners as piece-rate workers
do not fall within this group. As mentioned earlier, not only did
petitioners labor under the control of private respondents as
their employer, likewise did petitioners toil throughout the year
with the fulfillment of their quota as supposed basis for
compensation. Further, in Section 8 (b), Rule IV, Book III which
we quote hereunder, piece workers are specifically mentioned
as being entitled to holiday pay.
Sec. 8. Holiday pay of certain employees.
(b) Where a covered
employee is paid by
results or output,
such as payment on
piece work, his
holiday pay shall not
be less than his
average daily
earnings for the last
seven (7) actual
working days
preceding the
regular
holiday: Provided,
however, that in no
case shall the
holiday pay be less
than the applicable
statutory minimum
wage rate.
In addition, the Revised Guidelines on the Implementation of
the 13th Month Pay Law, in view of the modifications to P.D. No.
851 19 by Memorandum Order No. 28, clearly exclude the
employer of piece rate workers from those exempted from
paying 13th month pay, to wit:
2. EXEMPTED EMPLOYERS

The following employers are still not covered by

P.D. No. 851:
d. Employers of
those who are paid
on purely
commission,
boundary or task
basis, and those who
are paid a fixed
amount for
performing specific
work, irrespective of
the time consumed
in the performance
thereof, except
where the workers
are paid on piecerate basis in which
case the employer
shall grant the
required 13th month
pay to such workers.
(emphasis supplied)
The Revised Guidelines as well as the Rules and
Regulations identify those workers who fall under the
piece-rate category as those who are paid a standard
amount for every piece or unit of work produced that is
more or less regularly replicated, without regard to the
time spent in producing the same. 20
As to overtime pay, the rules, however, are different. According
to Sec. 2(e), Rule I, Book III of the Implementing Rules, workers
who are paid by results including those who are paid on piecework, takay, pakiao, or task basis, if their output rates are in
accordance with the standards prescribed under Sec. 8, Rule VII,
Book III, of these regulations, or where such rates have been
fixed by the Secretary of Labor in accordance with the aforesaid
section, are not entitled to receive overtime pay. Here, private
respondents did not allege adherence to the standards set forth
in Sec. 8 nor with the rates prescribed by the Secretary of
Labor. As such, petitioners are beyond the ambit of exempted

persons and are therefore entitled to overtime pay. Once more,

the National Labor Relations Commission would be in a better
position to determine the exact amounts owed petitioners, if
any.
As to the claim that private respondents violated petitioners'
right to self-organization, the evidence on record does not
support this claim. Petitioners relied almost entirely on
documentary evidence which, per se, did not prove any
wrongdoing on private respondents' part. For example,
petitioners presented their complaint 21 to prove the violation of
labor laws committed by private respondents. The complaint,
however, is merely "the pleading alleging the plaintiff's cause or
causes of action." 22 Its contents are merely allegations, the
verity of which shall have to be proved during the trial. They
likewise offered their Consolidated Affidavit of Merit and Position
Paper 23 which, like the offer of their Complaint, was a
tautological exercise, and did not help nor prove their cause. In
like manner, the petition for certification election 24 and the
subsequent order of certification 25 merely proved that
petitioners sought and acquired the status of bargaining agent
for all rank-and-file employees. Finally, the existence of the
memorandum of agreement 26 offered to substantiate private
respondents' non-compliance therewith, did not prove either
compliance or non-compliance, absent evidence of concrete,
overt acts in contravention of the provisions of the
memorandum.
IN VIEW WHEREOF, the instant petition is hereby GRANTED. The
Resolution of the National Labor Relations Commission of 29
March 1995 and the Decision of the Labor Arbiter of 27 July
1994 in NLRC Case No. RAB-III-01-1964-91 are hereby SET
ASIDE, and another is hereby rendered:
1. DECLARING petitioners to have
been illegally dismissed by private
respondents, thus entitled to full
back wages and other privileges,
and separation pay in lieu of
reinstatement at the rate of one
month's salary for every year of
service with a fraction of six

months of service considered as

one year;
2. REMANDING the records of this
case to the National Labor
Relations Commission for its
determination of the back wages
and other benefits and separation
pay, taking into account the
foregoing observations; and
3. DIRECTING the National Labor
Relations Commission to resolve
the referred issues within sixty (60)
days from its receipt of a copy of
this decision and of the records of
the case and to submit to this
Court a report of its compliance
hereof within ten (10) days from
the rendition of its resolution.
Costs against private respondents.
SO ORDERED.
Davide, Jr., Bellosillo, Vitug, Panganiban and Quisumbing, JJ.,
concur.