Termination of Employment > Management Prerogative

VIRGINIA SUGUE & HEIRS OF RENATO VALDERRAMA, Petitioners, vs. TRIUMPH INT’L. (PHILS.),
INC., Respondent (2009; G.R. No. 164804: J. Leonardo-De Castro)

TRIUMPH INT’L. (PHILS.), INC., Petitioner, vs. VIRGINIA SUGUE & HEIRS OF RENATO
VALDERRAMA, Respondents (2009; G.R. No. 164784: J. Leonardo-De Castro)

FACTS: Sugue – hired by Triumph in May 1990 as its Assistant Manager for Marketing; subsequently promoted to
Marketing Services Manager with a monthly salary of P82,500.00.
Valderrama - hired by Triumph in April 1993 as Direct Sales Manager with a monthly salary of P121,000.00.
**Their main function/responsibility was to ensure that the company’s sales targets and objectives were met.

Beginning sometime in October 1999, there was a decline in company sales. In the following months, the actual sales figures
continued to be significantly below the sales targets set by Valderrama himself. This persistent below target sales
performance was the subject of correspondence between Valderrama and his superiors from Nov. 1999 to July 2000.

June 1, 2000: Sugue and Valderrama filed a complaint with the NLRC against Triumph for payment of money claims
(unpaid vacation and sick leave credits, birthday leave and 14th month pay for the period 1999-2000).

June 19, 2000: Sugue and Valderrama personally attended the preliminary conference of the said case.

June 20, 2000: Triumph’s Managing Dir./GM, Alfredo Escueta, issued a memorandum reminding all dept. heads of existing
company policy that requires dept. heads to notify him before leaving the office during work hours. That same day,
Triumph’s Personnel Mngr., Ralph Funtila, issued separate memoranda to Sugue and Valderrama requiring them to inform
the office of the GM of their whereabouts on June 19, 2000 (from 9:06 a.m. to 11:15 a.m.).
o They replied that they attended the aforementioned preliminary conference.

June 23, 2000: Valderrama and Sugue were directed to submit a written explanation as to why they used company time and
the company vehicle and driver in attending the NLRC preliminary conference and why they left the office without advising
the Managing Director.
o They explained that they believed they may use company time and the company vehicle since the hearing they
attended was pursuant to a complaint that they filed as employees of the company.

June 28, 2000: Triumph charged the one-half day utilized by Sugue and Valderrama in attending the aforementioned NLRC
hearing to their vacation leave credits.

Valderrama
*In the pleadings, Valderrama also complained that his request for an executive check-up on June 19, 2000 was disapproved
by Triumph. Thereafter, Valderrama did not report for work on July 3 to 5, 2000 due allegedly to persistent cough and
vertigo, but his request for sick leave on those dates was disapproved by Triumph because he failed to submit a medical
certificate as required by the company’s rules and policies.*

July 10, 2000: Triumph issued a show cause memo to Valderrama requiring him to explain, among others, his department’s
dismal performance since Oct. 1999, within 48 hrs. from receipt.
o July 11, 2000: Valderrama replied to the show cause memo.

July 17, 2000: Valderrama wrote the company a letter stating that he considered himself constructively dismissed due to the
unreasonable pressures and harassments he suffered the past months.
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July 28, 2000: Triumph issued a memorandum requiring Valderrama to explain, under pain of dismissal, his continued
absences without official leave.
o Valderrama failed to respond, thus, on August 11, 2000, Triumph terminated Valderrama’s employment for
abandonment of work.

Sugue
July 25, 2000: Sugue also wrote the company stating that she considers herself constructively dismissed.

*From the pleadings, Sugue’s charge of constructive dismissal was based on the fact that her request for vacation leave
from July 14 to 15, 2000 was subject to the condition that she first submit a report on the company’s 2001 Marketing Plan.
Also, the approval of her request for executive check-up was deferred. Then, on July 18, 2000, she received a memorandum
instructing her to report to Mr. Efren Temblique, who was appointed OIC for Marketing as a result of a reorganization
prompted by Valderrama’s continued absences. Sugue claimed that such act by Triumph was an outright demotion
considering that Mr. Temblique was her former assistant.*

Aug. 11, 2000: Triumph required Sugue to explain why she should not be terminated for continued absences without official
leave.
o Sugue failed to comply, thus, on Sept, 1, 2000, her employment was terminated for abandonment of work.

==

July 31, 2000: Prior to the actual termination of their employment by Triumph, Sugue and Valderrama filed a complaint for
constructive dismissal against Triumph.

Aug. 1, 2000: Valderrama commenced his employment as Sales Director of Fila Phils., Inc., a competitior of Triumph.

LA Decision: Sugue and Valderrama were constructively dismissed (Triumph appealed to the NLRC)

NLRC: Reversed LA ruling (Sugue and Valderrama filed a petition for certiorari before the CA)

CA: Petition partly granted; NLRC decision set aside, LA decision reintstated (subject to the deletion of the award of
attorney’s fees and the reduction of the award of moral damages and exemplary damages for each of the petitioners)
(Triumph’s MR and Sugue and Valderrama’s Motion for Partial Recon.  DENIED)

Hence, these consolidated petitions for review on certiorari filed by both contending parties.

ISSUE: WON Sugue and Valderrama were validly terminated  YES

RULING: Triumph has shown the existence of a just & valid cause in terminating the employment of Sugue and
Valderrama, and has faithfully complied with the procedural requirements of due process for valid termination of
employment.

Re. half day in NLRC charged to VL credit

SC: No reason to ascribe bad faith to Triumph for charging to the leave credits of Sugue and Valderrama the half-day that
they spent in attending the preliminary conference of the case they instituted against Triumph. It is fair and reasonable for
Triumph to do so considering that Sugue and Valderrama did not perform work for one-half day on June 19, 2000.

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Re. memorandum issued by Triumph in connection with the NLRC hearing as undue harassment
SC: The memorandum was addressed to ALL department heads. Contrary to Sugue and Valderrama’s claim that said policy
was being retroactively applied to them, the policy of requiring department heads to give notice to the Office of the
Managing Director/GM should they leave the office during regular work hours had been in force since 1997.

Funtila’s memoranda requiring Sugue and Valderrama to inform the office of the GM of their whereabouts morning of June
19, 2000 was in keeping with due process. Notwithstanding the fact that the company had received summons for the same
hearing, Triumph could not simply assume that the hearing was the reason for Valderrama and Sugue’s absence.

Finally, the memoranda informing Valderrama and Sugue that they cannot use company time and the company vehicle
when attending hearings for the case they filed and that their absence would be charged against their vacation leaves were
in accordance with existing jurisprudence and principles of fair play. Even assuming that Sugue and Valderrama in good
faith believed that they are merely exercising their legal right when they chose to absent themselves from work to attend the
hearing, it would have imposed little burden on them to inform their employer beforehand of their intention to attend
the hearing and the decency to do so on their own time and at their own expense.

Re. unjust denial of leaves

SC: In the case of Valderrama, he failed to comply with the company’s requirement that an application for sick leave for
two or more days must be supported by a medical certificate which must be verified by the company physician. He was
even given twenty-four 24 hours to submit the same but he totally ignored it.

In Sugue’s case, Escueta’s memorandum advised Sugue that her application for leave will be approved if she will commit
to submit her reports in connection with the 2001 Marketing Plan by July 17, 2000, which was two days after her leave.
There is nothing discriminatory in such a condition considering that she was unable to show that she was the only employee
whose leave application has been subjected to a condition.

 It is NOT unreasonable for the employer to require its employee to complete her assignments on time or before taking a
vacation leave. Being the Marketing Services Manager, Sugue’s reports were indispensable in the preparation of the 2001
Marketing Plan plus the fact that the company had been experiencing a significant decline in sales at that time which all the
more emphasizes the need for her to submit an updated report relative to the 2001 Initial Marketing Plan.

Re. denial by triumph of request for executive check-up

SC: Triumph did not completely turn down their request. Their request was merely deferred because the 2001 Initial
Marketing Plan was due on June 26, 2000 and Triumph’s regional product manager was scheduled to visit the country on
June 26 to 29, 2000. As Valderrama was the Direct Sales Manager and Sugue was the Marketing Services Manager, their
presence on those dates was undoubtedly needed.

 In the grant of vacation and sick leave privileges to an employee, the employer is given leeway to impose conditions
on the entitlement to the same as the grant of vacation and sick leave is not a standard of law, but a prerogative of
management. It is a mere concession or act of grace of the employer and not a matter of right on the part of the employee.
Thus, it is well within the power and authority of an employer to deny an employee’s application for leave and the same
cannot be perceived as discriminatory or harassment.

Re. Sugue’s demotion [Demotion = a situation where an employee is relegated to a subordinate/less important position
constituting a reduction to a lower grade or rank, with a corresponding decrease in salaries, benefits and privileges]
SC: In view of Valderrama’s sudden severance of his employment coupled with the substantially low sales, Triumph saw
an imperative need to effect a reorganization in its sales department. This included the temporary designation of Temblique
as OIC for Marketing concurrently with his position as Asst. Manager for Direct Sales-SMSD. When Sugue was directed

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to report to Temblique, she was not being made to report to Temblique as Asst. Manager for Direct Sales-SMSD but
as the newly designated OIC for Marketing, i.e., the officer chiefly responsible for all marketing matters. Also, there
is no merit in Sugue’s contention that she was in any way stripped of her usual functions. She continued to be the
head of Marketing Services, under the supervision of Temblique as OIC for Marketing.

Triumph’s reorganization was intended to improve management operations especially in the light of the poor sales
performance of the company during that period. The act of management in reorganizing the sales department in order
to achieve its objectives is a legitimate exercise of its management prerogatives, barring any showing of bad faith
which is absent in the instant case.

Re. Valderrama’s employment at Fila Phils.

SC: Valderrama intended to leave his employment with Triumph even before the company issued a show cause memo (on
July 10, 2000) for him to explain, among others, his below target sales performance and before he informed the company
that he considered himself constructively dismissed on July 17, 2001. It may be inferred therefrom that he filed the
constructive dismissal case merely as a subterfuge to evade liability for breach of his employment contract with Triumph
which requires 60-day notice prior to resignation.

Re. Abandonment [Abandonment = deliberate and unjustified refusal of an employee to resume his employment, without
any intention of returning; a form of neglect of duty, hence, a just cause for termination of employment]
SC: Having failed to substantiate their claim of constructive dismissal, Sugue and Valderrama should be deemed to have
abandoned their work, thus, their dismissal is warranted.

 For abandonment to be a valid ground for dismissal, two elements must then be satisfied: (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.
The second element is the more determinative factor and must be evinced by overt acts.

The abovementioned elements are present in the instant case.

o First, Sugue and Valderrama’s failure to report for work was without justifiable reason.
o Second, their overt act of writing letters informing Triumph that they considered themselves constructively
dismissed was a clear manifestation of their intention to desist from their employment. Too, their defiance and
disregard of the memorandum sent by Triumph requiring them to explain their unauthorized absences demonstrated
a clear intention on their part to sever their employer-employee relationship. This is particularly true with
Valderrama who, even before unilaterally terminating his employment with Triumph, had already sought regular
employment elsewhere

Further, they filed a complaint for constructive dismissal without praying for reinstatement. By analogy, the Court points to
the doctrine that abandonment of work is inconsistent with the filing of a complaint for illegal dismissal is not applicable
where the complainant does not pray for reinstatement and just asks for separation pay instead. In this case, Sugue and
Valderrama opted not to ask for reinstatement and even for separation pay, which clearly contradicts their stance
that they did not abandon their work, for it appears they have no intention of ever returning to their positions in
Triumph.

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Aklan Electric Coop v. NLRC
January 25, 2000 | Gonzaga-Reyes, J.
By: Arrow

SUMMARY:
The Board of Directors of AKELCO allowed the temporary holding of office at Amon Theater, Kalibo, Aklan, on the
ground that the office at Lezo, Aklan was dangerous and unsafe. Majority of the employees including the herein
complainants, continued to report for work at Lezo, Aklan and were paid of their salaries. The complainants claimed that
transfer of office from Lezo, Aklan to Kalibo, Aklan was illegal thus the they remained and continued to work at the Lezo
Office until they were illegally locked out therefrom by the respondents. Despite the illegal lock out however, complainants
continued to report daily to the location of the Lezo Office, prepared to continue in the performance of their regular duties.
Complainants who continuously reported for work at Lezo, Aklan were not paid their salaries from June 1992 up to March
18, 1993. Court ruled they were not entitled to their salaries for that period since it has been established that the petitioner’s
business office was transferred to Kalibo and all its equipments, records and facilities were transferred thereat and that it
conducted its official business in Kalibo during the period in question. It was incumbent upon private respondents to prove
that they indeed rendered services for petitioner, which they failed to do.

DOCTRINE: (No Work, No Pay Principle)

The age-old rule governing the relation between labor and capital, or management and employee of a "fair days wage for a
fair days labor" remains as the basic factor in determining employees wages. If there is no work performed by the employee
there can be no wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked out,
suspended or dismissed, or otherwise illegally prevented from working, a situation which we find is not present in the instant
case.

FACTS:

These are consolidated cases/claims for non-payment of salaries and wages, 13th month pay, ECOLA and other fringe
benefits as rice, medical and clothing allowances, submitted by complainant Rodolfo M. Retiso and 163 others, Lyn E.
Banilla and Wilson B. Sallador against respondents Aklan Electric Cooperative, Inc. (AKELCO), Atty. Leovigildo Mationg
in his capacity as General Manager; Manuel Calizo, in his capacity as Acting Board President, Board of Directors,
AKELCO.

Complainants alleged that prior to the temporary transfer of the office of AKELCO from Lezo Aklan to Amon Theater,
Kalibo, Aklan, complainants were continuously performing their task and were duly paid of their salaries at their main office
located at Lezo, Aklan.

On January 22, 1992, the Board of Directors of AKELCO allowed the temporary transfer holding of office at Amon Theater,
Kalibo, Aklan per information by their Project Supervisor, Atty. Leovigildo Mationg, that their head office is closed and
that it is dangerous to hold office thereat Nevertheless, majority of the employees including herein complainants continued
to report for work at Lezo Aklan and were paid of their salaries.

On February 6, 1992, the administrator of NEA, Rodrigo Cabrera, wrote a letter addressed to the Board of AKELCO, that
he is not interposing any objections to the action taken by respondent Mationg

On February 11, 1992, an unnumbered resolution was passed by the Board of AKELCO withdrawing the temporary
designation of office at Kalibo, Aklan, and that the daily operations must be held again at the main office of Lezo, Aklan;

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That complainants who were then reporting at the Lezo office from January 1992 up to May 1992 were duly paid of their
salaries, while in the meantime some of the employees through the instigation of respondent Mationg continued to remain
and work at Kalibo, Aklan;

From June 1992 up to March 18, 1993, complainants who continuously reported for work at Lezo, Aklan in compliance
with the aforementioned resolution were not paid their salaries;
On March 19, 1993 up to the present, complainants were again allowed to draw their salaries; with the exception of a few
complainants who were not paid their salaries for the months of April and May 1993;

Allegations of the respondents:

1. That these complainants voluntarily abandoned their respective work/job assignments, without any justifiable
reason and without notifying the management of the Aklan Electric Cooperative, Inc. (AKELCO), hence the cooperative
suffered damages and systems loss;

2. That the complainants herein defied the lawful orders and other issuances by the General Manager and the Board
of Directors of the AKELCO. These complainants were requested to report to work at the Kalibo office x x x but despite
these lawful orders of the General Manager, the complainants did not follow and wilfully and maliciously defied said orders
and issuance of the General Manager; that the Board of Directors passed a Resolution resisting and denying the claims of
these complainants, x x x under the principle of "no work no pay" which is legally justified; That these complainants have
"mass leave" from their customary work on June 1992 up to March 18, 1993 and had a "sit-down" stance for these periods
of time in their alleged protest of the appointment of respondent Atty. Leovigildo Mationg as the new General Manager of
the Aklan Electric Cooperative, Inc. (AKELCO) by the Board of Directors and confirmed by the Administrator of the
National Electrification Administration (NEA), Quezon City; That they engaged in " . . . slowdown mass leaves, sit downs,
attempts to damage, destroy or sabotage plant equipment and facilities of the Aklan Electric Cooperative, Inc. (AKELCO)."

LA: Dismissed the complaint

NLRC: Reversed decision, held that the workers are entitled to unpaid wages from June 16, 1992 to March 18, 1993

ISSUES/HELD:
WON private respondents refused to work under the lawful orders of the petitioner AKELCO management; hence they are
covered by the "no work, no pay" principle and are thus not entitled to the claim for unpaid wages from June 16, 1992 to
March 18, 1993. YES, they are not entitled to the unpaid wages. NLRC decision is reversed and set aside

RATIO:

Public respondent based its conclusion on the following: (a) the letter dated April 7, 1993 of Pedrito L. Leyson, Office
Manager of AKELCO addressed to AKELCOs General Manager, Atty. Leovigildo T. Mationg, requesting for the payment
of private respondents unpaid wages from June 16, 1992 to March 18, 1993; (b) the memorandum of said Atty. Mationg
dated 14 April 1993, in answer to the letter request of Pedrito Leyson where Atty. Mationg made an assurance that he will
recommend such request; (c) the private respondents own computation of their unpaid wages. We find that the foregoing
does not constitute substantial evidence to support the conclusion that private respondents are entitled to the payment of
wages from June 16, 1992 to March 18, 1993.

On the other hand, petitioner was able to show that private respondents did not render services during the stated period.
Petitioners evidences show that on January 22, 1992, petitioners Board of Directors passed a resolution temporarily
transferring the Office from Lezo, Aklan to Amon Theater, Kalibo, Aklan upon the recommendation of Atty. Leovigildo
Mationg, then project supervisor, on the ground that the office at Lezo was dangerous and unsafe. Such transfer was

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approved by then NEA Administrator, Rodrigo E. Cabrera, in a letter dated February 6, 1992 addressed to petitioners Board
of Directors. Thus, the NEA Administrator, in the exercise of supervision and control over all electric cooperatives,
including petitioner, wrote a letter dated February 6, 1992 addressed to the Provincial Director PC/INP Kalibo Aklan
requesting for military assistance for the petitioners team in retrieving the electric cooperatives equipments and other
removable facilities and/or fixtures consequential to the transfer of its principal business address from Lezo to Kalibo and
in maintaining peace and order in the cooperatives coverage area.

The foregoing establishes the fact that the continuous operation of the petitioners business office in Lezo Aklan would pose
a serious and imminent threat to petitioners officials and other employees, hence the necessity of temporarily transferring
the operation of its business office from Lezo to Kalibo. Such transfer was done in the exercise of a management prerogative
and in the absence of contrary evidence is not unjustified. With the transfer of petitioners business office from its former
office, Lezo, to Kalibo, Aklan, its equipments, records and facilities were also removed from Lezo and brought to the Kalibo
office where petitioners official business was being conducted; thus private respondents allegations that they continued to
report for work at Lezo to support their claim for wages has no basis.

The age-old rule governing the relation between labor and capital, or management and employee of a "fair days wage for a
fair days labor" remains as the basic factor in determining employees wages. If there is no work performed by the employee
there can be no wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked out,
suspended or dismissed, or otherwise illegally prevented from working, a situation which we find is not present in the instant
case. It would neither be fair nor just to allow private respondents to recover something they have not earned and could not
have earned because they did not render services at the Kalibo office during the stated period.
UNIVERSITY OF PANGASINAN FACULTY UNION vs. NATIONAL LABOR RELATIONS COMMISSION
and UNIVERSITY OF PANGASINAN (1984)
GUTIERREZ, JR., J.:
FACTS:
Petitioner is a labor union composed of faculty members of the respondent University of Pangasinan, an educational
institution duly organized and existing by virtue of the laws of the Philippines.

On December 18, 1981, the petitioner, through its President, Miss Consuelo Abad, filed a complaint against the private
respondent with the Arbitration Branch of the NLRC, Dagupan District Office, Dagupan City. The complaint seeks:
a) the payment of Emergency Cost of Living Allowances (ECOLA) for November 7 to December 5, 1981, a
semestral break;
b) (b) salary increases from the sixty (60%) percent of the incremental proceeds of increased tuition fees; and
c) (c) payment of salaries for suspended extra loads.
The petitioner’s members are full-time professors, instructors, and teachers of respondent University. The teachers in the
college level teach for a normal duration of ten (10) months a school year, divided into two (2) semesters of five (5)
months each, excluding the two (2) months summer vacation. These teachers are paid their salaries on a regular monthly
basis.

In November and December, 1981, the petitioner’s members were fully paid their regular monthly salaries. However,
from November 7 to December 5, during the semestral break, they were not paid their ECOLA. The private respondent
claims that the teachers are not entitled thereto because the semestral break is not an integral part of the school year and
there being no actual services rendered by the teachers during said period, the principle of "No work, no pay" applies.

During the same school year (1981-1982), the private respondent was authorized by the Ministry of Education and
Culture to collect, as it did collect, from its students a fifteen (15%) percent increase of tuition fees. Petitioner’s members
demanded a salary increase effective the first semester of said schoolyear to be taken from the sixty (60%) percent
incremental proceeds of the increased tuition fees. Private respondent refused, compelling the petitioner to include said

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demand in the complaint filed in the case at bar. While the complaint was pending in the arbitration branch, the private
respondent granted an across-the-board salary increase of 5.86%. Nonetheless, the petitioner is still pursuing full
distribution of the 60% of the incremental proceeds as mandated by the Presidential Decree No. 451.

Aside from their regular loads, some of petitioner’s members were given extra loads to handle during the same 1981-1982
schoolyear. Some of them had extra loads to teach on September 21, 1981, but they were unable to teach as classes in all
levels throughout the country were suspended, although said days was proclaimed by the President of the Philippines as a
working holiday. Those with extra loads to teach on said day claimed they were not paid their salaries for those loads, but
the private respondent claims otherwise.

ISSUE:

1. WON the petitioners are entitled for payments of ECOLA during their semestral break. YES. Issue related to
topic.
2. WON 60% of the Incremental proceeds of the increased tuition fees shall be devoted exclusively to salary
increases. YES.

HELD:
Regarding the first issue, the various Presidential Decrees on ECOLAs to wit: PD’s 1614, 1634, 1678 and 1713, provide
on "Allowances of Fulltime Employees . . ." that "Employees shall be paid in full the required monthly allowance
regardless of the number of their regular working days if they incur no absences during the month. If they incur absences
without pay, the amounts corresponding to the absences may be deducted from the monthly allowance . . ." ; and on
"Leave of Absence Without Pay", that "All covered employees shall be entitled to the allowance provided herein when
they are on leave of absence with pay."

It is beyond dispute that the petitioner’s members are full-time employees receiving their monthly salaries irrespective of
the number of working days or teaching hours in a month. However, they find themselves in a most peculiar situation
whereby they are forced to go on leave during semestral breaks. These semestral breaks are in the nature of work
interruptions beyond the employees’ control. The duration of the semestral break varies from year to year
dependent on a variety of circumstances affecting at times only the private respondent but at other times all
educational institutions in the country. As such, these breaks cannot be considered as absences within the meaning
of the law for which deductions may be made from monthly allowances. The "No work, no pay" principle does not
apply in the instant case. The petitioner’s members received their regular salaries during this period. It is clear from the
aforequoted provision of law that it contemplates a "no work" situation where the employees voluntarily absent
themselves. Petitioners, in the case at bar, certainly do not, ad voluntatem, absent themselves during semestral breaks.
Rather, they are constrained to take mandatory leave from work. For this they cannot be faulted nor can they be
begrudged that which is due them under the law. To a certain extent, the private respondent can specify dates when no
classes would be held. Surely, it was not the intention of the framers of the law to allow employers to withhold employee
benefits by the simple expedient of unilaterally imposing "no work" days and consequently avoiding compliance with the
mandate of the law for those days.

Respondent’s contention that "the fact of receiving a salary alone should not be the basis of receiving ECOLA", is,
likewise, without merit. Particular attention is brought to the Implementing Rules and Regulations of Wage Order No. 1 to
wit.

SECTION 5. Allowance for Unworked Days. —

"a) All covered employees whether paid on a monthly or daily basis shall be entitled to their daily living allowance
when they are paid their basic wage."
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The time during which an employee is inactive by reason of interruptions in his work beyond his control shall be
considered time either if the imminence of the resumption of work requires the employee’s presence at the place of work
or if the interval is too brief to be utilized effectively and gainfully in the employee’s own interest."
The petitioner’s members in the case at bar, are exactly in such a situation. The semestral break scheduled is an
interruption beyond petitioner’s control and it cannot be used "effectively nor gainfully in the employee’s interest’. Thus,
the semestral break may also be considered as "hours worked." For this, the teachers are paid regular salaries and, for this,
they should be entitled to ECOLA. Not only do the teachers continue to work during this short recess but much less do
they cease to live for which the cost of living allowance is intended. The legal principles of "No work, no pay; No pay, no
ECOLA" must necessarily give way to the purpose of the law to augment the income of employees to enable them to cope
with the harsh living conditions brought about by inflation; and to protect employees and their wages against the ravages
brought by these conditions. Significantly, it is the commitment of the State to protect labor and to provide means by
which the difficulties faced by the working force may best be alleviated. To submit to the respondents’ interpretation of
the no work, no pay policy is to defeat this noble purpose. The Constitution and the law mandate otherwise.
With regard to the second issue, we are called upon to interpret and apply Section 3 of Presidential Decree 451 to
wit:chanrob1es virtual 1aw library

SEC. 3. Limitations. — The increase in tuition or other school fees or other charges as well as the new fees or charges
authorized under the next preceding section shall be subject to the following conditions:jgc:chanrobles.com.ph

"(a) That no increase in tuition or other school fees or charges shall be approved unless sixty (60%) per centum of the
proceeds is allocated for increase in salaries or wages of the members of the faculty and all other employees of the school
concerned, and the balance for institutional development, student assistance and extension services, and return to
investments: Provided, That in no case shall the return to investments exceed twelve (12%) per centum of the incremental
proceeds; . . .
DISPOSITIVE: Petition for certiorari is hereby GRANTED. The private respondent is ordered to pay its regular
fulltime teachers/employees emergency cost of living allowances for the semestral break from November 7 to
December 5, 1981 and the undistributed balance of the sixty (60%) percent incremental proceeds from tuition increases
for the same schoolyear as outlined above. The respondent Commission is sustained insofar as it DENIED the payment of
salaries for the suspended extra loads on September 21, 1981.

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International School Alliance of Educators v. Hon. Quisumbing (G.R. No. 128845 | June 1, 2000)
Kapunan

Quick Summary: The local-hires (mostly Filipino) of International School, Inc. (“IS”) have been receiving less than their
counterparts hired abroad. Thus, they cry discrimination with which the Court agrees. Employees should be given equal
pay for work of equal value. That is the principle long honored in this jurisdiction. That is a principle that rests on
fundamental notions of justice, which we uphold today.

Facts:

1. IS is a domestic educational institution established primarily for dependents of foreign diplomatic personnel and
other temporary residents (pursuant to PD 732).
 It’s authorized to employ its own teaching and management personnel selected by it either locally or abroad.
Accordingly, it hires both foreign and local teachers as members of its faculty, classifying them into 2: (1)
foreign-hires and (2) local-hires1
 The school grants foreign-hires certain benefits not accorded local-hires.
a. Housing, transportation, shipping costs, taxes, and home leave travel allowance.
b. Paid 25% more than local-hires.
 The school justifies the difference on two “significant economic disadvantages” foreign-hires have to
endure: (a) dislocation factor; and (b) limited tenure
2. Negotiations for a new collective bargaining agreement (“CBA”) were held in June 1955.
 Petitioner ISAE (a legit labor union and CB rep of all faculty members) contested the difference in salary
rates between foreign and local-hires.
 There was also an issue of w/n the foreign-hires belong to the same bargaining unit as the local-hires.
3. ISAE filed a notice of strike on Sept. 7, 1995.
 The National Conciliation and Mediation Board failed to bring the parties to a compromise, so DOLE
assumed jurisdiction over the dispute.
4. The DOLE Acting Sec. (Trajano) issued an Order resolving the issue in favor of IS. Then DOLE Secretary
(respondent Sec. Leonardo Quisumbing) denied ISAE’s MR.
5. Thus, ISAE seeks relief in this Court.

Arguments:

ISAE – The point-of-hire classification is discriminatory to Filipinos and that the grant of higher salaries to foreign-hires
constitutes racial discrimination.

IS – The compensation package given to local-hires applies to all, regardless of race. There are foreigners who have been
hired locally and paid equally as Filipino hires (as found by the Acting Sec. of Labor)

6. The Acting Sec. upheld the point-of-hire classification for the distinction in salary rates.
 “Equal pay for equal work” is not applicable in this case. The int’l character of the IS requires the hiring of
foreign personnel to deal w/ diff. nationalities & culture

1 Four tests employed by the school to determine the classification: 1. Domicile, 2. Home economy, 3. Country of economic
allegiance, and 4. Whether the individual was hired abroad specifically to work in IS and whether IS was responsible for
bringing that individual to the Philippines. If the answer to all these items is the PHILIPPINES, then the faculty member is a
local-hire. Otherwise, he/she is a foreign-hire.
10
  Certain amenities have to be provided to foreigners in order to entice them to render their services in the Phils
and in the process remain competitive in the int’l market
 Foreign-hires have limited contract of employment unlike local-hires who enjoy security of tenure.

7. The SC disagrees to the Acting Secretary’s conclusions.

Issue: W/N the point-of-hire classification employed by IS to justify the distinction in the salary rates of foreign-hires and
local-hires is a valid classification.– NO.

There is no reasonable distinction between the services rendered by foreign-hires and local-hires. The practice of IS
according higher salaries to foreign-hires contravenes public policy.

Ratio:

1. That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws reflect
the policy against these evils. The Constitution in the Article on Social Justice and Human Rights exhorts
Congress to “give highest priority to the enactment of measures that protect and enhance the right of all people to
human dignity, reduce social, economic, and political inequalities.”
2. The Constitution specifically provides that labor is entitled to “humane conditions of work.” These
conditions are not restricted to physical workplace—the factory, the office or the field—but include as well
the manner by w/c the employers treat their employees.
 The Constitution also directs the State to promote “equality of employment opportunities for all.”
 Similarly, the Labor Code provides that the State shall “ensure equal work opportunities regardless of sex,
race or creed.”
3. Discrimination, particularly in terms of wage, is frowned upon by the Labor Code. (ex. Art. 135, Art. 248)
4. Persons who work with substantially equal qualifications, skill, effort, and responsibility, under similar
conditions, should be paid similar salaries. This rule applies to IS, its “international character”
notwithstanding.
5. IS contends that ISAE has not adduced evidence that local-hires perform work equal to that of foreign-hires. The
SC finds this argument a little cavalier. If an employer accords employees the same position and rank, the
presumption is that these employees perform equal work.
 Besides, if the employer doesn’t pay its employees equally, it is for that employer to explain why the
employee is treated unfairly. It is not for the employee to explain why he receives less. That would be adding
insult to injury.
 IS failed to discharge this burden. There’s no evidence that foreign-hires perform 24% more efficiently
or effectively than local-hires. Both groups have similar functions and responsibilities, which they perform
under similar working conditions.
 While we recognize the need of IS to attract foreign-hires, salaries shouldn’t be used as an enticement to the
prejudice of local-hires.
 The dislocation factor and limited tenure affecting foreign-hires are adequately compensated by certain
benefits accorded them w/c are not enjoyed by local-hires.

WHEREFORE, the petition is GRANTED in part. Orders of the Secretary of Labor and Employment is REVERSED
insofar as they uphold the practice of IS of according foreign-hires higher salaries than local-hires.

NOTE: The Court, however, agrees that the foreign-hires do not belong to the same bargaining unit as the local-hires. The
factors determining the appropriate CB unit are: (1) will of the employees (Globe Doctrine); (2) affinity and unity of the
11
employees’ interest (Substantial Mutual Interests Rule); (3) prior collective bargaining history; and (4) similarity of
employment status.

12
 LEGEND HOTEL (MANILA), OLWNED BY TITANIUM CORPORATION AND/OR, NELSON NAPUD, IN
HIS CAPACITY AS THE PRESIDENT OF PETITIONER CORPORATION, PETITIONER,
VS.
HERNANI S. REALUYO, ALSO KNOWN AS JOEY ROA, RESPONDENT.
G.R. No. 153511, July 18, 2012

FACTS:
- This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a hotel.
- August 9, 1999: Realuyo, whose stage name was Joey R. Roa, filed a complaint for alleged unfair labor practice,
constructive illegal dismissal, and the underpayment/nonpayment of his premium pay for holidays, separation
pay, service incentive leave pay, and 13th month pay. He prayed for attorney’s fees, moral damages of
P100,000.00 and exemplary damages for P100,000.00
- Roa averred that he had worked as a pianist at the Legend Hotel’s Tanglaw Restaurant from September 1992
with an initial rate of P400.00/night; and that it had increased to P750.00/night. During his employment, he could
not choose the time of performance, which had been fixed from 7:00PM to 10:00pm for three to six times a week.
- July 9, 1999: the management had notified him that as a cost-cutting measure, his services as a pianist would no
longer be required effective July 30, 1999.
- In its defense, petitioner denied the existence of an employer-employee relationship with Roa, insisting that he
had been only a talent engaged to provide live music at Legend Hotel’s Madison Coffee Shop for three hours/day
on two days each week; and stated that the economic crisis that had hit the country constrained management to
dispense with his services.
- December 29,1999: the Labor Arbiter (LA) dismissed the complaint for lack of merit upon finding that the parties
had no employer-employee relationship, because Roa was receiving talent fee and not salary, which was
reinforced by the fact that Roa received his talent fee nightly, unlike the regular employees of the hotel who are
paid monthly.
- NLRC affirmed the LA’s decision on May 31, 2001.
- CA set aside the decision of the NLRC, saying CA failed to take into consideration that in Roa’s line of work, he
was supervised and controlled by the hotel’s restaurant manager who at certain times would require him to
perform only tagalong songs or music, or wear barong tagalong to conform with the Filipinana motif of the place
and the time of his performance is fixed. As to the status of Roa, he is considered a regular employee of the hotel
since his job was in furtherance of the restaurant business of the hotel. Granting that Roa was initially a
contractual employee, by the sheer length of service he had rendered for the company, he had been converted into
a regular employee.
- CA held that the dismissal was due to retrenchment in order to avoid or minimize business losses, which is
recognized by law under Art. 283 of the Labor Code.

ISSUES:
- WON there was employer-employee relationship between the two, and if so,
- WON Roa was validly terminated

RULING:
- YES. Employer-employee relationship existed between the parties.
o Roa was undeniably employed as a pianist of the restaurant. The hotel wielded the power of selection at
the time it entered into the service contract dated Sept. 1, 1992 with Roa. The hotel could not seek refuge
behind the service contract entered into with Roa. It is the law that defines and governs an employment
relationship, whose terms are not restricted to those fixed in the written contract, for other factors, like the
nature of the work the employee has been called upon to perform, are also considered.

13
 o The law affords protection to an employee, and does not countenance any attempt to subvert its spirit and
intent. Any stipulation in writing can be ignored when the employer utilizes the stipulation to deprive the
employee of his security of tenure. The inequality that characterizes employer-employee relationship
generally tips the scales in favor of the employer, such that the employee is often scarcely provided
real and better options.
o The argument that Roa was receiving talent fee and not salary is baseless. There is no denying that the
remuneration denominated as talent fees was fixed on the basis of his talent, skill, and the quality of
music he played during the hours of his performance. Roa’s remuneration, albeit denominated as talent
fees, was still considered as included in the term wage in the sense and context of the Labor Code,
regardless of how petitioner chose to designate the remuneration, as per Article 97(f) of the Labor Code.
o The power of the employer to control the work of the employee is considered the most significant
determinant of the existence of an employer-employee relationship. This is the so-called control test, and
is premised on whether the person for whom the services are performed reserves the right to control both
the end achieved and the manner and means used to achieve that end.
o Lastly, petitioner claims that it had no power to dismiss respondent due to his not being even subject to its
Code of Discipline, and that the power to terminate the working relationship was mutually vested in the
parties, in that either party might terminate at will, with or without cause. This claim is contrary to the
records. Indeed, the memorandum informing respondent of the discountinuance of his service because of
the financial condition of petitioner showed the latter had the power to dismiss him from employment.
- NO. Roa was not validly terminated.
o The conclusion that Roa’s termination was by reason of retrenchment due to an authorized cause under
the labor Code is inevitable.
o Retrenchment is one of the authorized causes for the dismissal of employees recognized by the Labor
Code. It is a management prerogative resorted to by employers to avoid ro to minimize business losses.
On this matter, Article 283 of the Labor Code states:
 Article 283. Closure of establishment and reduction of personnel. – The employer may also
terminate the employment of any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the provisions
of this Title, by serving a written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof. xxx. In case of retrenchment
to prevent losses and in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
o Justifications for retrenchment:
a. The expected losses should be substantial and not merely de minimis in extent;
b. The substantial losses apprehended must be reasonably imminent;
c. The retrenchment must be reasonably necessary and likely to effectively prevent the expected losses;
and
d. The alleged losses, if already incurred, and the expected imminent losses sought to be forestalled
must be proved by sufficient and convincing evidence.
o In termination cases, the burden of proving that the dismissal was for a valid or authorized cause rests
upon the employer. Here, petitioner did not submit evidence of the losses to its business operations and
the economic havoc it would thereby imminently sustain. It only claimed that Roa’s termination was due
to its “present business/financial condition.” This bare statement fell short of the norm to show a valid
retrenchment. Hence, there was no valid cause for the retrenchment of respondent. Since the lapse of
time since the retrenchment might have rendered Roa’s reinstatement to his former job no longer feasible,

14
 Legend Hotel should pay him separation pay at the rate of one month pay for every year of service
computed from September 1992 until the finality of this decision, and full backwages from the time his
compensation was withheld until the finality of this decision.

Petition denied.

15
 R90
Edilberto Etom vs Aroma Lodging House
Medialdea, J.

DOCTRINE
Burden of showing proof of payment of wages rests on the employer.

FACTS
1. Edilberto Etom filed a complaint for illegal dismissal and money claims against Aroma Lodging House, who hired him
as a roomboy in 1997 with a monthly salary of P2,500.00.
2. February 4, 2008, ALH refused to allow him to report for work. Petitioner argued that respondent did not inform him of
any violation that would warrant his dismissal. He also claimed that he was not given an opportunity to explain and answer
any imputation against him by his employer.

3. ALH stated that they hired Etom as a roomboy in 2000. He was paid salary above the required minimum wage, holiday
pay, 13th month pay and overtime pay. Respondent also stated that it provided petitioner with free meals, allowed him to
receive "tips" from customers, and sell bottles left by customers in the lodge. It also gave him commission on certain
occasions.

4.According to them, the guy was mentally unastable as all hell, had a penchant for quarreling with his coworkers, stole
from the guests, even got accused of rape, and on one memorable occasion, chased his coworkers down with a knife. He
was served with a memorandum requiring him to explain the knife-chasing, but he refused to receive it. Fearing for their
guests’ and other employees’ safety, they decided to let him go.
‘
4. LA- ruled IFO Etom
5. NLRC- affirmed LA ruling. ALH’s MR denied.
6. CA- ALH filed a petition for certiorari. This was granted, and the LA/NLRC ruling reversed. the CA explained that for
having executed an earlier notarized affidavit stating that he received wages above the required minimum salary, petitioner
could not subsequently claim that he was underpaid by ALH. It also declared that there is no factual basis to support the
grant of 13th month pay and holiday pay in favor of Etom. Etom’s MR denied.

.
ISSUE with HOLDING
1. Was there illegal dismissal, and should ALH be held liable for Etom’s money claims?

SC: YES.

While a notarized document is presumed to be regular such presumption is not absolute and may be overcome by clear
and convincing evidence to the contrary. The fact that a document is notarized is not a guarantee of the validity of its
contents.[50]

Here, petitioner is an unlettered employee who may not have understood the full import of his statements in the affidavit.
Notably, petitioner, along with a co-worker did not state the specific amount of what they referred as salary above the
minimum required by law. Their statement only reads as follows:

16
 Na kami ay namamasukan bilang mga 'roomboy' sa naturang Aroma Lodge magmula pa noong taong 2000 at bilang
mga regular na mga empleyado nito, kami ay nakakatangap ng pasueldo na lagpas sa 'minimum wage' na takda ng batas,
bukod pa sa libreng tirahan (stay-in), pagkain, [paggamit] ng ilaw at tubig, at mga 'tips' at komisyon sa mga parokyano
ng Aroma Lodge.[51]
As found by the LA, respondent did not present substantial evidence that it paid the required minimum wage, 13th
month pay and holiday pay in favor of petitioner.[52] Respondent's mere reliance on the foregoing affidavit is misplaced
because the requirement of established jurisprudence is for the employer to prove payment, and not merely deny the
employee's accusation of non-payment on the basis of the latter's own declaration.

In conclusion, we find that the CA erred in ascribing grave abuse of discretion on the part of the NLRC in awarding
salary differential, 13th month pay and holiday pay in favor of petitioner.
.

DISPOSITIVE PORTION
WHEREFORE, the Petition is GRANTED. The January 21, 2010 Decision and July 2, 2010 Resolution of the Court of
Appeals in CA-G.R. SP No. 110901 are REVERSED and SET ASIDE. Accordingly, the April 30, 2009 Decision and June
30, 2009 Resolution of the National Labor Relations Commission in NLRC LAC No. 09-003303-08 are REINSTATED
and AFFIRMED.

SO ORDERED.

Carpio,* (Chairperson), Brion, Perlas-Bernabe,** and Leonen, JJ., concur.

DIGESTER: Hil

17
[G.R. No. 94825. September 4, 1992.]
PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY, vs. NATIONAL LABOR RELATIONS
COMMISSION, and ODIN SECURITY AGENCY, as representative of its Security Guards (GUTIERREZ,
JR., J.)
FACTS:

 P is a GOCC created by P.D. No. 977.

 November 11, 1985 – P entered into a contract with the Odin Security Agency for security services of its Iloilo
Fishing Port Complex in Iloilo City.
 The pertinent provision of the contract provides:
OBLIGATION OF THE FISHING PORT COMPLEX
1. For and in consideration of the services to be rendered by the AGENCY to the FISHING PORT COMPLEX, the latter
shall pay to the former per month for eight (8) hours work daily as follows:
OUTSIDE METRO MANILA
Security Guard P1,990.00
Security Supervisor 2,090.00
Det. Commander 2,190.00.

The Security Group of the AGENCY will be headed by a detachment commander whose main function shall consist of the
administration and supervision control of the AGENCY’s personnel in the FISHING PORT COMPLEX. There shall be
one supervisor per shift who shall supervise the guards on duty during a particular shift.

The above schedule of compensation includes among others, the following:

(a) Minimum wage (Wage Order No. 5)
(b) Rest Day Pay
(c) Night Differential Pay
(d) Incentive Leave Pay
(e) 13th Month Pay
(f) Emergency Cost of Living Allowance (up to Wage Order No. 5)
(g) 4% Contractor’s Tax
(h) Operational Expenses
(i) Overhead (Rollo, pp. 197-198)

The contract for security services also provided for a one year renewable period unless terminated by either of the
parties. It reads:
9. This agreement shall take effect upon approval for a period of one (1) year unless sooner terminated upon notice of one
party to the other provided, that should there be no notice of renewal within thirty (30) days before the expiry date, the
same shall be deemed renewed, and provided further, that the party desiring to terminate the contract before the expiry
date shall give thirty (30) days written advance notice to the other party. (Rollo, p. 198)
 October 24, 1987 (during the effectivity of the said Security Agreement) – PR requested P to adjust the contract
rate in view of the implementation of Wage Order No. 6 which took effect on November 1, 1984.
WAGE ORDER No. 6

SECTION 9. In the case of contracts for construction projects and for security, janitorial and similar services, the
increases in the minimum wage and allowance rates of the workers shall be borne by the principal or client of the
construction/service contractor and the contracts shall be deemed amended accordingly, subject to the provisions of
Section 3(c) of this Order. (Rollo, p. 49)

18
Section 7, par. c of the Security Services Contract which calls for an automatic escalation of the rate per guard in case
of wage increase also reads: The terms and conditions herein set forth shall be modified by the applicable provisions of
subsequent laws or decrees, especially as they pertain to increases in the minimum wage and occupational benefits to
workers. (Rollo, p. 46)

 Requests for adjustment of the contract price were reiterated on January 14, 1988 and February 19, 1988 but were
ignored by the petitioner. Thus on June 7, 1988, the PR filed with the Office of the Sub-Regional Arbitrator in Region
VI, Iloilo City a complaint for unpaid amount of re-adjustment rate under Wage Order No. 6 together with
wage salary differentials arising from the integration of the cost of living allowance under Wage Order No. 1,
2, 3 and 5 pursuant to Executive Order No. 178 plus the amount of P25,000.00 as attorney’s fees and cost of
litigation.
 July 29, 1988, the petitioner filed a Motion to Dismiss on the following grounds:
(1) The Commission has no jurisdiction to hear and try the case;
(2) Assuming it has jurisdiction, the security guards of Odin Security Agency have no legal personality to sue or be
sued; and
(3) Assuming the individual guards have legal personality the action involves interpretation of contract over which it
has no authority. (Rollo, p. 75)
 August 19, 1988 - LA dismissed the complaint stating that the petitioner’s being a GOCC would place it under
the scope and jurisdiction of the Civil Service Commission and not within the ambit of the NLRC.
 NLRC - issued the questioned resolution setting aside the order and entered a decision granting reliefs to the private
Respondent.
 A motion for reconsideration was subsequently filed raising among others that the resolution is:
(1) In violation of the right of the respondent to due process under the Constitution;
(2) Granting arguendo that the due process clause was observed, the resolution granting relief is without any legal
basis; and
(3) Granting arguendo that there is legal basis for the award, the stipulation under the contract allowing an increase of
wage rate is void ab initio. (Rollo, p. 86)
 June 25, 1990 - the MR denied.

ISSUES:

 WON an indirect employer is bound by the rulings of the NLRC  YES

 Who should carry the burden of the wage increases?  Both the petitioner and the private respondent are ORDERED
to pay jointly and severally the unpaid wage differentials under Wage Order No. 6 without prejudice to the right of
reimbursement for one-half of the amount which either the petitioner or the private respondent may have to pay to the
security guards.
RATIO:

 P is a GOCC with a special charter thus it is under the scope of the civil service (Art. XI [B] [1] and [2], 1987
Constitution); Boy Scouts of the Philippines v. NLRC, 196 SCRA 176 [1991]; PNOC-Energy Development Corp. v.
NLRC, 201 SCRA 487 [1991]). However, the guards are not employees of the petitioner. The contract of
services explicitly states that the security guards are not considered employees of the petitioner.There being no
employer-employee relationship between the petitioner and the security guards, the jurisdiction of the Civil
Service Commission may not be invoked in this case. The contract entered into by the petitioner which is merely
job contracting makes the petitioner an indirect employer. Notwithstanding that the petitioner is a government
agency, its liabilities, which are joint and solidary with that of the contractor, are provided in Articles 106, 107
and 109 of the Labor Code. This places the petitioner’s liabilities under the scope of the NLRC. Moreover, Book
Three, Title II on Wages specifically provides that the term "employer" includes any person acting directly or
indirectly in the interest of an employer in relation to an employee and shall include the Government and all its
19
 branches, subdivisions and instrumentalities, all government-owned or controlled corporation and institutions
as well as non-profit private institutions, or organizations (Art. 97 [b], Labor Code; Eagle Security Agency, Inc. v.
NLRC, 173 SCRA 479 [1989]; Rabago v. NLRC, 200 SCRA 158 [1991]). The NLRC, therefore, did not commit
grave abuse of discretion in assuming jurisdiction to set aside the Order of dismissal by the Labor Arbiter.
 Settled is the rule that in job contracting, the petitioner as principal is jointly and severally liable with the
contractor for the payment of unpaid wages. The statutory basis for the joint and several liability is set forth in
Articles 107, and 109 in relation to Article 106 of the Labor Code. In the case at bar, the action instituted by the
private respondent was for the payment of unpaid wage differentials under Wage Order No. 6. The liabilities of the
parties were very well explained in the case of Eagle Security v. NLRC*: “What the Wage Orders require, therefore,
is the amendment of the contract as to the consideration to cover the service contractor’s payment of the increases
mandated. In the end, therefore, ultimate liability for the payment of the increases rests with the principal." The Wage
Orders are statutory and mandatory and can not be waived. The petitioner can not escape liability since the law
provides the joint and solidary liability of the principal and the contractor for the protection of the laborers. There can
be no question that the security guards are entitled to wage adjustments. Undeniably, services were rendered already
and the petitioner benefitted from said contract for two (2) years now. The petitioner is therefore estopped from
assailing the contract.
 Quite noteworthy is the fact that the private respondent entered into the contract when Wage Order No. 6 had already
been in force. The contract was entered into in November 11, 1985 one year after the effectivity of Wage Order No. 6
which was on November 1, 1984. The rates of the security guards as stipulated in the contract did not consider the
increases in the minimum wage mandated by Wage Order No. 6. Two years after, the private respondent is now
asking for an adjustment in the contract price pursuant to the wage order provision. Such action of the private
respondent is rather disturbing and must not remain unchecked. In the complaint filed, the private respondent alleged
that it requested the Regional Director, NCR Region of the Department of Labor and Employment for their
intercession in connection with the illegal bidding and award made by the petitioner in favor of Triad Security Agency
which was below the minimum wage law. Undeniably, the private respondent is equally guilty when it entered into
the contract with the petitioner without considering Wage Order No. 6. While it is true that security personnel should
not be deprived of what is lawfully due them, it bears emphasis that it was the private respondent which first deprived
the security personnel of their rightful wage under Wage Order No. 6. The private respondent is the employer of the
security guards and as the employer, it is charged with knowledge of labor laws and the adequacy of the compensation
that it demands for contractual services is its principal concern and not any other’s (Del Rosario & Sons Logging
Enterprises, Inc. v. NLRC, 136 SCRA 669 [1985]). Given this peculiar circumstance, the private respondent
should also be faulted for the unpaid wage differentials of the security guards. By filing the complaint in its own
behalf and in behalf of the security guards, the private respondent wishes to exculpate itself from liability on the
strength of the ruling in the Eagle case that the ultimate liability rests with the principal. Nonetheless, the inescapable
fact is that the employees must be guaranteed payment of the wages due them for the performance of any work, task,
job or project. They must be given ample protection as mandated by the Constitution (See Article II, Section 18 and
Article XIII, Section 3). Thus, to assure compliance with the provisions of the Labor Code including the
statutory minimum wage, the joint and several liability of the contractor and the principal is mandated. We,
therefore, hold the petitioner and the private respondent jointly and severally liable to the security guards for
the unpaid wage differentials under Wage Order No. 6. As held in the Eagle case, the security guards’
immediate recourse is with their direct employer, private respondent Odin Security Agency. The solidary
liability is, however, without prejudice to a claim for reimbursement by the private respondent against the
petitioner for only one-half of the amount due considering that the private respondent is also at fault for
entering into the contract without taking into consideration the minimum wage rates under Wage Order No. 6.

Antonio Iran (doing business under the name and style of Tones Iran Enterprises) v NLRC, Godofredo Petralba,
Moreno Cadalso, Pepito Tecson, Apolinario Gothon Gemina, Jesus Bandilao, Edwin Martin, Celso Labiaga,
Diosdado Gonzalgo, and Fernando Colina
20
GR No. 121927, April 22, 1998

Facts:
 Iran is engaged in softdrinks merchandising and distribution in Mandaue, Cebu. He employed respondents as
truck drivers who double as salesmen, truck helpers, and non-field personnel. As part of their compensation, they
received commissions per case of softdrinks sold.
 In June 1991, Iran discovered cash shortages and irregularities while conducting an audit. In a return-to-work
Order, he requested respondents to report to work every day, but not allowed to go on their respective routes.
They stopped reporting for work so Iran concluded they abandoned their employment. Iran terminated their
services and subsequently filed complaint for estafa.
 December 5, 1991, respondents filed complaints against Iran for illegal dismissal, illegal deduction,
underpayment of wages, premium pay for holiday and rest day, holiday pay, service incentive leave pay, 13th
month pay, allowances, separation pay, recovery of cash bond, damages and attorney’s fees.
 LA: Iran validly terminated respondents, there being just cause for dismissal. BUT Iran did not comply with
minimum wage requirements and failed to pay 13th month pay. Total award: P81k.
 Both parties appealed to NLRC.
o Iran: presented for the first time, vouchers denominated as 13th month pay signed by respondents
o Respondents: not illegally dismissed!
o NLRC: affirmed validity of dismissal, but found that it did not comply with procedural requirements for
dismissing employees.

Issue: WoN commissions are included in determining compliance with the minimum wage requirement

Held: Yes, commissions are included in determining compliance with minimum wage requirements.

LC 97 (f) explicitly includes commissions as part of wages.

 While commissions are, indeed, incentives or forms of encouragement to inspire employees to put a little more
industry on the jobs particularly assigned to them, still these commissions are direct remunerations for services
rendered. In fact, commissions have been defined as the recompense, compensation or reward of an agent,
salesman, executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the
amount of his transactions or on the profit to the principal. The nature of the work of a salesman and the reason
for such type of remuneration for services rendered demonstrate clearly that commissions are part of a salesman’s
wage or salary.
 Thus, the commissions earned by private respondents in selling softdrinks constitute part of the compensation or
remuneration paid to drivers/salesmen and truck helpers for serving as such, and hence, must be considered part
of the wages paid them.

There is no law mandating that commissions be paid only after the minimum wage has been paid to the employee. Verily,
the establishment of a minimum wage only sets a floor below which an employee’s remuneration cannot fall, not that
commissions are excluded from wages in determining compliance with the minimum wage law.
 Philippine Agricultural Commercial and Industrial Workers Union v NLRC: drivers and conductors who are
compensated purely on a commission basis are automatically entitled to the basic minimum pay mandated by law
should said commissions be less than their basic minimum for eight hours work. It can, thus, be inferred that were
said commissions equal to or even exceed the minimum wage, the employer need not pay, in addition, the basic
minimum pay prescribed by law

21
Issue of procedural requirement: in terminating employees, the employer must furnish the worker with 2 written notices:
(a) a notice which apprises the employee of the particular acts or omissions for which his dismissal is sought, and (b) the
subsequent notice which informs the employee of the employer’s decision to dismiss him
 Return-to-work order as equivalent to the first notice apprising the employee of the particular acts or omissions
for which his dismissal is sought. But Iran admitted that private respondents were never told in said notice that
their dismissal was being sought, only that they should settle their accountabilities.

WHEREFORE, the decision of the NLRC dated July 31, 1995, insofar as it excludes the commissions received by private
respondents in the determination of petitioner’s compliance with the minimum wage law, as well as its exclusion of the
particular amounts received by private respondents as part of their 13th month pay is REVERSED and SET ASIDE. This
case is REMANDED to the Labor Arbiter for a recomputation of the alleged deficiencies. For non-observance of
procedural due process in effecting the dismissal of private respondents, said decision is MODIFIED by increasing the
award of nominal damages to private respondents from P1,000.00 to P5,000.00 each. No costs.

22
 OUR HAUS REALTY DEV. AUTHORITY v ALEXANDER PARIAN
(4 OTHERS)
Aug. 6, 2014| Brion J. |Facilities and Supplements/Allowances
Digester: Vizconde, Ronald P.

FACTS:

 Respondents Alexander Parian, Jay Erinco, Alexander Canlas, Jerry Sabulao and Bernardo Tenederowere all laborers
working for petitioner Our Haus Realty Development Corporation (Our Haus), a company engaged in the construction
business.
 Sometime in May 2010, Our Haus experienced financial distress. To alleviate its condition, Our Haus suspended
some of its construction projects and asked the affected workers, including the respondents, to take vacation leaves.
 Eventually, the respondents were asked to report back to work but instead of doing so, they filed with the LA a
complaint for underpayment of their daily wages.
 They claimed that except for respondent Bernardo N. Tenedero, their wages were below the minimum rates
prescribed in the following wage orders from 2007 to 2010:
o 1. Wage Order No. NCR-13, daily minimum wage rate of P362.00 for the non-agriculture sector (effective
from August 28, 2007 until June 13, 2008); and
o 2. Wage Order No. NCR-14, which provides for a daily minimum wage rate of P382.00 for the non-
agriculture sector (effective from June 14, 2008 until June 30, 2010).
 The respondents also alleged that Our Haus failed to pay them their holiday, service incentive leave (SIL), 13th month
and overtime pays.
 Before the LA, Our Haus primarily argued that the respondents’ wages complied with the law’s minimum
requirement. Aside from paying the monetary amount of the respondents’ wages, Our Haus also subsidized their
meals (3 times a day), and gave them free lodging near the construction project they were assigned to.
 Our Haus argued that in determining the total amount of the respondents’ daily wages, the value of these benefits
should be considered, in line with Article 97(f) of the Labor Code.
 On the other hand, the respondents argued that the value of their meals should not be considered in determining their
wages’ total amount since the requirements set under Section 4 of DOLE Memorandum Circular No. 2 were not
complied with.
 The respondents pointed out that Our Haus never presented any proof that they agreed in writing to the inclusion of
their meals’ value in their wages.
 Also, Our Haus failed to prove that the value of the facilities it furnished was fair and reasonable.
 Finally, instead of deducting the maximum amount of 70% of the value of the meals, Our Haus actually withheld its
full value (which was Php290.00 per week for each employee).
 The LA ruled in favor of Our Haus. He held that if the reasonable values of the board and lodging would be taken into
account, the respondents’ daily wages would meet the minimum wage rate. As to the other benefits, the LA found that
the respondents were not able to substantiate their claims for it.
 The respondents appealed the LA’s decision to the NLRC, which in turn, reversed it. Citing the case of Mayon Hotel
& Restaurant v. Adana, the NLRC noted that the respondents did not authorize Our Haus in writing to charge the
values of their board and lodging to their wages. Thus, the same cannot be credited. The NLRC also ruled that the
respondents are entitled to their respective proportionate 13th month payments for the year 2010 and SIL payments
for at least three years,
 Our Haus moved for the reconsideration of the NLRC’s decision and submitted new evidence (the five kasunduans) to
show that the respondents authorized Our Haus in writing to charge the values of their meals and lodging to their
wages.
 The CA dismissed Our Haus’ certiorari petition and affirmed the NLRC rulings in toto. It found no real distinction
between deduction and charging, and ruled that the legal requirements before any deduction or charging can be made,
23
 apply to both.
o Accordingly, it cannot consider the values of its meal and housing facilities in the computation of the
respondents’ total wages.
o Also, the CA ruled that since the respondents were able to allege non-payment of SIL in their position paper,
and Our Haus, in fact, opposed it in its various pleadings, then the NLRC properly considered it as part of the
respondents’ causes of action. Lastly, the CA affirmed the respondent’s entitlement to attorney’s fees.
 Our Haus filed a motion for reconsideration but the CA denied its motion, prompting it to file the present petition for
review on certiorari under Rule 45.

RULING:
The Petition is DENIED and the Court of Appeals' decision is AFFIRMED.

ISSUE AND RATIO

W/N there is a difference betwen deduction and charging?– NO

Our Haus’ argument is a vain attempt to circumvent the minimum wage law by trying to create a distinction where none
exists.

In reality, deduction and charging both operate to lessen the actual take-home pay of an employee; they are two sides of the
same coin. In both, the employee receives a lessened amount because supposedly, the facility’s value, which is part of his
wage, had already been paid to him in kind. As there is no substantial distinction between the two, the requirements set by
law must apply to both.

W/N Our Haus complied with the legal requirements of deduction? – NO

a. The facility must be customarily furnished by the trade

The existence of a company policy or guideline showing that provisions for a facility should designated as part of the
employees’ salaries.

 Our Haus only produced documents when the NLRC had already earlier determined that Our Haus failed to prove
that it was traditionally giving the respondents their board and lodging.
 This document did not state whether these benefits had been consistently enjoyed by the rest of Our Haus’
employees.
 Moreover, the records reveal that the board and lodging were given on a per project basis. Our Haus did not show
if these benefits were also provided in its other construction projects, thus negating its claimed customary nature.
 Even assuming the sinumpaang salaysay to be true, this document would still work against Our Haus’ case. If Our
Haus really had the practice of freely giving lodging, electricity and water provisions to its employees, then Our
Haus should not deduct its values from the respondents’ wages. Otherwise, this will run contrary to the affiants’
claim that these benefits were traditionally given free of charge.

Apart from company policy, the employer may also prove compliance with the first requirement by showing the
existence of an industry-wide practice of furnishing the benefits in question among enterprises engaged in the same
line of business.

 Peculiar to the construction business are the occupational safety and health (OSH) services which the law
24
 itself mandates employers to provide to their workers. This is to ensure the humane working conditions of
construction employees despite their constant exposure to hazardous working environments.
 As part of the project cost that construction companies already charge to their clients, the value of the housing of
their workers cannot be charged again to their employees’ salaries. Our Haus cannot pass the burden of the
OSH costs of its construction projects to its employees by deducting it as facilities. This is Our Haus’
obligation under the law.

Lastly, even if a benefit is customarily provided by the trade, it must still pass the purpose test set by
jurisprudence. Under this test, if a benefit or privilege granted to the employee is clearly for the employer’s convenience,
it will not be considered as a facility but a supplement.

In the case at bench, the items provided were given freely by SLL for the purpose of maintaining the efficiency and health
of its workers while they were working at their respective projects.

Based on these considerations, we conclude that even under the purpose test, the subsidized meals and free lodging
provided by Our Haus are actually supplements. Although they also work to benefit the respondents, an analysis of the
nature of these benefits in relation to Our Haus’ business shows that they were given primarily for Our Haus’ greater
convenience and advantage.

b. The provision of deductible facilities must be voluntarily accepted in writing by the employee.

Again, in the motion for reconsideration with the NLRC, Our Haus belatedly submitted five kasunduans, supposedly
executed by the respondents, containing their conformity to the inclusion of the values of the meals and housing to their
total wages. Oddly, Our Haus only offered these documents when the NLRC had already ruled that respondents did not
accomplish any written authorization, to allow deduction from their wages. These five kasunduans were also undated,
making us wonder if they had really been executed when respondents first assumed their jobs.

c. The facility must be charged at a fair and reasonable value.

Our Haus admitted that it deducted the amount of P290.00 per week from each of the respondents for their meals.

However, Our Haus’ valuation cannot be plucked out of thin air. The valuation of a facility must be supported by relevant
documents such as receipts and company records for it to be considered as fair and reasonable.

In the present case, Our Haus never explained how it came up with the valuesit assigned for the benefits it provided; it
merely listed its supposed expenses without any supporting document. Since Our Haus is using these additional expenses
(cook’s salary, water and LPG) to support its claim that it did not withhold the full amount of the meals’ value, Our Haus
is burdened to present evidence to corroborate its claim. The records however, are bereft of any evidence to support Our
Haus’ meal expense computation. Even the value it assigned for the respondents’ living accommodations was not
supported by any documentary evidence. Without any corroborative evidence, it cannot be said that Our Haus complied
with this third requisite.

25
SLL INTERNATIONAL CABLES SPECIALIST and LAGON VS NLRC, LOPEZ, ZUÑIGA and CAÑETE
(2011) – FACILITIES and SUPPLEMENTS
FACTS:
Private Respondents were hired by Lagon as apprentice or trainee cable/lineman and were paid the full minimum wage and
other benefits; they did not report to work regularly, since they are trainees, but came in substitutes for other regular workers.
After their training, they were engaged as Project Employees in different parts of the Country (Bohol, Anitpolo, Bulacan
and Caloocan) upon which they have to re-apply after every completion. Faced with economic problems, Lagon was
constrained to cut down the overtime work of its workers. Thus, when private respondents requested to work overtime,
Lagon refused. Private respondents went home to Cebu and filed a complaint for illegal dismissal, non-payment of wages,
holiday pay, 13th month pay and service incentive leave pay as well as damages and attorney’s fees.
Petitioners admitted private respondents’ employment but claimed that the latter were only project employees for their
services were merely engaged for a specific project or undertaking and the same were covered by contracts duly signed by
private respondents. And since the workplaces of private respondents were all in Manila, the complaint should be filed
there. Thus, petitioners prayed for the dismissal of the complaint for lack of jurisdiction and utter lack of merit.
The LA claimed that his office had jurisdiction under RULE 4 SEC 1 of the NLRC RULES because the "workplace," as
defined in the said rule, included the place where the employee was supposed to report back after a temporary detail,
assignment or travel, which in this case was Cebu. As to the status of their employment, the LA opined that private
respondents were regular employees because they were repeatedly hired by petitioners and they performed activities which
were usual, necessary and desirable in the business or trade of the employer.

LA found that private respondents were underpaid. It ruled that the free board and lodging, electricity, water, and food
enjoyed by them could not be included in the computation of their wages because these were given without their written
consent. However, petitioners were not liable for illegal dismissal. The LA viewed private respondents’ act of going home
as an act of indifference when petitioners decided to prohibit overtime work.
NLRC affirmed the LA’s decision. It noted that no single report of project completion was filed with the PUBLIC
EMPLOYMENT office as required by DOLE. The CA affirmed both the LA’s and NLRC’s decisions and considered that
petitioners failure to comply with the simple but compulsory requirement to submit a report of termination to the nearest
Public Employment Office every time private respondents’ employment was terminated was proof that the latter were not
project employees but regular employees.
ISSUEWON private respondents are entitled to be paid the minimum wage.
HELD: YES.
As a general rule, on payment of wages, a party who alleges payment as a defense has the burden of proving it. Specifically
with respect to labor cases, the burden of proving payment of monetary claims rests on the employer, the rationale being
that the pertinent personnel files, payrolls, records, remittances and other similar documents are not in the possession of the
worker but in the custody and absolute control of the employer.
In this case, petitioners, aside from bare allegations that private respondents received wages higher than the prescribed
minimum, failed to present any evidence, such as payroll or payslips, to support their defense of payment. Thus, petitioners
utterly failed to discharge the onus probandi.
Private respondents, on the other hand, are entitled to be paid the minimum wage, whether they are regular or non-regular
employees.
On whether the value of the facilities should be included in the computation of the "wages" received by private respondents,
Section 1 of DOLE Memorandum Circular No. 2 provides that an employer may provide subsidized meals and snacks to
his employees provided that the subsidy shall not be less that 30% of the fair and reasonable value of such facilities. In such
cases, the employer may deduct from the wages of the employees not more than 70% of the value of the meals and snacks
enjoyed by the latter, provided that such deduction is with the written authorization of the employees concerned.
Moreover, before the value of facilities can be deducted from the employees’ wages, the following requisites must all
be attendant: first, proof must be shown that such facilities are customarily furnished by the trade; second, the

26
provision of deductible facilities must be voluntarily accepted in writing by the employee; and finally, facilities must
be charged at reasonable value. Mere availment is not sufficient to allow deductions from employees’ wages.
These requirements, however, have not been met in this case. SLL failed to present any company policy or guideline
showing that provisions for meals and lodging were part of the employee’s salaries. It also failed to provide proof of the
employees’ written authorization, much less show how they arrived at their valuations. At any rate, it is not even clear
whether private respondents actually enjoyed said facilities.
Facilities VS Supplements
"Supplements," therefore, constitute extra remuneration or special privileges or benefits given to or received by the
laborers over and above their ordinary earnings or wages. "Facilities," on the other hand, are items of expense necessary
for the laborers and his family's existence and subsistence so that by express provision of law, they form part of the wage
and when furnished by the employer are deductible therefrom, since if they are not so furnished, the laborer would spend
and pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes an extra remuneration above and over his basic or
ordinary earning or wage is supplement; and when said benefit or privilege is part of the laborers' basic wages, it is a facility.
The distinction lies not so much in the kind of benefit or item (food, lodging, bonus or sick leave) given, but in the purpose
for which it is given. In the case at bench, the items provided were given freely by SLL for the purpose of maintaining the
efficiency and health of its workers while they were working at their respective projects.

27
MILLARES VS. NLRC
FACTS: In 1992, PICOP suffered a major financial setback. To avert further losses, it undertook a retrenchment program
and terminated the services of petitioners (116 employees). Accordingly, they received separation pay. Believing
however that the allowances they allegedly regularly received should have been included in the computation thereof they
lodged a complaint for separation pay differentials.
The allowances in question pertained to the following -

1. Staff/Manager's Allowance - PICOP provides free housing facilities to supervisory and managerial employees.
Owing however to shortage of such facilities, it was constrained to grant Staff allowance instead to those who live
in rented houses outside but near the vicinity of the mill site. But the allowance ceases whenever a vacancy
occurs in the company's housing facilities. The former grantee is then directed to fill the vacancy.
2. Transportation Allowance - To relieve PICOP's motor pool in Bislig from a barrage of requests for company
vehicles and to stabilize company vehicle requirements it grants transportation allowance to key officers and
Managers assigned in the mill site who use their own vehicles in the performance of their duties. It is a
conditional grant such that when the conditions no longer obtain, the privilege is discontinued.
3. Bislig Allowance - The Bislig Allowance is given to Division Managers and corporate officers assigned in Bislig
on account of the hostile environment prevailing therein. But once the recipient is transferred elsewhere outside
Bislig, the allowance ceases.

LA ruled that the subject allowances, being customarily furnished by PICOP and regularly received by petitioners, formed
part of the latter's wages. Thus respondent PICOP was ordered to pay petitioners their separation pay differentials.
NLRC reversed LA. It ruled that representation and transportation allowances are deemed not part of salary and should
therefore be excluded in the computation of separation benefits.
ISSUE: W/N the allowances cited above should be included in the computation of the petitioner’s separation pay
HELD: NO.
As per Art 97 (f) vis a vis Art 283, when an employer customarily furnishes his employee board, lodging or other
facilities, the fair and reasonable value thereof, as determined by the Secretary, is included in "wage." In order to ascertain
whether the subject allowances form part of petitioner's "wages," we divide the discussion on the following - "customarily
furnished;" "board, lodging or other facilities;" and, "fair and reasonable value as determined by the Secretary of Labor."
"Customary" is founded on long-established and constant practice connoting regularity. The receipt of an allowance on a
monthly basis does not ipso facto characterize it as regular and forming part of salary because the nature of the grant is a
factor worth considering. We agree with the observation of the Office of the Solicitor General- that the subject
allowances were temporarily, not regularly, received by petitioners because -
In the case of the housing allowance, once a vacancy occurs in the company-provided housing accommodations,
the employee concerned transfers to the company premises and his housing allowance is discontinued x x x x
On the other hand, the transportation allowance is in the form of advances for actual transportation expenses
subject to liquidation x x x given only to employees who have personal cars.
The Bislig allowance is given to Division Managers and corporate officers assigned in Bislig, Surigao del Norte.
Once the officer is transferred outside Bislig, the allowance stops.
We add that in the availment of the transportation allowance, respondent PICOP set another requirement that the personal
cars be used by the employees in the performance of their duties. When the conditions for availment ceased to exist, the
allowance reached the cutoff point.
__
Board and lodging allowances furnished to an employee not in excess of the latter's needs and given free of charge,
constitute income to the latter except if such allowances or benefits are furnished to the employee for the convenience of
the employer and as necessary incident to proper performance of his duties in which case such benefits or allowances do
not constitute taxable income.
Petitioners' allowances do not represent such fair and reasonable value as determined by the proper authority simply
because the Staff/Manager's allowance and transportation allowance were amounts given by respondent company in lieu
28
of actual provisions for housing and transportation needs whereas the Bislig allowance was given in consideration of
being assigned to the hostile environment then prevailing in Bislig.
The inevitable conclusion is that, as reached by the NLRC, subject allowances did not form part of petitioners' wages.
WHEREFORE, the petition is DISMISSED.

29
JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners,
vs NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER FLAVIO
AGUAS, and F.E. ZUELLIG (M), INC., respondents
GR L-50999 ; 23 Mar 1990 ; Medialdea

Facts: Songco et al are sales agents of R-Zuellig. R decided to terminate Ps’ services on the ground of retrenchment due
to financial losses. Initially, at the LA, Ps content illegal dismissal and ULP, supposedly because R is retaliating against
the Ps for joining the union. However, during the last hearing, Ps agreed re. retrenchment and R’s financial losses. Hence,
the only issue now is the correct computation of separation pay for Ps.

Arguments:
Ps – Since they are sales agents, they earn on sales commission basis. Their sales commission should be included in the
computation of the separation pay. This is in line with the definition of wages in LC 97(f). Employee transpo and
emergency living allowances should also be included.

R – Admittedly, LC 97(f) includes commission as “wage”. However, this definition is only general, and the proper basis
for computing separation pay is “salary” as used in the ff:
1. Zuellig’s CBA with employees, Article XIV on Retirement Gratuity: Any employee, who is separated from
employment due to XXX permanent lay-off not due to the fault of said employee shall receive from the company
a retirement gratuity in an amount equivalent to one (1) month's salary per year of service.
2. LC 284 - Reduction of personnel. Xxx In case of termination due to the installation of labor-saving devices or
redundancy, the separation pay shall be equivalent to one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher.xxx
3. LC’s IRR, Sec. 9(b) and Sec. 10, Rule 1, Book VI: Sec. 9(b). Where the termination of employment is due to
retrenchment initiated by the employer to prevent losses or other similar cause the employee shall be entitled to
termination pay equivalent at least to his one month salary, or to one-half month pay for every year of service,
whichever is higher, a fraction of at least six (6) months being considered as one whole year.
Sec. 10. Basis of termination pay. — The computation of the termination pay of an employee as provided herein
shall be based on his latest salary rate xxx

LA: Ruled in favor of R-Zuellig. “Wage” is not equal to “salary”. Had the Congress intended for “commission” to be
considered as salary for computation of separation pay, the same should have been expressly provided in the pertinent
provisions re. computation of separation pay.

NLRC (on appeal by P): Affirmed LA.

Issues/Held:
1. WON allowances are included in computation for separation pay – Yes.
2. WON sales commissions should be included in the computation for separation pay – Yes.

Ratio:

On allowances – This issue has already been settled in Santos v NLRC (1987). In the computation of backwages and
separation pay, account must be taken not only of the basic salary of petitioner but also of her transportation and
emergency living allowances.

On sales commissions – The difference between “salary” and “wage” is more apparent than real.

30
Ratio # 1 : Wage = Salary. They basically mean the same thing: recompense or consideration made to a person for his
pains or industry in another man's business. Latin “salarium”, as payment for the services of the Roman Soldier, while
Mid-English “wagen” are often interchangeable, for both words generally refer to one and the same meaning, that is, a
reward or recompense for services performed.

Since the definition of “wages” as found in LC 97(f) includes “commissions”, and since we can say that salary = wage,
therefore we can say that the sales commissions should be included in the computation of separation pay.

Ratio # 2: KAWAWA NAMAN YUNG MGA AHENTENG WALANG REGULAR MONTHLY RATE. The SC
takes judicial notice of the fact that sales agents are usually paid on commission basis. Commission is the recompense,
compensation or reward of an agent, salesman XXXX when the same is calculated as a percentage on the amount of his
transactions or on the profit to the principal. We take judicial notice of the fact that some salesmen do not receive any
basic salary but depend on commissions and allowances or commissions alone, as part of petitioners' wage or salary,
although an employer-employee relationship exists. A strict interpretation re. “salary” limited to monthly pay for the
purpose of computing termination pay would result to an injustice against those workers who are salaried on a
commission basis, for then, they would be excluded from employees entitled to separation pay.

Ratio # 3: Case law. The ruling in Santos v NLRC stated that for commissions to be included in the computation of
separation pay, said commissions must be earned by actual market transactions attributable to petitioner. In the present
case, Ps earned such commissions through actual market transactions.

Ratio # 4: Rules on construction of LC provisions. all doubts in the implementation and interpretation of the provisions
of the Labor Code including its implementing rules and regulations shall be resolved in favor of labor

31
G.R. No. 110068 February 15, 1995
PHILIPPINE DUPLICATORS, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE DUPLICATORS EMPLOYEES UNION-
TUPAS, respondents.

FACTS:

In 1993, Court rendered it's decision directing petitioner to pay 13th month pay to private respondent employees
computed on the basis of their fixed wages plus sales sales commissions. Court also denied with finality the Motion for
Reconsideration filed by petitioner.

In this present case, petitioner filed a Motion for leave to admit 2nd motion for reconsideration and a 2nd Motion for
Reconsideration. Petitioner invoked the decision of the Court in 1993 in the 2 consolidated cases of Boie-Takeda
Chemicals vs Hon. De la Serna and Philippine Fuji vs. Hon Trajano which held that the commissions should not be
included in the definition of basic salary for the computation of the 13th month pay.

ISSUE:

WON sales commissions of private respondent employees are included in the definition of basic salary for the purpose of
determining 13th month pay

HELD:

YES, it should be included. The Court ruled that the decision rendered in Boie-Takeda cannot serve as a precedent under
the doctrine of stare decisis. The Boie-Takeda decision was promulgated a month after this court 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.

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 sales commission received by a salesman is different from the bonus received by a medical representative in the case
of Boie. The sales commission is intimately related or directly proportional to the extent or energy of the employee's
endeavors and it is paid upon specific results achieved by the employee. These commissions are not overtime payments,
nor profit-sharing payments nor any other fringe benefit. Thus, the salesmen's commissions, comprising a pre-determined
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. On the other hand, the commission of the medical representative is a kind of
productivity bonus which is in the nature of additional monetary benefits not properly included in the term "basic salary"
in computing their 13th month pay since it closely resembles a profit-sharing agreement.

The Supplementary RRI 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.

32
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.

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.

33
 Cash Wage Commission
Toyota Pasig v. De Peralta
Perlas-Bernabe

DOCTRINE
Art. 97(f) of the Labor Code explicitly includes commissions as part of wages.

While commissions are, indeed, incentives or forms of encouragement to inspire employees to put a little more industry on
the jobs particularly assigned to them, still these commissions are direct remunerations for services rendered.

The nature of the work of a salesman and the reason for such type of remuneration for services rendered demonstrate clearly
that commissions are part of a salesman's wage or salary.

FACTS
1. Respondent Vilma De Peralta filed a complaint for illegal dismissal, illegal deduction, unpaid commission, annual profit
sharing, damages, and attorney's fees against petitioner Toyota Pasig et al.
2. Toyota initially hired her as a cashier in March 1997. She worked her way up to the position of Insurance Sales Executive
(ISE).
3. However, things turned sour when her husband, Romulo "Romper" De Peralta, also petitioner's employee, organized a
collective bargaining unit through a certification election.
4. According to respondent, petitioner suddenly dismissed from service the officials/directors of the union, including her
husband.
5. Thereafter, petitioner allegedly started harassing respondent for her husband's active involvement in the union, which
resulted to the issuance of a Notice to Explain accusing her of "having committed various acts" relative to the processing
of insurance of 3 units as "outside transactions" and claiming commissions therefor, instead of considering the said
transactions as "new business accounts" under the dealership's marketing department.
6. She was preventively suspended because of such charge and eventually received a Notice of Termination, which
prompted her to file the instant complaint, where she also prayed for the payment of her earned substantial commissions,
tax rebates, and other benefits dating back from July 2011 to January 2012, amounting to P617,248.08.
7. Toyota’s defense:
a. De Peralta was dismissed from service for just cause and with due process.
b. She was charged and proven to have committed acts of dishonesty and falsification by claiming commissions
for new business accounts which should have been duly credited to the dealership's marketing department.
c. Her claims for commissions, tax rebates, and other benefits were unfounded and without documentation and
validation.
8. LA dismissed the complaint for lack of merit, but ordered petitioner to pay respondent the amount of P11,111.50
representing the latter's salary for January 2012.
a. Respondent admitted that she indeed processed the insurance of units from petitioner's own dealership, and as
a result, received commissions which were rightly attributable to the dealership's marketing department not
being "outside transactions."
b. LA found no basis to grant unpaid commissions, considering that the documents submitted in support thereof
were mere computations which are insufficient proof of her entitlement thereto.
9. NLRC affirmed the LA ruling with modification finding petitioner liable to respondent in the amount of
P617,248.08 representing the latter's unpaid commissions, tax rebate for achieved monthly targets, salary
deductions, salary for the month of January 2012, and success share/profit sharing.
10. CA affirmed NLRC.
34
ISSUE with HOLDING
1. Whether or not the CA correctly upheld petitioner's liability to respondent in the amount of P617,248.08 representing
the latter's unpaid commissions, tax rebate for achieved monthly targets, salary deductions, salary for the month of
January 2012, and success share/profit sharing – YES.
- Toyota’s argument:
o CA erred in awarding respondent her monetary claims despite failing to prove her entitlement thereto.
o Such monetary claims do not partake of unpaid wages/salaries, as well as the labor standard benefits of
employees as provided by and as such, petitioner, as employer, did not bear the burden of proving the
payment of such monetary claims or that respondent was not entitled thereto.
- Section 97 (f) of the Labor Code reads:
o (f) "Wage" paid to any employee shall mean the remuneration of earnings, however designated, capable of
being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis
xxx
- The aforesaid provision explicitly includes commissions as part of wages.
- Iran v. NLRC:
o This definition explicitly includes commissions as part of wages. While commissions are, indeed, incentives
or forms of encouragement to inspire employees to put a little more industry on the jobs particularly
assigned to them, still these commissions are direct remunerations for services rendered. In fact,
commissions have been defined as the recompense, compensation or reward of an agent, salesman,
executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the
amount of his transactions or on the profit to the principal. The nature of the work of a salesman and the
reason for such type of remuneration for services rendered demonstrate clearly that commissions are part
of a salesman's wage or salary.
- In this case, respondent's monetary claims are given to her as incentives or forms of encouragement in order for her
to put extra effort in performing her duties as an ISE.
o Clearly, such claims fall within the ambit of the general term "commissions" which in turn, fall within the
definition of wages.
o Thus, respondent's allegation of nonpayment of such monetary benefits places the burden on the
employer, to prove with a reasonable degree of certainty that it paid said benefits and that the
employee actually received such payment or that the employee was not entitled thereto.
- In this case, petitioner simply dismissed respondent's claims for being purely self-serving and unfounded, without
even presenting any tinge of proof showing that respondent was already paid of such benefits or that she was not
entitled thereto.
o During the proceedings before the LA, petitioner was even given the opportunity to submit pertinent
company records to rebut respondent's claims but opted not to do so, thus, constraining the LA to direct
respondent to submit her own computations.
o It is well-settled that the failure of employers to submit the necessary documents that are in their possession
gives rise to the presumption that the presentation thereof is prejudicial to its cause.

DISPOSITIVE PORTION
WHEREFORE, the petition is DENIED. The Resolutions dated April 14, 2014 and July 24, 2014 of the Court of Appeals
in CA-G.R. SP Nos. 131495 and 131558 are hereby AFFIRMED in toto.

DIGESTER: Sarah.

35
 PLASTIC TOWN CENTER CORP v. NLRC
G.R. No. 81176/ APRIL 19 1989 / GUTIERREZ, JR. J./LABOR-Minimum wages and wage fixing machinery; Wages;
Gratuity and Salary or Wages; Difference

NATURE Petition to review the NLRC decision

PETITIONERS Plastic Town Center Corporation
RESPONDENTS NLRC and Nagkakaisang Lakas ng Manggagawa (NLM)- Katipunan

SUMMARY. PRs are piece rate employees of P. In their CBA with P, it was agreed that their gratuity
pay, in case they retire from work after 2 years of service, shall be equivalent to 1 month salary. This is
increased proportionally to the number of years of service rendered, but always on a per month basis.
When some of the PRs retired, P paid them only for 26 days of work since PRs do not work on a
Sunday, hence they only render 26 days of work. PR contends that per CBA agreement, it should be 30
days, as this is the general number of days per month. Court held that Computation should be at 30
days, strictly based on the CBA.
DOCTRINE: Gratuity pay is not intended to pay a worker for actual services rendered. It is a money
benefit given to the workers whose purpose is "to reward employees or laborers, who have rendered
satisfactory and efficient service to the company." While it may be enforced once it forms part of a
contractual undertaking, the grant of such benefit is not mandatory so as to be considered a part of
labor standard law unlike the salary, cost of living allowances, holiday pay, leave benefits, etc., which
are covered by the Labor Code. Nowhere has it ever been stated that gratuity pay should be based on
the actual number of days worked over the period of years forming its basis. We see no point in
counting the number of days worked over a ten-year period to determine the meaning of "two and one-
half months' gratuity."

FACTS.

 September 1984: respondent Nagkakaisang Lakas ng Manggagawa (NLM)-Katipunan filed a complaint against
petitioner Plastic Town Center Corporation with:
a. violation of CBA by crediting the P1 per day increase in gratuity pay to resigning employees instead of 30 days
equivalent to one month
b. unfair labor practice by giving only 26 days pay instead of 30 days equivalent to one month as gratuity pay to
resigning employees.
 CBA provided that company shall grant gratuity pay to a resigning employee or laborer amounting to, among others2,
one month salary for those who rendered two to five years of service.
 Plastic Town Center Corporation maintained that under the principle of “fair day’s wage for fair day’s labor”, gratuity
pay should be computed on the basis of 26 days for one month salary considering that the employees are daily paid.
 Labor Arbiter: Ruled in favor of Plastic Town Corporation. It held that:
o The 1.00 increase was ahead of the implementation of the CBA provision
o The salary of 26 days is a month salary. As daily wage earner, there would be no instance that the worker would
work for 30 days a month since work does not include Sunday or rest days.

2 “Section 2. It is the intention of both the COMPANY and the UNION, that the grant of gratuity pay by the COMPANY herein set forth is to reward employees and
laborers, who have rendered satisfactory and efficient service with the COMPANY. THUS, in case of voluntary resignation, which is not covered by Section 1 above,
the COMPANY nevertheless agrees to grant a gratuity pay to the resigning employee or laborer as follows:

1. 2-5 years of service : 1 month salary

2. 6-10 years of service: 2.5 months salary
3. 11-15 years of service: 4 months
4. 16-20 years of service: 5 months
5. 21 and above years of service : 12 months
36
 NLRC: Reversed the decision of Labor Arbiter and held that Plastic Town Center should grant gratuity pay equivalent
of thirty days salary.

ISSUE & RATIO.

1. WON NLRC committed abuse of discretion in granting gratuity pay equivalent to 1 month or 30 days salary –
NO

Computation should be at 30 days, strictly based on the CBA.

Gratuity pay is not intended to pay a worker for actual services rendered. It is a money benefit given to the
workers whose purpose is “to reward employees or laborers who have rendered satisfactory and efficient service to the
company.”

While it may be enforced once it forms part of a contractual undertaking, the grant of such benefit is not
mandatory so as to be considered a part of labor standard law unlike salary, which are covered in Labor Code. Nowhere
has it ever been stated that gratuity pay should be based on actual number of days worked over the period of years
forming its basis. Court sees no point in counting the number of days worked over a ten-year period to determine the
meaning of “two and one- half months’ gratuity.”

Moreover any doubts or ambiguity in the contract between management and the union members should be
resolved in favor of the laborer. When months are not designated by name, a month is understood to be 30 days.

DECISION.
Petition dismissed for lack of merit.

37
 DAVAO FRUITS VS. ASSOCIATED LABOR UNIONS
G.R. No. 85073 / AUG 24, 1993 / QUIASON, J./LABOR-HOLIDAY PAY
NATURE Petition for Certiorari
PETITIONERS Davao Fruits Corporation
RESPONDENTS Associated Labor Unions (ALU)

SUMMARY. The employees of Davao Fruits are contending that the inclusion of the different benefits
in the computation of 13th month pay has became a company practice, and so are assailing the corrected
computation of the company, which claims to have only mistakenly included the benefits previously.
SC ruled that it has indeed become company practice, and to change it now would amount to a
diminution of benefits.
DOCTRINE. From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the
computation of its employees’ thirteenth month pay, the payments for sick, vacation and maternity
leaves, premiums for work done on rest days and special holidays, and pay for regular holidays. The
considerable length of time the questioned items had been included by petitioner indicates a unilateral
and voluntary act on its part, sufficient in itself to negate any claim of mistake.

FACTS.

 Respondent Associated Labor Unions (ALU), for and in behalf of all the rank-and-file workers and employees of
petitioner, filed a complaint before the Ministry of Labor and Employment, Regional Arbitration Branch XI, Davao
City, against petitioner, for “Payment of the Thirteenth­Month Pay Differentials.” Respondent ALU sought to recover
from petitioner the thirteenth month pay differential for 1982 of its rank-and-file employees, equivalent to their sick,
vacation and maternity leaves, premium for work done on rest days and special holidays, and pay for regular holidays
which petitioner, allegedly in disregard of company practice since 1975, excluded from the computation of the thirteenth
month pay for 1982.
 In its answer, petitioner claimed that it erroneously included items subject of the complaint in the computation of the
thirteenth month pay for the years prior to 1982, upon a doubtful and difficult question of law. According to petitioner,
this mistake was discovered only in 1981 after the promulgation of the Supreme Court decision in the case of San
Miguel Corporation v. Inciong.
 Hence this appeal.

ISSUES & RATIO.

2. WON in the computation of the thirteenth month pay given by employers to their employees under P.D. No. 851,
payments for sick, vacation and maternity leaves, premiums for work done on rest days and special holidays, and
pay for regular holidays may be excluded in the computation and payment thereof, regardless of long-standing
company practice. – NO.

Davao Fruits can no longer exclude the benefits from the computation, in light of the practice it has established.

Presidential Decree No. 851, promulgated on December 16, 1975, mandates all employers to pay their employees a
thirteenth month pay. How this pay shall be computed is set forth in Section 2 of the “Rules and Regulations Implementing
Presidential Decree No. 851,” thus:
“SECTION 2. x x x
(a) ‘Thirteenth month pay’ shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year.
(b) ‘Basic Salary’ shall include all remunerations or earnings paid by an employer to an employee for services rendered but
may not include cost of living allowances granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174,

38
profit- sharing payments, and all allowances and monetary benefits which are not considered or integrated as part of the
regular or basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975.”

The Department of Labor and Employment issued on January 16, 1976 the “Supplementary Rules and Regulations
Implementing P.D. No. 851” which in paragraph 4 thereof further defines the term “basic salary,”
thus: “4. Overtime pay, earnings and other remunerations which are not part of the basic salary shall not be included in the
computation of the 13 month pay.”

Clearly, the term “basic salary” includes all remunerations or earnings paid by the employer to the employee, but excludes
cost-of-living allowances, profit-sharing payments, and all allowances and monetary benefits which have not been
considered as part of the basic salary of the employee as of December 16, 1975. The exclusion of cost-of-living allowances
and profit sharing payments shows the intention to strip “basic salary” of payments which are otherwise considered as
“fringe” benefits. This intention is emphasized in the catch all phrase “all allowances and monetary benefits which are not
considered or integrated as part of the basic salary.” Basic salary, therefore does not merely exclude the benefits expressly
mentioned but all payments which may be in the form of “fringe” benefits or allowances.

In other words, whatever compensation an employee receives for an eight-hour work daily or the daily wage rate in the
basic salary. Any compensation or remuneration other than the daily wage rate is excluded. It follows therefore, that
payments for sick, vacation and maternity leaves, premium for work done on rest days and special holidays, as well as pay
for regular holidays, are likewise excluded in computing the basic salary for the purpose of determining the thirteenth month
pay.

The “Supplementary Rules and Regulations Implementing P.D. No. 851,” which put to rest all doubts in the computation
of the thirteenth month pay, was issued by the Secretary of Labor as early as January 16, 1976, barely one month after the
effectiv- ity of P.D. No. 851 and its Implementing Rules. And yet, petitioner computed and paid the thirteenth month pay,
without excluding the subject items therein until 1981. Petitioner continued its practice in December 1981, after
promulgation of the afore­quoted San Miguel decision on February 24, 1981, when petitioner purportedly “discovered” its
mistake.

From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of its employees’
thirteenth month pay, the payments for sick, vacation and maternity leaves, premiums for work done on rest days and special
holidays, and pay for regular holidays. The considerable length of time the questioned items had been included by petitioner
indicates a unilateral and voluntary act on its part, sufficient in itself to negate any claim of mistake.

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

DECISION.
Petition dismissed.

39
 NASIPIT LUMBER COMPANY, INC. v. NATIONAL WAGES AND PRODUCTIVITY COMMISSION
G.R. No. 113097 / APR 27, 1998 / PANGANIBAN, J./LABOR-WAGE FIXING MACHINERY/
NATURE: Petition for Certiorari, etc.
PETITIONERS: Nasipit Lumber Company, Inc.
RESPONDENTS: National Wages and Productivity Commission, et al.

SUMMARY. The RTWPB issued wage order no. RX-01 and RX-01-A. NALCO, PWC and ALCO
applied for exemption from the said wage order as distressed establishments.
DOCTRINE. The power to prescribe the rules and guidelines for the determination of minimum wage
and productivity measures is lodged in the NWPC, while the RTWPB has the power to issue wage orders
under Article 122 (b) of the Labor Code, such orders are subject to the guidelines prescribed by the NWPC.

FACTS.

 On October 20, 1990, the Region X [Tripartite Wages and Productivity] Board (RTWPB) issued Wage Order No. RX-
013
 Subsequently, a supplementary Wage Order No. RX-01-A was issued by the Board on November 6, 19904
 Applicants/appellees Nasipit Lumber Company, Inc. (NALCO), Philippine Wallboard Corporation (PWC), and Anakan
Lumber Company (ALCO), claiming to be separate and distinct from each other but for expediency and practical
purposes, jointly filed an application for exemption from the above-mentioned Wage Orders as distressed establishments
under Guidelines No. 3, issued by the herein Board on November 26, 1990
 On the other hand, oppositor/appellant Unions jointly opposed the application for exemption on the ground that said
companies are not distressed establishments since their capitalization has not been impaired by 25%.
 The RTWPB approved the applicants joint application for exemption but only given a temporary reprieve from
compliance with mandated wage increase.
 Dissatisfied with RTWPB decision, private respondents lodged an appeal with the NWPC, which affirmed ALCOs
application but reversed the applications of herein petitioners, NALCO and PWC.5
 NWPC reasoned that the Guidelines No. 3 dated November 26, 1990, issued by the herein Board cannot be used as valid
basis for granting applicants/appellees application for exemption since it did not pass the approval of this Commission.
 Hence, this petition

ISSUES & RATIO.

3. WON Public Respondent National Wages and Productivity Commission committed grave abuse of discretion
amounting to lack of or in excess of jurisdiction in ruling that RTWPB-X-Guideline No. 3 has no operative force
and effect, among others, and consequently, denying for lack of merit the application for exemption of petitioners
Nasipit Lumber Company, Inc. and Philippine Wallboard Corporation from the coverage of Wage Orders Nos.
RX-01 and RX-01-A.– NO.

3Section 1. Upon the effectivity of this Wage Order, the increase in minimum wage rates applicable to workers and employees in the private sector in Northern
Mindanao (Region X) shall be as follows:
a.The provinces of Agusan del Norte, Bukidnon, Misamis Oriental, and the Cities of Butuan, Gingoog, and Cagayan de Oro - - - - -P13.00/day
b.The provinces of Agusan del Sur, Surigao del Norte and Misamis Occidental, and the Cities of Surigao Oroquieta, Ozamis and Tangub - - - - - P11.00/day
c.The province of Camiguin P9.00/day
4 Section 1. Upon the effectivity of the original Wage Order RX-01, all workers and employees in the private sector in Region X already receiving wages above the
statutory minimum wage rates up to one hundred and twenty pesos (P120.00) per day shall also receive an increase of P13, P11, P9 per day, as provided for under
Wage Order No. RX-01
5 In the case at bar, it is undisputed that during the relevant accounting period, NALCO, ALCO and PWC sustained capital impairments of 1.89, 28.72, and 5.03
percent, respectively.
40
 The power to prescribe the rules and guidelines for the determination of minimum wage and productivity measures
is lodged in the NWPC, while the RTWPB has the power to issue wage orders under Article 122 (b) of the Labor
Code, such orders are subject to the guidelines prescribed by the NWPC.
The NWPC has the power not only to prescribe guidelines to govern wage orders, but also to issue exemptions therefrom,
as the said rule provides that [w]henever a wage order provides for exemption, applications thereto shall be filed with the
appropriate Board which shall process the same, subject to guidelines issued by the Commission. In short, the NWPC lays
down the guidelines which the RTWPB implements.
Since the NWPC never assented to Guideline No. 3 of the RTWPB, the said guideline is inoperative and cannot be used
by the latter in deciding or acting on petitioners application for exemption. To allow RTWPB Guideline No. 3 to take
effect without the approval of the NWPC is to arrogate unto RTWPB a power vested in the NWPC by Article 121 of the
Labor Code, as amended by RA 6727.

DECISION.
WHEREFORE, the petition is hereby DISMISSED. The assailed Decisions are hereby AFFIRMED. Costs against
petitioners. SO ORDERED.

NOTES.
ART. 121. LC. Powers and Functions of the Commission. - The Commission shall have the following powers and
functions:
(c) To prescribe rules and guidelines for the determination of appropriate minimum wage and productivity measures at the
regional, provincial or industry levels;
(d) To review regional wage levels set by the Regional Tripartite Wages and Productivity Boards to determine if these are
in accordance with prescribed guidelines and national development plans

ART.122. Creation of Regional Tripartite Wages and Productivity Boards.

(b) To determine and fix minimum wage rates applicable in their region, provinces or industries therein and to issue the
corresponding wage orders, subject to guidelines issued by the Commission

41
 EMPLOYERS CONFEDERATION V NATIONAL WAGES AND PROD COMM
G.R. No. 96169 / September 24, 1991 / SARMIENTO, J./LABOR
NATURE
PETITIONERS EMPLOYERS CONFEDERATION OF THE PHILIPPINES (ECOP)
RESPONDENTS NATIONAL WAGES AND PRODUCTIVITY COMMISSION AND REGIONAL TRIPARTITE
WAGES AND PRODUCTIVITY BOARD-NCR, TRADE UNION CONGRESS OF THE PHILIPPINES

SUMMARY. ECOP assails the validity of the wage order as it prescribes salary ceilings which
allegedly are not within the power of the board. SC upheld the validity of the order.
DOCTRINE. The salary-cap method in rationalizing wages has reduced disputes arising from wage
distortions (brought about, apparently, by the floor-wage method).

FACTS.

 The Regional Board of NCR issued Wage Order No. NCR-01, pursuant to RA 6727, increasing the minimum wage by
P17.00 daily in the National Capital Region. Upon reconsideration, it was amended, Sec 1 of which states:
o Upon the effectivity of this Wage Order, all workers and employees in the private sector in the National Capital
Region already receiving wages above the statutory minimum wage rates up to one hundred and twenty-five
pesos (P125.00) per day shall also receive an increase of seventeen pesos (P17.00) per day.
 ECOP assails that the boards may only prescribe "minimum wages," not determine "salary ceilings." Moreover, ECOP
argued that the board can’t preempt CBAs by establishing ceilings. According to them, wage is a legislative function, and
RA 6727 delegated to the regional boards no more "than the power to grant minimum wage adjustments”
 SOLGEN: Republic Act No. 6727 is intended to correct "wage distortions" and the salary-ceiling method (of determining
wages) is meant, precisely, to rectify wage distortions.

ISSUES & RATIO.

1. WON Order is valid. – YES.

The order is valid as it is in accordance with the salary ceiling method in rectifying wage distortions.

the determination of wages has generally involved two methods, the "floor-wage" method and the "salary-ceiling" method.
Floor wage method Salary ceiling method
fixing of determinate amount that would be added wage adjustment is applied to employees receiving
to the prevailing statutory minimum wage. a certain denominated salary ceiling.
The increasing trend is toward the second mode, the salary-cap method, which has reduced disputes arising from wage
distortions (brought about, apparently, by the floor-wage method). Of course, disputes are appropriate subjects of collective
bargaining and grievance procedures, but as the Commission observed and as we are ourselves agreed, bargaining has
helped very little in correcting wage distortions.

Moreover, pursuant to Art 124, such falls within the Board’s powers as the Act is meant to rationalize wages, that is, by
having permanent boards to decide wages rather than leaving wage determination to Congress year after year and law after
law.:

ART. 124. Standards / Criteria for Minimum Wage Fixing. — The regional minimum wages to be established by the
Regional Board shall be as nearly adequate as is economically feasible to maintain the minimum standards of living
necessary for the health, efficiency and general well-being of the employees within the framework of the national economic
and social development program. In the determination of such regional minimum wages, the Regional Board shall, among
other relevant factors, consider the following:
42
(a) The demand for living wages;
(b) Wage adjustment vis-a-vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of emphasis employers;
(i) Effects of employment generation and family income; and
(j) The equitable distribution of income and wealth along the imperatives of economic and social development.

*Definition of wage and living wage

Wage
"Wage" paid to any employee shall mean the remuneration
or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained
on a time, task, piece, 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 and includes the
fair and reasonably value, as determined by the Secretary
of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee. "Fair and
reasonable value" shall not include any profit to the
employer or to any person affiliated with the employer.
Living Wage
"Minimum wages" underlies the effort of the State, as
Republic Act No. 6727 expresses it, "to promote
productivity-improvement and gain-sharing measures to
ensure a decent standard of living for the workers and their
families; to guarantee the rights of labor to its just share in
the fruits of production; to enhance employment generation
in the countryside through industry dispersal; and to allow
business and industry reasonable returns on investment,
expansion and growth,"
means more than setting a floor wage to upgrade existing
wages

DECISION. Petition DENIED

METROPOLITAN BANK AND TRUST COMPANY vs NWPC
G.R. No. 144322 / FEB 6, 2007 / AUSTRIA-MARTINEZ, J./ WAGE ORDER - VALIDITY / RCTMAINES
NATURE Petition for certiorari under Rule 45
PETITIONERS Metropolitan Bank and Trust Company Inc.
RESPONDENTS National Wages and Productivity Commission and Regional Tripartite Wages and Productivity
Board - Region II

SUMMARY. The Regional Tripartite Wages and Productivity Board of

Region (RTWPB) II issued a Wage Order declaring that all employees in the
private sector under its jurisdiction must be granted an across-the-board
increase of P15 daily regardless of their status of employment. Petitioner bank
is requesting for an exemption since it is already paying its employees more
than the minimum wage. The National Wages and Productivity Commission
denied their request. The bank appealed to the SC which held that the RTWPB
exceeded its authority when it extended the coverage of the Wage Order to
wage earners receiving more than the prevailing minimum wage rate, without
a denominated salary ceiling.
DOCTRINE. Pursuant to its wage fixing authority, the RTWPB may issue
wage orders which set the daily minimum wage rates based on the standards
or criteria set by Article 124 of the Labor Code.
43
FACTS.

 On October 17, 1995, the Regional Tripartite Wages and Productivity Board, Region II, Tuguegarao, Cagayan
(RTWPB), by virtue of Republic Act No. 6727 (R.A. No. 6727), otherwise known as the Wage Rationalization Act,
issued Wage Order No. R02-03 (Wage Order), as follows:
“Section 1. Upon effectivity of this Wage Order, all employees/workers in the private sector throughout Region II,
regardless of the status of employment are granted an across-the-board increase of P15.00 daily.”
 The Wage Order was published in a newspaper of general circulation on December 2, 1995 and took effect on January
1, 1996. Its Implementing Rules were approved on February 14, 1996.
 Per Section 13 of the Wage Order, any party aggrieved by the Wage Order may file an appeal with the National Wages
and Productivity Commission (NWPC) through the RTWPB within 10 calendar days from the publication of the Wage
Order.
 Metropolitan Bank and Trust Company’s Council, in a letter inquiry to NWPC, requested for ruling to seek exemption
from coverage of the wage order since the member bank are paying more than the regular wage.
 NWPC replied that the member banks are covered by the wage order and does not fall with the exemptible categories.
 In another letter inquiry, Metrobank asked for the interpretation of the applicability of the wage order. NWPC referred
it to RTWPB. RTWPB in return clarified that establishments in Region 2 are covered by the wage order.
 Petitioner filed a petition with the CA and denied the petition.

ISSUES & RATIO.

2. WON the wage order is void and thus has no legal effect and the RTWPB acted in excess of its jurisdiction –
YES.
Section 1, Wage Order No. R02-03 is void insofar as it grants a wage increase to employees earning more than the
minimum wage rate; but pursuant to the separability clause of the Wage Order, Section 1 is declared valid with respect to
employees earning the prevailing minimum wage rate.

The powers of NWPC are enumerated in ART. 121:

Powers and Functions of the Commission. –
The Commission shall have the following powers and functions:
(d) To review regional wage levels set by the Regional Tripartite Wages and Productivity Boards to determine if these are
in accordance with prescribed guidelines and national development plans;
(f) To review plans and programs of the Regional Tripartite Wages and Productivity Boards to determine whether these are
consistent with national development plans;
(g) To exercise technical and administrative supervision over the Regional Tripartite Wages and Productivity Boards.

R.A. No. 6727 declared it a policy of the State to rationalize the fixing of minimum wages and to promote productivity-
improvement and gain-sharing measures to ensure a decent standard of living for the workers and their families; to guarantee
the rights of labor to its just share in the fruits of production; to enhance employment generation in the countryside through
industrial dispersal; and to allow business and industry reasonable returns on investment, expansion and growth.

In line with its declared policy, R.A. No. 6727 created the NWPC, vested with the power to prescribe rules and guidelines
for the determination of appropriate minimum wage and productivity measures at the regional, provincial or industry levels;
and authorized the RTWPB to determine and fix the minimum wage rates applicable in their respective regions, provinces,
or industries therein and issue the corresponding wage orders, subject to the guidelines issued by the NWPC. Pursuant to
its wage fixing authority, the RTWPB may issue wage orders which set the daily minimum wage rates, based on the
standards or criteria set by Article 124 of the Labor Code.
44
The Court declared that there are two ways of fixing the minimum wage: the "floor-wage" method and the "salary-ceiling"
method. The "floor-wage" method involves the fixing of a determinate amount to be added to the prevailing statutory
minimum wage rates. On the other hand, in the "salary-ceiling" method, the wage adjustment was to be applied to employees
receiving a certain denominated salary ceiling. In other words, workers already being paid more than the existing minimum
wage (up to a certain amount stated in the Wage Order) are also to be given a wage increase.

In the present case, the RTWPB did not determine or fix the minimum wage rate by the "floor-wage method" or the
"salary-ceiling method" in issuing the Wage Order. The RTWPB did not set a wage level nor a range to which a wage
adjustment or increase shall be added. Instead, it granted an across-the-board wage increase of P15.00 to all employees and
workers of Region 2. In doing so, the RTWPB exceeded its authority by extending the coverage of the Wage Order to wage
earners receiving more than the prevailing minimum wage rate, without a denominated salary ceiling. As correctly pointed
out by the OSG, the Wage Order granted additional benefits not contemplated by R.A. No. 6727.

DECISION.
Petition PARTIALLY GRANTED.

45
Philippine Geothermal Inc. Employees Union (PGIEU) v Chevron Geothermal Phils. Holdings Inc. (Chevron)
Jan 24 2018
Reyes Jr., J
Topic: Not all increases in salary which obliterate salary differences of certain employees should be perceived as wage
distortion

FACTS:
- PGIEU is a legitimate labor org and certified bargaining agent of rank and file employees of Chevron
- (July 31, 2008) PGIEU and Chevron executed CBA which included stipulation governing salary increases of
Chevron’s rank and file employees:

- PGIEU argued that implementing rules are not being implemented properly according to guidelines and if not
addressed would result to salary distortion
- PGIEU’s example: Chevron granted salary increases to probationary employees. Lanao and Cordoves
were regularized only on Jan and April 2010 yet they were granted salary increases for Nov. 1 2008. As a
result, wages of these probationary workers equated the wages of regular employees obliterating the
distinction based on merit, skills, and length of service.
- Chevron denied this and reiterated their remuneration policy of “similar value for similar jobs” which means that
employees with similar valued jobs would have similar salary rates.
- Re Lanao and Cordoves: Salary increases of Lanao and Cordoves were only granted after they were
regularized. The similarity in wages was merely a result of their being hired on different dates,
regularization at different occasions and differences in hiring rates at the time of their employment.
- Voluntary arbitrator ruled in favor of Chevron
- CA sustained voluntary arbitrator’s decision
- Petition for review on certiorari pursuant to rule 45

ISSUE: WON there was a violation of the CBA which resulted in wage distortion (NO)

HELD:
- Definition of wage distortion according to RA 6727 (Wage Rationalization Act): “situation where an increase in
prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in
wage or salary rate between and among employee groups an establishment as to effectively obliterate the

46
 distinctions embodied in such wage structure based on skills, length of service or other logical bases of
differentiation.”
- Elements of wage distortion according to Prubankers Association v. Prudential Bank and Trust Company:
- (1) existing hierarchy of positions with corresponding salary rates
- (2) significant change in the salary rate of a lower pay class without concomitant increase in the salary
rate of a higher one
- (3) elimination of distinction between the two levels
- (4) existence of distortion in the same region of the country
- Increase in salaries of Lanao and Cordoves was not pursuant to wage increase rather it was the result in
the increase in hiring rates at the time they were hired. Chevron never violated the CBA and in fact
complied with it to the lettter.
- To illustrate (as stated in Chevron’s reply): Robert Gawat was regularized on April 16, 2007. At the time
of his hiring, the hiring rate for Pay Grade 12 was P31,800.00. CBA was applied to Gawat which
resulted to several salary increases over the yearts. Salary was increased to P36,500.00 per month. Lanao,
on the other hand was hired on July 9, 2009. At the time of his hiring, the hiring rate for Pay Grade 12
was P35,000.00 having been adjusted by Chevron in accordance with market and industry practice.
CBA was applied to Lanao and he was granted a salary increase which resulted to his salary amounting to
P36,500.00.
- The setting and implementation of different hiring rates were purely an exercise of Chevron’s business
prerogative in order to attract or lure the best applicants which the Court will not interfere with absent any
showing of bad faith. (Management prerogative)
- Article 124 of Labor Code only cover wage adjustments and increases due to a prescribed law or wage order.
- “Where the application of any prescribed wage increase by virtue of a law or Wage Order issued by
any Regional Board results in distortion in the wage structure…
- No wage distortion in this case as there was no law or wage order. Not all increases in salary which
obliterate salary differences of certain employees should be perceived as wage distortion.
- Bankard Employees v NLRC discussed danger of expanded interpretation of concept of wage distortion:
- “Hands of employer would be completely tied even in cases where an increase in wages of a particular
group is justified due to a re-evaluation of the high productivity of a particular group or the need to
increase the competitiveness of Bankard’s hiring rate”
- “Employer would be discouraged from adjusting salary rates of a particular group of employees for fear ti
would result to demand by all employees for similar increase especially if financial conditions of business
cannot address an across-the-board increase.”
PETITION DENIED

47
DOMINICO C. CONGSON, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NOE BARGO, ROGER HIMENO, RAYMUNDO
BADAGOS, PATRICIO SALVADOR, SR., NEHIL BARGO, JOEL MENDOZA, and EMMANUEL
CALIXIHAN, respondents
G.R. No. 114250
(April 5, 1995)

FACTS:
Petitioner is the registered owner of Southern Fishing Industry. Private respondents were hired on various dates by
petitioner as regular piece-rate workers. They were uniformly paid at a rate of P1.00 per tuna weighing thirty (30) to eighty
(80) kilos per movement, that is — from the fishing boats down to petitioner's storage plant at a load/unload cycle of work
until the tuna catch reached its final shipment/destination. They worked seven (7) days a week.During the first week of June
1990, petitioner notified his workers of his proposal to reduce the rate-per-tuna movement due to the scarcity of tuna. Private
respondents resisted petitioner's proposed rate reduction. When they reported for work the next day, they were informed
that they had been replaced by a new set of workers, When they requested for a dialogue with the management, they were
instructed to wait for further notice. They waited for the notice of dialogue for a full week but in vain.
No amicable settlement was reached between the parties before the Labor Arbiter. Petitioner sought recourse with
the NLRC. Petitioner admits that the P1.00-per-tuna movement is the actual wage rate applied to private respondents as
expressly agreed upon by both parties. Petitioner further admits that private respondents, per their request, were entitled to
retrieve the tuna intestines and liver as part of their compensation and even exceeded what was provided under the Minimum
Wage Law.

ISSUES:
1) Whether or not petitioner complied with the Minimum Wage Law regarding their form of payment.
2) Did the Court err in granting separation pay to the private respondents.

HELD:
1) NO. The Labor Code expressly provides:
Article 102. Forms of Payment. —No. employer shall pay the wages of an employee by means of,
promissory notes, vouchers, coupons, tokens tickets, chits, or any object other than legal tender,even when
expressly requested by the employee.
Payment of wages by check or money order shall be allowed when such manner of payment is customary
on the date of effectivity of this Code, or is necessary as specified in appropriate regulations to be issued
by the Secretary of Labor or as stipulated in a collective bargaining agreement.

Undoubtedly, petitioner's practice of paying the private respondents the minimum wage by means of legal tender
combined with tuna liver and intestines runs counter to the above cited provision of the Labor Code. The fact that said
method of paying the minimum wage was not only agreed upon by both parties in the employment agreement but even
expressly requested by private respondents, does not shield petitioner. Article 102 of the Labor Code is clear. Wages shall
be paid only by means of legal tender. The only instance when an employer is permitted to pay wages informs other than
legal tender, that is, by checks or money order, is when the circumstances prescribed in the second paragraph of Article 102
are present.

2) NO. A careful scrutiny of the records of the case at bench, however, readily discloses the existence of strained relationship
between the petitioner and private respondents.Firstly, petitioner consistently refused to re-admit private respondents in his
establishment. Petitioner even replaced private respondents with a new set of workers to perform the tasks of private

48
respondents. And secondly, private respondents themselves, from the very start, had already indicated their aversion to their
continued employment in petitioner's establishment. The very filing of their second case before Labor Arbiter Aponesto
(RAB-1 1-07-90179-90) specifically for separation pay is conclusive of private respondents' intention to sever their working
ties with petitioner.

BIENVENIDO GILLES vs. CA, SCHEMA KONSULT and EDGARDO ABORES (2009)

Parties:
Schema Konsult, Inc. (SKI)- company engaged in all phases of project consulting, management, and supervision of
services, including investment studies, feasibility studies, micro-processing analysis, and detailed scheme formulation, for
all types of industrial plants, and installation, infrastructure, and development projects
Carl Bro International (CBI)- a corporation organized under the laws of Denmark
Aquatic Farms, Ltd.- a foreign corporation under contract with the government of India
Edgardo C. Abores (Abores)- respondent; President of SKI
Bienvenido Gilles- petitioner; incorporator, stockholder, and member of the Board of Directors from 1987 to March
1993, Vice-President for Finance and Administration from 1992 to 1993 and Principal Engineer of SKI from 1987 to
March 1993.

FACTS
The Ministry of Agriculture of India signed a contract with Aquatic Farms in association with CBI, for provision of
consultancy assistance on the “Shrimp and Fish Culture Project” (Project) involving the development of shrimp farms in
different parts of India. CBI contracted SKI (“Agreement Regarding Staff Provision”) to provide a qualified aquaculture
engineer for the Project.

Gilles was accepted as Water Systems/Irrigation Engineer of the Project for 2 years beginning Jan. 24, 1993. Agreement
provides that: (1) CBI would pay SKI a monthly fee of US$4,000.00; (2) Gilles’ basic salary of US$2,500.00 would be
taken from the said fee; and (3) during Gilles’ first sixty (60) days in India, he would receive a subsistence allowance of
US$87.00 per calendar day to defray his expenses for accommodation, board and lodging, and hotel room accommodation
during project travels away from the duty station. For the duration of Gilles’ assignment in India, he would be considered
as a regular employee of SKI, but all the conditions in the Agreement between SKI and CBI would apply.

Gilles received US$ 5,000 from SKI as an advance of his subsistence allowance prior to his departure for India in January
1993. In India, he received 43,000 Indian Rupees twice, to cover his expenses from April 1-30, 1993 and May 1-15, 1993.

On May 10 1993, Gilles tendered his resignation letter to Mr. Schou of CBI, stating that he decided to go back to the
Philippines in view of serious personal and financial problems which affect his physical condition and capacity to
concentrate on his work. He left India in May 11 1993.

Abores was informed of the abrupt departure of Gilles. An inter-office memo was then sent by SKI to Gilles requesting
him to attend the Board of Directors meeting to discuss his resignation. At the meeting, Abores read before the Members
of the Board Gilles' letter6 which stated his reasons for his resignation. The Board of Directors decided to terminate Gilles.

6
Gilles' letter to the Members of the Board:
x x x
The following has created a very discouraging and depressing working environment for me in India which pushed me to make such decision.
1) In our contract with Carl Bro x x x, it is stated that design works for the 13 proposed prawn farms are to be undertaken from the 5th
month (May 1993) to the 27th month. x x x
In our initial review of the design undertaken by CICEF on all 13 proposed farms x x x, we found that major changes on the
design criteria should be made x x x. Although these changes necessitate redesign for all proposed farms, the original work schedule can
still be made applicable with only slight modifications.
49
Gilles filed a complaint for illegal dismissal, seeking reinstatement, moral damages and other monetary claims. Gilles
claimed that while he was in India, his salary was not given to him on time; he tried to communicate with SKI reps esp
with Abores but his calls were ignored. SKI, on the other hand claimed, among others, that: (1) Gilles was well provided
in India; his resignation from CBI and departure was not known nor approved by SKI; (2) SKI paid Gilles what was due
him from the Project in India even if CBI had yet to pay the consultancy fees.

LA rendered a decision in favor of Gilles. It ordered SKI to (1) reinstate him to his former position as VP for
Finance/Admin, with full backwages, or pay separation pay + backwages if reinstatement should become improbable; (2)
pay him P500k as moral damages. NLRC affirmed LA. SKI raised via a petition for certiorari and prohibition under Rule
65 ROC the issue that the controversy was intra-corporate, exclusively cognizable by the SEC and beyond the NLRC's
jurisdiction. CA granted SKI's petition and further ruled that Gilles was not illegally dismissed from service as he resigned
from his assignment in India even before a replacement was found.

ISSUES
1. WON NLRC has jurisdiction over the ID case --YES
2. WON Gilles was illegally dismissed (relevant to topic) --YES

RULING: CA DECISION SET ASIDE. Gilles is awarded separation pay equivalent to one month pay for every year
of service and full backwages, other privileges and benefits, or the monetary equivalent thereof, computed from the date
of his illegal dismissal on June 7, 1993 until the finality of this decision. Schema Konsult, Inc. is likewise ORDERED to
pay Gilles One Hundred Thousand Pesos (Php100,000.00) as moral damages.

1. Yes. Based on Art. 217 LC, NLRC has jurisdiction over the illegal dismissal case filed by Gilles, as the case is a labor
controversy. Gilles sought reinstatement; he wanted to recover his position as Principal Engineer of SKI. He also prayed
for backwages, moral damages, and attorney’s fees. However, LA erred in ordering the reinstatement of Gilles to his
former position as Finance VP of SKI as said ruling finds no legal support in its ratio decidendi. Based on the records,
Gilles never sought to regain his seat in the Board of Directors; he actually claimed reinstatement as Principal Engineer of
SKI.

2. Yes, the Court held that he was constructively dismissed from employment.

Gilles: He only resigned as a consultant for the Project in India, not as a regular employee of SKI; also, he was not given
the opportunity to explain his side
SKI: Gilles was terminated for willful disobedience (elements: conduct must be willful, ie characterized by wrongful and
perverse attitude; order violated must have been reasonable, lawful, made known to the employee, and must pertain to the

However, on April 1 during a meeting in Delhi attended by our Project Advisor, he committed the completion of the design x
x x of three proposed farms by the end of May and the completion of the design for the other 10 sites by the end of 1993. This means
that we have to finish the design for 1.5 sites per month x x x
Since I was the water systems engineer in the group, much of the pressure of keeping up with our Senior Project Advisor’s
commitment was passed on to me. I had to work 18 hours on the average every day seven days a week.
xxxx
4) I was made to expect when I left for this assignment that I will be better off financially. However, for the last three and a half months
now, Carl Bro has not paid my salary (3.5 months) and my subsistence allowance for my first 60 days stay in Bangalore. x x x I have
an 80-year old mother to support, loans to amortize, relatives to help with their medical expenses, etc. x x x
Several times I have made personal long distance calls to SCHEMA to follow-up on my salary and to talk to management about the
other items mentioned above. x x x However, the person who could have helped me most refused to talk to me. I felt that I was abandoned
by SCHEMA management.
x x x

50
duties which he had been engaged to discharge) and gross neglect of his duties (requirements: gross and habitual), just
causes recognized under Art. 282 LC

SC:
Though Gilles’ resignation from CBI and sudden departure from India despite SKI’s clear and lawful instructions to stay
until a replacement was found constitute willful disobedience and gross neglect of duties, SKI was also guilty of violating
Article 103 LC ("wages shall be paid at least once every two (2) weeks or twice a month at intervals not exceeding
sixteen (16) days and that no employer shall make payment with less frequency than once a month"). SKI was remiss in
paying the compensation of Gilles as Aquaculture Engineer of the Project on time. Based on the findings of fact of the
LA, as confirmed by the NLRC, Gilles was not paid his salaries for the 3½ months of his stay in India.

Gilles’ departure from India was impelled by the financial difficulties he encountered thereat. The money given to him
before he left for India was already spent. The Chief Accountant of SKI admitted on the witness stand that Gilles was paid
his salaries for the 3 ½ months when he was already back in Manila. Added to this were the problems he encountered due
to the acceleration of the job completion period, the obligations he had to meet at home for his aged mother at that time,
now deceased, and the relatives who needed his financial support.

SKI, as the principal employer of Gilles, had the obligation to pay Gilles his salaries and defray his expenses while he was
engaged in the Project in India. Based on the Agreement, all the time Gilles was employed as Aquaculture Engineer for
the Project, he remained SKI's regular employee. Due to SKI's failure to pay and neglect in its duties, SKI may be
considered to have acted in bad faith.

Hence, Gilles was found to be constructively dismissed from employment. The disobedience committed by Gilles cannot
be characterized as wrongful or perverse per se, given the conditions he was subjected to while in India. He left the
Project primarily because of the financial difficulties he encountered, owing to his failure to receive his salary and because
of the adverse working conditions in India.

Wrt the charge of neglect of duty against Gilles, SC held that there was no neglect of duty on Gilles’ part to justify his
dismissal. A single or isolated act of negligence does not constitute a just cause for the dismissal of the employee. Prior to
his abrupt departure from India, Gilles had no derogatory record in the company.

Wrt Abores’ liability, malice or bad faith on the part of Abores in the constructive dismissal of Gilles was not sufficiently
proven to justify holding him solidarily liable with SKI.

51
RADIO PHILIPPINES NETWORK, INC., and/or MIA CONCIO, President, LEONOR LINAO, General Manager,
LOURDES ANGELES, HRD Manager, and IDA BARRAMEDA, AGM-Finance vs. RUTH F. YAP, MA. FE
DAYON, MINETTE BAPTISTA, BANNIE EDSEL SAN MIGUEL, and MARISA LEMINA
G.R. No. 187713 August 1, 2012
REYES, J.

Topic: Wage Payment and Protection; Place of Payment

Facts: Petitioner Radio Philippines Network, Inc. (RPN) is a government sequestered corporation. Respondents were
employees of RPN and former members of the Radio Philippines Network Employees Union (RPNEU), the bargaining
agent of the rank-and-file employees of the said company. RPN and RPNEU entered into a Collective Bargaining Agreement
(CBA) with a union security clause providing that a member who has been expelled from the union shall also be terminated
from the company. A conflict arose between the respondents and other members of RPNEU. RPNEU’s Grievance and
Investigation Committee recommended to the union’s board of directors the expulsion of the respondents from the union.
RPN notified the respondents that their employment would be terminated whereupon the respondents filed with the Labor
Arbiter (LA) a complaint for illegal dismissal and non-payment of benefits.

LA: ordered the reinstatement of the respondents with payment of backwages and full benefits and without loss of seniority
rights after finding that the petitioners failed to establish the legal basis of the termination of respondents’ employment

Respondents: alleged that petitioner’s did not comply with the LA order, and narrated:
They went to RPN to present themselves to the petitioners for actual reinstatement to their former positions.
The General Manager informed them that they had been reinstated, but only in the payroll, and that the company
would endeavor to pay their salaries regularly despite its precarious financial condition. Four days later, the
respondents returned to RPN to collect their salaries, it being a payday; but they were barred entry upon strict orders
of the President and GM. The respondents returned in the afternoon but were likewise stopped by 8 guards now
manning the gate. Respondents nonetheless tried to push their way in, but the guards manhandled them, pulled them
by the hair and arms and pushed them back to the street. Some even endured having their breasts mashed, their
blouses pulled up and their bags grabbed away. Later that afternoon, the respondents somehow managed to enter
the RPN lobby. It was the AGM for Finance who came out, but instead of meeting them, she ordered the guards to
take them back outside the gate, where she said they would be paid their salaries (outside the gate). Their removal
was so forcible and violent that they sustained physical injuries and had to be medically treated. Because of these,
the respondents prayed that the LA issue an order finding the officers liable for contempt for not complying with
the court’s prior order.

On the other hand, the petitioners denied any liability for the narrated incidents, insisting that the respondents had been duly
informed through a letter of their payroll reinstatement. The petitioners explained that because of the intra-union dispute
between the respondents and the union leaders, they deemed it wise not to allow the respondents inside the company
premises to prevent any more untoward incidents, and to release their salaries only at the gate. For this reason, the
respondents were asked to open an ATM account with the Land Bank, Quezon City Circle Branch, where their salaries
would be deposited every 5th and 20th day of the month, rather than on the 15th and 30th along with the other employees.
This measure was for the protection not only of complainants but also for the other employees of RPN.

Petitioners continued expressing different ways as to how to effect payment to the respondents. They manifested to the LA
that the respondents could collect their salaries at the Bank of Commerce in Broadcast City Branch, Quezon City. However,
respondents refused to collect their salaries. To prove their good faith, petitioners stated that the respondents’ salaries shall
henceforth be deposited at the NLRC Cashier on the 5th and 20th of every month.

52
LA still cited them for indirect contempt, and issued a writ of execution in favor of respondents.

Issue: W/N the petitioner has actually fully complied with the decision of the LA (LA decision under 2 nd paragraph of facts)

Ruling: Yes, they complied and thus, cannot be liable for indirect contempt.

It is not denied that after the order of reinstatement of the respondents, RPN forthwith restored them in its payroll without
diminution of their benefits and privileges, or loss of seniority rights. They retained their entitlement to the benefits under
the CBA. Respondents regularly received their salaries and benefits, notwithstanding that the company has been in financial
straits. Any delays appear to have been due to misunderstandings as to the exact place and time of the fortnightly payments,
or because the respondents were tardy in collecting them from the Bank of Commerce at Broadcast City Branch or from the
NLRC cashier. The petitioners tried proposing opening ATM accounts for them, but the respondents rejected the idea.

Nonetheless, there was no sufficient basis for the charge of indirect contempt against the petitioners. It was made without
due regard for their right to exercise their management prerogatives to preserve the viability of the company and the harmony
of the workplace. This is because the manner of reinstating a dismissed employee in the payroll generally involves an
exercise of management prerogative. In case of strained relations or non-availability of positions, Art 223 of the Labor Code
gives the employer the option to reinstate the employee merely in the payroll, precisely in order to avoid the intolerable
presence in the workplace of the unwanted employee. The circumstances of the present case have more than amply shown
that the physical restoration of the respondents to their former positions would be impractical and would hardly promote the
best interest of both parties. Respondents have accused the petitioners of being directly complicit in the plot to expel them
from the union and to terminate their employment, while petitioners have charged the respondents with trying to sabotage
the peace of the workplace in "furthering their dispute with the union." The resentment and enmity between the parties have
so strained their relationship and even provoked antipathy and antagonism, as amply borne out by the physical clashes that
had ensued every time the respondents attempted to enter the RPN compound, that respondents’ presence in the workplace
will not only be distracting but even disruptive, to say the least.

EUFROCIO BERMISO, ET AL. v. HIJOS DE F. ESCAÑO, INC., ET AL.

28 February 1959 || Labrador, J.

FACTS: There were formerly 45 petitioners in this case, including Democratic Labor Association and Katubsanan sa
Mamumuo. However, only five laborers remained, namely: Eufrocio Bermiso, Fortunato Geteso, Constancio Olaco,
Laureano Amistoso, Vicente Tuyogan.

This is an action filed before the CIR praying for reinstatement with back wages, direct payment of wages to laborers
instead of through the union, payment of accrued overtime pay & wage differentials, prohibition from carrying load in
excess of 50 kilos, minimum daily wage of P5.00, vacation & sick leave, free hospitalization, accident insurance, free
choice of labor union and grievance committee.

Hijos de F. Escaño is a domestic company engaged in the business of carrying or transporting passengers and goods by
water for compensation within the Philippines. The Katubsanan sa Mamumuo is a labor organization duly registered with
the DOLE with office address in Cebu City. It has several groups/chapters, one of which is the Sabay group, headed by
the labor organization’s general treasurer Vitaliano Sabay. To this group formerly belonged some or all of the 45
petitioners.

The members of the Sabay group generally perform work similar to that done by laborers of stevedoring & arrastre firms.
They load and unload vessels in the port of Cebu and haul or transport discharged cargo from the waterfront to the
consignee’s warehouses as well as cargo to be shipped out of Cebu from the shippers' warehouse to the waterfront.

53
The Sabay men regularly served as stevedores for the Hijos de F. Escaño. Their relation had its inception in 1947 when,
through the representation made by Muaña and Sabay, Salvador Sala, general manager of said carrier, permitted the Sabay
group to do the work of loading and unloading its vessels to the exclusion of all other persons. From the beginning the
Company has not directly paid Muaña, Sabay or the group any compensation for the loading or unloading services
rendered by Sabay men. Neither has it received any payment for the exclusive privilege enjoyed by the group. The
practice which they have continuously followed is that the group collects from the shippers and consignees the
charges for the handling of the cargo based on a schedule of rates which appears to have been previously approved
by all the parties affected by the work, while the Company receives or collects from the shippers or consignees only
the freightage for the cargo.

The amount collected from the shippers & consignees is considered as the gross income of the group, from which are
deducted its expenses for gasoline, spare parts, damage to, loss or destruction of, cargo not imputable to any particular
individual, meals, recreation, wages of casual workers and 2% for the Katubsanan for maintenance of the union clinic &
newspaper. The net income is then divided into equal shares in accordance with the sharing plan under which each
common laborer is entitled to one share, and the rest (including Sabay) is entitled to a share depending on the length of
membership and importance of position held in the group.

Before the Minimum Wage Law (R. A. No. 602) went into effect, the number of hours each laborer worked was not taken
into account by the group. Even members who did not actually render any service were given shares if their failure to
work was found to have been due a reasonable cause. Certain records were made of the disposition of the group's income
but they, together with some payrolls, were destroyed by water when Cebu was visited by a strong typhoon in 1951. After
August 4, 1951, the share was given a fixed value: P0.39, at first P0.40, later, and, finally, P0.50 per hour of work or
service. Under this modified plan, if the computation would result in wages falling short of the legal minimum because
there were many laborers who worked, the group collected additional charges from the shippers and consignees. If further
payment was refused for the reason that the work was delayed by the workers, the group covered the deficit from its so-
called sinking fund which was accumulated from the small undivided or invisible amounts remaining after each
distribution of net income. At times laborers were rotated to obviate the possibility of wage shortage. As regards the
expenses, whether or not they were deductible from the earnings was looked into by the auditor-bookkeeper employed by
the Katubsanan. Since the modification of the sharing plan was made, the group has been using payrolls printed in the
name of the union.

CIR ordered the reinstatement of the five laborers, without backwages, while it dismissed the other claims.
Insofar as the stevedores are concerned, Hijos de Escaño was the employer of petitioners. With respect to the arrastre
service, it held that the question was beyond the scope of the relationship between it and the petitioners.
Claimants failed to establish any reasonable basis for all their claims except that for reinstatement.
With respect to the direct payment of wages, the court found no reason for changing the practice of apportioning the
wages for their joint labor sharing therein, because only 5 members were dissatisfied out of the 150 members of the union.

In its petition for certiorari before the SC, petitioner argues that the above decision violates the law on direct payment of
wages, as provided by Section 10, par. (b) of Republic Act No. 602:
SEC. 10. (b) Wages, including wages which may be paid retroactively for whatever reason, shall be paid directly
to the employee to whom they are due, except:
(1) In cases where the employee is insured with his consent by the employer, the latter shall entitled to deduct
from the wage of the employee the amount paid by the employer for premiums on the insurance;
(2) In cases of force majeure rendering such payments impossible; and
(3) In cases where the right of the employee or his union to check-off has been recognized by the employer or
authorized in writing by the individual employees concerned

54
ISSUE: W/N wages should be directly paid to the laborers

HELD: No. The practice of paying wages through the union is not violative of the law since the contract to perform the
service was made by the leader of the group, for and on behalf of the latter, not for each of them individually. The
work of stevedoring was undertaken by the laborers, not in their individual capacities, but as a group. For the sake
of convenience it was necessary that the group must be large enough to be able to perform the task of loading and
unloading in as short time as possible. As the group undertook to render service for vessels other than those of the Hijos
de F. Escaño, it was absolutely necessary that some sort of leadership be instituted in the group to determine which of the
members will work for one vessel and which for another. Leadership is also essential to obtain work for the group as
employers naturally prefer to deal with a leader of a group than with each member individually. Leadership was,
therefore, essential not only to secure work for the group but also to arrange the laborers who are to perform the
service. The leadership must be paid for and it was not shown that the head of the groups got the lion's share of the cost of
the service rendered. The lower court did not find sufficient evidence to show that racketeering was employed by the
leaders. If any existed the remedy can not be found in this court; it is for the group or organize into a closely
knitted union which would secure the privileges that the selves who would not exploit them.

Also, Hijos de F. Escaño did not pay for the stevedoring charges. These were collected by the group from the shippers
themselves, without the intervention of Escaño.

There is also no reason to grant the prayer for backwages, as Escaño did not deal with the petitioners individually through
a contract of employment, but with the group through its leaders. If the group, thru its leaders, did not allow the petitioners
to work and share in the price paid therefor, the one responsible is not the respondent Escaño but the leader thru whom the
group itself made the contract for work and apportioned the time of work for each member and the pay therefor.

55
NIÑA JEWELRY MANUFACTURING OF METAL ARTS, INC. (otherwise known as NIÑA MANUFACTURING
AND METAL ARTS, INC.) and ELISEA B. ABELLA vs. MADELINE C. MONTECILLO and LIZA M.
TRINIDAD (2011)
REYES, J.:

FACTS: Madeline Montecillo and Liza Trinidad were first employed as goldsmiths by the petitioner Niña Jewelry
Manufacturing of Metal Arts, Inc. in 1996 and 1994, respectively. Madeline's weekly rate was P1,500.00 while Liza's was
P2,500.00. Petitioner Elisea Abella is Niña Jewelry's president and general manager.
There were incidents of theft involving goldsmiths in Niña Jewelry's employ.
On August 13, 2004, Niña Jewelry imposed a policy for goldsmiths requiring them to post cash bonds or deposits in varying
amounts but in no case exceeding 15% of the latter's salaries per week. The deposits were intended to answer for any loss
or damage which Niña Jewelry may sustain by reason of the goldsmiths' fault or negligence in handling the gold entrusted
to them. The deposits shall be returned upon completion of the goldsmiths' work and after an accounting of the gold received.
Niña Jewelry alleged that the goldsmiths were given the option not to post deposits, but to sign authorizations allowing the
former to deduct from the latter's salaries amounts not exceeding 15% of their take home pay should it be found that they
lost the gold entrusted to them. The respondents claimed otherwise insisting that Niña Jewelry left the goldsmiths with no
option but to post the deposits. The respondents alleged that they were constructively dismissed by Niña Jewelry as their
continued employments were made dependent on their readiness to post the required deposits.
Niña Jewelry averred that on August 14, 2004, the respondents no longer reported for work and signified their defiance
against the new policy which at that point had not even been implemented yet.
The respondents filed against Niña Jewelry complaints for illegal dismissal and for the award of separation pay.
Labor Arbiter Jose Gutierrez dismissed the respondents' complaints for lack of merit but ordered Niña Jewelry to pay
Madeline the sum of P3,750.00, and Liza, P6,250.00, representing their proportionate entitlements to 13th month pay for
the year 2004. The NLRC affirmed the decision of the LA. The CA reversed the NLRC and held that there was constructive
dismissal of the employees.
ISSUE: WON there was constructive dismissal.
Issue relative to Wages: WON there is a basis for Niña Jewelry to impose its new policy upon the goldsmiths.
HELD: There was NO constructive dismissal. However, there is no basis for Niña Jewelry to impose its new policy without
first complying with the strict requirements of the law.
RATIO: Constructive dismissal occurs when there is cessation of work because continued employment is rendered
impossible, unreasonable or unlikely; when there is a demotion in rank or diminution in pay or both; or when a clear
discrimination, insensibility, or disdain by an employer becomes unbearable to the employee.
The petitioners did not whimsically or arbitrarily impose the policy to post cash bonds or make deductions from the workers'
salaries. As attested to by the respondents' fellow goldsmiths in their Joint Affidavit, the workers were convened and
informed of the reason behind the implementation of the new policy. Instead of airing their concerns, the respondents just
promptly stopped reporting for work.
Although the propriety of requiring cash bonds seems doubtful, there are no grounds to hold that the respondents were
dismissed expressly or even constructively by the petitioners. It was the respondents who merely stopped reporting for work.
While it is conceded that the new policy will impose an additional burden on the part of the respondents, it was not intended
to result in their demotion. Neither is a diminution in pay intended because as long as the workers observe due diligence in
the performance of their tasks, no loss or damage shall result from their handling of the gold entrusted to them, hence, all
the amounts due to the goldsmiths shall still be paid in full. Further, the imposition of the new policy cannot be viewed as
an act tantamount to discrimination, insensibility or disdain against the respondents. For one, the policy was intended to be
implemented upon all the goldsmiths in Niña Jewelry's employ and not solely upon the respondents. Besides, as stressed by
the petitioners, the new policy was intended to merely curb the incidences of gold theft in the work place. The new policy
can hardly be said to be disdainful or insensible to the workers as to render their continued employment unreasonable,
unlikely or impossible.

56
Article 113 of the Labor Code is clear that there are only three exceptions to the general rule that no deductions from the
employees' salaries can be made. The exception which finds application in the instant petition is in cases where the employer
is authorized by law or regulations issued by the Secretary of Labor to effect the deductions. On the other hand, Article 114
states that generally, deposits for loss or damages are not allowed except in cases where the employer is engaged in such
trades, occupations or business where the practice of making deposits is a recognized one, or is necessary or desirable as
determined by the Secretary of Labor in appropriate rules or regulations.
While the petitioners are not absolutely precluded from imposing the new policy, they can only do so upon compliance with
the requirements of the law. In other words, the petitioners should first establish that the making of deductions from the
salaries is authorized by law, or regulations issued by the Secretary of Labor. Further, the posting of cash bonds should be
proven as a recognized practice in the jewelry manufacturing business, or alternatively, the petitioners should seek for the
determination by the Secretary of Labor through the issuance of appropriate rules and regulations that the policy the former
seeks to implement is necessary or desirable in the conduct of business. The petitioners failed in this respect. It bears
stressing that without proofs that requiring deposits and effecting deductions are recognized practices, or without securing
the Secretary of Labor's determination of the necessity or desirability of the same, the imposition of new policies relative to
deductions and deposits can be made subject to abuse by the employers.

57
 GENESIS TRANSPORT SERVICE v. UMMGT & TAROY
G.R. No. 182114 / APRIL 5, 2010 / CARPIO-MORALES, J. / LABOR – Wage Deduction, ILO /

NATURE Petition for Certiorari

PETITIONERS Genesis Transport Service, Inc. & Rely L. Jalbuna
RESPONDENTS Unyon ng Malayang Manggagawa ng Genesis Transport & Juan Taroy

SUMMARY. Taroy was a driver of Genesis on commission basis. He was

dismissed after an accident where he was found to have been driving
recklessly. He filed a complaint for illegal dismissal, etc. He alleged that
Genesis deducted toll fees from his weekly earnings without his consent as
required under Art. 113. SC held that the deductions were illegal and
ordered Genesis to refund Taroy.
DOCTRINE. The invocation of the rule on “company practice” is generally
used with respect to the grant of additional benefits to employees, not on
issues involving diminution of benefits.

FACTS.

 An information for reckless imprudence resulting in homicide was filed against the petitioner before the RTC of
Bulacan. Respondent Juan Taroy was hired on February 2, 1992 by petitioner Genesis Transport Service, Inc. (Genesis
Transport) as driver on commission basis at 9% of the gross revenue per trip.
 May 10, 2002: Taroy was, after due notice and hearing, terminated from employment after an accident on April 20, 2002
where he was deemed to have been driving recklessly.
 Taroy filed on June 7, 2002 a complaint for illegal dismissal and payment of service incentive leave pay, claiming
that he was singled out for termination because of his union activities, other drivers who had met accidents not having
been dismissed from employment.
o Taroy later amended his complaint to implead Unyon ng Malayang Manggagawa ng Genesis Transport (the
union) as complainant and add as grounds of his cause of action unfair labor practice (ULP), reimbursement
of illegal deductions on tollgate fees, and payment of service incentive leave pay.
 Taroy: alleged that in 1997, petitioner started deducting from his weekly earnings an amount ranging from P160 to P900
representing toll fees, without his consent and written authorization as required under Article 113 and contrary to company
practice; and that deductions were also taken from the bus conductors earnings to thus result to double deduction.
 Genesis Transport: countered that Taroy committed several violations of company rules; that those violations included
poor driving skills, tardiness, gambling inside the premises, use of shabu, smoking while driving, insubordination and
reckless driving; and that Taroy’s dismissal was on a valid cause and after affording him due process.
o DP: preventive suspension; the directive for him to explain in writing his involvement in the accident; a hearing
during which the expert opinion of its Maintenance Department, as well as an independent entity the Columbian
Motors Corporation, was considered in the determination of whether the accident was due to his reckless driving
or, as he contended, to faulty brakes.
o Result of investigation: cause was reckless driving
 LA: Ruled for Genesis. Taroy not illegally dismissed, not entitled to service incentive leave pay
o With respect to Taroy’s claim for refund, however, the LA ruled in his favor for if, as contended by Genesis
Transport, tollgate fees form part of overhead expense, why were not expenses for fuel and maintenance also
charged to overhead expense? The Labor Arbiter concluded that it would appear that the tollgate fees are
deducted from the gross revenues and not from the salaries of drivers and conductors, but certainly the deduction
thereof diminishes the take home pay of the employees.

58
 NLRC: Affirmed
 CA: ruled that Genesis Transport violated Taroy’s statutory right to due process when he was preventively suspended
for more than thirty (30) days, in violation of the IRR of the LC. The appellate court thus held Taroy to be entitled to
nominal damages and it reinstated the Labor Arbiter’s order for petitioners to refund Taroy the underpayment.
 Petitioners aver that cases of similar import involving also the union have been decided with finality in their favor by the
NLRC and so the Court should apply the principle of res judicata vis-a-vis the present case.

ISSUES & RATIO.

1. WON Taroy is entitled to a refund. – YES

The NLRC cases have not yet attained finality.

Albeit the amounts representing tollgate fees were deducted from gross revenues and not directly from Taroy’s
commissions, the withholding of those amounts reduced the amount from which Taroy’s 9% commission would be
computed. Such a computation not only marks a change in the method of payment of wages, resulting in a diminution of
Taroy’s wages in violation of Article 113 vis-a-vis Article 1007 of the Labor Code, as amended. It need not be underlined
that without Taroy’s written consent or authorization, the deduction is considered illegal.

Neither may the Court take judicial notice of petitioners claim that the deduction of tollgate fees from the gross earnings of
drivers is an accepted and long-standing practice in the transportation industry. None of the material requisites8 for the Court
to take judicial notice of a particular matter was established by petitioners.

Besides, the invocation of the rule on company practice is generally used with respect to the grant
of additional benefits to employees, not on issues involving diminution of benefits.

DECISION.
CA affirmed except for the finding that Genesis violated Taroy’s statutory due process.

7
Art. 113. Wage deduction. No employer, in his own behalf or in behalf of any person,
shall make any deduction from the wages of his employees, except:
a. In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as
premium on the insurance;
b. For union dues, in cases where the right of the worker or his union to check-off
has been recognized by the employer or authorized in writing by the individual
worker concerned; and
c. In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor and Employment.
8 Expertravel & Tours, Inc. v. Court of Appeals instructs:

Generally speaking, matters of judicial notice have three material requisites: (1) the matter must be one of common and general knowledge; (2) it must be
well and authoritatively settled and not doubtful or uncertain; and (3) it must be known to be within the limits of the jurisdiction of the court. The principal
guide in determining what facts may be assumed to be judicially known is that of notoriety. Hence, it can be said that judicial notice is limited to facts evidenced by
public records and facts of general notoriety. Moreover, a judicially noticed fact must be one not subject to a reasonable dispute in that it is either: (1) generally
known within the territorial jurisdiction of the trial court; or (2) capable of accurate and ready determination by resorting to sources whose accuracy cannot
reasonably be questionable.
Things of common knowledge, of which courts take judicial matters coming to the knowledge of men generally in the course of the ordinary experiences of life, or
they may be matters which are generally accepted by mankind as true and are capable of ready and unquestioned demonstration. Thus, facts which are universally
known, and which may be found in encyclopedias, dictionaries or other publications, are judicially noticed, provided, they are of such universal notoriety and so
generally understood that they may be regarded as forming part of the common knowledge of every person. As the common knowledge of man ranges far and
wide, a wide variety of particular facts have been judicially noticed as being matters of common knowledge. But a court cannot take judicial notice of any fact
which, in part, is dependent on the existence or non-existence of a fact of which the court has no constructive knowledge.

59
60
 PORTILLO V. LIETZ
G.R. No. 196539 / OCTOBER 10, 2012 / PEREZ, J. / LABOR – Wage Deduction/ GRACEGAR

NATURE Special Civil Action in the Supreme Court

PETITIONERS Marietta N. Portillo
RESPONDENTS Rudolf Lietz Inc., Rudolf Lietz, and Court of Appeals

SUMMARY. Portillo was employed in the defendant company under a

contract which stated that she cannot engage in directly or indirectly as
employee, manager, proprietor, or solicitor for yourself or others in a similar
or competitive business or the same character of work which you were
employed by Lietz Inc. to do and perform. Subsequently, Lietz Inc. learned
that Portillo had been hired by Ed Keller Philippines, Limited to head its
Pharma Raw Material Department. Ed Keller Limited is purportedly a direct
competitor of Lietz Inc. The defendant company then refused to give her
remaining salaries stating the defense of legal compensation. SC ruled that
legal compensation was not proper in this case.

DOCTRINE. Article 113 of the Labor Code prohibits wage deductions

except in three circumstances: (a) In cases where the worker is insured with
his consent by the employer, and the deduction is to recompense the
employer for the amount paid by him as premium on the insurance; (b) For
union dues, in cases where the right of the worker or his union to check-off
has been recognized by the employer or authorized in writing by the
individual worker concerned; and (c) In cases where the employer is
authorized by law or regulations issued by the Secretary of Labor.

FACTS.

 Portillo was hired by the Lietz under the following terms and conditions: you [Portillo] will not engage in any other
gainful employment by yourself or with any other company either directly or indirectly without written consent of [Lietz
Inc.], and we hereby accept and henceforth consider your proposal an undertaking on your part, a breach of which will
render you liable to [Lietz Inc.] for liquidated damages.
 On her tenth (10th) year with Lietz Inc., specifically on 1 February 2002, Portillo was promoted to Sales Representative
and received a corresponding increase in basic monthly salary and sales quota. In this regard, Portillo signed another letter
agreement containing a “Goodwill Clause”: for a period of three (3) years thereafter, you shall not engage directly or
indirectly as employee, manager, proprietor, or solicitor for yourself or others in a similar or competitive business or the
same character of work which you were employed by [Lietz Inc.] to do and perform. Should you breach this good will
clause of this Contract, you shall pay [Lietz Inc.] as liquidated damages the amount of 100% of your gross compensation
over the last 12 months, it being agreed that this sum is reasonable and just.
 Three years thereafter, on 6 June 2005, Portillo resigned from Lietz Inc. During her exit interview, Portillo declared that
she intended to engage in business―a rice dealership, selling rice in wholesale.
 On 15 June 2005, Lietz Inc. accepted Portillo’s resignation and reminded her of the “Goodwill Clause” in the last letter
agreement she had signed. Upon receipt thereof, Portillo jotted a note thereon that the latest contract she had signed in
February 2004 did not contain any “Goodwill Clause” referred to by Lietz Inc.
 In a subsequent letter dated 21 June 2005, Lietz Inc. wrote Portillo and supposed that the exchange of correspondence
between them regarding the “Goodwill Clause” in the employment contract was a moot exercise since Portillo’s
articulated intention to go into business, selling rice, will not compete with Lietz Inc.’s products.

61
 Subsequently, Lietz Inc. learned that Portillo had been hired by Ed Keller Philippines, Limited to head its Pharma Raw
Material Department. Ed Keller Limited is purportedly a direct competitor of Lietz Inc. Meanwhile, Portillo’s demands
from Lietz Inc. for the payment of her remaining salaries and commissions went unheeded.
 On 14 September 2005, Portillo filed a complaint with the National Labor Relations Commission (NLRC) for non-
payment of 11⁄2 months’ salary, two (2) months’ commission, 13th month pay, plus moral, exemplary and actual damages
and attorney’s fees.
 However, Lietz Inc. raised the defense of legal compensation: Portillo’s money claims should be offset against her liability
to Lietz Inc. for liquidated damages in the amount of P869,633.097 for Portillo’s alleged breach of the “Goodwill Clause”
in the employment contract when she became employed with Ed Keller Philippines, Limited.
 On 25 May 2007, Labor Arbiter Daniel J. Cajilig granted Portillo’s complaint. On appeal by respondents, the NLRC,
through its Second Division, affirmed the ruling of Labor Arbiter Daniel J. Cajilig. Then the appellate court initially
affirmed the labor tribunals but the Court of Appeals, on motion for reconsideration, modified its previous decision.

ISSUE & RATIO.

1. WON Portillo’s money claims for unpaid salaries may be offset against respondents’ claim for liquidated
damages – NO

The “reasonable causal connection with the employer-employee relationship” is a requirement not only in employees’
money claims against the employer but is, likewise, a condition when the claimant is the employer. The employer did not
ask for any relief under the Labor Code but sought to recover damages agreed upon in the contract as redress for its
employee’s breach of contractual obligation to its “damage and prejudice.” The “Goodwill Clause” or the “Non-Compete
Clause” is a contractual undertaking effective after the cessation of the employment relationship between the parties. It is
clear, therefore, that while Portillo’s claim for unpaid salaries is a money claim that arises out of or in connection with an
employer-employee relationship, Lietz Inc.’s claim against Portillo for violation of the goodwill clause is a money claim
based on an act done after the cessation of the employment relationship. And, while the jurisdiction over Portillo’s claim is
vested in the labor arbiter, the jurisdiction over Lietz Inc.’s claim rests on the regular courts. The alleged contractual
violation did not arise during the existence of the employer-employee relationship. It was a post-employment matter, a post-
employment violation.

Also, the application of compensation in this case is effectively barred by Article 113 of the Labor Code which prohibits
wage deductions except in three circumstances:

ART. 113. Wage Deduction.―No employer, in his own behalf or in behalf of any person, shall make any deduction from
wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the employer
for the amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has been recognized by the employer or
authorized in writing by the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor.

DECISION.
Petition granted. CA decision set aside.

62
 EMER MILAN ET AL (5 others) v. NLRC, SOLID MILLS
Feb. 4, 2015| Leonen J. |Prohibition Against Wage Deduction - EXCEPTION

SUMMARY: Petitioners are employees of Solid Mills. As employees they were allowed to occupy SMI Village, which
was a property of Solid Mills “out of liberality”. The Company suffered financial losses and filed for closure with the
DOLE and filed the corresponding closure of operations and termination reports. The Union was also consequently
informed. The petitioners demanded for the release of their separation pay, SL/VL leaves, and 13th month pay. Solid Mills
argued that they would release such once they have vacated the properties in SVI Village. The LA ruled in favor of
petitioner. The NLRC/CA ruled in favor of Solid Mills.

The SC held that the employer is authorized to withhold wages due to debt claims based on Article 1706. Withholding of
the wages, except for a debt due, shall not be made by the employer.cr

The “debt” of not returning the SVI property used by the employees is deemed an accountability, which the employee
needs to settle

DOCTRINE: An employer is allowed to withhold terminal pay and benefits pending the employee’s return of its
properties.

FACTS:

 Petitioners are respondent Solid Mills, Inc.’s (Solid Mills) employees. They are represented by the National
Federation of Labor Unions (NAFLU), their collective bargaining agent.
 As Solid Mills’ employees, petitioners and their families were allowed to occupy SMI Village, a property owned by
Solid Mills.
 According to Solid Mills, this was “out of liberality and for the convenience of its employees . . . [and] on the
condition that the employees . . . would vacate the premises anytime the Company deems fit.”
 In September 2003, petitioners were informed that effective October 10, 2003, Solid Mills would cease its operations
due to serious business losses.
 NAFLU recognized Solid Mills’ closure due to serious business losses in the memorandum of agreement dated
September 1, 2003.
 The memorandum of agreement provided for Solid Mills’ grant of separation pay less accountabilities, accrued sick
leave benefits, vacation leave benefits, and 13th month pay to the employees.
 Solid Mills filed its Department of Labor and Employment termination report on September 2,
2003roblesvirtuallawlibrary
 Later, Solid Mills, through Alfredo Jingco, sent to petitioners individual notices to vacate SMI Village.
 Petitioners were no longer allowed to report for work by October 10, 2003. They were required to sign a
memorandum of agreement with release and quitclaim before their vacation and sick leave benefits, 13th month pay,
and separation pay would be released.
 Employees who signed the memorandum of agreement were considered to have agreed to vacate SMI Village, and to
the demolition of the constructed houses inside as condition for the release of their termination benefits and separation
pay.
 Petitioners refused to sign the documents and demanded to be paid their benefits and separation pay.
 Hence, petitioners filed complaints before the Labor Arbiter for alleged non-payment of separation pay, accrued sick
and vacation leaves, and 13th month pay.
o They argued that their accrued benefits and separation pay should not be withheld because their payment is
based on company policy and practice.
63
 o Moreover, the 13th month pay is based on law, specifically, Presidential Decree No. 851.
o Their possession of Solid Mills property is not an accountability that is subject to clearance procedures.
o They had already turned over to Solid Mills their uniforms and equipment when Solid Mills ceased
operations.
 On the other hand, Solid Mills argued that petitioners’ complaint was premature because they had not vacated its
property.an
 The Labor Arbiter ruled in favor of petitioners.
o According to the Labor Arbiter, Solid Mills illegally withheld petitioners’ benefits and separation pay.
o Petitioners’ right to the payment of their benefits and separation pay was vested by law and contract.
o Petitioners’ possession should not be construed as petitioners’ “accountabilities” that must be cleared first
before the release of benefits.
 The National Labor Relations Commission ruled that because of petitioners’ failure to vacate Solid Mills’ property,
Solid Mills was justified in withholding their benefits and separation pay.
o Solid Mills granted the petitioners the privilege to occupy its property on account of petitioners’ employment.
o It had the prerogative to terminate such privilege.
o The termination of Solid Mills and petitioners’ employer-employee relationship made it incumbent upon
petitioners to turn over the property to Solid Mills.
 On January 31, 2012, the Court of Appeals agreed with NLRC and issued a decision dismissing petitioners’ petition.

RULING:
The Petition is DENIED and the Court of Appeals' decision is AFFIRMED in favor of SOLID MILLS INC.

ISSUE AND RATIO

W/N SOLID MILLS is authorized to withhold employee claims pending their compliance of turnover of lots used
by employee in the SVI Village? -YES

 Requiring clearance before the release of last payments to the employee is a standard procedure among employers,
whether public or private. Clearance procedures are instituted to ensure that the properties, real or personal,
belonging to the employer but are in the possession of the separated employee, are returned to the employer before the
employee’s departure.
 As a general rule, employers are prohibited from withholding wages from employees. The Labor Code provides:

o Art. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person, directly or
indirectly, to withhold any amount from the wages of a worker or induce him to give up any part of his wages
by force, stealth, intimidation, threat or by any other means whatsoever without the worker’s consent.

 The Labor Code also prohibits the elimination or diminution of benefits. Thus:

o 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.

 However, our law supports the employers’ institution of clearance procedures before the release of wages. As an
exception to the general rule that wages may not be withheld and benefits may not be diminished, the Labor Code
64
 provides:

o Art. 113. Wage deduction. No employer, in his own behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except:

1. In cases where the worker is insured with his consent by the employer, and the deduction is to recompense
the employer for the amount paid by him as premium on the insurance;

2. For union dues, in cases where the right of the worker or his union to check-off has been recognized by the
employer or authorized in writing by the individual worker concerned; and

3. In cases where the employer is authorized by law or regulations issued by the Secretary of Labor and
Employment.

 The Civil Code provides that the employer is authorized to withhold wages for debts due:

o Article 1706. Withholding of the wages, except for a debt due, shall not be made by the employer.

 “Debt” in this case refers to any obligation due from the employee to the employer. It includes any accountability that
the employee may have to the employer. There is no reason to limit its scope to uniforms and equipment, as
petitioners would argue.
 More importantly, respondent Solid Mills and NAFLU, the union representing petitioners, agreed that the release of
petitioners’ benefits shall be “less accountabilities.”
 “Accountability,” in its ordinary sense, means obligation or debt. The ordinary meaning of the term “accountability”
does not limit the definition of accountability to those incurred in the worksite. As long as the debt or obligation was
incurred by virtue of the employer-employee relationship, generally, it shall be included in the employee’s
accountabilities that are subject to clearance procedures.
 Petitioners were merely allowed to possess and use it out of respondent Solid Mills’ liberality. The employer may,
therefore, demand the property at will.

65
 FIVE J TAXI v. NLRC
GR No. 111474 / AUG 22, 1994 / REGALADO, J. / Labor – Requirement to Make Deposits for Loss or Damage /

NATURE Special Civil Action

PETITIONERS Five J Taxi and/or Juan S. Aramento
RESPONDENTS National Labor Relations Commission, et al.

SUMMARY. Maldigan and Sabsalon worked as taxi drivers for Five J Taxi. Eventually they were
dismissed when it was found out that they were working for other companies. In light of their dismissal,
they seek to be reimbursed of their P15.00 and P20.00 deposits with Five J. NLRC ruled that they are
entitled to such. Hence this petition.
DOCTRINE. The exception of Art. 114, LC. does not apply to the taxi business since paying deposits to
cover for boundary shortages was not a “practice” recognized by the Secretary of Labor.

FACTS.

 Domingo Maldigan and Gilberto Sabsalon were hired by Five J Taxi as taxi drivers; they were to work 4 days a week on
a 24-hour shifting schedule.
 They were also required to meet a daily “boundary” of P700.00 if they drove an air-conditioned taxi or P450.00 if non-
air-conditioned. Aside from this they were required to pay P20.00 for car washing and P15.00 as deposit to answer for
any deficiency in their boundary.
 In less than 4 months after being employed, Maldigan already failed to report for unknown reasons. Only to find out that
he was already working for another taxi company – Mine of Gold Taxi Co.
 On the other hand, Sabsalon, while driving a taxicab for Five J, was held up by his armed passenger who took all of his
money and stabbed him after. He was hospitalized and went home to his province to recuperate.
 Sabsalon was eventually re-admitted under the same terms but his schedule was made on an “alternative basis” – driving
every other day. However, he failed to report to work.
 Sometime after, Sabsalon failed to remit his “boundary” of P700 and abandoned his taxi in Makati without fuel refill
worth P300.00.
 Despite repeated requests from Five J for him to report to work, he adamantly refused. After this, it was found out that he
started working for Bulaklak Taxi Co.
 Sometime in 1989, Maldigan requested for reimbursement of his daily cash deposit for 2 years, but Five J refused claiming
that not a single centavo was left of his deposits as these were not even enough to cover the amount of repairs of the
taxicab he was driving.
 When Maldigan insisted, Five J terminated his services
 Sabsalon claimed that his termination from employment was effected when he refused to pay for the washing of his taxi
seat covers.
 Two years after their dismissal in 1989, private respondents filed a complaint for illegal dismissal and illegal deductions
with the Manila Arbitration Office of the NLRC. NLRC dismissed the complaint – not consistent with natural reaction
who claims that he was unjustly treated, filing is a mere after-thought.
 HOWEVER, Five J must return their accumulated deposits and car wash payments. NLRC denied MR.

ISSUES & RATIO.

1. WON Five J must return Maldigan and Sabsalon’s deposits. – YES.

On the P15.00 Daily Deposits

66
o NLRC Argument: P15.00 daily deposits is covered by the general prohibition in Art. 1149 of the Labor Code against
requiring employees to make deposits, and that there is no showing that the Sec. of Labor has allowed the same as a
practice in the taxi industry
o Clearly the rules do not apply to the deficiencies from not meeting their boundary.
o Also, when respondents stopped working, the purpose of the unwarranted deposits ceased.
o However, it was found out that Sabsalon already withdrew hand even incurred shortages (P3,448.00). Therefore
he was still indebted to Five J.
o The SC affirms this finding and agrees with the OSG’s recommendations – Reimbursement for Maldigan (only).
On the P20.00 Car Wash Payments

o LA: “…as a matter of practice in the taxi industry, after a tour of duty, it is incumbent upon the driver to restore the unit
he has driven to the same clean condition when he took it out, …(respondents) were made to shoulder the expenses for
washing, the amount doled out was paid directly to the person who washed the unit, thus we find nothing illegal in this
practice
o SC: Private respondents are not entitled to the P20.00 refund. There was nothing to prevent them from cleaning the car
themselves and save their P20.00. Citing the OSG’s recommendation; car washing after a tour of duty is a practice in
the taxi industry, and is, in fact, dictated by fair play.

DECISION.
Petition granted in so far as the P15.00 must be reimbursed to respondents. NLRC decisions modified.

9 Article 114. Deposits for loss or damage.— No employer shall require his worker to make deposits from which deductions shall be made for the reimbursement

of loss of or damage to tools, materials, or equipment supplied by the employer, except when the employer is engaged in such trades, occupations or business
where the practice of making deposits is a recognized one, or is necessary or desirable as determined by the Secretary of Labor in appropriate rules and
regulations.

67
 DENTECH MANUFACTURING CORP v NLRC
GR No. 81477/ APR 19, 1989/ GANCAYCO, J./LABOR – Wage Prohibitions: Requirement to Make Deposits for Loss
or Damage/

NATURE Petition for Certiorari

PETITIONERS Dentech Manufacturing Corp and Jacinto Ledesma (Manager)
RESPONDENTS NLR, CCLU, Benjamin Marbella, Armando Torno, Juanito Tajan, et al.

SUMMARY. The workers filed a complaint against DenTech for illegal dismissal. They also the refund
of the cash bond they filed with the company at the start of their employment, as well as their separation
pay. DenTech did not want to refund the bond inasmuch as the proceeds of the same had already been
given to a certain carinderia to pay for the outstanding accounts of the private respondents therein. Court
held that the cash bond should be refunded.

DOCTRINE. The cash band should be refunded since Art 114 of the Labor Code prohibits an employer
from requiting his employees to file a cash bond or to make deposits

FACTS.

 Petitioner Dentech is a domestic engaged in the manufacture and sale of dental equipment and supplies.
 The respondents used to be the employees of the petitioner firm, working therein as welders, upholsterers and
painters. They were already employed with the company when it was still a sole proprietorship.
 They were dismissed from the firm in 1985 which led to their filing a complaint with NLRC against the petitioners
for, among others, illegal dismissal and violation of PD. 851. .
 At first, they only sought the payment of their 13th month pay under PD 851 as well as their separation pay, and
the refund of the cash bond they filed with the company at the start of their employment.
 Later on, they sought their reinstatement as well as the payment of their 13th month pay and service incentive leave
pay, and separation pay in the event that they are not reinstated. It is alleged same that they were dismissed from
the firm for pursuing union activities.
 On the other hand, the petitioners alleged that the private respondents were not dismissed from the firm on account
of their union activities. They maintained that the private respondents abandoned their work without informing the
company about their reasons for doing so and that, accordingly, the private respondents are not entitled to service
incentive leave pay and separation pay.
 As to the cash bond, the position of the petitioners that the refund of the cash bond filed by the private respondents
is improper inasmuch as the proceeds of the same had already been given to a certain carinderia to pay for the
outstanding accounts of the private respondents therein
 The petitioners also argued that the private respondents are not entitled to a 13th month pay. They maintained that
each of the private respondents receive a total monthly compensation of more that Pl,000.00 and that under Section
1 of PD 851, such employees are not entitled to receive a 13th month pay. The petitioners likewise alleged that the
company is in bad financial shape and that pursuant to Section 3 of the Decree, the firm is exempted from complying
with the provisions of the Decree.
 LA and NLRC sided with the workers, hence this appeal.

ISSUES & RATIO.

1. WON the cash bond should be refunded – YES (main issue)

68
The cash band should be refunded since Art 114 of the Labor Code prohibits an employer from requiting his
employees to file a cash bond or to make deposits, subject to certain exceptions:

Art. 114. Deposits for loss or damage.- No employer shall require his worker to make deposits from which
deductions shall be made for the reimbursement of loss of or damage to tools, materials, or equipment
supplied by the employer, except when the employer is engaged in such trades, occupations or business
where the practice of making deductions or requiring deposits is a recognized one, or is necessary or
desirable as determined by the Secretary of Labor in appropriate rules and regulations.
The petitioners have not satisfactorily disputed the applicability of this provision of the Labor Code to the case at bar.
Considering further that the petitioners failed to show that the company is authorized by law to require the private
respondents to file the cash bond in question, the refund thereof is in order.
The allegation of the petitioners to the effect that the proceeds of the cash bond had already been given to a
certain carinderia to pay for the accounts of the private respondents therein does not merit serious consideration. As
correctly observed by the Solicitor General, no evidence or receipt has been shown to prove such payment.

2. WON the employees are entitled to separation pay – YES

The Pl,000.00 salary ceiling provided in Presidential Decree No. 851 pertains to basic salary, not total monthly
compensation. The petitioners admit that the private respondents work only five days a week and that they each receive a
basic daily wage of P40.00 only. A simple computation of the basic daily wage multiplied by the number of working days
in a month results in an amount of less than Pl,000.00. Thus, there is no basis for the contention that the company is exempted
from the provision of Presidential Decree No. 851 which mandated the payment of 13th month compensation to employees
receiving less than P1,000.00 a month.

DECISION.
Decision of lower court reversed.

69
 SHS PERFORATED MATERIALS v. DIAZ
G.R. No. 185814 / OCT 13, 2010 / MENDOZA, J./LABOR-Wage Prohibitions; Withholding of Wages /

NATURE Petition for Certiorari, etc.

PETITIONERS SHS Perforated Materials, Inc., Winfried Hartmannshenn
Hinrich Johann Schumacher
RESPONDENTS Manuel F. Diaz

SUMMARY. Respondent is a Business Dev’t Manager for petitioner company. The president of the
company is a German national who was often abroad. There was no close supervision by the private
petitioners on respondent’s work. After dissatisfaction with respondent’s performance, the company
president asked respondent to resign and instructed the withholding of the latter’s salary. Respondent then
resigned. LA ruled that the respondent was constructively dismissed. NLRC said that the withholding of
wages was a valid exercise of management prerogative. CA reversed NLRC. SC upheld CA’s decision.
Withholding of wages invalid. Respondent was constructively dismissed.
DOCTRINE. Although management prerogative refers to “the right to regulate all aspects of
employment,” it cannot be understood to include the right to temporarily withhold salary/wages without
the consent of the employee. LC 116: It shall be unlawful for any person, directly or indirectly, to withhold
any amount from the wages of a worker or induce him to give up any part of his wages by force, stealth,
intimidation, threat or by any other means whatsoever without the worker’s consent.

FACTS.

 Petitioner SHS Perforated Materials, Inc. is a start-up corporation organized and existing under the laws of the Republic
of the Philippines and registered with the Philippine Economic Zone Authority (PEZA).
 Winfried Hartmannshenn, a German national, is its president, in which capacity he determines the administration and
direction of the day-to-day business affairs of SHS.
 Hinrich Johann Schumacher, also a German national, is the treasurer and one of the board directors. As such, he is
authorized to pay all bills, payrolls, and other just debts of SHS of whatever nature upon maturity. Schumacher is also the
EVP of the European Chamber of Commerce of the Philippines (ECCP) which is a separate entity from SHS. Both entities
have an arrangement where ECCP handles the payroll requirements of SHS to simplify business operations and minimize
operational expenses.
 Thus, the wages of SHS employees are paid out by ECCP, through its Accounting Services Department headed by Juliet
Taguiang.
 Manuel F. Diaz (respondent) was hired by petitioner SHS as Manager for Business Development on probationary status
from July 18, 2005 to January 18, 2006, with a monthly salary of P100,000.00.
 He was also instructed by Hartmannshenn to report to the SHS office and plant at least 2 days every work week to observe
technical processes involved in the manufacturing of perforated materials, and to learn about the products of the company.
 During respondent’s employment, Hartmannshenn was often abroad and, because of business exigencies, his instructions
to respondent were either sent by e-mail or relayed through telephone or mobile phone. When he would be in the
Philippines, he and the respondent held meetings. There was no close supervision on Diaz’ work.
 During meetings with the respondent, Hartmannshenn expressed his dissatisfaction over respondent’s poor performance.
In numerous e-mails, respondent acknowledged his poor performance and offered to resign from the company.
 Respondent, however, denied sending such messages but admitted that he had reported to the SHS office and plant only
eight times from July 18, 2005 to Nov 30, 2005.
 On Nov 16, 2005, in preparation for his trip to the Philippines, Hartmannshenn tried to call respondent on his mobile
phone, but the latter failed to answer. On Nov 18, 2005, Hartmannshenn arrived in the Philippines from Germany, and on

70
 Nov 22 and 24, 2005, notified respondent of his arrival through electronic mail messages and advised him to get in touch
with him. Respondent claimed that he never received the messages.
 On Nov 29, 2005, Hartmannshenn instructed Taguiang not to release respondent’s salary. Later that afternoon,
respondent called and inquired about his salary. Taguiang informed him that it was being withheld and that he had to
immediately communicate with Hartmannshenn. Again, respondent denied having received such directive.
 Respondent served on SHS a demand letter and a resignation letter  “It is precisely because of illegal and unfair labor
practices such as these (withholding of wages) that I offer my resignation…
 Petitioners averred that respondent was unable to give a proper explanation for his behavior. Hartmannshenn then accepted
respondent’s resignation and informed him that his salary would be released upon explanation of his failure to report to
work, and proof that he did, in fact, work for the period in question. He demanded that respondent surrender all company
property and information in his possession.
 Respondent agreed to these “exit” conditions through e-mail. Instead of complying with the said conditions, however,
respondent sent another electronic mail message to Hartmannshenn and Schumacher on Dec 1, 2005, appealing for the
release of his salary.
 Respondent claimed that the only thing in his possession was a sample panels folder which he had already returned and
which was duly received by Taguiang on Nov 30, 2005.
 Respondent filed Complaint against petitioners for illegal dismissal, non-payment of salaries/wages and 13th month pay
with prayer for reinstatement and full backwages.
 LA: found that respondent was constructively dismissed because the withholding of his salary was contrary to Article 116
of the Labor Code as it was not one of the exceptions for allowable wage deduction by the employer under Article 113 of
the Labor Code.
 NLRC: reversed LA and explained that the withholding of respondent’s salary was a valid exercise of management
prerogative. The act was deemed justified as it was reasonable to demand an explanation for failure to report to work and
to account for his work accomplishments.
 CA: reversed NLRC and held that withholding respondent’s salary was not a valid exercise of management prerogative
as there is no such thing as a management prerogative to withhold wages temporarily. Petitioners’ averments of
respondent’s failure to report to work were found to be unsubstantiated allegations not corroborated by any other evidence,
insufficient to justify said withholding and lacking in probative value.

ISSUES & RATIO.

1. WON temporary withholding of respondent’s salary/wages by petitioners was a valid exercise of management
prerogative. – NO.

Although management prerogative refers to “the right to regulate all aspects of employment,” it cannot be
understood to include the right to temporarily withhold salary/wages without the consent of the employee. To
sanction such an interpretation would be contrary to Article 116 of the Labor Code10. Any withholding of an employee’s
wages by an employer may only be allowed in the form of wage deductions under the circumstances provided in Article
113 of the Labor Code11.

10 Art. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person, directly or indirectly, to withhold any amount from the wages of a
worker or induce him to give up any part of his wages by force, stealth, intimidation, threat or by any other means whatsoever without the worker’s consent.
11 Art. 113. Wage deduction. No employer, in his own behalf or in behalf of any person, shall make any deduction from the wages of his employees, except:

1. In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the employer for the amount paid by
him as premium on the insurance;
2. For union dues, in cases where the right of the worker or his union to check-off has been recognized by the employer or authorized in writing by the
individual worker concerned; and
3. In cases where the employer is authorized by law or regulations issued by the Secretary of Labor and Employment.
71
 Also, it was not established that respondent did not work during the period in question. Petitioners argue that Article
116 of the Labor Code only applies if it is established that an employee is entitled to his salary/wages and, hence, does
not apply in cases where there is an issue or uncertainty as to whether an employee has worked and is entitled to his
salary/wages, in consonance with the principle of “a fair day’s wage for a fair day’s work.” Petitioners contend that in
this case there was precisely an issue as to whether respondent was entitled to his salary because he failed to report to
work and to account for his whereabouts and work accomplishments during the period in question.

The Court finds petitioners’ evidence insufficient to prove that respondent did not work from November 16 to November
30, 2005. As can be gleaned from respondent’s Contract of Probationary Employment and the exchanges of electronic
mail messages between Hartmannshenn and respondent, the latter’s duties as manager for business development entailed
cultivating business ties, connections, and clients in order to make sales. Such duties called for meetings with prospective
clients outside the office rather than reporting for work on a regular schedule. In other words, the nature of respondent’s
job did not allow close supervision and monitoring by petitioners. Neither was there any prescribed daily monitoring
procedure established by petitioners to ensure that respondent was doing his job.

2. WON respondent voluntarily resigned. – NO.

Respondent was constructively dismissed and, therefore, illegally dismissed.

Respondent cited petitioners’ “illegal and unfair labor practice” as his cause for resignation. As correctly noted by the
CA, respondent lost no time in submitting his resignation letter and eventually filing a complaint for illegal dismissal just
a few days after his salary was withheld. These circumstances are inconsistent with voluntary resignation and bolster the
finding of constructive dismissal.

DECISION.
CA decision affirmed with modification – no 13th month pay (provided in contract that such is included in salary); Payment
of separation pay instead of reinstatement; No bad faith on the part of corporate officers, therefore, they are not solidarily
liable with SHS.

72
 SOUTH MOTORISTS ENTERPRISES v. TOSOC
G.R. No. 87449/ January 23, 1990 / MELENCIO-HERRERA, J./LABOR-KEEPING OF EMPLOYEE’S RECORDS IN
A PLACE OTHER THAN THE WORKPLACE/

NATURE Petition for Certiorari

PETITIONERS South Motorists Enterprises
RESPONDENTS Roque Tosoc, etal., and Hon. Sec. of Labor and Employment

SUMMARY. Complaints for non-payment of emergency cost of living allowance were filed by 46
workers against South Motorists before the Naga City District Office. South Motorists was unable to
present its employment records, alleging that they had been sent to the main office in Manila. They were
never presented. The claims were awarded based on an Inspection Report submitted by the Labor
Regulations Officers. The Court ruled that the ruling based on the Inspection Report is valid since South
Motorists failed to present employment records.
DOCTRINE. All employment records of the employees of the employer shall be kept and maintained in
or about the premises of the workplace. The premises of a workplace shall be understood to mean the
main or branch office or establishment, if any, depending, upon where the employees are regularly
assigned. The keeping of the employee's records in another place is prohibited.

FACTS.

 In January of 1983, complaints for non-payment of emergency cost of living allowances were filed by 46 workers,
Tosoc, et al., against SOUTH MOTORISTS before the Naga City District Office of Regional Office No. 5 of the then
Ministry of Labor.
 The Labor Regulation Officers were ordered by the District Labor Officer to conduct an inspection and verification of
SOUTH MOTORISTS' employment records. However, SOUTH MOTORISTS was unable to present its employment
records on the allegation that they had been sent to the main office in Manila.
 The case was then set for conference on 25 January 1983 but had to be reset 3 times: 1st to enable SOUTH MOTORISTS
to present all its employment records; 2nd because of its lawyer's tight schedule; and 3rd because of the alleged
voluminous records it had to locate and its desire to submit a memorandum regarding complainants' claims. However, on
2 March 1983, SOUTH MOTORISTS once again requested an extension of 30 days on the ground that the documents
were still being prepared and collated and that a formal manifestation or motion would follow. Nothing did.
 On 7 March 1983, the assigned Labor Regulation Officers submitted an Inspection Report on the basis of which an
Order dated 14 April 1983 was issued by Labor Officer Domingo Reyes directing SOUTH MOTORISTS to pay Tosoc,
et al., the total amount of P184,689.12 representing the latter's corresponding emergency cost of living
allowances.SOUTH MOTORISTS moved for reconsideration of the Order, which was denied.
 The Secretary of Labor and Employment affirmed the appealed Order. SOUTH MOTORISTS moved for
reconsideration but this proved unsuccessful. A Second Motion for Reconsideration was filed, which was likewise denied
in an Order dated 7 March 1989.
 Hence, this certiorari Petition questioning the monetary award by the Regional Director and, in general, his jurisdiction
to validly award money claims.
 SOUTH MOTORISTS maintains that said officials are bereft of authority to act on such claims as this falls under the
original and exclusive jurisdiction of Labor Arbiters. Respondents maintain otherwise.

ISSUES & RATIO.

1. WON the Regional Director has jurisdiction to try this case on money claims. –YES
 The Regional Director has jurisdiction only over those claims not exceeding P5,000.
73
  In accordance with Articles 12912 and 217 of the Labor Code, those awards in excess of P5,000.00, should be
ventilated in a proceeding before the Labor Arbiters. The other awards, or those not in excess of P5,000.00 and
having no issue of reinstatement set forth, should be affirmed.

2. WON the Secretary of Labor and Employment erred in affirming the award based on a mere Inspection
Report. – NO.
 SOUTH MOTORISTS failed to present employment records giving as an excuse that they were sent to the main
office in Manila, in violation of Section 11 of Rule X, Book II of the Omnibus Rules Implementing the Labor Code
providing that:
o All employment records of the employees of the employer shall be kept and maintained in or about the
premises of the workplace. The premises of a workplace shall be understood to mean the main or branch
office or establishment, if any, depending, upon where the employees are regularly assigned. The keeping
of the employee's records in another place is prohibited.
 SOUTH MOTORISTS also caused the resettings of all subsequent hearings. Its repeated failure to attend the
hearings, and to submit any motion as manifested may be construed as a waiver of its right to adduce evidence to
controvert the worker's claims.

DECISION.
The award of P 184,689.12 is hereby MODIFIED. The individual claims of MacarioGavino, Vito T. Euste Jose, Brequillo,
Domingo Cis, Alberto Agreda, AmancioGalona, RoqueTosoc, Hilarion P. Guinoo, Felipe Cea, Roberto Guinoo, and Ernesto
Osoc, each of which exceeds P5,000.00, are hereby remanded to the Labor Arbiter for proper disposition. All other
individual awards not in excess of P5,000.00 are hereby AFFIRMED. Costs against petitioner.

12
Art. 129. Recovery of wages, simple money claims and other benefits.— Upon complaint of any interested party, the Regional Director of the Department of Labor and Employment or
any of the duly authorized hearing officers of the Department is empowered, through summary proceeding and after due notice, to hear and decide cases involving the recovery of wages
and other monetary claims and benefits, including legal interest, owing to an employee or person employed in domestic or household service and househelper under this Code, arising
from employer-employee relations: Provided, That such complaint does not include a claim for reinstatement: Provided, further, That the aggregate claim of each employee or
househelper does not exceed five thousand pesos (P5,000.00). . . .

Art. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and
decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving
all workers, whether agricultural or non-agricultural:

Xxxxxxxxx

(6) Except claims for employees compensation, social security, medicare and maternity benefits, all other claims arising from employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding five thousand pesos (P5,000), whether or not accompanied with a claim for reinstatement.

74
 GAA v CA
G.R. No.L 44169/ December 3, 1985 / PATAJO, J./WAGE PROHIBITIONS – GARNISHMENT / EXECUTION
NATURE Petition for review on Certiorari
PETITIONERS Rosario Gaa
RESPONDENTS Court of Appeals, Europhil Industry, Cesar Roxas (Deuty Sheriff of Manila)

SUMMARY. A writ of garnishment upon the salaries, commission and remuneration of Rosario Gaa
was served. Gaa contends that these are exempted from garnishment by virtue of Art 1708 NCC. SC
held that she is not a laborer under the common and customarily used sense. As such, her salaries,
commission and remuneration are not exempted.
DOCTRINE. Regarding exemption from garnishment,“laborer” under Art 1708 NCC refers to those
whose work depends on mere physical power to perform ordinary manual labor and not one engaged in
services consisting mainly of work requiring mental skill or business capacity and involving the exercise
of intellectual faculties. Hence, an employee which is responsibly placed is not covered by the
exemption.

FACTS.

 Europhil was a former tenant of the Trinity Building wherein Rosario Gaa was the building administrator.
 Europhil filed a civil caseagainst Gaa for having perpetrated certain acts that it considered as trespass upon its rights (i.e.
cutting of its electricity, and removing its name from the building directory and gate passes of its officials and employees)
 Court rendered judgment in favor of Europhil and ordered petitioner to pay 10k as actual damages, 5k as moral damages
and 5k as exemplary damages. When the decision became final and executory, a writ of garnishment was issued.
 The deputy sheriff of Manila issued a writ of garnishment upon El Grande Hotel garnishing her salary, commission and
remuneration.
 Petitioner opposed this arguing that her salaries, commission and remuneration are exempted from execution under Art.
1708 NCC13
 Lower Court as well as the CA dismissed Gaa’s petition.

ISSUES & RATIO.

1. WON Gaa’s salaries, commission and remuneration are exempted from garnishment. – NO
“Laborer” under Art 1708 NCC refers to those whose work depends on mere physical power to perform ordinary manual
labor and not one engaged in services consisting mainly of work requiring mental skill or business capacity and involving
the exercise of intellectual faculties

 Gaa is not an ordinary rank and fule laborer but a “responsibly place employee”14
o She is responsible for planning, directing, controlling, and coordinating the activities of all housekeeping
personnel.
o Considering he importance of her function in El Grande Hotelit is undeniable that she is occupying a
position equivalent to that of managerial or supervisory.
 In its broadest sense, the word "laborer" includes everyone who performs any kind of mental or physical labor, but
as commonly and customarily used, it only applies to one engaged in some form of manual or physical labor.

13 ART. 1708. The laborer's wage shall not be subject to execution or attachment, except for debts incurred for food, shelter, clothing and medical attendance.
14 Yan talaga nakalagay sa lawphil. “Responsibly place”
75
 o That is the sense in which the courts generally apply the term in exemption acts, since persons of that class
usually look to the reward of a day's labor for immediate or present support and so are more in need of the
exemption than the others.
 According to various cases cited by the SC,“LABORER”is
o One who performs menial or manual services and usually looks to the reward of a day's labor or services
for immediate or present support.
o A term ordinarily employed to denote one who subsists by physical toil in contradistinction to those who
subsists by professional skill.
o Those persons who earn a livelihood by their own manual labor.
 Article 1708 used the word "wages" and not "salary" in relation to "laborer" when it declared what are to be
exempted from attachment and execution.
o "Wages" as distinguished from "salary", applies to the compensation for manual labor, skilled or unskilled,
paid at stated times, and measured by the day, week, month, or season. It indicates considerable pay for a
lower and less responsible character of employment
o "Salary" denotes a higher degree of employment, or a superior grade of services, and implies a position of
office. It is suggestive of a larger and more important service.
o Salary is understood to relate to position of office, to be the compensation given for official or other service,
as distinguished from 'wages', the compensation for labor.
 SC doesn’t think that the legislature intended the exemption in Article 1708 o to operate in favor of any but those
who are laboring men or women in the sense that their work is manual. Persons belonging to this class usually look
to the reward of a day's labor for immediate or present support, and such persons are more in need of the exemption
than any others.
DECISION.
Petition DISMISSED. CA’s ruling is AFFIRMED.

76
 RP v. PERALTA
G.R. No. 56568 / MAY 20, 1987 / FELICIANO, J./ LABOR – WORK PREFERENCE IN THE EVENT OF
BANKRUPTCY /

NATURE Petition for certiorari to review CFI decision

PETITIONERS Republic of the Philippines
RESPONDENTS Peralta, CFI judge, Quality Tobacco Corporation

SUMMARY. In the voluntary insolvency proceedings of Quality Tobacco, its employees and the Bureau
of Internal Revenue filed claims for separation pay, and tobacco inspection fees and customs duties and
taxes, respectively. The Court held that following provisions in the Civil Code and the Labor Code, the
order of preference of satisfaction of these claims depends on whether or not Quality's processed tobacco
products remain in its inventories and within the custody of the Bureau of Customs.
DOCTRINE. Tax liens on specific movable and immovable property take precedence above all other
claims. However, depending on the circumstances, claims on unpaid wage may take precedence over
liens to the government [see last paragraph, issue 2].

FACTS.

 In the voluntary insolvency proceedings commenced in May 1977 by private respondent Quality Tobacco Corporation, a
claim for P2,806,729.92 by the USTC Association of Employees and workers Union-PTGWO USTC as separation pay
for their members was filed.
 The Bureau of Internal Revenue also filed claims for tobacco inspection fees and customs duties and taxes.
 The trial court held that the claims of the unions for separation pay of their respective members were to be preferred over
the claims of the Bureau of Customs and the Bureau of Internal Revenue. It relied on Art. 110 of the Labor Code:

Article 110. Worker preference in case of bankruptcy — In the event of bankruptcy or liquidation of an employer's
business, his workers shall enjoy first preference as regards wages due them for services rendered during the
period prior to the bankruptcy or liquidation, any provision of law to the contrary notwithstanding. Union paid
wages shall be paid in full before other creditors may establish any claim to a share in the assets of the employer.

 The SolGen argues that Art. 110 is inapplicable because separation pay is not included in the term “wages.” It contends
that separation pay is given to a laborer for a separation from employment computed on the basis of the number of years
the laborer was employed by the employer; it is a form of penalty or damage against the employer in favor of the employee
for the latter's dismissal or separation from service.

ISSUES & RATIO.

 WON separation pay is part of “wages” – YES

Liability for separation pay might indeed have the effect of a penalty, so far as the employer is concerned. But for the
employee, separation pay is additional remuneration to which they become entitled because, having previously rendered
services, they are separated from the employer's services.

 WON the claims for separation pay are to be preferred over the claims for tobacco inspection fees and customs
duties/taxes – SEE LAST PARAGRAPH

77
The Civil Code
The Civil Code provides that tax liens due on specific movable or immovable priority shall be prioritized before all other
liens are to be satisfied, as per Articles 2241, 2242, 2243. Following that, non-tax liens or special preferred credits which
subsist in respect of specific movable or immovable property are to be treated on an equal basis and to be satisfied
concurrently and proportionately.

Credits which are specially preferred because they constitute liens (tax or non-tax) in turn, take precedence over ordinary
preferred credits (Art. 2244). Under Article 2244, taxes due to the national government, taxes and assessments due to any
province, and taxes and assessments due to any city or municipality are ninth, tenth, and eleventh in priority, respectively.

On the Bureau of Customs – specially preferred credit

Under Section 1204 of the Tariff and Customs Code, the liability of an importer for duties, taxes and fees and other charges
attaching on importation constitute a personal debt due from the importer to the government which can be discharged only
by payment in full of all duties, taxes, fees and other charges legally accruing. It also constitutes a lien upon the articles
imported which may be enforced while such articles are in the custody or subject to the control of the government.

Clearly, the claim of the Bureau of Customs for unpaid customs duties and taxes enjoys the status of a specially preferred
credit under Article 2241, No. 1.

On the Bureau of Internal Revenue – specially preferred credit

Under Section 315 of the National Internal Revenue Code, an unpaid "internal revenue tax," together with related interest,
penalties and costs, constitutes a lien in favor of the Government from the time an assessment therefor is made and until
paid, "upon all property and rights to property belonging to the taxpayer."

Tobacco inspection fees are specifically mentioned as one of the miscellaneous taxes imposed under the National Internal
Revenue Code. It follows that the claim of the Bureau of Internal Revenue for unpaid tobacco inspection fees constitutes a
claim for unpaid internal revenue taxes, which then gives rise to a tax lien upon all the properties and assets, movable and
immovable, of the Insolvent as taxpayer. Under the Civil Code provisions aforementioned, this tax claim must be given
preference over any other claim of any other creditor, in respect of any and all properties of the Insolvent.

On the claims for separation pay

Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees for unpaid wages either
upon all of the properties or upon any particular property owned by their employer. But unpaid wages may still be considered
specially preferred credit, to the extent that such claims for unpaid wages are already covered by Article 2241(6): "claims
for laborers' wages, on the goods manufactured or the work done.”

Applying Article 2241(6), the claims of the Unions for separation pay of their members constitute liens attaching to the
processed leaf tobacco, cigars and cigarettes and other products produced or manufactured by Quality Tobacco.

Article 110 of the LC in relation to the CC

Art. 110 did not sweep away the overriding preference accorded under the scheme of the Civil Code to tax claims of the
government or any subdivision thereof which constitute a lien upon properties.

But the use of the phrase "first preference" in Article 110 indicates that what Article 110 intended to modify is the order of
preference found in Article 2244. Article 2244(2) establishes second priority for claims for wages for services rendered by
employees or laborers of the Insolvent "for one year preceding the commencement of the proceedings in insolvency." Article
110 of the Labor Code establishes "first preference" for services rendered "during the period prior to the bankruptcy or

78
liquidation,” a period not limited to the year immediately prior to the bankruptcy or liquidation. Therefore, Art. 110 removes
the one year limitation, and moves up claims for unpaid wages to first preference (Art. 2244).

Order to the Trial Court

The trial court should inventory the properties of the Insolvent so as to determine specifically: (a) whether the assets of the
Insolvent before the trial court includes stocks of processed or manufactured tobacco products; and (b) whether the Bureau
of Customs still has in its custody or control articles imported by the Insolvent and subject to the lien of the government for
unpaid customs duties and taxes.

(a) If Quality Tobacco has inventories of manufactured or processed tobacco products, these inventories will be
subjected to the claims for tobacco inspection fees first, and then to the claim of unpaid wages.
(b) If the Bureau of Customs doesn't have any of Quality Tobacco's importations within its custody or control,
customs duties and taxes remaining unpaid would have only ninth priority, and unpaid wages will be considered
before them.

DECISION.
Petition granted. Case remanded to trial court.

DBP v NLRC and Leonor Ang

GR No. 108031, March 1, 1995

Doctrine: declaration of bankruptcy or judicial liquidation is required before the worker’s preference may be invoked

Facts:
 March 21, 1977: Leonor hired as Executive Secretary with Tropical Philippines Wood Industries, Inc. (TPWII) In
1982, promoted to Personnel Officer.
 September 1983: DBP, as mortgagee of TPWII, foreclosed its plant facilities and equipment, but TPWII still
continued business operations.
 January 1986: DBP took possession of the properties and then TPWII ceased operations. Leonor was verbally
terminated on April 15, 1986.
 December 14, 1987: Leonor filed complaint for separation pay, 13th month pay, vacation and sick leave pay,
salaries and allowance.
 LA: TPWII primarily liable for separation pay, VL and SL pay only, because her claims for unpaid wages and
13th month pay were paid after complaint was filed. GM was absolved of any liability. But DBP held subsidiarily
liable in the event the company failed to satisfy the judgment.
o PNB v Delta Motor Workers Union: the right of an employee to be paid benefits due him from the
properties of his employer is superior to the right of the latter's mortgage
 NLRC affirmed LA

Issue: WoN NLRC committed GAD in holding that LC 110, which refers to worker preference in case of bankruptcy or
liquidation of an employer's business is applicable to the present case notwithstanding the absence of any formal
declaration of bankruptcy or judicial liquidation of TPWII

Held: Yes, NLRC committed GAD. LC 110 should not be treated apart from other laws but applied in conjunction with
the pertinent provisions of the NCC and the Insolvency Law so piece-meal distribution of the assets of the debtor is
avoided.

79
DBP v Santos interpreted Sec. 10, Rule VIII, Book III of the Revised Rules and Regulations:
 A declaration of bankruptcy or a judicial liquidation must be present before the worker's preference may be
enforced. Thus, LC 110 and its implementing rule cannot be invoked by the respondents in this case absent a
formal declaration of bankruptcy or a liquidation order

RA 6715 effective 21 March 1989 amended Art. 110 and the IRR:
 The amendment expanded the concept of "worker preference" to cover not only unpaid wages but also other
monetary claims to which even claims of the Government must be deemed subordinate.

DBP v Santos: worker preference will find application when, in proceedings such as insolvency, such unpaid wages shall
be paid in full before the "claims of the Government and other creditors" may be paid. But, for an orderly settlement of a
debtor's assets, all creditors must be convened, their claims ascertained and inventoried, and thereafter the preferences
determined. In the course of judicial proceedings which have for their object the subjection of the property of the debtor to
the payment of his debts or other lawful obligations. Thereby, an orderly determination of preference of creditors' claims
is assured (Philippine Savings Bank vs. Lantin) the adjudication made will be binding on all parties-in-interest since those
proceedings are proceedings in rem; and the legal scheme of classification, concurrence and preference of credits in the
Civil Code, the Insolvency Law, and the Labor Code is preserved in harmony

A preference applies only to claims which do not attach to specific properties. A lien creates a charge on a particular
property. The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on the
property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in
application. It is a method adopted to determine and specify the order in which credits should be paid in the final
distribution of the proceeds of the insolvent's assets. It is a right to a first preference in the discharge of the funds of the
judgment debtor . . . In the words of Republic v. Peralta, LC 110 does not purport to create a lien in favor of workers or
employees for unpaid wages either upon all of the properties or upon any particular property owned by their employer.

In the present case, there is as yet no declaration of bankruptcy nor judicial liquidation of TPWII. Hence, it would be
premature to enforce the worker's preference.

WHEREFORE, the petition is GRANTED. The decision of public respondent NLRC affirming the decision of the Labor
Arbiter insofar as it held petitioner DBP liable for the monetary claims of private respondent Leonor A. Ang is SET
ASIDE. The TRO we issued on 8 February 1993 enjoining the execution of the decision of public respondent against
petitioner is made PERMANENT.

80
South Cotabato Communicatons v Hon. Patricia Sto Tomas
G.R. No. 217575| June 15, 2016
Velasco, Jr., J.

FACTS: In 2004, the DOLE-Region XII conducted an inspection of the premises of DXCP Radio Station, owned by
petitioner, by virtue of a complaint. It was found out by the DOLE that there were multiple labor standards violations such
as underpayment of wages and of 13th month pay, non-payment of 5 day SIL, of rest day premium, and of holiday pay,
non-remittance of SSS contributions, and some employees are paid on commission basis.
DOLE RDdirected the petitioner to effect restitution or correction of the violations but petitioner did not do so.
DOLE RD conducted a Summary Investigation hearing but petitioners failed to appear twice.
DOLE RD ordered petitioner to pay its employees.
Petitioner appealed to SOLE on the basis of denial of due process and lack of factual basis. It asserted that the
Order of the DOLERD does not state that an EE-ER exists which is necessary to confer jurisdiction to the DOLE. The
SOLE denied the appeal.
Petitioner appealed to the CA which affirmed the SOLE. It moved for reconsideration, reiterating its arguments
and raising another argument, that in a separate case involving the two parties in the NLRC, the NLRC held that no ER-
EE existed between the parties. The CA denied the motion.

ISSUE: WON ER-EE was sufficiently established to give jurisdiction to the DOLE. - NO

RATIO: Under Art 128, the Secretary of Labor, or any of his or her authorized representatives, is granted visitorial and
enforcement powers for the purpose of determining violations of, and enforcing, the Labor Code and any labor law, wage
order, or rules and regulations issued pursuant thereto. Indispensable to the DOLE'S exercise of such power is the
existence of an actual employer-employee relationship between the parties.
The power of the DOLE to determine the existence of an employer-employee relationship between petitioners and
private respondents in order to carry out its mandate under Article 128 has been established beyond cavil in Bombo Radyo
It can be assumed that the DOLE in the exercise of its visitorial and enforcement power
somehow has to make a determination of the existence of an employer- employee relationship.
In the MR to the Bombo Radyo case, the SC further said:
The DOLE must have the power to determine whether or not an employer- employee relationship
exists, and from there to decide whether or not to issue compliance orders in accordance with Art. 128(b) of the Labor
Code

In this case, the Orders of the Regional Director and the Secretary of Labor do not contain clear and distinct
factual basis necessary to establish the jurisdiction of the DOLE and to justify the monetary awards to private respondents.
In its Order, the Regional Director merely noted the discovery of violations of labor standards provisions in the
course of inspection of the DXCP premises. No such categorical determination was made on the existence of an
employer-employee relationship utilizing any of the guidelines set forth. In a word, the Regional Director had presumed,
not demonstrated, the existence of the relationship. Of particular note is the DOLE'S failure to show that petitioners, thus,
exercised control over private respondents' conduct in the workplace.
The Secretary of Labor adverts to private respondents' allegation in their Reply to justify their status as employees
of petitioners. The proffered justification falls below the quantum of proof necessary to establish such fact as allegations
can easily be concocted and manufactured. Private respondents' allegations are inadequate to support a conclusion absent
other concrete proof that would support or corroborate the same. Mere allegation, without more, is not evidence and is not
equivalent to proof.

81
Superior Packaging Corp. vs Arnel Balagsay et al.
GR 178909 ; 10 October 2012 ; J. Reyes
Note: Case in italics

Facts: P Superior Packaging Corp. (SPC) engaged the services of Lancer Staffing and Services Network, Inc. (Lancer) to
provide reliever services to its business, which involve the manufacture and sale of commercial and industrial corrugated
boxes. According to petitioner, the respondents were engaged for four (4) months from February to June 1998 and their
tasks included loading, unloading and segregation of corrugated boxes.

Rs filed underpayment of wages case and non-payment of OT pay, premium pay for worked rest days, etc. before the
DOLE. This prompted the DOLE to conduct an inspection of P’s premises, pursuant to its visitorial and enforcement
powers. DOLE found several violations, including, among others, failure of P to present a payroll and DTR of the
employees and non-submission of annual reports. Hence, DOLE issued a Compliance Order vs P, adopting Rs’ reports re
underpayment, ordering P to pay Rs 840k.

P raised the defense of no ee-er rel. between P and R, since Lancer is the real employer of Rs. DOLE denied P’s MR.
DOLE stated that even assuming that P is not the direct employer, P can be held liable to pay wages as an indirect
employer and pay said wages to the extent of work performed by R for P’s business.

P raised the issue before the CA, raising for the first time the issue of DOLE’s authority in determining the presence of ee-
er relationship between P and R. according to P, the DOLE does not have the power to do this, since a finding of ee-er rel.
is a question of fact which requires further presentation of evidence, therefore indeterminable by mere ocular and
documentary inspection which is all that DOLE does in its exercise of its visitorial and enforcement powers.

CA affirmed DOLE’s findings. Issue now before SC.

Issue: WON the DOLE may determine presence of ee-er relationship.

Held: Yes, but such finding is only prima facie and is disputable or subject to judicial review
Ratio: Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered to make a
determination as to the existence of an employer-employee relationship in the exercise of its visitorial and enforcement
power, subject to judicial review, not review by the NLRC

The DOLE in the exercise of its visitorial and enforcement power somehow has to make a determination of the existence
of an employer-employee relationship. Such determination, however, is merely preliminary, incidental and collateral to
the DOLEs primary function of enforcing labor standards provisions.

The expanded visitorial and enforcement power of the DOLE granted by RA 7730 would be rendered nugatory if the
alleged employer could, by the simple expedient of disputing the employer-employee relationship, force the referral of the
matter to the NLRC. The Court issued the declaration that at least a prima facie showing of the absence of an employer-
employee relationship be made to oust the DOLE of jurisdiction.

82
 METEORO VS. CREATIVE CREATURES
G.R. No. 171275/ JULY 13, 2009 / NACHURA, J./LABOR-WAGE RECOVERY/JURISDICTION
NATURE Petition for Review on Certiorari
PETITIONERS Victor Meteoro, et al.
RESPONDENTS Creative Creatures Inc.

SUMMARY. Meteoro et al. filed suit against Creative Creatures, alleging that the company was
violating labor standards, and asked the DOLE to investigate the matter under its visitorial and
enforcement powers. Although the DOLE found the company guilty, the CA dismissed the case
against Creative for lack of jurisdiction, and the SC affirmed.
DOCTRINE. The power of the Regional Director to hear and decide the monetary claims of
employees is not absolute. The last sentence of Article 128 (b) of the Labor Code, otherwise known as
the "exception clause," provides an instance when the Regional Director or his representatives may be
divested of jurisdiction over a labor standards case.

FACTS.

 Creative Creatures hired Victor Meteoro and the rest of the petitioners on various dates as artists, carpenters, and
welders, tasked to design, create, assemble, set-up, and dismantle props, and provide sound effects for Creative’s various
TV programs and movies.
 In 1999, Meteoro and the others filed a complaint against Creative for non-payment of labor standards incentives with
the DOLE-NCR. An inspection was conducted.
 Creative claimed that the petitioners were only contractual workers, and as such, no employer-employee relationship
existed. Thus, the DOLE could not have exercised jurisdiction over the case, for it had none.
 It added that the petitioners were free-lance individuals, performing special services with skills and expertise inherently
exclusive to them like actors, actresses, directors, producers, and script writers, such that they were treated as special
types of workers.
 Petitioners, on the other hand, asserted that they were employees because the elements of an employer-employee
relationship existed. Subsequently, petitioners filed a complaint for illegal dismissal against Creative, with prayer for
payment of overtime pay, premium pay for holiday and rest day, holiday pay, service incentive leave pay, 13th month
pay, and attorney’s fees before the NLRC.
 A few months after, DOLE Regional Director Maximo Baluyot Lim issued an order directing Creative to pay petitioners.
On appeal, DOLE Secretary Patricia Sto. Tomas upheld the DOLE Regional Director’s findings. She stated that the
Secretary of Labor or his duly authorized representative is allowed to use his visitorial and enforcement powers to give
effect to labor legislation, regardless of the amount involved.
 On appeal, the CA dismissed the case against Creative for lack of jurisdiction. Hence this petition for review on
certiorari.

ISSUES & RATIO.

3. WON the DOLE-NCR properly exercised its jurisdiction over the case. – NO.
Creative Creatures contested the findings of the labor inspector during and after the inspection and raised issues
the resolution of which necessitated the examination of evidentiary matters not verifiable in the normal course of
inspection, thus divesting the RD of jurisdiction

The DOLE Secretary and her authorized representatives, such as the DOLE-NCR Director, have jurisdiction to enforce
compliance with labor standards laws under the broad visitorial and enforcement powers conferred by Article 128 of the
Labor Code, and expanded by RA No. 7730.
83
But this notwithstanding, the power of the Regional Director to hear and decide money claims is not absolute. The last
sentence of Article 128 (b) of the Labor Code, otherwise known as the “exception clause,” provides an instance when the
Regional Director or his representatives may be divested of jurisdiction over a labor standards case. Under prevailing
jurisprudence, the so-called “exception clause” has the following elements, all of which must concur:
(a)That the employer contests the findings of the labor regulations officer and raises issues thereon;
(b) That in order to resolve such issues, there is a need to examine evidentiary matters; and
(c) That such matters are not verifiable in the normal course of inspection.

In the case at bar, whether or not petitioners were independent contractors/project employees/free lance workers is a question
of fact that necessitates the examination of evidentiary matters not verifiable in the normal course of inspection. Indeed, the
contracts of independent services, as well as the check vouchers, were kept and maintained in or about the premises of the
workplace and were, therefore, verifiable in the course of inspection. However, respondent likewise claimed that petitioners
were not precluded from working outside the service contracts they had entered into with it (respondent); and that there
were instances when petitioners abandoned their service contracts with the respondent, because they had to work on another
project with a different company. Undoubtedly, the resolution of these issues requires the examination of evidentiary matters
not verifiable in the normal course of inspection. Verily, the Regional Director and the Secretary of Labor are divested of
jurisdiction to decide the case.

We would like to emphasize that "to contest" means to raise questions as to the amounts complained of or the absence of
violation of labor standards laws; or, as in the instant case, issues as to the complainants’ right to labor standards benefits.
To be sure, raising lack of jurisdiction alone is not the "contest" contemplated by the exception clause. It is necessary that
the employer contest the findings of the labor regulations officer during the hearing or after receipt of the notice of inspection
results. More importantly, the key requirement for the Regional Director and the DOLE Secretary to be divested of
jurisdiction is that the evidentiary matters be not verifiable in the course of inspection. Where the evidence presented was
verifiable in the normal course of inspection, even if presented belatedly by the employer, the Regional Director, and later
the DOLE Secretary, may still examine it; and these officers are not divested of jurisdiction to decide the case.

In sum, respondent contested the findings of the labor inspector during and after the inspection and raised issues the
resolution of which necessitated the examination of evidentiary matters not verifiable in the normal course of inspection.
Hence, the Regional Director was divested of jurisdiction and should have endorsed the case to the appropriate Arbitration
Branch of the NLRC. Considering, however, that an illegal dismissal case had been filed by petitioners wherein the existence
or absence of an employer-employee relationship was also raised, the CA correctly ruled that such endorsement was no
longer necessary.

DECISION.
Petition denied for lack of merit. CA Decision affirmed.

NOTES.
Art. 128 (b) of the Labor Code:

The provisions of Article 217 of this Code to the contrary notwithstanding and in cases where the relationship of employer-
employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power
to order and administer, after due notice and hearing, compliance with the labor standards provisions of this Code and other
labor legislation based on the findings of labor regulation officers or industrial safety engineers made in the course of
inspection, and to issue writs of execution to the appropriate authority for the enforcement of their order, except in cases
where the employer contests the findings of the labor regulation officer and raises issues which cannot be resolved
without considering evidentiary matters that are not verifiable in the normal course of inspection.

84
85
NESTOR J. BALLADARES, ROLDAN L. GUANIZO, ARNULFO E. MERTO, GERONIMO G. GOBUYAN,
EDGARDO O. AVILA, and EDUARD F. RAMOS, JR., Petitioners,
vs
PEAK VENTURES CORPORATION/ EL TIGRE SECURITY AND INVESTIGATION AGENCY and YANGCO
MARKET OWNERS ASSOCIATION/LAO TI SIOK BEE, Respondents.

FACTS: Petitioners were employed by respondent Peak Ventures as security guards and were assigned at the premises of
respondent Yangco Market Owners and Administrators Association (YMOAA). They filed a complaint for underpayment
of wages against their employer, Peak Ventures.

Acting on the complaint, DOLE conducted an inspection of Peak Ventures and noted the following: (1) underpayment of
the minimum wage and other auxiliary benefits and (2) pertinent employment records (payrolls, etc) were not available at
the time of inspection. A Notice of Inspection Result was issued and Peak Ventures was instructed to effect restitution
and/or to file its objections within 5 working days.

Respondent failed to contest the findings as required; hence, the parties were summoned for hearing. During the
scheduled hearing, both complainants and Peak Ventures moved to implead YMOAA as party respondent. YMOAA
opposed on the ground that it was not the employer of petitioners.

Peak Ventures then filed a Third-Party Complaint alleging that it was entitled to indemnity or subrogation from YMOAA
in respect to the monetary claims of petitioners, because the underpayment arose from the failure of the YMOAA to pay
the security agency the correct amount due petitioners as prescribed by various Wage Orders.

Regional Director of DOLE ruled in favor of petitioners; YMOAA was jointly and severally liable with Peak Ventures.
Respondent Peak Ventures filed a Motion for Reconsideration which was denied for lack of merit. Secretary of Labor
sustained the ruling.

CA reversed saying that the Regional Director had no jurisdiction to hear and decide the case, because the claims of each
of the petitioners exceeded P5,000.00 (total claims amounted to P1,106,298.07) and the power to adjudicate such claims
belonged to the Labor Arbiter, as provided in Art 129 LC.

ISSUE: Whether or not the DOLE Regional Director has jurisdiction over the case

HELD: Yes it has jurisdiction as per Art 128 LC.

Petitioners’ complaint involved underpayment of wages and other benefits. In order to verify the allegations in the
complaint, DOLE conducted an inspection, which yielded proof of violations of labor standards. By the nature of the
complaint and from the result of the inspection, the authority of the DOLE, under Article 128, came into play regardless
of the monetary value of the claims involved.

The Servando ruling (that LA has jurisdication over money claims >P5K) is no longer tenable in view of the enactment of
R.A. No. 7730, amending Article 128 (b) of the Labor Code. The Secretary of Labor or his duly authorized
representatives is now empowered to hear and decide, in a summary proceeding, any matter involving the recovery of any
amount of wages and other monetary claims arising out of employer-employee relations at the time of the inspection, even
if the amount of the money claim exceeds P5,000.00.

[Exception clause] In order to divest the Regional Director or his representatives of jurisdiction, the following elements
must be present: (a) that the employer contests the findings of the labor regulations officer and raises issues thereon; (b)

86
that in order to resolve such issues, there is a need to examine evidentiary matters; and (c) that such matters are not
verifiable in the normal course of inspection. The rules also provide that the employer shall raise such objections during
the hearing of the case or at any time after receipt of the notice of inspection results.

In this case, the Regional Director validly assumed jurisdiction over the money claims of private respondents even if the
claims exceeded P5,000 because such jurisdiction was exercised in accordance with Article 128(b) of the Labor Code and
the case does not fall under the exception clause.

Accordingly, there is no sufficient reason to warrant the certification of the instant case to the Labor Arbiter and divest the
Regional Director of jurisdiction. Respondent did not contest the findings of the labor regulations officer. Even during
the hearing, respondent never denied that petitioners were not paid correct wages and benefits. This was, in fact, even
admitted by respondent in its petition filed before the CA. In its defense, respondent tried to pass the buck to YMOAA,
which failed to pay the correct wages pursuant to the wage orders.

It bears stressing that this petition clearly involves a labor standards case, and it is in keeping with the law that “the
worker need not litigate to get what legally belongs to him, for the whole enforcement machinery of the DOLE exists to
insure its expeditious delivery to him free of charge.”

WHEREFORE, the petition is GRANTED.

87
 ARCHILLES MANUFACTURING v. NLRC
G.R. No.107225 / JUN 2, 1995 / BELOSILLO, J./LABOR-COVERAGE
NATURE: Petition for Certiorari
PETITIONERS: Archilles Manufacturing, et al
RESPONDENTS: NLRC, et al

SUMMARY. Archilles had a bunkhouse which was used by the workers as their resting place. One time,
a mauling incident involving a relative of a worker occurred in the bunkhouse, resulting to the banning
of bringing of relatives. Private respondents continued to bring their relatives but Archilles found out
and ordered the former to remove their families and file a report regarding their violation of company
policy. The private respondents removed their families but failed to file a report and absented
themselves. Archilles terminated the private respondents for abandonment and violation of company
policy. Private respondents filed a complaint to the LA and decided in their favor but NLRC ruled that
termination was valid but Archilles must still pay the withheld salaries and proportionate 13th month
pay. Hence, this petition.
DOCTRINE. "(a)n employee who has resigned or whose services were terminated at any time before
the payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time
he worked during the year, reckoned from the time he started working during the calendar year up to
the time of his resignation or termination from the service. The payment of the 13th month pay may be
demanded by the employee upon the cessation of employer-employee relationship. This is consistent
with the principle of equity that as the employer can require the employee to clear himself of all
liabilities and property accountability, so can the employee demand the payment of all benefits due him
upon the termination of the relationship."

FACTS.

 Archilles was maintaining a bunkhouse in the work area as a resting place for the workers.
 In 1988, a mauling incident involving a relative of an employee occurred in the bunkhouse. So, Archilles banned its
workers from bringing relatives to the bunkhouse.
 Private respondents continued to bring their relatives.
 On May 1990, Archilles ordered respondents to remove their families from their bunkhouse and to explain their violation
of the company rule.
 Respondents removed their families but failed to file a report and absented themselves from May 14th-18th , 1990.
 On May 18th, Archilles terminated respondents for abandonment and violation of company rule.
 Respondents filed a complaint for illegal dismissal and on July 10, 1990, the Labor Arbiter found the dismissal illegal and
ordered their reinstatement as well as payment for backwages and 13th month pay. Archilles appealed.
 On September 10th, 1991, respondents filed a motion for the issuance of a writ of execution for their immediate
reinstatement to the NLRC but Archilles opposed the motion.
 No action was taken by NLRC so respondents filed a similar motion on July 15th, 1992.
 On August 11th, 1992, NLRC vacated and set aside the decision of the Labor Arbiter and ruled that the termination was
valid but ordered Archilles to pay respondents their withheld salaries and proportionate 13th month pay.
 Archilles filed a motion for reconsideration but was denied by the NLRC.
 Hence, this petition.

ISSUES & RATIO.

4. WON a writ of execution is still necessary to enforce the Labor Arbiter’s order of immediate reinstatement pending
appeal.– YES.
88
 It is necessary. The third paragraph of Art. 223 of the Labor Code provides:
—In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the
reinstatement aspect is concerned, shall be immediately executory, even pending appeal. The employee shall either be
admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option
of the employer, merely reinstated in the payroll. The posting of the bond by the employer shall not stay the execution for
reinstatement provided herein. It must be stressed, however, that although the reinstatement aspect of the decision is
immediately executory, it does not follow that it is self-executory. There must be a writ of execution which may be issued
motu proprio or on motion of an interested party. Article 224 of the Labor Code provides:
Art. 224. Execution of decisions, orders or awards. — (a) The Secretary of Labor and Employment or any Regional
Director, the Commission or any Labor Arbiter, or med-Arbiter or voluntary arbitrator may, motu proprio or on motion
of any interested party, issue a writ of execution on a judgment within five (5) years from the date it becomes final and
executory . . . .
The second paragraph of Section 1, Rule XVIII of the New Rules of Procedure of the NLRC also provides:
The Labor Arbiter, POEA Administrator, or the Regional Director, or his duly authorized hearing officer of origin shall,
motu proprio or upon motion of any interested party, issue a writ of execution on a judgment only within five (5) years
from the date it becomes final and executory . . . . No motion for execution shall be entertained nor a writ be issued unless
the Labor Arbiter is in possession of the records of the case which shall include an entry of judgment.

5. WON dismissal for cause results in the forfeiture of the employee’s rights to 13th month pay. – NO.
Paragraph 6 of the Revised Guidelines on the Implementation of the 13th Month Pay Law (P. D. 851) provides that "(a)n
employee who has resigned or whose services were terminated at any time before the payment of the 13th month
pay is entitled to this monetary benefit in proportion to the length of time he worked during the year, reckoned
from the time he started working during the calendar year up to the time of his resignation or termination from
the service. The payment of the 13th month pay may be demanded by the employee upon the cessation of employer-
employee relationship. This is consistent with the principle of equity that as the employer can require the employee
to clear himself of all liabilities and property accountability, so can the employee demand the payment of all
benefits due him upon the termination of the relationship." Furthermore, Sec. 4 of the original Implementing Rules of
P.D. 851 mandates employers to pay their employees a 13th month pay not later than the 24th of December every year
provided that they have worked for at least one (1) month during a calendar year. In effect, this statutory benefit is
automatically vested in the employee who has at least worked for one month during the calendar year. As correctly stated
by the Solicitor General, such benefit may not be lost or forfeited even in the event of the employee's subsequent dismissal
for cause without violating his property rights.

6. WON award of attorney’s fees is proper in the instant case. – NO.

The disputed attorney's fees can only be assessed in cases of unlawful withholding of wages. It cannot be said that
petitioners were guilty of unlawfully withholding private respondents' salaries since the occasion never arose for them to
exercise that option under Art. 223 of the Labor Code. Clearly, the award of attorney's fees is baseless.

DECISION.
The instant petition is partly granted. The challenged Decision of the National Labor Relations Commission dated 11
August 1992 is MODIFIED by deleting that portion ordering petitioners to pay private respondents their salaries from 19
September 1991 to 20 September 1992 as well as that portion awarding 10% of the total judgment award as attorney's fees
for lack of legal and factual basis. In other respects, the Decision is AFFIRMED.

89
 INTERCONTINENTAL BROADCASTING v. PANGANIBAN
G.R. No. 151407 / FEB 6 2007 / AUSTRIA-MARTINEZ, J./LABOR 1 - Amount and Date of Payment, Revised
Guidelines on the Implementation of the 13th Month Pay Law
NATURE Petition for review on certiorari
PETITIONERS Intercontinental Broadcasting Corporation
RESPONDENTS Ireneo Panganiban

SUMMARY. Panganiban wants to claim unpaid commissions from Intercontinental. He commences a civil action 7
months after his resignation but it gets dismissed. Almost 8 years after his resignation, he files an action to collect
them again. Court says that LC 291 states that the prescription of money claims is 3 years. The prescription of
Panganiban’s claim for unpaid commissions was not interrupted because the case was dismissed; therefore, his claim
expired 5 years ago.
DOCTRINE. LC 291 provides that all money claims arising from employee-employer relations shall be filed within
3 years from the time the cause of action accrued; otherwise, they shall be forever barred. Also, the dismissal of civil
action leaves the parties in exactly the same position as though no action has been commenced at all

FACTS.

 Repondent Panganiban was employed as Assistant General Manager of the Intercontinental Broadcasting (petitioner
company). He was preventively suspended on August 26, 1988, and he resigned on September 2, 1988.
 On April 12, 1989, Panganiban filed in the RTC of QC a civil case against the Board of Administrators (BOA) of Intercon
alleging, among others, non-payment of his unpaid commissions.
 A motion to dismiss was filed by Santiago, one of members of the BOA, because of lack of jurisdiction. RTC denied, but
the CA granted the petition. Therefore, the civil case was dismissed on October 19, 1990.
 Then, Panganiban was elected by the BOA as Vice President for Marketing in July 1992. He resigned in April 1993.
 On January 21, 1993, the Intercon BOA expressly acknowledged their debt to Panganiban (unpaid commissions), for Php
105 573.88
 On July 24, 1996, Panganiban filed a complaint for illegal dismissal, separation pay, retirement benefits, unpaid
commissions, and damages.
 LA: reinstatement with full back wages, and payment of unpaid commissions in the amount of Php2 521 769.77, damages
and attorney’s fees
 NLRC: Dismissed due to Intercon’s failure to post a bond
 CA: LA reversed, claims of private respondent for his employment from 1986-1988 have prescribed
 On reconsideration in the CA: Intercon ordered to pay Panganiban’s unpaid commissions

ISSUES & RATIO.

7. WON Panganiban’s claim for unpaid commissions has prescribed - YES

LC 291 provides that all money claims arising from employee-employer relations shall be filed within 3 years from
the time the cause of action accrued; otherwise, they shall be forever barred. Respondent’s claim have exceeded
the 3-year prescription period.

As per NCC 1155, prescription of actions can only be interrupted when 1) they are filed before the court; 2) when there
is a written extrajudicial demand by the creditors; and 3) when there is any written acknowledgement of the debt by the

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 debtor. But the court has ruled that the dismissal of civil action leaves the parties in exactly the same position as
though no action has been commenced at all.

Therefore, because Panganiban resigned on September 2, 1988, the action for his money claim prescribed on September
2, 1991 because his civil action on April 1989 was dismissed.

The acknowledgement of the unpaid commissions by Intercon on January 1993 does not have any effect whatsoever,
because, as the Court said, the action prescribed on September 1991.

DECISION.
Petition granted. CA resolution set aside, and the CA decision reinstated.

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 SUBSTITUTION OF 13th MONTH PAY
G.R. Nos. 72616-17; 171 SCRA 87; March 8, 1989 – FRAMANLIS FARMS, INC. v. MINISTER OF LABOR
GRIÑO-AQUINO

After a complaint filed against it in the Regional Office was resolved in favor of labor, Framanlis Farms was ordered to pay,
among other benefits, 13th month pay. It argued that it should not be made to pay it anymore because it gave its employees
pork meat subsidy, free light electricity, and year-end bonuses for loyalty and service, and this should be considered
substantial compliance therewith as equivalents of 13th month pay. The Court disagreed.

DOCTRINE
Benefits in the form of food or free electricity are not proper substitutes for 13th month pay. Neither may year-end rewards
for loyalty and service be considered in lieu of 13th month pay.

FACTS
11. Two labor standard cases were filed against Framanlis with the Regional Office of the Ministry of Labor (Bacolod
City).
a. Allegation: Nonpayment in 1977-1979 of ECOLA, minimum wage, 13th month pay, holiday pay, and SIL
b. Framanlis’s answer:
i. The employees were not regular but migratory (sacadas) or pakyaw workers who worked seasonally.
ii. In 1977 they applied for exemption from paying certain benefits, but no ruling as of yet.
iii. Submitted: random payrolls showing that women workers were underpaid (P5.94/day compared to the
P10/day or more received by men).
12. Minister of Labor, through Assistant Regional Director, directed Framanlis, Eloisa Sycip, and Lincoln Sycip to pay
deficiency payments to both female and male workers under several laws as well as their other claims.
13. On appeal, order was modified:
a. All non-pakyaw workers: Holiday and SIL (clarified: pakyaw workers are excluded from holiday and SIL)
b. All complainants: 13th month pay
c. All pakyaw workers: pay differentials
14. Framanlis’s further appeal via certiorari, said there was error:
a. In awarding pay differentials to pakyaw workers who are piece-rate, not regular
b. In requiring 13th month pay despite Framanlis’ substantial compliance by extending yearly bonuses and
other benefits in kind and in cash to the employees pursuant to Sec. 3(c) exempting an employer who has
paid its equivalent
i. Weekly subsidy of choice pork meat for P9-11/kg instead of P10-15/kg
ii. Free choice pork meat in May and December of every year
iii. Free light or electricity
c. In not precisely stating who are among the employees are pakyaw and non-pakyaw. (Court: they can be
identified in the proceedings for execution of the judgment).

ISSUE with HOLDING

W/N pakyaw workers are entitled to pay differentials – YES
PD 928 fixed a minimum wage for agricultural workers in any plantation or agricultural enterprise irrespective of
whether the worker was paid on a piece-rate basis.

W/N yearly bonuses and other benefits in kind and in cash are substantial compliance with 13 th month pay
requirement – NO

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 Sec. 3, par. 3 of PD 851: “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 1/12th 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 employees’ basic salary,
the employer shall pay the difference.”
Year-end rewards for loyalty and service cannot be considered so either because Section 10 of the IRR of PD 851
is a prohibition against reduction or elimination of benefits.

DISPOSITIVE PORTION
WHEREFORE, the petition for certiorari is dismissed with costs against the petitioners.

DIGESTER: Gabi Timbancaya

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EASTERN TELECOMMUNICATIONS PHILS., INC. [ETPI], Petitioner, vs. EASTERN TELECOMS
EMPLOYEES UNION [ETEU], Respondent (2012; J. Mendoza; GR No. 185665)

FACTS:
ETPI - a corp. engaged in the business of providing telecommunications facilities, particularly leasing international date
lines or circuits, regular landlines, internet and data services; employing approx. 400 employees
ETEU - certified exclusive bargaining agent of the company’s rank and file employees with a strong following of 147 regular
members

ETEU has an existing CBA with the company to expire in the year 2004 with a Side Agreement signed on Sept. 3, 2001.
Said side agreement stated:

4. Employment Related Bonuses. The Company confirms that the 14th, 15th and 16th month bonuses (other than 13th month
pay) are granted.

The labor dispute was a spin-off of the company’s plan to defer payment of the 2003 14th, 15th and 16th month bonuses
sometime in April 2004. The company’s main ground in postponing the payment of bonuses is due to allege continuing
deterioration of company’s financial position which started in the 2000. However, ETPI while postponing payment of
bonuses sometime in April 2004, such payment would also be subject to availability of funds.

The union strongly opposed the deferment in payment of the bonuses by filing a preventive mediation complaint with the
NCMB on July 3, 2003.

In the NCMB conference, ETPI reiterated its stand that payment of the bonuses would only be made in April 2004 to which
date of payment, the union agreed. Thus, considering the agreement forged between the parties, the said agreement was
reduced to a MOA. The union requested that the President of the company should be made a signatory to the agreement,
however, the latter refused to sign. In addition to such a refusal, the company made a sudden turnaround in its position
by declaring that they will no longer pay the bonuses until the issue is resolved through compulsory arbitration.

The company’s change in position was contained in a letter written to the union by Mr. Sonny Javier, VP - HR and Admin.,
stating that “the deferred release of bonuses had been superseded and voided due to the union’s filing of the issue to
the NCMB….” He declared that “until the matter is resolved in a compulsory arbitration, the company cannot and
will not pay any ‘bonuses’ to any and all union members.”

Thus, on April 26, 2004, ETEU filed a Notice of Strike on the ground of ULP for ETPI’s failure to pay the bonuses in gross
violation of the economic provision of the existing CBA.

On May 19, 2004, the Labor Sec., finding that the company is engaged in an industry considered vital to the economy and,
certified the labor dispute for compulsory arbitration pursuant to LC 263 (q).

ETEU’s position paper:

- ETPI had consistently and voluntarily been giving out 14th month bonus during the month of April, and 15th and 16th
month bonuses every Dec. of each year to its employees from 1975 to 2002, even when it did not realize any net profits.
- By reason of its long and regular concession, the payment of these monetary benefits had ripened into a company practice
which could no longer be unilaterally withdrawn by ETPI. This long-standing company practice had been expressly
confirmed in the Side Agreements of the 1998-2001 and 2001-2004 CBA
- The company’s refusal was nothing but a ploy to spite the union for bringing the matter of delay in the payment of the
subject bonuses to NCMB.

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ETPI’s position paper:
- NLRC has no jurisdiction over the case since the issue which merely involved the interpretation of the economic provision
of the 2001-2004 CBA Side Agreement.
- The complaint for nonpayment of 14th, 15th and 16th month bonuses for 2003 and 14th month bonus for 2004 was bereft of
any legal and factual basis.
o The subject bonuses were not part of the legally demandable wage and the grant thereof to its employees was
an act of pure gratuity and generosity on its part, involving the exercise of management prerogative and
always dependent on the financial performance and realization of profits.
- The bonus provision in the 2001-2004 CBA Side Agreement was a mere affirmation that the distribution of bonuses was
discretionary to the company, premised and conditioned on the success of the business and availability of cash.
- Said provision partook of the nature of a “one-time” grant which the employees may demand only during the year when
the Side Agreement was executed and was never intended to cover the entire term of the CBA.
- Even if it had an unconditional obligation to grant bonuses to its employees, the drastic decline in its financial condition
had already legally released it therefrom pursuant to Article NCC 1267.

NLRC: DISMISSED ETEU’s complaint (NLRC denied MR. Thus, ETEU filed a petition for certiorari before the
CA.)
- ETPI could not be forced to pay the subject bonuses inasmuch as the payment of these additional benefits was basically a
management prerogative, being an act of generosity and munificence on the part of the company and contingent upon the
realization of profits.
- ETPI may not be obliged to pay these extra compensations in view of the substantial decline in its financial condition.
- ETPI was not guilty of the ULP charge since no sufficient and substantial evidence was adduced to attribute malice to the
company for its refusal to pay the subject bonuses.

CA: NLRC RESOLUTION ANNULLED & SET ASIDE

- The Side Agreements of the 1998 and 2001 CBA created a contractual obligation on ETPI to confer the subject bonuses
to its employees w/o qualification or condition.
- The grant of said bonuses has already ripened into a company practice and their denial would amount to diminution of the
employees’ benefits.
- ETPI could not seek refuge under NCC 1267 because this provision would apply only when the difficulty in fulfilling the
contractual obligation was manifestly beyond the contemplation of the parties, which was not the case therein.
- The allegation of ULP is devoid of merit.

Thus, ETEU filed the instant petition for review on certiorari.

ISSUE: WON the members of ETEU are entitled to the payment of 14th, 15th and 16th month bonuses for the year 2003 and
14th month bonus for year 2004

RULING: YES. PETITION IS DENIED.

[In petitions for review under Rule 45, the Court, not being a trier of facts, does not normally embark on a re-examination
of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the
CA are conclusive and binding on the Court. The rule, however, admits of several exceptions, one of which is when the
findings of the CA are contrary to those of the TC or the lower administrative body, as in this case.]

BONUS  From a legal point of view, it is a GRATUITY or ACT OF LIBERALITY of the giver which the recipient has
no right to demand as a matter of right. The grant of a bonus is a management prerogative which cannot be forced upon the

95
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.

A bonus, however, becomes a demandable or enforceable obligation when it is made part of the wage or salary or
compensation of the employee.
o Metro Transit Org., Inc. v. NLRC: WON a bonus forms part of wages depends upon the circumstances and
conditions for its payment. If it is additional compensation which the employer promised and agreed to give w/o
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 if a certain level of productivity is achieved, it
cannot be considered part of the wage. Where it is not payable to all but only to some employees and only when
their labor becomes more efficient or more productive, it is only an inducement for efficiency, a prize therefore,
not a part of the wage.

Therefore, the issue that needs to be settled is: can the subject bonuses be considered part of the wage, salary or
compensation making them enforceable obligations? SC: YES.

1. ETPI and ETEU agreed on the inclusion of a provision for the grant of 14 th, 15th and 16th month bonuses in the 1998-
2001 CBA Side Agreement, as well as in the 2001-2004 CBA Side Agreement. The provision, which was similarly worded,
states:
Employment-Related Bonuses
The Company confirms that the 14th, 15th and 16th month bonuses (other than the 13th month pay) are granted.

The above provision provides for the giving of 14th, 15th and 16th month bonuses w/o qualification. The said provision does
not state that the subject bonuses shall be made to depend on the ETPI’s financial standing or that their payment was
contingent upon the realization of profits.

2. The records are bereft of any showing that the ETPI made it clear before or during the execution of the Side Agreements
that the bonuses shall be subject to any condition. Indeed, if ETPI and ETEU intended that the subject bonuses would be
dependent on the company earnings, such intention should have been expressly declared in the Side Agreements or the
bonus provision should have been deleted altogether.

Verily, by virtue of its incorporation in the CBA Side Agreements, the grant of 14th, 15th and 16th month bonuses has become
more than just an act of generosity on the part of ETPI but a contractual obligation it has undertaken. Moreover, the
continuous conferment of bonuses by ETPI to the union members from 1998 to 2002 by virtue of the Side Agreements
negates its argument that the giving of the subject bonuses is a management prerogative.

3. ETPI cannot insist on business losses as a basis for disregarding its undertaking. It is clear that although it incurred
business losses in 2000, it continued to distribute 14th, 15th and 16th month bonuses for said year. Notwithstanding such huge
losses, ETPI entered into the 2001-2004 CBA Side Agreement whereby it contracted to grant the subject bonuses to ETEU
in no uncertain terms. ETPI continued to sustain losses for the succeeding years of 2001 and 2002. Still, this did not deter
it from honoring the bonus provision in the Side Agreement as it continued to give the subject bonuses to each of the union
members in 2001 and 2002. Parenthetically, ETPI even agreed to the payment of the 14th, 15th and 16th month bonuses for
2003 although it opted to defer the actual grant in April 2004.

4. The Court finds no merit in ETPI’s contention that the bonus provision confirms the grant of the subject bonuses only on
a single instance because if this is so, the parties should have included such limitation in the agreement.

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5. ETPI: even if it is contractually bound to distribute the subject bonuses to ETEU members under the Side Agreements,
its current financial difficulties should have released it from the obligatory force of said contract invoking NCC 1267.

Article 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the
obligor may also be released therefrom, in whole or in part.

SC: The parties to the contract must be presumed to have assumed the risks of unfavorable developments. It is, therefore,
only in absolutely exceptional changes of circumstances that equity demands assistance for the debtor. In this case, the
Court determines that ETPI’s claimed depressed financial state will not release it from the binding effect of the 2001-2004
CBA Side Agreement.

ETPI appears to be well aware of its deteriorating financial condition when it entered into the 2001-2004 CBA Side
Agreement with ETEU and obliged itself to pay bonuses to the members of ETEU. Considering that ETPI had been
continuously suffering huge losses from 2000 to 2002, its business losses in the year 2003 were not exactly unforeseen or
unexpected. Consequently, it cannot be said that the difficulty in complying with its obligation under the Side Agreement
was “manifestly beyond the contemplation of the parties.”

6. Granting arguendo that the CBA Side Agreement does not contractually bind ETPI to give the subject bonuses,
nevertheless, the Court finds that its act of granting the same has become an established company practice such that it has
virtually become part of the employees’ salary or wage. A bonus may be granted on equitable consideration when the giving
of such bonus has been the company’s long and regular practice.

The records show that ETPI, aside from complying with the regular 13th month bonus, has been further giving its
employees14th month bonus every April as well as 15th and 16th month bonuses every December of the year, without fail,
from 1975 to 2002 or for 27 years whether it earned profits or not. The considerable length of time ETPI has been giving
the special grants to its employees indicates a unilateral and voluntary act on its part to continue giving said benefits knowing
that such act was not required by law.

7. The giving of the subject bonuses cannot be peremptorily withdrawn by ETPI without violating LC 100:

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.

8. ETPI never presented countervailing evidence to refute ETEU’s claim that the company has been continuously paying
bonuses since 1975 up to 2002 regardless of its financial state. Its failure to controvert the allegation, when it had the
opportunity and resources to do so, works in favor of ETEU.

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