G.R. No.

80593 December 18, 1989

13. Amelia Medina 2 740.00 740.00 6,822.81

PHILIPPINE NATIONAL BANK, petitioner, 14. Eduardo 4 970.00 1,940.00 234.10

vs. Espejo
TERESITA CRUZ, JOSE AGRIPINO, BERNARDO BAUZON, LUCRECIA
BILBAO, MA. LUISA CABRERA, FRANCIS BAACLO GUADALUPE 15. Ricardo Batto 7 3,000.00 10,500.00 9,874.70
CAMACHO, LUZ DE LEON, MIKE VILLAVERDE, NEPOMUCENO
MEDINA, EDGARDO MENDOZA, JENNIFER VELEZ, AMELIA MEDINA, TOTAL 83,360.00 136,092.03
EDUARDO ESPEJO and RICARDO BATTO respondents.

The Chief Legal Officer for petitioner. in the total amount of P219,452.03. To properly
effectuate the payment of the same, the necessary
arrangement should be made between respondents
Romualdo C. Delos Santos for respondents. Amex and T.M. San Andres Development Corp. and
Philippine National Bank (PNB) on their respective role
and participation herein. For should the principal
respondent be unable to satisfy these Awards, the
GANCAYCO, J.: same can be satisfied from the proceeds or fruits of its
machineries and equipment being operated by
respondent T.M. San Andres Dev. Corp. either by
The focus of the instant petition for certiorari is the application of Article 110 operating agreement with respondent Amex or thru
of the Labor Code. The said article provides that workers shall enjoy first lease of the same from PNB.
preference with regard to wages due them in cases of bankruptcy or
liquidation of an employer's business.
To obviate any further differences between
complainants and their counsel to the latter's attorney's
The antecedent facts of the case are as follows: fees which seems to be the cause of their earlier
misunderstanding, as can be gleaned from the
Sometime in 1980 Aggregate Mining Exponents (AMEX) laid-off about Charging Lien filed by said counsel, respondents are,
seventy percent (70%) of its employees because it was experiencing moreover, ordered to segregate and pay the same
business reverses. The retained employees constituting thirty percent (30%) directly to said counsel, the amount of which is to be
of the work force however, were not paid their wages. This non-payment of computed pursuant to their agreement on July 14,
salaries went on until July 1982 when AMEX completely ceased operations 1983 (Annex A of Position to Enter Attorney's Charging
and instead entered into an operating agreement with T.M. San Andres Lien in the Record of the Case). 2
Development Corporation whereby the latter would be leasing the equipment
and machineries of AMEX. AMEX and its President, Tirso Revilla did not appeal from this decision. But
PNB, in its capacity as mortgagee-creditor of AMEX interposed an appeal
The unpaid employees sought redress from the Labor Arbiter 1 who, on with the respondent Commission, not being satisfied with the outcome of the
August 27,1986 rendered a decision finding their claim valid and meritorious. case. The appeal was primarily based on the allegation that the workers' lien
The dispositive part of the said decision, reads: covers unpaid wages only and not the termination or severance pay which
the workers likewise claimed they were entitled to. In a resolution 3 dated
WHEREFORE, finding the claims of complainants for October 27, 1987, the National Labor Relations Commission affirmed the
payment of unpaid wages and separation pay to be decision appealed from. Hence the instant petition filed by the petitioner bank
based on the following grounds:
valid and meritorious, respondents Aggregate Mining
Exponent and its president Luis Tirso Revilla should,
as they are hereby ordered to pay the same to said I. ARTICLE 110 OF THE LABOR CODE MUST BE
complainants in the following amounts: READ IN RELATION TO ARTICLES 2241, 2242,
2243, 2244 AND 2245 OF THE CIVIL CODE
CONCERNING THE CLASSIFICATION,
Employees Yrs. of Rate Separation Backwages CONCURRENCE AND PREFERENCE OF CREDITS.
Service Pay
II. ARTICLE 110 OF THE LABOR CODE DOES NOT
1. Jose Agripino 8 P1,300.00 P5,200.00 P6,174.96 PURPORT TO CREATE A LIEN IN FAVOR OF
WORKERS OR EMPLOYEES FOR UNPAID WAGES
2.Bernardo 9 1,900.00 8,550.00 11,712.85 EITHER UPON ALL OF THE PROPERTIES OR
Bauzon UPON ANY PARTICULAR PROPERTY OWNED BY
THEIR EMPLOYER. 4
3. Lucresia Bilbao 7 2,300.00 8,050.00 19,247.00

4. Teresita S. Cruz 12 2,700.00 16,200.00 23,485.70 The petition is devoid of merit.

5. Ma. Luisa 3 1,800.00 2,700.00 5,004.35 At the outset, petitioner PNB did not question the validity of the workers'
Cabrera claim for unpaid wages with respect to the mortgaged properties of AMEX,
provided that the same be limited to the unpaid wages, and to the exclusion
6. Francis Baaclo 7 3,500.00 12,550.00 32,986.90 of termination pay. In the instant petition however, PNB starts off with the
question of whether or not the workers' lien take precedence over any other
7. Guadalupe 6 1,300.00 3,900.00 3,227.15 claim considering that this Court has ruled otherwise in Republic vs.
Camacho Peralta. 5

8. Luz de Leon 5 1,300.00 3,250.00 3,110.85 This Court cannot allow the petitioner to alter its stance at this stage
inasmuch as it is deemed to have acquiesced in the decision of the labor
9. Mike Villaverde 6 1,500.00 4,500.00 4,793.80 arbiter concerning payment of unpaid wages. The records reveal that the
petitioner failed to question the same on appeal. Hence, it is now barred from
10. Nepomuceno 5 1,200.00 3,000.00 4,287.10 claiming that the workers' lien applies only to the products of their labor and
Medina not to other properties of the employer which are encumbered by mortgage
contracts or otherwise.
11. Edgardo 4 920.00 1,840.00 832.10
Mendoza
Notwithstanding the foregoing, an attempt on the part of the petitioner to
12. Jennifer Velez 2 740.00 740.00 4,287.66 seek relief from that portion of the decision would still be in vain.

1
Article 110 of the Labor Code provides that:
Art. 110. Worker preference in case of bankruptcy. In
the event of bankcruptcy or liquidation of an employer's
business - his workers shall enjoy first preference as
regards their unpaid wages and other monetary claims,
any provision of law to the contrary notwithstanding.
Such unpaid wages and monetary claims, shall be paid
in full before claims of the government and other
creditors may be paid. 6
This Court must uphold the preference accorded to the private respondents
in view of the provisions of Article 110 of the Labor Code which are clear and
which admit of no other interpretation. The phrase "any provision of law to
the contrary notwithstanding" indicates that such preference shall prevail
despite the order set forth in Articles 2241 to 2245 of the Civil Code. 6-a No
exceptions were provided under the said article, henceforth, none shall be
considered. Furthermore, the Labor Code was signed into Law decades after
the Civil Code took effect.
In Herman vs. Radio Corporation of the Philippines, 7 this Court declared that
whenever two statutes of different dates and of contrary tenor are of equal
theoretical application to a particular case, the statute of later date must
prevail being a later expression of legislative will. Applying the aforecited
case in the instant petition, the Civil Code provisions cited by the petitioner
must yield to Article 110 of the Labor Code.
Moreover, Our pronouncement in A. C. Ransom Labor Union-CCLU vs.
NLRC, 8 reinforces the above-mentioned interpretation where this Court,
speaking through Associate Justice Melencio-Herrera, explicitly stated that
"(t)he worker preference applies even if the employer's properties are
encumbered by means of a mortgage contract ... So that, when (the)
machinery and equipment of RANSOM were sold to Revelations
Manufacturing Corporation for P2M in 1975, the right of the 22 laborers to be
paid from the proceeds should have been recognized ... " 9
Reliance by the petitioners on Republic vs. Peralta is without basis. The said
case involved a question of workers' preference as against the tax claims of
the State. In the said case the Court held that the State must prevail in that
instance since "it has been frequently said that taxes are the very lifeblood of
government. The effective collection of taxes is a task of highest importance
for the sovereign. It is critical indeed for its own survival ." 10
Nevertheless, under Article 110 of the Labor Code as amended, the unpaid
wages and other monetary claims of workers should be paid in full before the
claims of the Government and other creditors. Thus not even tax claims
could have preference over the workers' claim.
Consistent with the ruling of this Court in Volkschel Labor Union vs. Bureau
of Labor Relations, 11 this court adopts the doctrine that "(i)n the
implementation and interpretation of the provisions of the Labor Code and its
implementing regulations, the workingman's welfare should be the primordial
and paramount consideration." 12 Bearing this in mind, this Court must
reiterate the dictum laid down in A.C. Ransom that the conflict between
Article 110 of the Labor Code and Article 2241 to 2245 of the Civil Code must
be resolved in favor of the former. A contrary ruling would defeat the purpose
for which Article 110 was intended; that is, for the protection of the working
class, pursuant to the never-ending quest for social justice.
Petitioner next advances the theory that "even if the worker's lien applies in
the instant case, the same should cover only unpaid wages excluding
termination or severance pay. 13 To support this contention, petitioner cites
Section 7, Rule 1, Book VI of the Rules and Regulations implementing the
Labor Code which provides that:
The just causes for terminating the services of an
employee shall be those provided under article 283 of
the Code. The separation from work of an employee
for a just cause does not entitle him to termination pay
provided in the Code, emphasis supplied)
Based on that premise, petitioner contends that the claim for termination pay
should not be enforced against AMEX properties mortgaged to petitioner
PNB because Article 110 of the Labor Code refers only to "wages due them
for services rendered during the period prior to bankcruptcy or
liquidation." 14 Citing serious financial losses as the basis for the termination
2
of the private respondents, petitioner alleges that the employees are not
entitled to the termination pay which they claim.
This contention is, again, bereft of merit.
The respondent Commission noted that "AMEX failed to adduce convincing
evidence to prove that the financial reverses were indeed serious." 15 After a
careful study of the records of the case, this Court finds no reason to alter the
findings of the respondent Commission.
In Garcia vs. National Labor Relations Commission ,16 it was held that "it is
essentially required that the alleged losses in business operations must be
proved. " 17 This policy was adopted to obviate the possibility of an employer
fabricating business reverses in order to ease out employees for no apparent
reason. Hence, no departure shall be made by this Court from the ruling
in Philippine Commercial and Industrial Bank vs. National Mines and Allied
Workers Union (NAMAWU-MIF) 18 where it was categorically stated that the
term "wages" includes not only remunerations or earnings payable by an
employer for services rendered or to be rendered, but also covers all benefits
of the employees under a Collective Bargaining Agreement like severance
pay, educational allowance, accrued vacation leave earned but not enjoyed,
as well as workmen's compensation awards and unpaid salaries for services
rendered. All of these benefits fall under the term "wages" which enjoy first
preference over all other claims against the employer. 19
Furthermore, in Peralta, this Court held that for purposes of the application of
Article 110, "termination pay is reasonably regarded as forming part of the
remuneration or other money benefits accruing to employees or workers by
reason of their having previously rendered services..." 20 Hence, separation
pay must be considered as part of remuneration for services rendered or to
be rendered.
Indeed Article 110 of the Labor Code, as amended, aforecited, now provides
that the workers' preference covers not only unpaid wages but also other
monetary claims.
The respondent Commission was, therefore, not in error when it awarded the
termination pay claimed by the private respondents. As far as the latter are
concerned, the termination pay which they so rightfully claim is an additional
remuneration for having rendered services to their employer for a certain
period of time. Noteworthy also is the relationship between termination pay
and services rendered by an employee, that in computing the amount to be
given to an employee as termination pay, the length of service of such
employee is taken into consideration such that the former must be
considered as part and parcel of wages. Under these circumstances then,
this Court holds that the termination or severance pay awarded by the
respondent Commission to the private respondents is proper and should be
sustained.
Lastly, it must be noted that the amount claimed by petitioner PNB for the
satisfaction of the obligations of AMEX is relatively insubstantial and is not
significant enough as to drain its coffers. By contrast, that same amount
could mean subsistence or starvation for the workingman. Quoting further
from Philippine Commercial and Industrial Bank, this Court supports the
equitable principle that "it is but humane and partakes of the divine that labor,
as human beings, must be treated over and above chattels, machineries and
other kinds of properties and the interests of the employer who can afford
and survive the hardships of life better than their workers. Universal sense of
human justice, not to speak of our specific social justice and protection to
labor constitutional injunctions dictate the preferential lien that the above
provision accord to labor. 21 In line with this policy, measures must be
undertaken to ensure that such constitutional mandate on protection to labor
is not rendered meaningless by an erroneous interpretation of the applicable
laws.
WHEREFORE, premises considered, the petition is hereby DISMISSED for
lack of merit. No costs.
SO ORDERED.
Narvasa, Griño-Aquino and Medialdea, JJ, concur.
Separate Opinions
CRUZ, J.,concurring:
I can perhaps be allowed a little immodesty in taking this occasion to point
out that in Republic of the Philippines v. Peralta, cited in the ponencia, I was
the only one who held the view that the claims of the laborers should take
precedence over those of even the Government under Article 110 of the
Labor Code.

Interpreting the said provision, I submitted that it should be read according to

its literal import and obvious philosophy, to favor and protect the laborer
pursuant to the social justice policy. None of my thirteen colleagues then
agreed with me.

With the amendment of the article, evidently to correct the meaning given to
it in Peralta, all doubt has been removed as to its original intention (which I
feel was quite clear even before). There is no question now that under Article
110 of the Labor Code as reworded the claims of the laborer prevail over
those of all others, including the Government itself, in the interest of social
justice. It is for me a cause for deep elation.

Separate Opinions

CRUZ, J.,concurring:

I can perhaps be allowed a little immodesty in taking this occasion to point

out that in Republic of the Philippines v. Peralta, cited in the ponencia, I was
the only one who held the view that the claims of the laborers should take
precedence over those of even the Government under Article 110 of the
Labor Code.

Interpreting the said provision, I submitted that it should be read according to

its literal import and obvious philosophy, to favor and protect the laborer
pursuant to the social justice policy. None of my thirteen colleagues then
agreed with me.

With the amendment of the article, evidently to correct the meaning given to
it in Peralta, all doubt has been removed as to its original intention (which I
feel was quite clear even before). There is no question now that under Article
110 of the Labor Code as reworded the claims of the laborer prevail over
those of all others, including the Government itself, in the interest of social
justice. It is for me a cause for deep elation.

3
G.R. No. L-31832 October 23, 1982 Court, en banc, denied reconsideration on 25 March 1970 for lack of
sufficient justification.
SOCIAL SECURITY SYSTEM, petitioner,
vs. Contending that the Industrial Court had no authority to issue the Order
SSS SUPERVISORS' UNION-CUGCO and COURT OF INDUSTRIAL dated 3 March 1970 and its Resolution en banc dated 25 March 1970,
RELATIONS, respondents. petitioner asks this Tribunal to have them annulled.

Benjamin C. Pineda for respondent Union.
Filemon Q. Almazan for petitioners.
MELENCIO-HERRERA, J.:
This Petition seeks to review on certiorari the Orders of respondent Court of
Industrial Relations (CIR) on the issue of whether or not petitioner Social
Security System (SSS) may be held liable for the payment of wages of
members of respondent Union who admittedly did not work during the 17-day
strike declared in 1968 by the rank and file Union (the Philippine Association
of Free Labor Unions [PAFLU]).
For a brief factual background, it should be stated that the instant case is an
offshoot of Case No. 46-IPA (49) certified to the CIR by the President of the
Philippines for compulsory arbitration of labor dispute between the SSS and
the PAFLU concerning the interpretation of certain provisions of their
Collective Bargaining Agreement. The PAFLU had staged a strike in defiance
of the CIR Order of August 29, 1968 "enjoining the parties, for the sake of
industrial peace . . . to maintain the status quo-the Union not to
declare any strike and the Management not to dismiss nor suspend any of its
employees nor to declare any lockout." On 3 September 1968, in that same
case, the SSS filed an Urgent Petition to declare the strike illegal.
On 26 September 1968, respondent Union (the SSS Supervisors' Union)
filed a Motion for Intervention in the said case averring, inter alia, that it had
not participated in the strike: that its members wanted to report for work but
were prevented by the picketers from entering the work premises; that under
the circumstances, they were entitled to their salaries corresponding to the
duration of the strike, which could be deducted from the accrued leave
credits of their members.
We find for the petitioner based on the equitable tenet of a "fair day's wage
for a fair day's labor."
The age-old rule governing the relation between labor
and capital or management and employee is that of a
'fair day's wage for a fair day's labor.' 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,
dismissed or suspended. It is hardly fair or just for an
employee or laborer to fight or litigate against his
employer on the employer's time.<äre||anº•1àw> 3
In this case, the failure to work on the part of the members of respondent
Union was due to circumstances not attributable to themselves. But neither
should the burden of the economic loss suffered by them be shifted to their
employer, the SSS, which was equally faultless, considering that the situation
was not a direct consequence of the employer's lockout or unfair labor
practice. Under the circumstances, it is but fair that each party must bear his
own loss.
Considering, therefore, that the parties had no hand or
participation in the situation they were in, and that the
stoppage of the work was not the direct consequence
of the company's lockout or unfair labor practice, 'the
economic loss should not be shifted to the employer.'
Justice and equity demand that each must have to
bear its own loss, thus placing the parties in equal
footing where none should profit from the other there
being no fault of either. 4
WHEREFORE, we hereby set aside respondent Court's Order dated 3 March
1970 as affirmed by its Resolution en banc dated 25 March 1970, without
pronouncement as to costs.

The SSS had no objection to the intervention sought but opposed the SO ORDERED.
demand for the payment of salaries pertaining to the entire period of the
strike.
Plana, Vasquez, Relova and Gutierrez, Jr., JJ., concur.
In its Order of 12 March 1969, intervention was allowed by respondent Court,
and pending resolution of the claim for salaries, the SSS was directed to pay Teehankee (Chairman), J., is on leave.
the same, chargeable in the meantime to the accrued leave credits of the
members 1 pending the determination of the question of the illegality of the
strike. Reconsideration of that Order sought by the SSS was denied on 6
November 1969.

On 24 November 1969, respondent Court issued an Order 2 directing the CIR

Examining Division to compute immediately the money equivalent of the
salaries of the members of respondent Union as well as the salaries of those
employees who were not members of the striking Union (PAFLU) and to
deposit the amount computed, for further disposition.

The SSS challenged on certiorari the said Orders before this Court (G.R. No.
L-31234), particularly the order to deposit, grounded on the overlapping
membership in the two Unions and the impossibility of compliance. We
denied the Petition on 2 December 1969 and the proceedings below were
resumed.

Upon a joint Motion for clarification of its Order of 24 November 1969,

respondent Court, through Judge Joaquin M. Salvador, issued the Order of 3
March 1970, ordering the payment of salaries of the members of respondent
Union during the strike period, but not to be chargeable to accrued leave
credits. The reasons given were that this Court had already declared the
strike premature, and that the members of respondent Union had not
participated in the strike and had actually manifested their desire to work but
could not cross the heavy picket lines during the height of the strike.

The SSS moved to reconsider the Order of 3 March 1970 arguing that since
respondent Union members actually rendered no service at all during the
strike, they were not entitled to the payment of salaries. Respondent
4
G.R. No. 128845 June 1, 2000
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS
(ISAE), petitioner,
vs.
HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of
Labor and Employment; HON. CRESENCIANO B. TRAJANO in his
capacity as the Acting Secretary of Labor and Employment; DR. BRIAN
MACCAULEY in his capacity as the Superintendent of International
School-Manila; and INTERNATIONAL SCHOOL, INC., respondents.
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the local-hires
of private respondent School, mostly Filipinos, cry discrimination. We agree.
That the local-hires are paid more than their colleagues in other schools is, of
course, beside the point. The point is that employees should be given equal
pay for work of equal value. That is a principle long honored in this
jurisdiction. That is a principle that rests on fundamental notions of justice.
That is the principle we uphold today.1âwphi1.nêt
Private respondent International School, Inc. (the School, for short), pursuant
to Presidential Decree 732, is a domestic educational institution established
primarily for dependents of foreign diplomatic personnel and other temporary
residents.1 To enable the School to continue carrying out its educational
program and improve its standard of instruction, Section 2(c) of the same
decree authorizes the School to employ its own teaching and management
personnel selected by it either locally or abroad, from Philippine or other
nationalities, such personnel being exempt from otherwise applicable laws
and regulations attending their employment, except laws that have been or
will be enacted for the protection of employees.
Accordingly, the School hires both foreign and local teachers as members of
its faculty, classifying the same into two: (1) foreign-hires and (2) local-hires.
The School employs four tests to determine whether a faculty member
should be classified as a foreign-hire or a local hire:
a. What is one's domicile?
b. Where is one's home economy?
c. To which country does one owe economic allegiance?
d. Was the individual hired abroad specifically to work in the
School and was the School responsible for bringing that individual
to the Philippines?2
Should the answer to any of these queries point to the Philippines, the faculty
member is classified as a local hire; otherwise, he or she is deemed a
foreign-hire.
The School grants foreign-hires certain benefits not accorded local-
hires.1avvphi1 These include housing, transportation, shipping costs, taxes,
and home leave travel allowance. Foreign-hires are also paid a salary rate
twenty-five percent (25%) more than local-hires. The School justifies the
difference on two "significant economic disadvantages" foreign-hires have to
endure, namely: (a) the "dislocation factor" and (b) limited tenure. The School
explains:
A foreign-hire would necessarily have to uproot himself from his
home country, leave his family and friends, and take the risk of
deviating from a promising career path — all for the purpose of
pursuing his profession as an educator, but this time in a foreign
land. The new foreign hire is faced with economic realities: decent
abode for oneself and/or for one's family, effective means of
transportation, allowance for the education of one's children,
adequate insurance against illness and death, and of course the
primary benefit of a basic salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted again
with the same economic reality after his term: that he will
eventually and inevitably return to his home country where he will
have to confront the uncertainty of obtaining suitable employment
after along period in a foreign land.
5
The compensation scheme is simply the School's adaptive
measure to remain competitive on an international level in terms
of attracting competent professionals in the field of international
education.3
When negotiations for a new collective bargaining agreement were held on
June 1995, petitioner International School Alliance of Educators, "a legitimate
labor union and the collective bargaining representative of all faculty
members"4 of the School, contested the difference in salary rates between
foreign and local-hires. This issue, as well as the question of whether foreign-
hires should be included in the appropriate bargaining unit, eventually
caused a deadlock between the parties.
On September 7, 1995, petitioner filed a notice of strike. The failure of the
National Conciliation and Mediation Board to bring the parties to a
compromise prompted the Department of Labor and Employment (DOLE) to
assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting
Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and
representation issues in favor of the School. Then DOLE Secretary Leonardo
A. Quisumbing subsequently denied petitioner's motion for reconsideration in
an Order dated March 19, 1997. Petitioner now seeks relief in this Court.
Petitioner claims that the point-of-hire classification employed by the School
is discriminatory to Filipinos and that the grant of higher salaries to foreign-
hires constitutes racial discrimination.
The School disputes these claims and gives a breakdown of its faculty
members, numbering 38 in all, with nationalities other than Filipino, who have
been hired locally and classified as local hires.5 The Acting Secretary of
Labor found that these non-Filipino local-hires received the same benefits as
the Filipino local-hires.
The compensation package given to local-hires has been shown
to apply to all, regardless of race. Truth to tell, there are foreigners
who have been hired locally and who are paid equally as Filipino
local hires.6
The Acting secretary upheld the point-of-hire classification for the distinction
in salary rates:
The Principle "equal pay for equal work" does not find applications
in the present case. The international character of the School
requires the hiring of foreign personnel to deal with different
nationalities and different cultures, among the student population.
We also take cognizance of the existence of a system of salaries
and benefits accorded to foreign hired personnel which system is
universally recognized. We agree that certain amenities have to
be provided to these people in order to entice them to render their
services in the Philippines and in the process remain competitive
in the international market.
Furthermore, we took note of the fact that foreign hires have
limited contract of employment unlike the local hires who enjoy
security of tenure. To apply parity therefore, in wages and other
benefits would also require parity in other terms and conditions of
employment which include the employment which include the
employment contract.
A perusal of the parties' 1992-1995 CBA points us to the
conditions and provisions for salary and professional
compensation wherein the parties agree as follows:
All members of the bargaining unit shall be
compensated only in accordance with Appendix C
hereof provided that the Superintendent of the School
has the discretion to recruit and hire expatriate
teachers from abroad, under terms and conditions that
are consistent with accepted international practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with the
Overseas Recruited Staff (OSRS) salary schedule.
The 25% differential is reflective of the agreed value of
system displacement and contracted status of the
 OSRS as differentiated from the tenured status of
Locally Recruited Staff (LRS).
To our mind, these provisions demonstrate the parties' recognition
of the difference in the status of two types of employees, hence,
the difference in their salaries.
The Union cannot also invoke the equal protection clause to
justify its claim of parity. It is an established principle of
constitutional law that the guarantee of equal protection of the
laws is not violated by legislation or private covenants based on
reasonable classification. A classification is reasonable if it is
based on substantial distinctions and apply to all members of the
same class. Verily, there is a substantial distinction between
foreign hires and local hires, the former enjoying only a limited
tenure, having no amenities of their own in the Philippines and
have to be given a good compensation package in order to attract
them to join the teaching faculty of the School.7
We cannot agree.
That public policy abhors inequality and discrimination is beyond contention.
Our Constitution and laws reflect the policy against these evils. The
Constitution8 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." The very broad Article 19 of the Civil
Code requires every person, "in the exercise of his rights and in the
performance of his duties, [to] act with justice, give everyone his due, and
observe honesty and good faith.
International law, which springs from general principles of law,9 likewise
proscribes discrimination. General principles of law include principles of
equity, 10 i.e., the general principles of fairness and justice, based on the test
of what is reasonable. 11 The Universal Declaration of Human Rights, 12 the
International Covenant on Economic, Social, and Cultural Rights, 13 the
International Convention on the Elimination of All Forms of Racial
Discrimination, 14 the Convention against Discrimination in Education, 15 the
Convention (No. 111) Concerning Discrimination in Respect of Employment
and Occupation 16 — all embody the general principle against discrimination,
the very antithesis of fairness and justice. The Philippines, through its
Constitution, has incorporated this principle as part of its national laws.
In the workplace, where the relations between capital and labor are often
skewed in favor of capital, inequality and discrimination by the employer are
all the more reprehensible.
The Constitution 17 specifically provides that labor is entitled to "humane
conditions of work." These conditions are not restricted to the physical
workplace — the factory, the office or the field — but include as well the
manner by which employers treat their employees.
The Constitution 18 also directs the State to promote "equality of employment
opportunities for all." Similarly, the Labor Code 19 provides that the State shall
"ensure equal work opportunities regardless of sex, race or creed." It would
be an affront to both the spirit and letter of these provisions if the State, in
spite of its primordial obligation to promote and ensure equal employment
opportunities, closes its eyes to unequal and discriminatory terms and
conditions of employment. 20
Discrimination, particularly in terms of wages, is frowned upon by the Labor
Code. Article 135, for example, prohibits and penalizes 21 the payment of
lesser compensation to a female employee as against a male employee for
work of equal value. Article 248 declares it an unfair labor practice for an
employer to discriminate in regard to wages in order to encourage or
discourage membership in any labor organization.
Notably, the International Covenant on Economic, Social, and Cultural
Rights, supra, in Article 7 thereof, provides:
The States Parties to the present Covenant recognize the right of
everyone to the enjoyment of just and favourable conditions of
work, which ensure, in particular:
a. Remuneration which provides all workers, as a
minimum, with:
6
(i) Fair wages and equal remuneration for
work of equal value without distinction of
any kind, in particular women being
guaranteed conditions of work not inferior to
those enjoyed by men, with equal pay for
equal work;
xxx xxx xxx
The foregoing provisions impregnably institutionalize in this jurisdiction the
long honored legal truism of "equal pay for equal work." Persons who work
with substantially equal qualifications, skill, effort and responsibility, under
similar conditions, should be paid similar salaries. 22 This rule applies to the
School, its "international character" notwithstanding.
The School contends that petitioner has not adduced evidence that local-
hires perform work equal to that of foreign-hires. 23 The Court 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. This presumption is borne by logic and human experience. If the
employer pays one employee less than the rest, it is not for that employee to
explain why he receives less or why the others receive more. That would be
adding insult to injury. The employer has discriminated against that
employee; it is for the employer to explain why the employee is treated
unfairly.
The employer in this case has failed to discharge this burden. There is no
evidence here that foreign-hires perform 25% more efficiently or effectively
than the local-hires. Both groups have similar functions and responsibilities,
which they perform under similar working conditions.
The School cannot invoke the need to entice foreign-hires to leave their
domicile to rationalize the distinction in salary rates without violating the
principle of equal work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or
recompense for services performed." Similarly, the Philippine Legal
Encyclopedia states that "salary" is the "[c]onsideration paid at regular
intervals for the rendering of services." In Songco v. National Labor Relations
Commission, 24 we said that:
"salary" means a recompense or consideration made to a person
for his pains or industry in another man's business. Whether it be
derived from "salarium," or more fancifully from "sal," the pay of
the Roman soldier, it carries with it the fundamental idea of
compensation for services rendered. (Emphasis supplied.)
While we recognize the need of the School to attract foreign-hires, salaries
should not be used as an enticement to the prejudice of local-hires. The
local-hires perform the same services as foreign-hires and they ought to be
paid the same salaries as the latter. For the same reason, the "dislocation
factor" and the foreign-hires' limited tenure also cannot serve as valid bases
for the distinction in salary rates. The dislocation factor and limited tenure
affecting foreign-hires are adequately compensated by certain benefits
accorded them which are not enjoyed by local-hires, such as housing,
transportation, shipping costs, taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of workers and
promote their welfare," 25 "to afford labor full protection." 26 The State,
therefore, has the right and duty to regulate the relations between labor and
capital. 27 These relations are not merely contractual but are so impressed
with public interest that labor contracts, collective bargaining agreements
included, must yield to the common good. 28 Should such contracts contain
stipulations that are contrary to public policy, courts will not hesitate to strike
down these stipulations.
In this case, we find the point-of-hire classification employed by respondent
School to justify the distinction in the salary rates of foreign-hires and local
hires to be an invalid classification. There is no reasonable distinction
between the services rendered by foreign-hires and local-hires. The practice
of the School of according higher salaries to foreign-hires contravenes public
policy and, certainly, does not deserve the sympathy of this Court.1avvphi1
We agree, however, that foreign-hires do not belong to the same bargaining
unit as the local-hires.
A bargaining unit is "a group of employees of a given employer, comprised of
all or less than all of the entire body of employees, consistent with equity to
the employer, indicate to be the best suited to serve the reciprocal rights and
duties of the parties under the collective bargaining provisions of the
law." 29 The factors in determining the appropriate collective bargaining unit
are (1) the will of the employees (Globe Doctrine); (2) affinity and unity of the
employees' interest, such as substantial similarity of work and duties, or
similarity of compensation and working conditions (Substantial Mutual
Interests Rule); (3) prior collective bargaining history; and (4) similarity of
employment status. 30 The basic test of an asserted bargaining unit's
acceptability is whether or not it is fundamentally the combination which will
best assure to all employees the exercise of their collective bargaining
rights. 31

It does not appear that foreign-hires have indicated their intention to be

grouped together with local-hires for purposes of collective bargaining. The
collective bargaining history in the School also shows that these groups were
always treated separately. Foreign-hires have limited tenure; local-hires
enjoy security of tenure. Although foreign-hires perform similar functions
under the same working conditions as the local-hires, foreign-hires are
accorded certain benefits not granted to local-hires. These benefits, such as
housing, transportation, shipping costs, taxes, and home leave travel
allowance, are reasonably related to their status as foreign-hires, and justify
the exclusion of the former from the latter. To include foreign-hires in a
bargaining unit with local-hires would not assure either group the exercise of
their respective collective bargaining rights.

WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby

GRANTED IN PART. The Orders of the Secretary of Labor and Employment
dated June 10, 1996 and March 19, 1997, are hereby REVERSED and SET
ASIDE insofar as they uphold the practice of respondent School of according
foreign-hires higher salaries than local-hires.

SO ORDERED.

Puno and Pardo, JJ., concur.

Davide, Jr., C.J., on official leave.
Ynares-Santiago, J., is on leave.

7

[G.R. Nos. 50999-51000. March 23, 1990.]
JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, Petitioners,
v. NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION),
LABOR ARBITER FLAVIO AGUAS, and F.E. ZUELLIG (M),
INC., Respondents.
Raul E. Espinosa, for Petitioners.
Lucas Emmanuel B. Canilao for petitioner A. Manuel.
Atienza, Tabara, Del Rosario & Castillo for Private Respondent.
SYLLABUS
1. LABOR LAW; NATIONAL LABOR RELATIONS COMMISSION;
SEPARATION PAY; ALLOWANCES AND EARNED COMMISSIONS
INCLUDED IN THE MONTHLY SALARY IN THE COMPUTATION
THEREOF. — Insofar as the issues of whether or not allowances should be
included in the monthly salary of petitioners for the purpose of computation of
their separation pay is concerned, this has been settled in the case of Santos
v. NLRC, Et Al., G.R. No. 76721, September 21, 1987, 154 SCRA 166,
where We ruled that "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." This ruling was
reiterated in Soriano v. NLRC, Et Al., G.R. No. 75510, October 27, 1987, 155
SCRA 124 and recently, in Planters Products, Inc. v. NLRC, Et Al., G.R. No.
78524, January 20, 1989. Inasmuch as the words "wages", "pay" and
"salary" have the same meaning, and commission is included in the definition
of "wage", the logical conclusion, therefore, is, in the computation of the
separation pay of petitioners, their salary base should include also their
earned sales commissions.
2. ID.; ID.; TERM "WAGES" INCLUDE COMMISSIONS. — Article 97(f) by
itself is explicit that commission is included in the definition of the term
"wage." It has been repeatedly declared by the courts that where the law
speaks in clear and categorical language, there is no room for interpretation
or construction; there is only room for application (Cebu Portland Cement Co.
v. Municipality of Naga, G.R. Nos. 24116-17, August 22, 1968, 24 SCRA
708; Gonzaga v. Court of Appeals, G.R. No. L-27455, June 28, 1973, 51
SCRA 381). A plain and unambiguous statute speaks for itself, and any
attempt to make it clearer is vain labor and tends only to obscurity.
3. ID.; ID.; SYNONYMOUS TO "SALARY" AND "PAY." — The ambiguity
between Article 97(f), which defines the term ‘wage’ and Article XIV of the
Collective Bargaining Agreement, Article 284 of the Labor Code and Sections
9(b) and 10 of the Implementing Rules, which mention the terms "pay" and
"salary", is more apparent than real. Broadly, the word "salary" means a
recompense or consideration made to a person for his pains or industry in
another man’s business. Whether it be derived from "salarium," or more
fancifully from "sal," the pay of the Roman soldier, it carries with it the
fundamental idea of compensation for services rendered. Indeed, there is
eminent authority for holding that the words "wages" and "salary" are in
essence synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44
citing Hopkins v. Cromwell, 85 N.Y.S. 839, 841, 89 App. Div. 481; 38 Am.
Jur. 496). "Salary," the etymology of which is the Latin word "salarium," is
often used interchangeably with "wage", the etymology of which is the Middle
English word "wagen." Both words generally refer to one and the same
meaning, that is, a reward or recompense for services performed. Likewise,
"pay" is the synonym of "wages" and "salary" (Black’s Law Dictionary, 5th
Ed.).
4. ID.; ID.; ID.; COMMISSION; DEFINED. — We agree with the Solicitor
General that granting, in gratia argumenti, that the commissions were in the
form of incentives or encouragement, so that the petitioners would be
inspired to put a little more industry on the jobs particularly assigned to them,
still these commissions are direct remunerations for services rendered which
contributed to the increase of income of Zuellig. Commission is the
recompense, compensation or reward of an agent, salesman, executor,
trustees, 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
(Black’s Law Dictionary, 5th Ed., citing Weiner v. Swales, 217 Md. 123, 141
A. 2d 749, 750). 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 petitioners’ wage or salary.
5. ID.; ID.; ID.; ID.; BASIS IN THE COMPUTATION THEREOF. — In Soriano
v. NLRC, Et Al., supra, in resolving the issue of the salary base that should
8
be used in computing the separation pay, We held that: "The commissions
also claimed by petitioner (’override commission’ plus ‘net deposit incentive’)
are not properly includible in such base figure since such commissions must
be earned by actual market transactions attributable to petitioner." Applying
this by analogy, since the commissions in the present case were earned by
actual market transactions attributable to petitioners, these should be
included in their separation pay. In the computation thereof, what should be
taken into account is the average commissions earned during their last year
of employment.
6. ID.; INTERPRETATION OF THE LABOR CODE AND ITS
IMPLEMENTING RULES AND REGULATIONS; SHALL BE RESOLVED IN
FAVOR OF THE WORKINGMEN. — In carrying out and interpreting the
Labor Code’s provisions and its implementing regulations, the workingman’s
welfare should be the primordial and paramount consideration. This kind of
interpretation gives meaning and substance to the liberal and compassionate
spirit of the law as provided for in Article 4 of the Labor Code which states
that "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" (Abella v. NLRC, G.R. No. 71812, July 30, 1987,
152 SCRA 140; Manila Electric Company v. NLRC, Et Al., G.R. No. 78763,
July 12, 1989), and Article 1702 of the Civil Code which provides that "in
case of doubt, all labor legislation and all labor contracts shall be construed
in favor of the safety and decent living for the laborer.
DECISION
MEDIALDEA, J.:
This is a petition for certiorari seeking to modify the decision of the National
Labor Relations Commission in NLRC Case No. RB-IV-20840-78-T entitled,
"Jose Songco and Romeo Cipres, Complainants-Appellants, v. F.E. Zuellig
(M), Inc., Respondent-Appellee" and NLRC Case No. RN-IV-20855-78-T
entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M), Inc.,
Respondent-Appellee," which dismissed the appeal of petitioners herein and
in effect affirmed the decision of the Labor Arbiter ordering private
respondent to pay petitioners separation pay equivalent to their one month
salary (exclusive of commissions, allowances, etc.) for every year of service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig)
filed with the Department of Labor (Regional Office No. 4) an application
seeking clearance to terminate the services of petitioners Jose Songco,
Romeo Cipres, and Amancio Manuel (hereinafter referred to as petitioners)
allegedly on the ground of retrenchment due to financial losses. This
application was seasonably opposed by petitioners alleging that the
company is not suffering from any losses. They alleged further that they are
being dismissed because of their membership in the union. At the last
hearing of the case, however, petitioners manifested that they are no longer
contesting their dismissal. The parties then agreed that the sole issue to be
resolved is the basis of the separation pay due to petitioners. Petitioners,
who were in the sales force of Zuellig received monthly salaries of at least
P400.00. In addition, they received commissions for every sale they
made.chanrobles.com:cralaw:red
The Collective Bargaining Agreement entered into between Zuellig and F.E.
Zuellig Employees Association, of which petitioners are members, contains
the following provision (p. 71, Rollo):
"ARTICLE XIV — Retirement Gratuity.
"Section 1(a) — Any employee, who is separated from employment due to
old age, sickness, death or 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. One month of salary
as used in this paragraph shall be deemed equivalent to the salary at date of
retirement; years of service shall be deemed equivalent to total service
credits, a fraction of at least six months being considered one year, including
probationary employment. (Emphasis supplied).
On the other hand, Article 284 of the Labor Code then prevailing provides:
"Art. 284. Reduction of personnel. — The termination of employment of any
employee due to the installation of labor saving-devices, redundancy,
retrenchment to prevent losses, and other similar causes, shall entitle the
employee affected thereby to separation pay. 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. In case of retrenchment to prevent
losses and other similar causes, the separation pay shall be equivalent to
one (1) month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year." (Emphasis supplied)
In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing
the Labor Code provide:
x x x
"Sec. 9(b). Where the termination of employment is due to retrenchment
initiated by the employer to prevent losses or other similar causes, or where
the employee suffers from a disease and his continued employment is
prohibited by law or is prejudicial to his health or to the health of his co-
employees, 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.
x x x June 28, 1973, 51 SCRA 381). A plain and unambiguous statute speaks for
"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,
unless the same was reduced by the employer to defeat the intention of the
Code, in which case the basis of computation shall be the rate before its
deduction." (Emphasis supplied)
On June 26, 1978, the Labor Arbiter rendered a decision, the dispositive
portion of which reads (p. 78, Rollo):
"RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby,
ordered to pay the complainants separation pay equivalent to their one
month salary (exclusive of commissions, allowances, etc.) for every year of
service that they have worked with the company.
"SO ORDERED."
The appeal by petitioners to the National Labor Relations Commission was
dismissed for lack of merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified "Notice of Voluntary
Abandonment and Withdrawal of Petition" dated April 7, 1980 filed by
petitioner Romeo Cipres, based on the ground that he wants "to abide by the
decision appealed from" since he had "received, to his full and complete
satisfaction, his separation pay," resolved to dismiss the petition as to him.
The issue is whether or not earned sales commissions and allowances
should be included in the monthly salary of petitioners for the purpose of
computation of their separation pay.
The petition is impressed with merit.
Petitioners’ position was that in arriving at the correct and legal amount of
separation pay due them, whether under the Labor Code or the CBA, their
basic salary, earned sales commissions and allowances should be added
together. They cited Article 97(f) of the Labor Code which includes
commission as part of one’s salary, to wit:
"(f) ‘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 reasonable value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the employer to the
employee.’ Fair and reasonable value’ shall not include any profit to the
employer or to any person affiliated with the employer."
Zuellig argues that if it were really the intention of the Labor Code as well as
its implementing rules to include commission in the computation of
separation pay, it could have explicitly said so in clear and unequivocal
terms. Furthermore, in the definition of the term "wage", "commission" is
used only as one of the features or designations attached to the word
remuneration or earnings.
Insofar as the issue of whether or not allowances should be included in the
monthly salary of petitioners for the purpose of computation of their
separation pay is concerned, this has been settled in the case of Santos v.
NLRC, Et Al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where
9
We ruled that "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." This ruling was reiterated
in Soriano v. NLRC, Et Al., G.R. No. 75510, October 27, 1987, 155 SCRA
124 and recently, in Planters Products, Inc. v. NLRC, Et Al., G.R. No. 78524,
January 20, 1989.
We shall concern ourselves now with the issue of whether or not earned
sales commissions should be included in the monthly salary of petitioners for
the purpose of computation of their separation pay.
Article 97(f) by itself is explicit that commission is included in the definition of
the term "wage." It has been repeatedly declared by the courts that where
the law speaks in clear and categorical language, there is no room for
interpretation or construction; there is only room for application (Cebu
Portland Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August
22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals, G.R. No. L-27455,
itself, and any attempt to make it clearer is vain labor and tends only to
obscurity. However, it may be argued that if We correlate Article 97(f) with
Article XIV of the Collective Bargaining Agreement, Article 284 of the Labor
Code and Sections 9(b) and 10 of the Implementing Rules, there appears to
be an ambiguity. In this regard, the Labor Arbiter rationalized his decision in
this manner (pp. 74-76, Rollo)
‘The definition of ‘wage’ provided in Article 96 (sic) of the Code can be
correctly be (sic) stated as a general definition. It is ‘wage’ in its generic
sense. A careful perusal of the same does not show any indication that
commission is part of salary. We can say that commission by itself may be
considered a wage. This is not something novel for it cannot be gain said that
certain types of employees like agents, field personnel and salesmen do not
earn any regular daily, weekly or monthly salaries, but rely mainly on
commission earned.
"Upon the other hand, the provisions of Section 10, Rule I, Book VI of the
implementing rules in conjunction with Articles 273 and 274 (sic) of the Code
specifically states that the basis of the termination pay due to one who is
sought to be legally separated from the service is ‘his latest salary rates.’
x x x
"Even Articles 273 and 274 (sic) invariably use ‘monthly pay or monthly
salary.’
"The above terms found in those Articles and the particular Rules were
intentionally used to express the intent of the framers of the law that for
purposes of separation pay they mean to be specifically referring to salary
only.
". . . . Each particular benefit provided in the Code and other Decrees on
Labor has its own pecularities and nuances and should be interpreted in that
light. Thus, for a specific provision, a specific meaning is attached to simplify
matters that may arise therefrom. The general guidelines in (sic) the
formation of specific rules for particular purpose. Thus, that what should be
controlling in matters concerning termination pay should be the specific
provisions of both Book VI of the Code and the Rules. At any rate, settled is
the rule that in matters of conflict between the general provision of law and
that of a particular or specific provision, the latter should prevail."
On its part, the NLRC ruled (p. 110, Rollo):
"From the aforequoted provisions of the law and the implementing rules, it
could be deduced that wage is used in its generic sense and obviously refers
to the basic wage rate to be ascertained on a time, task, piece or commission
basis or other method of calculating the same. It does not, however, mean
that commission, allowances or analogous income necessarily forms part of
the employee’s salary because to do so would lead to anomaleas (sic), if not
absurd, construction of the word "salary." For what will prevent the employee
from insisting that emergency living allowance, 13th month pay, overtime and
premium pay, and other fringe benefits should be added to the computation
of their separation pay. This situation, to our mind, is not the real intent of the
Code and its rules."
We rule otherwise. The ambiguity between Article 97(f), which defines the
term ‘wage’ and Article XIV of the Collective Bargaining Agreement, Article
284 of the Labor Code and Sections 9(b) and 10 of the Implementing Rules,
which mention the terms "pay" and "salary", is more apparent than real.
Broadly, the word "salary" means a recompense or consideration made to a Narvasa (Chairman), Cruz, Gancayco and Griño-Aquino, JJ., concur.
person for his pains or industry in another man’s business. Whether it be
derived from "salarium," or more fancifully from "sal," the pay of the Roman
soldier, it carries with it the fundamental idea of compensation for services
rendered. Indeed, there is eminent authority for holding that the words
"wages" and "salary" are in essence synonymous (Words and Phrases, Vol.
38 Permanent Edition, p. 44 citing Hopkins v. Cromwell, 85 N.Y.S. 839, 841,
89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of which is the
Latin word "salarium," is often used interchangeably with "wage", the
etymology of which is the Middle English word "wagen." Both words
generally refer to one and the same meaning, that is, a reward or
recompense for services performed. Likewise, "pay" is the synonym of
"wages" and "salary" (Black’s Law Dictionary, 5th Ed.). Inasmuch as the
words "wages", "pay" and "salary" have the same meaning, and commission
is included in the definition of "wage", the logical conclusion, therefore, is, in
the computation of the separation pay of petitioners, their salary base should
include also their earned sales commissions.

The aforequoted provisions are not the only consideration for deciding the
petition in favor of the petitioners.

We agree with the Solicitor General that granting, in gratia argumenti, that
the commissions were in the form of incentives or encouragement, so that
the petitioners would be inspired to put a little more industry on the jobs
particularly assigned to them, still these commissions are direct
remunerations for services rendered which contributed to the increase of
income of Zuellig. Commission is the recompense, compensation or reward
of an agent, salesman, executor, trustees, 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 (Black’s Law Dictionary, 5th Ed.,
citing Weiner v. Swales, 217 Md. 123, 141 A.2d 749, 750). 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
petitioners’ wage or salary. 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, although an employer-employee
relationship exists. Bearing in mind the preceding discussions, if We adopt
the opposite view that commissions do not form part of wage or salary, then,
in effect, We will be saying that this kind of salesmen do not receive any
salary and therefore, not entitled to separation pay in the event of discharge
from employment. Will this not be absurd? This narrow interpretation is not in
accord with the liberal spirit of our labor laws and considering the purpose of
separation pay which is, to alleviate the difficulties which confront a
dismissed employee thrown to the streets to face the harsh necessities of
life.

Additionally, in Soriano v. NLRC, Et Al., supra, in resolving the issue of the

salary base that should be used in computing the separation pay, We held
that:
"The commissions also claimed by petitioner (’override commission’ plus ‘net
deposit incentive’) are not properly includible in such base figure since such
commissions must be earned by actual market transactions attributable to
petitioner."cralaw virtua1aw library

Applying this by analogy, since the commissions in the present case were
earned by actual market transactions attributable to petitioners, these should
be included in their separation pay. In the computation thereof, what should
be taken into account is the average commissions earned during their last
year of employment.

The final consideration is, in carrying out and interpreting the Labor Code’s
provisions and its implementing regulations, the workingman’s welfare should
be the primordial and paramount consideration. This kind of interpretation
gives meaning and substance to the liberal and compassionate spirit of the
law as provided for in Article 4 of the Labor Code which states that "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" (Abella v. NLRC, G.R. No. 71812, July 30, 1987, 152 SCRA
140; Manila Electric Company v. NLRC, Et Al., G.R. No. 78763, July 12,
1989), and Article 1702 of the Civil Code which provides that "in case of
doubt, all labor legislation and all labor contracts shall be construed in favor
of the safety and decent living for the laborer.

ACCORDINGLY, the petition is hereby GRANTED. The decision of the

respondent National Labor Relations Commission is MODIFIED by including
allowances and commissions in the separation pay of petitioners Jose
Songco and Amancio Manuel. The case is remanded to the Labor Arbiter for
the proper computation of said separation pay.

SO ORDERED.

10
G.R. No. 164772 June 8, 2006
EQUITABLE BANKING CORPORATION (now known as EQUITABLE-PCI
BANK), petitioner,
vs.
RICARDO SADAC, Respondent.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari with Motion to Refer the
Petition to the Court En Banc filed by Equitable Banking Corporation (now
known as Equitable-PCI Bank), seeking to reverse the Decision1 and
Resolution2 of the Court of Appeals, dated 6 April 2004 and 28 July 2004,
respectively, as amended by the Supplemental Decision3 dated 26 October
2004 in CA-G.R. SP No. 75013, which reversed and set aside the
Resolutions of the National Labor Relations Commission (NLRC), dated 28
March 2001 and 24 September 2002 in NLRC-NCR Case No. 00-11-05252-
89.
The Antecedents
As culled from the records, respondent Sadac was appointed Vice President
of the Legal Department of petitioner Bank effective 1 August 1981, and
subsequently General Counsel thereof on 8 December 1981. On 26 June
1989, nine lawyers of petitioner Bank’s Legal Department, in a letter-petition
to the Chairman of the Board of Directors, accused respondent Sadac of
abusive conduct, inter alia, and ultimately, petitioned for a change in
leadership of the department. On the ground of lack of confidence in
respondent Sadac, under the rules of client and lawyer relationship,
petitioner Bank instructed respondent Sadac to deliver all materials in his
custody in all cases in which the latter was appearing as its counsel of
record. In reaction thereto, respondent Sadac requested for a full hearing
and formal investigation but the same remained unheeded. On 9 November
1989, respondent Sadac filed a complaint for illegal dismissal with damages
against petitioner Bank and individual members of the Board of Directors
thereof. After learning of the filing of the complaint, petitioner Bank
terminated the services of respondent Sadac. Finally, on 10 August 1989,
respondent Sadac was removed from his office and ordered disentitled to
any compensation and other benefits.4
In a Decision5 dated 2 October 1990, Labor Arbiter Jovencio Ll. Mayor, Jr.,
dismissed the complaint for lack of merit. On appeal, the NLRC in its
Resolution6 of 24 September 1991 reversed the Labor Arbiter and declared
respondent Sadac’s dismissal as illegal. The decretal portion thereof reads,
thus:
WHEREFORE, in view of all the foregoing considerations, let the Decision of
October 2, 1990 be, as it is hereby, SET ASIDE, and a new one ENTERED
declaring the dismissal of the complainant as illegal, and consequently
ordering the respondents jointly and severally to reinstate him to his former
position as bank Vice-President and General Counsel without loss of
seniority rights and other privileges, and to pay him full backwages and other
benefits from the time his compensation was withheld to his actual
reinstatement, as well as moral damages of P100,000.00, exemplary
damages of P50,000.00, and attorney’s fees equivalent to Ten Percent
(10%) of the monetary award. Should reinstatement be no longer possible
due to strained relations, the respondents are ordered likewise jointly and
severally to grant separation pay at one (1) month per year of service in the
total sum of P293,650.00 with backwages and other benefits from November
16, 1989 to September 15, 1991 (cut off date, subject to adjustment)
computed at P1,055,740.48, plus damages of P100,000.00 (moral
damages), P50,000.00 (exemplary damages) and attorney’s fees equal to
Ten Percent (10%) of all the monetary award, or a grand total of
P1,649,329.53.7
Petitioner Bank came to us for the first time via a Special Civil Action for
Certiorari assailing the NLRC Resolution of 24 September 1991 in Equitable
Banking Corporation v. National Labor Relations Commission, docketed as
G.R. No. 102467.8
In our Decision9 of 13 June 1997, we held respondent Sadac’s dismissal
illegal. We said that the existence of the employer-employee relationship
between petitioner Bank and respondent Sadac had been duly established
bringing the case within the coverage of the Labor Code, hence, we did not
permit petitioner Bank to rely on Sec. 26, Rule 13810 of the Rules of Court,
11
claiming that the association between the parties was one of a client-lawyer
relationship, and, thus, it could terminate at any time the services of
respondent Sadac. Moreover, we did not find that respondent Sadac’s
dismissal was grounded on any of the causes stated in Article 282 of the
Labor Code. We similarly found that petitioner Bank disregarded the
procedural requirements in terminating respondent Sadac’s employment as
so required by Section 2 and Section 5, Rule XIV, Book V of the
Implementing Rules of the Labor Code. We decreed:
WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED
with the following MODIFICATIONS: That private respondent shall be entitled
to backwages from termination of employment until turning sixty (60) years of
age (in 1995) and, thereupon, to retirement benefits in accordance with law;
that private respondent shall be paid an additional amount of P5,000.00; that
the award of moral and exemplary damages are deleted; and that the liability
herein pronounced shall be due from petitioner bank alone, the other
petitioners being absolved from solidary liability. No costs.11
On 28 July 1997, our Decision in G.R. No. 102467 dated 13 June 1997
became final and executory.12
Pursuant thereto, respondent Sadac filed with the Labor Arbiter a Motion for
Execution13 thereof. Likewise, petitioner Bank filed a Manifestation and
Motion14 praying that the award in favor of respondent Sadac be computed
and that after payment is made, petitioner Bank be ordered forever released
from liability under said judgment.
Per respondent Sadac’s computation, the total amount of the monetary
award is P6,030,456.59, representing his backwages and other benefits,
including the general increases which he should have earned during the
period of his illegal termination. Respondent Sadac theorized that he started
with a monthly compensation of P12,500.00 in August 1981, when he was
appointed as Vice President of petitioner Bank’s Legal Department and later
as its General Counsel in December 1981. As of November 1989, when he
was dismissed illegally, his monthly compensation amounted to P29,365.00
or more than twice his original compensation. The difference, he posited, can
be attributed to the annual salary increases which he received equivalent to
15 percent (15%) of his monthly salary.
Respondent Sadac anchored his claim on Article 279 of the Labor Code of
the Philippines, and cited as authority the cases of East Asiatic Company,
Ltd. v. Court of Industrial Relations,15 St. Louis College of Tuguegarao v.
National Labor Relations Commission,16 and Sigma Personnel Services v.
National Labor Relations Commission.17 According to respondent Sadac, the
catena of cases uniformly holds that it is the obligation of the employer to pay
an illegally dismissed employee the whole amount of the salaries or wages,
plus all other benefits and bonuses and general increases to which he would
have been normally entitled had he not been dismissed; and therefore, salary
increases should be deemed a component in the computation of backwages.
Moreover, respondent Sadac contended that his check-up benefit, clothing
allowance, and cash conversion of vacation leaves must be included in the
computation of his backwages.
Petitioner Bank disputed respondent Sadac’s computation. Per its
computation, the amount of monetary award due respondent Sadac is
P2,981,442.98 only, to the exclusion of the latter’s general salary increases
and other claimed benefits which, it maintained, were unsubstantiated. The
jurisprudential precedent relied upon by petitioner Bank in assailing
respondent Sadac’s computation is Evangelista v. National Labor Relations
Commission,18 citing Paramount Vinyl Products Corp. v. National Labor
Relations Commission,19 holding that an unqualified award of backwages
means that the employee is paid at the wage rate at the time of his dismissal.
Furthermore, petitioner Bank argued before the Labor Arbiter that the award
of salary differentials is not allowed, the established rule being that upon
reinstatement, illegally dismissed employees are to be paid their backwages
without deduction and qualification as to any wage increases or other
benefits that may have been received by their co-workers who were not
dismissed or did not go on strike.
On 2 August 1999, Labor Arbiter Jovencio Ll. Mayor, Jr. rendered an
Order20 adopting respondent Sadac’s computation. In the main, the Labor
Arbiter relying on Millares v. National Labor Relations
Commission21 concluded that respondent Sadac is entitled to the general
increases as a component in the computation of his backwages. Accordingly,
he awarded respondent Sadac the amount of P6,030,456.59 representing
his backwages inclusive of allowances and other claimed benefits, namely
check-up benefit, clothing allowance, and cash conversion of vacation leave
plus 12 percent (12%) interest per annum equivalent to P1,367,590.89 as of
30 June 1999, or a total of P7,398,047.48. However, considering that
respondent Sadac had already received the amount of P1,055,740.48 by
virtue of a Writ of Execution22 earlier issued on 18 January 1999, the Labor
Arbiter directed petitioner Bank to pay respondent Sadac the amount of
P6,342,307.00. The Labor Arbiter also granted an award of attorney’s fees
equivalent to ten percent (10%) of all monetary awards, and imposed a 12
percent (12%) interest per annum reckoned from the finality of the judgment
until the satisfaction thereof.
The Labor Arbiter decreed, thus:
WHEREFORE, in view of al (sic) the foregoing, let an "ALIAS" Writ of
Execution be issued commanding the Sheriff, this Branch, to collect from
respondent Bank the amount of Ph6,342,307.00 representing the backwages
with 12% interest per annum due complainant.23
Petitioner Bank interposed an appeal with the NLRC, which reversed the
Labor Arbiter in a Resolution,24 promulgated on 28 March 2001. It
ratiocinated that the doctrine on general increases as component in
computing backwages in Sigma Personnel Services and St. Louis was
merely obiter dictum. The NLRC found East Asiatic Co., Ltd. inapplicable on
the ground that the original circumstances therein are not only peculiar to the
said case but also completely strange to the case of respondent Sadac.
Further, the NLRC disallowed respondent Sadac’s claim to check-up benefit
ratiocinating that there was no clear and substantial proof that the same was
being granted and enjoyed by other employees of petitioner Bank. The award
of attorney’s fees was similarly deleted.
The dispositive portion of the Resolution states:
WHEREFORE, the instant appeal is considered meritorious and accordingly,
the computation prepared by respondent Equitable Banking Corporation on
the award of backwages in favor of complainant Ricardo Sadac under the
decision promulgated by the Supreme Court on June 13, 1997 in G.R. No.
102476 in the aggregate amount of P2,981,442.98 is hereby ordered.25
Respondent Sadac’s Motion for Reconsideration thereon was denied by the
NLRC in its Resolution,26 promulgated on 24 September 2002.
Aggrieved, respondent Sadac filed before the Court of Appeals a Petition for
Certiorari seeking nullification of the twin resolutions of the NLRC, dated 28
March 2001 and 24 September 2002, as well as praying for the
reinstatement of the 2 August 1999 Order of the Labor Arbiter.
For the resolution of the Court of Appeals were the following issues, viz.:
(1) Whether periodic general increases in basic salary, check-up
benefit, clothing allowance, and cash conversion of vacation leave
are included in the computation of full backwages for illegally
dismissed employees;
(2) Whether respondent is entitled to attorney’s fees; and
(3) Whether respondent is entitled to twelve percent (12%) per
annum as interest on all accounts outstanding until full payment
thereof.
Finding for respondent Sadac (therein petitioner), the Court of Appeals
rendered a Decision on 6 April 2004, the dispositive portion of which is
quoted hereunder:
WHEREFORE, premises considered, the March 28, 2001 and the
September 24, 2002 Resolutions of the National Labor Relations
Commissions (sic) are REVERSED and SET ASIDE and the August 2, 1999
Order of the Labor Arbiter is REVIVED to the effect that private respondent is
DIRECTED TO PAY petitioner the sum of PhP6,342,307.00, representing full
back wages (sic) which sum includes annual general increases in basic
salary, check-up benefit, clothing allowance, cash conversion of vacation
leave and other sundry benefits plus 12% per annum interest on outstanding
balance from July 28, 1997 until full payment.
Costs against private respondent.27
The Court of Appeals, citing East Asiatic held that respondent Sadac’s
general increases should be added as part of his backwages. According to
the appellate court, respondent Sadac’s entitlement to the annual general
12
increases has been duly proven by substantial evidence that the latter, in
fact, enjoyed an annual increase of more or less 15 percent (15%).
Respondent Sadac’s check-up benefit, clothing allowance, and cash
conversion of vacation leave were similarly ordered added in the computation
of respondent Sadac’s basic wage.
Anent the matter of attorney’s fees, the Court of Appeals sustained the
NLRC. It ruled that our Decision28 of 13 June 1997 did not award attorney’s
fees in respondent Sadac’s favor as there was nothing in the aforesaid
Decision, either in the dispositive portion or the body thereof that supported
the grant of attorney’s fees. Resolving the final issue, the Court of Appeals
imposed a 12 percent (12%) interest per annum on the total monetary award
to be computed from 28 July 1997 or the date our judgment in G.R. No.
102467 became final and executory until fully paid at which time the
quantification of the amount may be deemed to have been reasonably
ascertained.
On 7 May 2004, respondent Sadac filed a Partial Motion for
Reconsideration29 of the 6 April 2004 Court of Appeals Decision insofar as
the appellate court did not award him attorney’s fees. Similarly, petitioner
Bank filed a Motion for Partial Reconsideration thereon. Following an
exchange of pleadings between the parties, the Court of Appeals rendered a
Resolution,30 dated 28 July 2004, denying petitioner Bank’s Motion for Partial
Reconsideration for lack of merit.
Assignment of Errors
Hence, the instant Petition for Review by petitioner Bank on the following
assignment of errors, to wit:
(a) The Hon. Court of Appeals erred in ruling that general salary
increases should be included in the computation of full
backwages.
(b) The Hon. Court of Appeals erred in ruling that the applicable
authorities in this case are: (i) East Asiatic, Ltd. v. CIR, 40 SCRA
521 (1971); (ii) St. Louis College of Tuguegarao v. NLRC, 177
SCRA 151 (1989); (iii) Sigma Personnel Services v. NLRC, 224
SCRA 181 (1993); and (iv) Millares v. NLRC, 305 SCRA 500
(1999) and not (i) Art. 279 of the Labor Code; (ii) Paramount Vinyl
Corp. v. NLRC, 190 SCRA 525 (1990); (iii) Evangelista v. NLRC,
249 SCRA 194 (1995); and (iv) Espejo v. NLRC, 255 SCRA 430
(1996).
(c) The Hon. Court of Appeals erred in ruling that respondent is
entitled to check-up benefit, clothing allowance and cash
conversion of vacation leaves notwithstanding that respondent did
not present any evidence to prove entitlement to these claims.
(d) The Hon. Court of Appeals erred in ruling that respondent is
entitled to be paid legal interest even if the principal amount due
him has not yet been correctly and finally determined.31
Meanwhile, on 26 October 2004, the Court of Appeals rendered a
Supplemental Decision granting respondent Sadac’s Partial Motion for
Reconsideration and amending the dispositive portion of the 6 April 2004
Decision in this wise, viz.:
WHEREFORE, premises considered, the March 24 (sic), 2001 and the
September 24, 2002 Resolutions of the National Labor Relations
Commission are hereby REVERSED and SET ASIDE and the August 2,
1999 Order of the Labor Arbiter is hereby REVIVED to the effect that private
respondent is hereby DIRECTED TO PAY petitioner the sum of
P6,342,307.00, representing full backwages which sum includes annual
general increases in basic salary, check-up benefit, clothing allowance, cash
conversion of vacation leave and other sundry benefits "and attorney’s fees
equal to TEN PERCENT (10%) of all the monetary award" plus 12% per
annum interest on all outstanding balance from July 28, 1997 until full
payment.
Costs against private respondent.32
On 22 November 2004, petitioner Bank filed a Supplement to Petition for
Review33 contending in the main that the Court of Appeals erred in issuing
the Supplemental Decision by directing petitioner Bank to pay an additional
amount to respondent Sadac representing attorney’s fees equal to ten
percent (10%) of all the monetary award.
The Court’s Ruling
I.
We are called to write finis to a controversy that comes to us for the second
time. At the core of the instant case are the divergent contentions of the
parties on the manner of computation of backwages.
Petitioner Bank asseverates that Article 279 of the Labor Code of the
Philippines does not contemplate the inclusion of salary increases in the
definition of "full backwages." It controverts the reliance by the appellate
court on the cases of (i) East Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and
(iv) Millares. While it is in accord with the pronouncement of the Court of
Appeals that Republic Act No. 6715, in amending Article 279, intends to give
more benefits to workers, petitioner Bank submits that the Court of Appeals
was in error in relying on East Asiatic to support its finding that salary
increases should be included in the computation of backwages as nowhere
in Article 279, as amended, are salary increases spoken of. The prevailing
rule in the milieu of the East Asiatic doctrine was to deduct earnings earned
elsewhere from the amount of backwages payable to an illegally dismissed
employee.
Petitioner Bank posits that even granting that East Asiatic allowed general
salary increases in the computation of backwages, it was because the
inclusion was purposely to cushion the blow of the deduction of earnings
derived elsewhere; with the amendment of Article 279 and the consequent
elimination of the rule on the deduction of earnings derived elsewhere, the
rationale for including salary increases in the computation of backwages no
longer exists. On the references of salary increases in the aforementioned
cases of (i) St. Louis; (ii) Sigma Personnel; and (iii) Millares, petitioner Bank
contends that the same were merely obiter dicta. In fine, petitioner Bank
anchors its claim on the cases of (i) Paramount Vinyl Products Corp. v.
National Labor Relations Commission;34 (ii) Evangelista v. National Labor
Relations Commission;35 and (iii) Espejo v. National Labor Relations
Commission,36 which ruled that an unqualified award of backwages is
exclusive of general salary increases and the employee is paid at the wage
rate at the time of the dismissal.
For his part, respondent Sadac submits that the Court of Appeals was correct
when it ruled that his backwages should include the general increases on the
basis of the following cases, to wit: (i) East Asiatic; (ii) St. Louis; (iii) Sigma
Personnel; and (iv) Millares.
Resolving the protracted litigation between the parties necessitates us to
revisit our pronouncements on the interpretation of the term backwages. We
said that backwages in general are granted on grounds of equity for earnings
which a worker or employee has lost due to his illegal dismissal.37 It is not
private compensation or damages but is awarded in furtherance and
effectuation of the public objective of the Labor Code. Nor is it a redress of a
private right but rather in the nature of a command to the employer to make
public reparation for dismissing an employee either due to the former’s
unlawful act or bad faith.38 The Court, in the landmark case of Bustamante v.
National Labor Relations Commission,39 had the occasion to explicate on the
meaning of full backwages as contemplated by Article 27940 of the Labor
Code of the Philippines, as amended by Section 34 of Rep. Act No. 6715.
The Court in Bustamante said, thus:
The Court deems it appropriate, however, to reconsider such earlier ruling on
the computation of backwages as enunciated in said Pines City Educational
Center case, by now holding that conformably with the evident legislative
intent as expressed in Rep. Act No. 6715, above-quoted, backwages to be
awarded to an illegally dismissed employee, should not, as a general rule, be
diminished or reduced by the earnings derived by him elsewhere during the
period of his illegal dismissal. The underlying reason for this ruling is that the
employee, while litigating the legality (illegality) of his dismissal, must still
earn a living to support himself and family, while full backwages have to be
paid by the employer as part of the price or penalty he has to pay for illegally
dismissing his employee. The clear legislative intent of the amendment in
Rep. Act No. 6715 is to give more benefits to workers than was previously
given them under the Mercury Drug rule or the "deduction of earnings
elsewhere" rule. Thus, a closer adherence to the legislative policy behind
Rep. Act No. 6715 points to "full backwages" as meaning exactly that, i.e.,
without deducting from backwages the earnings derived elsewhere by the
concerned employee during the period of his illegal dismissal. In other words,
the provision calling for "full backwages" to illegally dismissed employees is
clear, plain and free from ambiguity and, therefore, must be applied without
attempted or strained interpretation. Index animi sermo est.41
13
Verily, jurisprudence has shown that the definition of full backwages has
forcefully evolved. In Mercury Drug Co., Inc. v. Court of Industrial
Relations,42 the rule was that backwages were granted for a period of three
years without qualification and without deduction, meaning, the award of
backwages was not reduced by earnings actually earned by the dismissed
employee during the interim period of the separation. This came to be known
as the Mercury Drug rule.43 Prior to the Mercury Drug ruling in 1974, the total
amount of backwages was reduced by earnings obtained by the employee
elsewhere from the time of the dismissal to his reinstatement. The Mercury
Drug rule was subsequently modified in Ferrer v. National Labor Relations
Commission44 and Pines City Educational Center v. National Labor Relations
Commission,45 where we allowed the recovery of backwages for the duration
of the illegal dismissal minus the total amount of earnings which the
employee derived elsewhere from the date of dismissal up to the date of
reinstatement, if any. In Ferrer and in Pines, the three-year period was
deleted, and instead, the dismissed employee was paid backwages for the
entire period that he was without work subject to the deductions, as
mentioned. Finally came our ruling in Bustamante which superseded Pines
City Educational Center and allowed full recovery of backwages without
deduction and without qualification pursuant to the express provisions of
Article 279 of the Labor Code, as amended by Rep. Act No. 6715, i.e.,
without any deduction of income the employee may have derived from
employment elsewhere from the date of his dismissal up to his reinstatement,
that is, covering the entirety of the period of the dismissal.
The first issue for our resolution involves another aspect in the computation
of full backwages, mainly, the basis of the computation thereof. Otherwise
stated, whether general salary increases should be included in the base
figure to be used in the computation of backwages.
In so concluding that general salary increases should be made a component
in the computation of backwages, the Court of Appeals ratiocinated, thus:
The Supreme Court held in East Asiatic, Ltd. v. Court of Industrial Relations,
40 SCRA 521 (1971) that "general increases" should be added as a part of
full backwages, to wit:
In other words, the just and equitable rule regarding the point under
discussion is this: It is the obligation of the employer to pay an illegally
dismissed employee or worker the whole amount of the salaries or wages,
plus all other benefits and bonuses and general increases, to which he would
have been normally entitled had he not been dismissed and had not stopped
working, but it is the right, on the other hand of the employer to deduct from
the total of these, the amount equivalent to the salaries or wages the
employee or worker would have earned in his old employment on the
corresponding days he was actually gainfully employed elsewhere with an
equal or higher salary or wage, such that if his salary or wage in his other
employment was less, the employer may deduct only what has been actually
earned.
The doctrine in East Asiatic was subsequently reiterated, in the cases of St.
Louis College of Tugueg[a]rao v. NLRC, 177 SCRA 151 (1989); Sigma
Personnel Services v. NLRC, 224 SCRA 181 (1993) and Millares v. National
Labor Relations Commission, 305 SCRA 500 (1999).
Private respondent, in opposing the petitioner’s contention, alleged in his
Memorandum that only the wage rate at the time of the employee’s illegal
dismissal should be considered – private respondent citing the following
decisions of the Supreme Court: Paramount Vinyl Corp. v. NLRC 190 SCRA
525 (1990); Evangelista v. NLRC, 249 SCRA 194 (1995); Espejo v. NLRC,
255 SCRA 430 (1996) which rendered obsolete the ruling in East Asiatic, Ltd.
v. Court of Industrial Relations, 40 SCRA 521 (1971).
We are not convinced.
The Supreme Court had consistently held that payment of full backwages is
the price or penalty that the employer must pay for having illegally dismissed
an employee.
In Ala Mode Garments, Inc. v. NLRC 268 SCRA 497 (1997) and Bustamante
v. NLRC and Evergreen Farms, Inc. 265 SCRA 61 (1996) the Supreme Court
held that the clear legislative intent in the amendment in Republic Act 6715
was to give more benefits to workers than was previously given them under
the Mercury Drug rule or the "deductions of earnings elsewhere" rule.
The Paramount Vinyl, Evangelista, and Espejo cases cited by private
respondent are inapplicable to the case at bar. The doctrines therein came
about as a result of the old Mercury Drug rule, which was repealed with the
passage of Republic Act 6715 into law. It was in Alex Ferrer v. NLRC 255
SCRA 430 (1993) when the Supreme Court returned to the doctrine in East
Asiatic, which was soon supplanted by the case of Bustamante v. NLRC and
Evergreen Farms, Inc., which held that the backwages to be awarded to an
illegally dismissed employee, should not, as a general rule, be diminished or
reduced by the earnings derived from him during the period of his illegal
dismissal. Furthermore, the Mercury Drug rule was never meant to prejudice
the workers, but merely to speed the recovery of their backwages.
Ever since Mercury Drug Co. Inc. v. CIR 56 SCRA 694 (1974), it had been
the intent of the Supreme Court to increase the backwages due an illegally
dismissed employee. In the Mercury Drug case, full backwages was to be
recovered even though a three-year limitation on recovery of full backwages
was imposed in the name of equity. Then in Bustamante, full backwages was
interpreted to mean absolutely no deductions regardless of the duration of
the illegal dismissal. In Bustamante, the Supreme Court no longer regarded
equity as a basis when dealing with illegal dismissal cases because it is not
equity at play in illegal dismissals but rather, it is employer’s obligation to pay
full back wages (sic). It is an obligation of the employer because it is "the
price or penalty the employer has to pay for illegally dismissing his
employee."
The applicable modern definition of full backwages is now found in Millares v.
National Labor Relations Commission 305 SCRA 500 (1999), where
although the issue in Millares concerned separation pay – separation pay
and backwages both have employee’s wage rate at their foundation.
x x x The rationale is not difficult to discern. It is the obligation of the
employer to pay an illegally dismissed employee the whole amount of his
salaries plus all other benefits, bonuses and general increases to which he
would have been normally entitled had he not been dismissed and had not
stopped working. The same holds true in case of retrenched employees. x x
x
xxxx
x x x Annual general increases are akin to "allowances" or "other
benefits." 46 (Italics ours.)
We do not agree.
Attention must be called to Article 279 of the Labor Code of the Philippines,
as amended by Section 34 of Rep. Act No. 6715. The law provides as
follows:
ART. 279. Security of Tenure. – In cases of regular employment, the
employer shall not terminate the services of an employee except for a just
cause or when authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed
from the time his compensation was withheld from him up to the time of his
actual reinstatement. (Emphasis supplied.)
Article 279 mandates that an employee’s full backwages shall be inclusive of
allowances and other benefits or their monetary equivalent. Contrary to the
ruling of the Court of Appeals, we do not see that a salary increase can be
interpreted as either an allowance or a benefit. Salary increases are not akin
to allowances or benefits, and cannot be confused with either. The term
"allowances" is sometimes used synonymously with "emoluments," as
indirect or contingent remuneration, which may or may not be earned, but
which is sometimes in the nature of compensation, and sometimes in the
nature of reimbursement.47 Allowances and benefits are granted to the
employee apart or separate from, and in addition to the wage or salary. In
contrast, salary increases are amounts which are added to the employee’s
salary as an increment thereto for varied reasons deemed appropriate by the
employer. Salary increases are not separate grants by themselves but once
granted, they are deemed part of the employee’s salary. To extend the
coverage of an allowance or a benefit to include salary increases would be to
strain both the imagination of the Court and the language of law. As aptly
observed by the NLRC, "to otherwise give the meaning other than what the
law speaks for by itself, will open the floodgates to various
interpretations."48 Indeed, if the intent were to include salary increases as
basis in the computation of backwages, the same should have been explicitly
stated in the same manner that the law used clear and unambiguous terms in
expressly providing for the inclusion of allowances and other benefits.
14
Moreover, we find East Asiatic inapplicable to the case at bar. In East Asiatic,
therein petitioner East Asiatic Company, Ltd. was found guilty of unfair labor
practices against therein respondent, Soledad A. Dizon, and the Court
ordered her reinstatement with back pay. On the question of the amount of
backwages, the Court granted the dismissed employee the whole amount of
the salaries plus all general increases and bonuses she would have received
during the period of her lay-off with the corresponding right of the employer to
deduct from the total amounts, all the earnings earned by the employee
during her lay-off. The emphasis in East Asiatic is the duty of both the
employer and the employee to disclose the material facts and competent
evidence within their peculiar knowledge relative to the proper determination
of backwages, especially as the earnings derived by the employee elsewhere
are deductions to which the employer are entitled. However, East Asiatic
does not find relevance in the resolution of the issue before us. First, the
material date to consider is 21 March 1989, when the law amending Article
279 of the Labor Code, Rep. Act No. 6715, otherwise known as the Herrera-
Veloso Law, took effect. It is obvious that the backdrop of East Asiatic,
decided by this Court on 31 August 1971 was prior to the current state of the
law on the definition of full backwages. Second, it bears stressing that East
Asiatic was decided at a time when even as an illegally dismissed employee
is entitled to the whole amount of the salaries or wages, it was the
recognized right of the employer to deduct from the total of these, the
amount equivalent to the salaries or wages the employee or worker would
have earned in his old employment on the corresponding days that he was
actually gainfully employed elsewhere with an equal or higher salary or
wage, such that if his salary or wage in his other employment was less, the
employer may deduct only what has been actually earned.49 It is for this
reason the Court centered its discussion on the duty of both parties to be
candid and open about facts within their knowledge to establish the amount
of the deductions, and not leave the burden on the employee alone to
establish his claim, as well as on the duty of the court to compel the parties
to cooperate in disclosing such material facts. The inapplicability of East
Asiatic to respondent Sadac was sufficiently elucidated upon by the NLRC,
viz.:
A full discernment of the pertinent portion of the judgment sought to be
executed in East Asiatic Co., Ltd. would reveal as follows:
"x x x to reinstate Soledad A. Dizon immediately to her former position with
backwages from September 1, 1958 until actually reinstated with all the
rights and privileges acquired and due her, including seniority and such other
terms and conditions of employment AT THE TIME OF HER LAY-OFF"
The basis on which this doctrine was laid out was summed up by the
Supreme Court which ratiocinated in this light. To quote:
"x x x on the other hand, of the employer to deduct from the total of these,
the amount equivalent to these salaries or wages the employee or worker
would have earned in his old employment on the corresponding days that he
was actually gainfully employed elsewhere with an equal or higher salary or
wage, such that if his salary or wage in his other employment was less, the
employer may deduct only what has been actually earned x x x" (Ibid, pp.
547-548).
But the Supreme Court, in the instant case, pronounced a clear but different
judgment from that of East Asiatic Co. decretal portion, in this wise:
"WHEREFORE, the herein questioned Resolution of the NLRC is
AFFIRMED with the following MODIFICATIONS: that private respondent
shall be entitled to backwages from termination of employment until turning
sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; xxx"
Undisputably (sic), it was decreed in plain and unambiguous language that
complainant Sadac "shall be entitled to backwages." No more, no less.
Thus, this decree for Sadac cannot be considered in any way, substantially in
essence, with the award of backwages as pronounced for Ms. Dizon in the
case of East Asiatic Co. Ltd.50
In the same vein, we cannot accept the Court of Appeals’ reliance on the
doctrine as espoused in Millares. It is evident that Millares concerns itself
with the computation of the salary base used in computing the separation
pay of petitioners therein. The distinction between backwages and separation
pay is elementary. Separation pay is granted where reinstatement is no
longer advisable because of strained relations between the employee and
the employer. Backwages represent compensation that should have been
earned but were not collected because of the unjust dismissal. The bases for
computing the two are different, the first being usually the length of the
employee’s service and the second the actual period when he was unlawfully
prevented from working.51
The issue that confronted the Court in Millares was whether petitioners’
housing and transportation allowances therein which they allegedly received
on a monthly basis during their employment should have been included in
the computation of their separation pay. It is plain to see that the reference to
general increases in Millares citing East Asiatic was a mere obiter. The crux
in Millares was our pronouncement that 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.
Whether salary increases are deemed part of the salary base in the
computation of backwages was not the issue in Millares.
Neither can we look at St. Louis of Tuguegarao to resolve the instant
controversy. What was mainly contentious therein was the inclusion of fringe
benefits in the computation of the award of backwages, in particular
additional vacation and sick leaves granted to therein concerned employees,
it evidently appearing that the reference to East Asiatic in a footnote was a
mere obiter dictum. Salary increases are not akin to fringe benefits52 and
neither is it logical to conceive of both as belonging to the same taxonomy.
We must also resolve against the applicability of Sigma Personnel Services
to the case at bar. The basic issue before the Court therein was whether the
employee, Susan Sumatre, a domestic helper in Abu Dhabi, United Arab
Emirates, had been illegally dismissed, in light of the contention of Sigma
Personnel Services, a duly licensed recruitment agency, that the former was
a mere probationary employee who was, on top of this status, mentally
unsound.53 Even a cursory reading of Sigma Personnel Services citing St.
Louis College of Tuguegarao would readily show that inclusion of salary
increases in the computation of backwages was not at issue. The same was
not on all fours with the instant petition.
What, then, is the basis of computation of backwages? Are annual general
increases in basic salary deemed component in the computation of full
backwages? The weight of authority leans in petitioner Bank’s favor and
against respondent Sadac’s claim for the inclusion of general increases in
the computation of his backwages.
We stressed in Paramount that an unqualified award of backwages means
that the employee is paid at the wage rate at the time of his dismissal, thus:
The determination of the salary base for the computation of backwages
requires simply an application of judicial precedents defining the term
"backwages". Unfortunately, the Labor Arbiter erred in this regard. An
unqualified award of backwages means that the employee is paid at the
wage rate at the time of his dismissal [Davao Free Worker Front v. Court of
Industrial Relations, G.R. No. L-29356, October 27, 1975, 67 SCRA 418;
Capital Garments Corporation v. Ople, G.R. No. 53627, September 30, 1982,
117 SCRA 473; Durabilt Recapping Plant & Company v. NLRC, G.R. No.
76746, July 27, 1987, 152 SCRA 328]. And the Court has declared that the
base figure to be used in the computation of backwages due to the employee
should include not just the basic salary, but also the regular allowances that
he had been receiving, such as the emergency living allowances and the
13th month pay mandated under the law [See Pan-Philippine Life Insurance
Corporation v. NLRC, G.R. No. 53721, June 29, 1982, 144 SCRA 866;
Santos v. NLRC, G.R. No. 76721, September 21, 1987, 154 SCRA 166;
Soriano v. NLRC, G.R. No. 75510, October 27, 1987, 155 SCRA 124; Insular
Life Assurance Co., Ltd. v. NLRC, supra.]54 (Emphasis supplied.)
There is no ambivalence in Paramount, that the base figure to be used in the
computation of backwages is pegged at the wage rate at the time of the
employee’s dismissal, inclusive of regular allowances that the employee had
been receiving such as the emergency living allowances and the 13th month
pay mandated under the law.
In Evangelista v. National Labor Relations Commission,55 we addressed the
sole issue of whether the computation of the award of backwages should be
based on current wage level or the wage levels at the time of the dismissal.
We resolved that an unqualified award of backwages means that the
employee is paid at the wage rate at the time of his dismissal, thus:
As explicitly declared in Paramount Vinyl Products Corp. vs. NLRC, the
determination of the salary base for the computation of backwages requires
simply an application of judicial precedents defining the term "backwages."
An unqualified award of backwages means that the employee is paid at the
wage rate at the time of his dismissal. Furthermore, the award of salary
15
differentials is not allowed, the established rule being that upon
reinstatement, illegally dismissed employees are to be paid their backwages
without deduction and qualification as to any wage increases or other
benefits that may have been received by their co-workers who were not
dismissed or did not go on strike.56
The case of Paramount was relied upon by the Court in the latter case of
Espejo v. National Labor Relations Commission,57 where we reiterated that
the computation of backwages should be based on the basic salary at the
time of the employee’s dismissal plus the regular allowances that he had
been receiving. Further, the clarification made by the Court in General
Baptist Bible College v. National Labor Relations Commission,58 settles the
issue, thus:
We also want to clarify that when there is an award of backwages this
actually refers to backwages without qualifications and deductions. Thus, We
held that:
"The term ‘backwages without qualification and deduction’ means that the
workers are to be paid their backwages fixed as of the time of the dismissal
or strike without deduction for their earnings elsewhere during their layoff and
without qualification of their wages as thus fixed; i.e., unqualified by any
wage increases or other benefits that may have been received by their co-
workers who are not dismissed or did not go on strike. Awards including
salary differentials are not allowed. The salary base properly used should,
however, include not only the basic salary but also the emergency cost of
living allowances and also transportation allowances if the workers are
entitled thereto."59 (Italics supplied.)
Indeed, even a cursory reading of the dispositive portion of the Court’s
Decision of 13 June 1997 in G.R. No. 102467, awarding backwages to
respondent Sadac, readily shows that the award of backwages therein is
unqualified, ergo, without qualification of the wage as thus fixed at the time of
the dismissal and without deduction.
A demarcation line between salary increases and backwages was drawn by
the Court in Paguio v. Philippine Long Distance Telephone Co., Inc.,60 where
therein petitioner Paguio, on account of his illegal transfer sought
backwages, including an amount equal to 16 percent (16%) of his monthly
salary representing his salary increases during the period of his demotion,
contending that he had been consistently granted salary increases because
of his above average or outstanding performance. We said:
In several cases, the Court had the opportunity to elucidate on the reason for
the grant of backwages. Backwages are granted on grounds of equity to
workers for earnings lost due to their illegal dismissal from work. They are a
reparation for the illegal dismissal of an employee based on earnings which
the employee would have obtained, either by virtue of a lawful decree or
order, as in the case of a wage increase under a wage order, or by rightful
expectation, as in the case of one’s salary or wage. The outstanding feature
of backwages is thus the degree of assuredness to an employee that he
would have had them as earnings had he not been illegally terminated from
his employment.
Petitioner’s claim, however, is based simply on expectancy or his assumption
that, because in the past he had been consistently rated for his outstanding
performance and his salary correspondingly increased, it is probable that he
would similarly have been given high ratings and salary increases but for his
transfer to another position in the company.
In contrast to a grant of backwages or an award of lucrum cessans in the civil
law, this contention is based merely on speculation. Furthermore, it assumes
that in the other position to which he had been transferred petitioner had not
been given any performance evaluation. As held by the Court of Appeals,
however, the mere fact that petitioner had been previously granted salary
increases by reason of his excellent performance does not necessarily
guarantee that he would have performed in the same manner and, therefore,
qualify for the said increase later. What is more, his claim is tantamount to
saying that he had a vested right to remain as Head of the Garnet Exchange
and given salary increases simply because he had performed well in such
position, and thus he should not be moved to any other position where
management would require his services.61
Applying Paguio to the case at bar, we are not prepared to accept that this
degree of assuredness applies to respondent Sadac’s salary increases.
There was no lawful decree or order supporting his claim, such that his
salary increases can be made a component in the computation of
backwages. What is evident is that salary increases are a mere expectancy.
They are, by its nature volatile and are dependent on numerous variables,
including the company’s fiscal situation and even the employee’s future
performance on the job, or the employee’s continued stay in a position
subject to management prerogative to transfer him to another position where
his services are needed. In short, there is no vested right to salary increases.
That respondent Sadac may have received salary increases in the past only
proves fact of receipt but does not establish a degree of assuredness that is
inherent in backwages. From the foregoing, the plain conclusion is that
respondent Sadac’s computation of his full backwages which includes his
prospective salary increases cannot be permitted.
Respondent Sadac cannot take exception by arguing that jurisprudence
speaks only of wage and not salary, and therefore, the rule is inapplicable to
him. It is respondent Sadac’s stance that he was not paid at the wage rate
nor was he engaged in some form of manual or physical labor as he was
hired as Vice President of petitioner Bank. He cites Gaa v. Court of
Appeals62 where the Court distinguished between wage and salary.
The reliance is misplaced. The distinction between salary and wage in Gaa
was for the purpose of Article 1708 of the Civil Code which mandates that,
"[t]he laborer’s wage shall not be subject to execution or attachment, except
for debts incurred for food, shelter, clothing and medical attendance." In labor
law, however, the distinction appears to be merely semantics. Paramount
and Evangelista may have involved wage earners, but the petitioner in
Espejo was a General Manager with a monthly salary of P9,000.00 plus
privileges. That wage and salary are synonymous has been settled in
Songco v. National Labor Relations Commission.63 We said:
Broadly, the word "salary" means a recompense or consideration made to a
person for his pains or industry in another man’s business. Whether it be
derived from "salarium," or more fancifully from "sal," the pay of the Roman
soldier, it carries with it the fundamental idea of compensation for services
rendered. Indeed, there is eminent authority for holding that the words
"wages" and "salary" are in essence synonymous (Words and Phrases, Vol.
38 Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S.839, 841,
89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of which is the
Latin word "salarium," is often used interchangeably with "wage", the
etymology of which is the Middle English word "wagen". Both words
generally refer to one and the same meaning, that is, a reward or
recompense for services performed. Likewise, "pay" is the synonym of
"wages" and "salary" (Black’s Law Dictionary, 5th Ed). x x x64 (Italics
supplied.)
II.
Petitioner Bank ascribes as its second assignment of error the Court of
Appeals’ ruling that respondent Sadac is entitled to check-up benefit, clothing
allowance and cash conversion of vacation leaves notwithstanding that
respondent Sadac did not present any evidence to prove entitlement to these
claims.65
The determination of respondent Sadac’s entitlement to check-up benefit,
clothing allowance, and cash conversion of vacation leaves involves a
question of fact. The well-entrenched rule is that only errors of law not of
facts are reviewable by this Court in a petition for review.66 The jurisdiction of
this Court in a petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure, as amended, is limited to reviewing only errors of
law, not of fact, unless the factual findings being assailed are not supported
by evidence on record or the impugned judgment is based on a
misapprehension of facts.67 This Court is also not precluded from delving into
and resolving issues of facts, particularly if the findings of the Labor Arbiter
are inconsistent with those of the NLRC and the Court of Appeals.68 Such is
the case in the instant petition. The Labor Arbiter and the Court of Appeals
are in agreement anent the entitlement of respondent Sadac to check-up
benefit, clothing allowance, and cash conversion of vacation leaves, but the
findings of the NLRC were to the contrary. The Labor Arbiter sustained
respondent Sadac’s entitlement to check-up benefit, clothing allowance and
cash conversion of vacation leaves. He gave weight to petitioner Bank’s
acknowledgment in its computation that respondent Sadac is entitled to
certain benefits, namely, rice subsidy, tuition fee allowance, and medicine
allowance, thus, there exists no reason to deprive respondent Sadac of his
other benefits. The Labor Arbiter also reasoned that the petitioner Bank did
not adduce evidence to support its claim that the benefits sought by
respondent Sadac are not granted to its employees and officers. Similarly,
the Court of Appeals ratiocinated that if ordinary employees are entitled to
receive these benefits, so it is with more reason for a Vice President, like
herein respondent Sadac to receive the same.
16
We find in the records that, per petitioner Bank’s computation, the benefits to
be received by respondent are monthly rice subsidy, tuition fee allowance per
year, and medicine allowance per year.69 Contained nowhere is an
acknowledgment of herein claimed benefits, namely, check-up benefit,
clothing allowance, and cash conversion of vacation leaves. We cannot
sustain the rationalization that the acknowledgment by petitioner Bank in its
computation of certain benefits granted to respondent Sadac means that the
latter is also entitled to the other benefits as claimed by him but not
acknowledged by petitioner Bank. The rule is, he who alleges, not he who
denies, must prove. Mere allegations by respondent Sadac does not suffice
in the absence of proof supporting the same.
III.
We come to the third assignment of error raised by petitioner Bank in its
Supplement to Petition for Review, assailing the 26 October 2004
Supplemental Decision of the Court of Appeals which amended the fallo of its
6 April 2004 Decision to include "attorney’s fees equal to TEN PERCENT
(10%) of all the monetary award" granted to respondent Sadac. Petitioner
Bank posits that neither the dispositive portion of our 13 June 1997 Decision
in G.R. No. 102467 nor the body thereof awards attorney’s fees to
respondent Sadac. It is postulated that the body of the 13 June 1997
Decision does not contain any findings of facts or conclusions of law relating
to attorney’s fees, thus, this Court did not intend to grant to respondent
Sadac the same, especially in the light of its finding that the petitioner Bank
was not motivated by malice or bad faith and that it did not act in a wanton,
oppressive, or malevolent manner in terminating the services of respondent
Sadac.70
We do not agree.
At the outset it must be emphasized that when a final judgment becomes
executory, it thereby becomes immutable and unalterable. The judgment
may no longer be modified in any respect, even if the modification is meant
to correct what is perceived to be an erroneous conclusion of fact or law, and
regardless of whether the modification is attempted to be made by the Court
rendering it or by the highest Court of the land. The only recognized
exceptions are the correction of clerical errors or the making of so-called
nunc pro tunc entries which cause no prejudice to any party, and, of course,
where the judgment is void.71 The Court’s 13 June 1997 Decision in G.R. No.
102467 became final and executory on 28 July 1997. This renders moot
whatever argument petitioner Bank raised against the grant of attorney’s fees
to respondent Sadac. Of even greater import is the settled rule that it is the
dispositive part of the judgment that actually settles and declares the rights
and obligations of the parties, finally, definitively, and authoritatively,
notwithstanding the existence of inconsistent statements in the body that
may tend to confuse.72
Proceeding therefrom, we make a determination of whether the Court in
Equitable Banking Corporation v. National Labor Relations
Commission,73 G.R. No. 102467, dated 13 June 1997, awarded attorney’s
fees to respondent Sadac. In recapitulation, the dispositive portion of the
aforesaid Decision is hereunder quoted:
WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED
with the following MODIFICATIONS: That private respondent shall be entitled
to backwages from termination of employment until turning sixty (60) years of
age (in 1995) and, thereupon, to retirement benefits in accordance with law;
that private respondent shall be paid an additional amount of P5,000.00; that
the award of moral and exemplary damages are deleted; and that the liability
herein pronounced shall be due from petitioner bank alone, the other
petitioners being absolved from solidary liability. No costs.74
The dispositive portion of the 24 September 1991 Decision of the NLRC
awards respondent Sadac attorney’s fees equivalent to ten percent (10%) of
the monetary award, viz:
WHEREFORE, in view of all the foregoing considerations, let the Decision of
October 2, 1990 be, as it is hereby, SET ASIDE and a new one ENTERED
declaring the dismissal of the complainant as illegal, and consequently
ordering the respondents jointly and severally to reinstate him to his former
position as bank Vice-President and General Counsel without loss of
seniority rights and other privileges, and to pay him full backwages and other
benefits from the time his compensation was withheld to his actual
reinstatement, as well as moral damages of P100,000.00, exemplary
damages of P50,000.00, and attorney’s fees equivalent to Ten Percent
(10%) of the monetary award. Should reinstatement be no longer possible
due to strained relations, the respondents are ordered likewise jointly and
severally to grant separation pay at one (1) month per year of service in the
total sum of P293,650.00 with backwages and other benefits from November
16, 1989 to September 15, 1991 (cut off date, subject to adjustment)
computed at P1,055,740.48, plus damages of P100,000.00 (moral
damages), P50,000.00 (exemplary damages) and attorney’s fees equal to
Ten Percent (10%) of all the monetary award, or a grand total of
P1,649,329.53.75 (Italics Ours.)
As can be gleaned from the foregoing, the Court’s Decision of 13 June 1997
AFFIRMED with MODIFICATION the NLRC Decision of 24 September 1991,
which modification did not touch upon the award of attorney’s fees as
granted, hence, the award stands. Juxtaposing the decretal portions of the
NLRC Decision of 24 September 1991 with that of the Court’s Decision of 13
June 1997, we find that what was deleted by the Court was "the award of
moral and exemplary damages," but not the award of "attorney’s fees
equivalent to Ten Percent (10%) of the monetary award." The issue on the
grant of attorney’s fees to respondent Sadac has been adequately and
definitively threshed out and settled with finality when petitioner Bank came
to us for the first time on a Petition for Certiorari in Equitable Banking
Corporation v. National Labor Relations Commission, docketed as G.R. No.
102467. The Court had spoken in its Decision of 13 June 1997 in the said
case which attained finality on 28 July 1997. It is now immutable.
IV.
We proceed with the penultimate issue on the entitlement of respondent
Sadac to twelve percent (12%) interest per annum on the outstanding
balance as of 28 July 1997, the date when our Decision in G.R. No. 102467
became final and executory.
In Eastern Shipping Lines, Inc. v. Court of Appeals,76 the Court, speaking
through the Honorable Justice Jose C. Vitug, laid down the following rules of
thumb:
I. When an obligation, regardless of its source, i.e., law, contracts,
quasi-contracts, delicts or quasi-delicts is breached, the
contravenor can be held liable for damages. The provisions under
Title XVIII on "Damages" of the Civil Code govern in determining
the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of
actual or compensatory damages, the rate of interest, as well as
the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in
the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that
which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12%
per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to
the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand
can be established with reasonable certainty.
Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run
from the time the claim is made judicially or
extrajudicially (Article 1169, Civil Code) but when such
certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to
run only from the date the judgment of the court is
made (at which time the quantification of damages
may be deemed to have been reasonably
ascertained). The actual base for the computation of
legal interest shall, in any case, be on the amount
finally adjudged.
3. When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or
17
paragraph 2 above, shall be 12% per annum from such
finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance
of credit.77
It is obvious that the legal interest of twelve percent (12%) per annum shall
be imposed from the time judgment becomes final and executory, until full
satisfaction thereof. Therefore, petitioner Bank is liable to pay interest from
28 July 1997, the finality of our Decision in G.R. No. 102467.78 The Court of
Appeals was not in error in imposing the same notwithstanding that the
parties were at variance in the computation of respondent Sadac’s
backwages. What is significant is that the Decision of 13 June 1997 which
awarded backwages to respondent Sadac became final and executory on 28
July 1997.
V.
Finally, petitioner Bank’s Motion to Refer the Petition En Banc must
necessarily be denied as established in our foregoing discussion. We are not
herein modifying or reversing a doctrine or principle laid down by the Court
en banc or in a division. The instant case is not one that should be heard by
the Court en banc.791avvphil.net
Fallo
WHEREFORE, the petition is PARTIALLY GRANTED in the sense that in the
computation of the backwages, respondent Sadac’s claimed prospective
salary increases, check-up benefit, clothing allowance, and cash conversion
of vacation leaves are excluded. The petition is PARTIALLY DENIED insofar
as we AFFIRMED the grant of attorney’s fees equal to ten percent (10%) of
all the monetary award and the imposition of twelve percent (12%) interest
per annum on the outstanding balance as of 28 July 1997. Hence, the
Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 75013,
dated 6 April 2004 and 28 July 2004, respectively, and the Supplemental
Decision dated 26 October 2004 are MODIFIED in the following manner, to
wit:
Petitioner Bank is DIRECTED TO PAY respondent Sadac the following:
(1) BACKWAGES in accordance with Our Decision dated 13 June
1997 in G.R. No. 102467 with a clarification that the award of
backwages EXCLUDES respondent Sadac’s claimed prospective
salary increases, check-up benefit, clothing allowance, and cash
conversion of vacation leaves;
(2) ATTORNEY’S FEES equal to TEN PERCENT (10%) of the
total sum of all monetary award; and
(3) INTEREST of TWELVE PERCENT (12%) per annum is
hereby imposed on the total sum of all monetary award from 28
July 1997, the date of finality of Our Decision in G.R. No. 102467
until full payment of the said monetary award.
The Motion to Refer the Petition to the Court En Banc is DENIED.
No costs.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice
G.R. No. L-44169 December 3, 1985
ROSARIO A. GAA, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, EUROPHIL INDUSTRIES
CORPORATION, and CESAR R. ROXAS, Deputy Sheriff of
Manila, respondents.
Federico C. Alikpala and Federico Y. Alikpala, Jr. for petitioner.
Borbe and Palma for private respondent.
PATAJO, J.:
This is a petition for review on certiorari of the decision of the Court of
Appeals promulgated on March 30, 1976, affirming the decision of the Court
of First Instance of Manila.
It appears that respondent Europhil Industries Corporation was formerly one
of the tenants in Trinity Building at T.M. Kalaw Street, Manila, while petitioner
Rosario A. Gaa was then the building administrator. On December 12, 1973,
Europhil Industries commenced an action (Civil Case No. 92744) in the Court
of First Instance of Manila for damages against petitioner "for having
perpetrated certain acts that Europhil Industries considered a trespass upon
its rights, namely, cutting of its electricity, and removing its name from the
building directory and gate passes of its officials and employees" (p. 87
Rollo). On June 28, 1974, said court rendered judgment in favor of
respondent Europhil Industries, ordering petitioner to pay the former the sum
of P10,000.00 as actual damages, P5,000.00 as moral damages, P5,000.00
as exemplary damages and to pay the costs.
The said decision having become final and executory, a writ of garnishment
was issued pursuant to which Deputy Sheriff Cesar A. Roxas on August 1,
1975 served a Notice of Garnishment upon El Grande Hotel, where petitioner
was then employed, garnishing her "salary, commission and/or
remuneration." Petitioner then filed with the Court of First Instance of Manila
a motion to lift said garnishment on the ground that her "salaries, commission
and, or remuneration are exempted from execution under Article 1708 of the
New Civil Code. Said motion was denied by the lower Court in an order
dated November 7, 1975. A motion for reconsideration of said order was
likewise denied, and on January 26, 1976 petitioner filed with the Court of
Appeals a petition for certiorari against filed with the Court of Appeals a
petition for certiorari against said order of November 7, 1975.
On March 30, 1976, the Court of Appeals dismissed the petition
for certiorari. In dismissing the petition, the Court of Appeals held that
petitioner is not a mere laborer as contemplated under Article 1708 as the
term laborer does not apply to one who holds a managerial or supervisory
position like that of petitioner, but only to those "laborers occupying the lower
strata." It also held that the term "wages" means the pay given" as hire or
reward to artisans, mechanics, domestics or menial servants, and laborers
employed in manufactories, agriculture, mines, and other manual occupation
and usually employed to distinguish the sums paid to persons hired to
perform manual labor, skilled or unskilled, paid at stated times, and
measured by the day, week, month, or season," citing 67 C.J. 285, which is
the ordinary acceptation of the said term, and that "wages" in Spanish is
"jornal" and one who receives a wage is a "jornalero."
In the present petition for review on certiorari of the aforesaid decision of the
Court of Appeals, petitioner questions the correctness of the interpretation of
the then Court of Appeals of Article 1708 of the New Civil Code which reads
as follows:
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.
It is beyond dispute that petitioner is not an ordinary or rank and file laborer
but "a responsibly place employee," of El Grande Hotel, "responsible for
planning, directing, controlling, and coordinating the activities of all
housekeeping personnel" (p. 95, Rollo) so as to ensure the cleanliness,
maintenance and orderliness of all guest rooms, function rooms, public
areas, and the surroundings of the hotel. Considering the importance of
petitioner's function in El Grande Hotel, it is undeniable that petitioner is
18
occupying a position equivalent to that of a managerial or supervisory
position.
In its broadest sense, the word "laborer" includes everyone who performs
any kind of mental or physical labor, but as commonly and customarily used
and understood, it only applies to one engaged in some form of manual or
physical labor. That is the sense in which the courts generally apply the term
as applied 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 are other. (22 Am. Jur. 22 citing Briscoe vs.
Montgomery, 93 Ga 602, 20 SE 40; Miller vs. Dugas, 77 Ga 4 Am St Rep
192; State ex rel I.X.L. Grocery vs. Land, 108 La 512, 32 So 433; Wildner vs.
Ferguson, 42 Minn 112, 43 NW 793; 6 LRA 338; Anno 102 Am St Rep. 84.
In Oliver vs. Macon Hardware Co., 98 Ga 249 SE 403, it was held that in
determining whether a particular laborer or employee is really a "laborer," the
character of the word he does must be taken into consideration. He must be
classified not according to the arbitrary designation given to his calling, but
with reference to the character of the service required of him by his
employer.
In Wildner vs. Ferguson, 42 Minn 112, 43 NW 793, the Court also held that
all men who earn compensation by labor or work of any kind, whether of the
head or hands, including judges, laywers, bankers, merchants, officers of
corporations, and the like, are in some sense "laboring men." But they are
not "laboring men" in the popular sense of the term, when used to refer to a
must presume, the legislature used the term. The Court further held in said
case:
There are many cases holding that contractors,
consulting or assistant engineers, agents,
superintendents, secretaries of corporations and livery
stable keepers, do not come within the meaning of the
term. (Powell v. Eldred, 39 Mich, 554, Atkin v.
Wasson, 25 N.Y. 482; Short v. Medberry, 29 Hun.
39; Dean v. De Wolf, 16 Hun. 186; Krausen v.
Buckel, 17 Hun. 463; Ericson v. Brown, 39 Barb.
390; Coffin v. Reynolds, 37 N.Y. 640; Brusie v.
Griffith, 34 Cal. 306; Dave v. Nunan, 62 Cal. 400).
Thus, in Jones vs. Avery, 50 Mich, 326, 15 N.W. Rep. 494, it was held that a
traveling salesman, selling by sample, did not come within the meaning of a
constitutional provision making stockholders of a corporation liable for "labor
debts" of the corporation.
In Kline vs. Russell 113 Ga. 1085, 39 SE 477, citing Oliver vs. Macon
Hardware Co., supra, it was held that a laborer, within the statute exempting
from garnishment the wages of a "laborer," is one 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.
So, also in Wakefield vs. Fargo, 90 N.Y. 213, the Court, in construing an act
making stockholders in a corporation liable for debts due "laborers, servants
and apprentices" for services performed for the corporation, held that a
"laborer" is 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. And
in Weymouth vs. Sanborn, 43 N.H. 173, 80 Am. Dec. 144, it was held that
"laborer" is a term ordinarily employed to denote one who subsists by
physical toil in contradistinction to those who subsists by professional skill.
And in Consolidated Tank Line Co. vs. Hunt, 83 Iowa, 6, 32 Am. St. Rep.
285, 43 N.W. 1057, 12 L.R.A. 476, it was stated that "laborers" are 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.
The term "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, while "salary" denotes a
higher degree of employment, or a superior grade of services, and implies a
position of office: by contrast, the term wages " indicates considerable pay
for a lower and less responsible character of employment, while "salary" is
suggestive of a larger and more important service (35 Am. Jur. 496).
The distinction between wages and salary was adverted to in Bell vs. Indian
Livestock Co. (Tex. Sup.), 11 S.W. 344, wherein it was said: "'Wages' are the
compensation given to a hired person for service, and the same is true of
'salary'. The words seem to be synonymous, convertible terms, though we
believe that use and general acceptation have given to the word 'salary' a
significance somewhat different from the word 'wages' in this: that the former
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." Annotation 102 Am. St. Rep. 81, 95.

We do not think that the legislature intended the exemption in Article 1708 of
the New Civil Code 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. Petitioner Rosario A. Gaa is definitely not within that class.

We find, therefore, and so hold that the Trial Court did not err in denying in its
order of November 7, 1975 the motion of petitioner to lift the notice of
garnishment against her salaries, commission and other remuneration from
El Grande Hotel since said salaries, Commission and other remuneration
due her from the El Grande Hotel do not constitute wages due a laborer
which, under Article 1708 of the Civil Code, are not subject to execution or
attachment.

IN VIEW OF THE FOREGOING, We find the present petition to be without

merit and hereby AFFIRM the decision of the Court of Appeals, with costs
against petitioner.

SO ORDERED.

Teehankee (Chairman), Plana, Gutierrez, Jr. and De la Fuente, JJ., concur.

Melencio-Herrera (Chairperson) and Relova, JJ., is on leave.

19
G.R. No. 204651 August 6, 2014 respondents’ daily wages, the value of these benefits should be considered,
in line with Article 97(f)11 of the Labor Code.
OUR HAUS REALTY DEVELOPMENT CORPORATION, Petitioner,
vs. Our Haus also rejected the respondents’ other monetary claims for lack of
ALEXANDER PARIAN, JAY C. ERINCO, ALEXANDER CANLAS, proof that they were entitled to it.12
BERNARD TENEDERO and JERRY SABULAO, Respondents.
On the other hand, the respondents argued that the value of their meals
DECISION should not be considered in determining their wages’ total amount since the
requirements set under Section 413 of DOLE14 Memorandum Circular No.
BRION, J.: 215 were not complied with.

We resolve in this petition for review on certiorari1 the challenge to the May
7, 2012 decision2 and the November 27, 2012 resolution3 (assailed CA
rulings) of the Court of Appeals (CA) in CA-G.R. SP No. 123273. These
assailed CA rulings affirmed the July 20, 2011 decision4 and the December
2, 2011 resolution5 (NLRC rulings) of the National Labor Relations
Commission (NLRC) in NLRC LAC No. 02-000489-11 (NLRC NCR Case No.
06-08544-10). The NLRC rulings in turn reversed and set aside the
December 10, 2010 decision6 of the labor arbiter (LA).
Factual Antecedents
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.The respondents’ respective employment records
and daily wage rates from 2007 to 2010 are summarized in the table7 below:
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.16 Also, Our Haus failed to prove that the value of the facilities it
furnished was fair and reasonable.17 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).18
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.19 As to the other benefits, the LA
found that the respondents were not able to substantiate their claims for it.20
The respondents appealed the LA’s decision to the NLRC, which in turn,
reversed it. Citing the case of Mayon Hotel & Restaurant v. Adana,21 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
samecannot be credited.

Date Years of Year and Place of Daily The NLRC also ruled that the respondents are entitled to their respective
Name
Hired Service Assignment Rate proportionate 13th month payments for the year 2010 and SIL payments for
at least three years,immediately preceding May 31, 2010, the date when the
Alexander October 2007-2010-
10 years ₱353.50 respondents leftOur Haus. However, the NLRC sustained the LA’s ruling that
M. Parian 1999 Quezon City
the respondents were not entitled to overtime pay since the exact dates and
2008- Quezon City times when they rendered overtime work had not been proven.22
Jay C. January
10 years 2009- Antipolo ₱342.00
Erinco 2000
2010- Quezon City Our Haus moved for the reconsideration23 of the NLRC’s decision and
submitted new evidence (the five kasunduans) to show that the respondents
Alexander 2007-2010-
2005 5 years ₱312.00 authorized Our Haus in writing to charge the values of their meals and
R. Canlas Quezon City
lodging to their wages.
2008- Quezon City
Jerry Q. August
10 years 2009- Antipolo ₱342.00 The NLRC denied Our Haus’ motion, thus it filed a Rule 65 petition24 with the
Sabulao 1999
2010- Quezon City CA. In its petition, Our Haus propounded a new theory. It made a distinction
between deduction and charging. A written authorization is only necessary if
Bernardo N. 2007-2010- the facility’s value will be deducted and will not be needed if it will merely be
1994 16 years ₱383.50
Tenedero Quezon City charged or included in the computation of wages.25 Our Haus claimed that it
did not actually deduct the values of the meals and housing benefits. It only
Sometime in May 2010, Our Haus experienced financial distress. To alleviate considered these in computing the total amount of wages paid to the
its condition, Our Haus suspended some of its construction projects and respondents for purposes of compliance with the minimum wage law. Hence,
asked the affected workers, including the respondents, to take vacation the written authorization requirement should not apply.
leaves.8
Our Haus also asserted that the respondents’ claim for SIL pay should be
Eventually, the respondents were asked to report back to work but instead of denied as this was not included in their pro formacomplaint. Lastly, it
doing so, they filed with the LA a complaint for underpayment of their daily questioned the respondents’entitlement to attorney’s fees because they were
wages. They claimed that except for respondent Bernardo N. Tenedero, their not represented by a private lawyer but by the Public Attorney’s Office
wages were below the minimum rates prescribed in the following wage (PAO).
orders from 2007 to 2010:
The CA’s Ruling
1. Wage Order No. NCR-13, which provides for a daily minimum
wage rate of ₱362.00for the non-agriculture sector (effective from The CA dismissed Our Haus’ certiorari petition and affirmed the NLRC
August 28, 2007 until June 13, 2008); and rulings in toto. It found no real distinction between deduction and
charging,26 and ruled that the legal requirements before any deduction or
2. Wage Order No. NCR-14, which provides for a daily minimum charging can be made, apply to both. Our Haus, however, failed to prove that
wage rate of ₱382.00for the non-agriculture sector (effective from it complied with any of the requirements laid down in Mabeza v. National
June 14, 2008 until June 30, 2010). Labor Relations Commission.27 Accordingly, it cannot consider the values of
its meal and housing facilities in the computation of the respondents’ total
wages.
The respondents also alleged thatOur Haus failed to pay them their holiday,
service incentive leave (SIL), 13th month and overtime pays.9
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
The Labor Arbitration Rulings various pleadings,28 then the NLRC properly considered it as part of the
respondents’ causes of action. Lastly, the CA affirmed the respondent’s
Before the LA, Our Haus primarily argued that the respondents’ wages entitlement to attorney’s fees.29
complied with the law’s minimum requirement. Aside from paying the
monetary amount of the respondents’ wages, Our Haus also subsidized their Our Haus filed a motion for reconsideration but the CA denied its motion,
meals (3 times a day), and gave them free lodging near the construction prompting it to file the present petition for review on certiorari under Rule 45.
project they were assigned to.10 In determining the total amount of the
20
 The Petition
Our Haus submits that the CA erred in ruling that the legal requirements
apply without distinction ―whether the facility’s value will be deducted or
merely included in the computation of the wages. At any rate, it complied with
the requirements for deductibility of the value of the facilities. First, the five
kasunduans executed by the respondents constitute the written authorization
for the inclusion of the board and lodging’s values to their wages. Second,
Our Haus only withheld the amount of ₱290.00 which represents the food’s
raw value; the weekly cooking cost (cook’s wage, LPG, water) at ₱239.40
per person is a separate expense that Our Haus did not withhold from the
respondents’ wages.30 This disproves the respondents’claim that it deducted
the full amount of the meals’ value.
Lastly, the CA erred in ruling that the claim for SIL pay may still be granted
though not raised in the complaint; and that the respondents are entitled to
an award of attorney’s fees.31
The Case for the Respondents
The respondents prayed for the denial of the petition.32
They maintained that
the CA did not err inruling that the values of the board and lodging cannot be
deducted from their wages for failure to comply with the requirements set by
law.33 And though the claim for SIL pay was not included in their pro forma
complaint, they raised their claims in their position paper and Our Haus had
the opportunity to contradict it in its pleadings.34
Finally, under the PAO law, the availment of the PAO’s legal services does
not exempt its clients from an award of attorney’s fees.35
The Court’s Ruling
We resolve to DENYthe petition.
The nature of a Rule 45 petition ― only questions of law
Basic is the rule that only questions of lawmay be raised in a Rule 45
petition.36 However, in this case, weare confronted with mixed questions of
fact and law that are subsumed under the issue of whether Our Haus
complied with the legal requirements on the deductibility of the value of
facilities. Strictly, factual issues cannot be considered under Rule 45 except
in the course of resolving if the CA correctly determined whether or not the
NLRC committed grave abuse of discretion in considering and appreciating
the factual issues before it.37
In ruling for legal correctness, we have to view the CA decision in the same
context that the petition for certiorariit ruled upon was presented to it; we
have to examine the CA decision from the prism of whether it correctly
determined the presence or absence of grave abuse of discretion in the
NLRC decision before it, not on the basis of whether the NLRC decision, on
the merits of the case, was correct. In other words, we have to be keenly
aware that the CA undertook a Rule 65 review, not a review on appeal, of the
NLRC decision challenged before it. This is the approach that should bebasic
in a Rule 45 review of a CA ruling in a labor case. In question form, the
question to ask in the present case is: did the CA correctly determine that the
NLRC did not commit grave abuse of discretion in ruling on the case?38 We
rule that the CA correctly did.
No substantial distinction between deducting and charging a facility’s value
from the employee’s wage; the legal requirements for creditability apply to
both
To justify its non-compliance with the requirements for the deductibility of a
facility, Our Haus asks us to believe that there is a substantial distinction
between the deduction and the charging of a facility’s value to the wages.
Our Haus explains that in deduction, the amount of the wage (which may
already be below the minimum) would still be lessened by the facility’s value,
thus needing the employee’s consent. On the other hand, in charging, there
is no reduction of the employee’s wage since the facility’s value will just be
theoretically added to the wage for purposes of complying with the minimum
wage requirement.39
Our Haus’ argument is a vain attempt to circumvent the minimum wage law
by trying to create a distinction where none exists.
21
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.
As the CA correctly ruled, these requirements, as summarized in Mabeza,
are the following:
a. proof must be shown thatsuch facilities are customarily
furnished by the trade;
b. the provision of deductiblefacilities must be voluntarily accepted
in writingby the employee; and
c. The facilities must be charged at fair and reasonable value.40
We examine Our Haus’ compliance with each of these requirements in
seriatim.
a. The facility must be customarily furnished by the trade
In a string of cases, we have concluded that one of the badges to show that
a facility is customarily furnished by the trade is the existence of a company
policy or guideline showing that provisions for a facility were designated as
part of the employees’ salaries.41 To comply with this, Our Haus presented in
its motion for reconsideration with the NLRC the joint sinumpaang salaysayof
four of its alleged employees. These employees averred that they were
recipients of free lodging, electricity and water, as well as subsidized meals
from Our Haus.42
We agree with the NLRC’s finding that the sinumpaang salaysay statements
submitted by Our Haus are self-serving.1âwphi1 For one, Our Haus only
produced the 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 inits 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
furnishingthe benefits in question among enterprises engaged in the same
line of business. If it were customary among construction companies to
provide board and lodging to their workers and treat their values as part of
their wages, we would have more reason to conclude that these benefits
were really facilities.
However, Our Haus could not really be expected to prove compliance with
the first requirement since the living accommodation of workers in the
construction industry is not simply a matter of business practice. Peculiar to
the construction business are the occupational safety and health (OSH)
services which the law itself mandates employers to provide to their workers.
This isto ensure the humane working conditions of construction employees
despite their constant exposure to hazardous working environments. Under
Section 16 of DOLE Department Order (DO) No. 13, series of
1998,43 employers engaged in the construction business are required to
providethe following welfare amenities:
16.1 Adequate supply of safe drinking water
16.2 Adequate sanitaryand washing facilities
16.3 Suitable living accommodation for workers, and as may be
applicable, for their families
16.4 Separate sanitary, washing and sleeping facilitiesfor men
and women workers. [emphasis ours]
Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for
the implementation ofDOLE DO No. 13, mandates that the cost of the
implementation of the requirements for the construction safety and health of
workers, shall be integrated to the overall project cost.44 The rationale behind
this isto ensure that the living accommodation of the workers is not
substandard and is strictly compliant with the DOLE’s OSH criteria.
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 testset 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.45 Here, careful consideration is
given to the nature of the employer’s business in relation to the work
performed by the employee. This test is used to address inequitable
situations wherein employers consider a benefit deductible from the wages
even if the factual circumstances show that it clearly redounds to the
employers’ greater advantage.
While the rules serve as the initial test in characterizing a benefit as a facility,
the purpose test additionally recognizes that the employer and the employee
do not stand at the same bargaining positions on benefits that must or must
not formpart of an employee’s wage. In the ultimate analysis, the purpose
test seeks to prevent a circumvention of the minimum wage law.
a1. The purpose test in jurisprudence
Under the law,46 only the value of the facilities may be deducted from the
employees’ wages but not the value of supplements. Facilities include
articles or services for the benefit of the employee or his family but exclude
tools of the trade or articles or services primarily for the benefit of the
employer or necessary to the conduct of the employer’s business.47
The law also prescribes that the computation of wages shall exclude
whatever benefits, supplementsor allowances given to employees.
Supplements are paid to employees on top of their basic pay and are free of
charge.48 Since it does not form part of the wage, a supplement’s value may
not be includedin the determination of whether an employer complied with
the prescribed minimum wage rates.
In the present case, the board and lodging provided by Our Haus cannot be
categorized asfacilities but as supplements. In SLL International Cables
Specialist v. National Labor Relations Commission,49 this Court was
confronted with the issue on the proper characterization of the free board and
lodging provided by the employer. We explained:
The Court, at this point, makes a distinction between "facilities" and
"supplements". It is of the view that the food and lodging, or the electricity
and water allegedly consumed by private respondents in this case were not
facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big
Wedge Co., the two terms were distinguished from one another in this wise:
"Supplements", therefore, constitute extra remuneration or special privileges
or benefits given to or received by the laborers overand above their ordinary
earnings or wages. "Facilities", on the other hand, are items of expense
necessary for the laborer's and his family's existence and subsistence so
thatby express provision of law (Sec. 2[g]), 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 SLLfor
the purpose of maintaining the efficiency and health of its workers while they
were working attheir respective projects.50
Ultimately, the real difference lies not on the kind of the benefit but on the
purpose why it was given by the employer. If it is primarily for the employee’s
gain, then the benefit is a facility; if its provision is mainly for the employer’s
advantage, then it is a supplement. Again, this is to ensure that employees
22
are protected in circumstances where the employer designates a benefit as
deductible from the wages even though it clearly works to the employer’s
greater convenience or advantage.
Under the purpose test, substantial consideration must be given to the nature
of the employer’s business inrelation to the character or type of work
performed by the employees involved.
Our Haus is engaged in the construction business, a laborintensive
enterprise. The success of its projects is largely a function of the physical
strength, vitality and efficiency of its laborers. Its business will be jeopardized
if its workers are weak, sickly, and lack the required energy to perform
strenuous physical activities. Thus, by ensuring that the workers are
adequately and well fed, the employer is actually investing on its business.
Unlike in office enterprises where the work is focused on desk jobs, the
construction industry relies heavily and directly on the physical capacity and
endurance of its workers. This is not to say that desk jobs do not require
muscle strength; wesimply emphasize that in the construction business, bulk
of the work performed are strenuous physical activities.
Moreover, in the construction business, contractors are usually faced with the
problem ofmeeting target deadlines. More often than not, work is performed
continuously, day and night, in order to finish the project on the designated
turn-over date. Thus, it will be more convenient to the employer if itsworkers
are housed near the construction site to ensure their ready availability during
urgent or emergency circumstances. Also, productivity issues like tardiness
and unexpected absences would be minimized. This observation strongly
bears in the present case since three of the respondents are not residents of
the National Capital Region. The board and lodging provision might have
been a substantial consideration in their acceptance of employment in a
place distant from their provincial residences.
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. If weighed on a scale, the balance tilts more towards Our Haus’
side. Accordingly, their values cannot be considered in computing the total
amount of the respondents’ wages. Under the circumstances, the dailywages
paid to the respondents are clearly below the prescribed minimum wage
rates in the years 2007-2010.
b. The provision of deductible facilities must be voluntarily accepted in writing
by the employee
In Mayon Hotel, we reiterated that a facility may only be deducted from the
wage if the employer was authorized in writingby the concerned
employee.51 As it diminishes the take-home pay of an employee, the
deduction must be with his express consent.
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 reallybeen
executed when respondents first assumed their jobs.
Moreover, in the earlier sinumpaang salaysay by Our Haus’ four employees,
it was not mentioned that they also executed a kasunduanfor their board and
lodging benefits. Because of these surrounding circumstances and the
suspicious timing when the five kasunduanswere submitted as evidence, we
agree withthe CA that the NLRC committed no grave abuse of discretion in
disregarding these documents for being self serving.
c. The facility must be charged at a fair and reasonable value
Our Haus admitted that it deducted the amount of ₱290.00 per week from
each of the respondents for their meals. But it now submits that it did not
actually withhold the entire amount as it did not figure in the computation the
money it expended for the salary of the cook, the water, and the LPG used
for cooking, which amounts to ₱249.40 per week per person. From these, it
appears that the total meal expense per week for each person is
₱529.40,making Our Haus’ ₱290.00 deduction within the 70% ceiling
prescribed by the rules.
However, Our Haus’ valuation cannotbe plucked out of thin air. The valuation
of a facility must besupported by relevant documents such as receipts and
company records for it to be considered as fair and reasonable. In Mabeza,
we noted:
Curiously, in the case at bench, the only valuations relied upon by the labor
arbiter in his decision were figures furnished by the private respondent's own
accountant, without corroborative evidence.On the pretext that records prior
to the July 16, 1990 earthquake were lost or destroyed, respondent failed to
produce payroll records, receipts and other relevant documents, where he
could have, as has been pointedout in the Solicitor General's manifestation,
"secured certified copies thereof from the nearest regional office of the
Department of Labor, the SSS or the BIR".52 [emphasis ours]
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. Eventhe
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 withthis third requisite.
A claim not raised in the pro forma complaint may still beraised in the
position paper.
Finally, we affirm that respondents are entitled to attorney’s fees. Our Haus’
asserts that respondents’ availment of free legal services from the PAO
disqualifies them from such award. We find this untenable.
It is settled that in actions for recovery of wages or where an employee was
forced to litigate and, thus, incur expenses to protect his rights and interest,
the award of attorney's fees is legally and morally justifiable.56 Moreover,
under the PAO Law or Republic Act No. 9406, the costs of the suit, attorney's
fees and contingent fees imposed upon the adversary of the PAO clients
after a successful litigation shall be deposited in the National Treasury as
trust fund and shall be disbursed for special allowances of authorized officials
and lawyers of the PAO.57
Thus, the respondents are still entitled to attorney's fees. The attorney's fees
awarded to them shall be paid to the PAO. It serves as a token recompense
to the PAO for its provision of free legal services to litigants who have no
means of hiring a private lawyer.
WHEREFORE, in light of these considerations, we conclude that the Court of
Appeals correctly found that the National Labor Relations Commission did
not abuse its discretion in its decision of July 20, 2011 and Resolution of
December 2, 2011.1âwphi1 Consequently we DENY the petition and
AFFIRM the Court of Appeals' decision dated May 7, 2012 and resolution
dated November 27, 2012 in CA-G.R. SP No. 123273. No costs.
SO ORDERED.
ARTURO D. BRION
Associate Justice

Our Haus questions the respondents’ entitlement to SIL pay by pointing out
that this claim was not included in the pro forma complaint filed with the
NLRC. However, we agree with the CA that such omission does not bar the
labor tribunals from touching upon this cause of action since this was raised
and discussed inthe respondents’ position paper. In Samar-Med Distribution
v. National Labor Relations Commission,53 we held:

Firstly, petitioner’s contention that the validity of Gutang’s dismissal should

not be determined because it had not been included in his complaint before
the NLRC is bereft of merit. The complaint of Gutang was a mere checklist of
possible causes of action that he might have against Roleda. Such manner
of preparing the complaint was obviously designed to facilitate the filing of
complaints by employees and laborers who are thereby enabled to
expediently set forth their grievances in a general manner. But the non-
inclusion in the complaint of the issue on the dismissal did not necessarily
mean that the validity of the dismissal could not be an issue.The rules of the
NLRC require the submission of verified position papers by the parties
should they fail to agree upon an amicable settlement, and bar the inclusion
of any cause of action not mentioned in the complaint or position paper from
the time of their submission by the parties. In view of this, Gutang’s cause of
action should be ascertained not from a reading of his complaint alone but
also from a consideration and evaluation of both his complaint and position
paper.54

The respondents’ entitlement to the other monetary benefits

Generally a party who alleges payment as a defense has the burden of

proving it.Particularly in labor cases, the burden of proving payment of
monetary claims rests on the employeron the reasoning that the pertinent
personnel files, payrolls, records, remittances and other similar documents —
which will show that overtime, differentials, service incentive leave and other
claims of workers have been paid — are not in the possession of the worker
but in the custody and absolute control of the employer.55

Unfortunately, records will disclose the absence of any credible document

which will show that respondents had been paid their 13th month pay,
holiday and SIL pays. Our Haus merely presented a handwritten certification
from its administrative officer that its employees automatically become
entitled to five days of service incentive leave as soon as they pass
probation. This certification was not even subscribed under oath. Our Haus
could have at least submitted its payroll or copies of the pay slips of
respondents to show payment of these benefits. However, it failed to do so.

Respondents are entitled to attorney’s fees.

23
G.R. No. 122827 March 29, 1999
LIDUVINO M. MILLARES, J. CAPISTRANO CORDITA, SHIRLEY P. UY,
DIONISIO J. REQUINA, GABRIEL A. DEJERO, NELSON T. GOMONIT,
IMELDA IMPEYNADO SULPICIO B. SUMILE, MA. CONSUELO AVIEL,
SILVINO S.GUEVARRA, FIDEL DUMANHOG, NELFA T.POLOTAN,
LEMUEL C. RISMA, JUANITO M. GONZALES, ROGELIO B. CABATUAN,
EPIFANCIO E. GANANCIAL, DOMINADOR D. ATOK, CONRADO U.
SERRANO, ISIDRO J. BARNAJA, ROMEO VIRTUDAZO, AVELINO
NABLE, EDGAR TAMPOS, ERNESTO ORIAS, DALMACIO LEGARAY,
ROMEO R. BULA ROBERTO G.GARCIA, RUDOLFO SUZON, JERRY S.
DANO, AUGUST G. ESCUDERO, OSCAR B. CATBAGAN, TEOFILO C.
SISON, NARCISO BULASA, ALBERTO CORTEZ, LILIA C. CABRERA,
NESTOR A. ACASO, BIENVENIDO MOZO, ISIDORO A. ALMENDAREZ,
VICENTE M. PILONGO, ROBERTO N. LUMPOT, PATRICIO BANDOLA,
MANUEL S. ESPINA, ISIDRO K. BALCITA, JR., EMMANUEL O.
ABRAHAM, OLEGARIO A. EPIS, NESTOR D. PEREGRINO, RAMON
A.USANAGA, PRESTO BARTOLOME, BRADY EMPEYNADO, PORFERIO
N. CONDADO, AQUILLO V. CORDOVA, LEONARDO ESTOSI, PACIFICO
B. DACORINA, PABLITO B. LLUBIT, ANTONIO DOZA, LEONITO
LABADIA, EDGARDO BELLIZA, FEDENCIO P. GEBERTAS, VIRGILIO D.
GULBE, MANUEL A. LERIO, JR., ROGELIO B. OCAMIA, RODOLFO A.
CASTILLO, EDMUNDO L. PLAZA, ROBERTO D. YAGONIA, JR.,
PETRONIO ESTELA, JR., CRISOLOGO A. LOGRONIO, ERNESTO T.
MORIO, ROGELIO M. DAVID, BENJAMIN U. ARLIGUE, APOLONIO
MUNDO, JR., NENE M. ESPINOSA, NILO B. BALAORO, GERONIMO S.
CONVI, VICENTE R. TARAGOZA, YOLANDO A. SALAZAR, MANUEL A.
NERI, ELIO C. TICAR, ROBERTO A. MACALAM, MIGUEL MACARIOLA,
WALTERIO DAPADAP, SILVERIO CUAMAG EUPARQUIO PLANOS,
GILBERTO M. MIRA, REYNALDO BACSARSA, DIOSDADO B. ABING,
ARISTARCO V. SALON, TOMAS N. CATACTE, RODOLFO MEMORIA,
PAPENIANO CURIAS, JOSE S. CANDIA, DESIDERIO C. NAVARRO,
EMMANUEL O. ABRAHAM, JOSELITO D. ARLAN, FRANCISCO S.
SANCHEZ, MANSUETO B. LINGGO, ISIDRO BARNAJA, ROMEO S.
CABRERA, LEODEGARIO CAINTIC, NESTOR G. BLANDO, FLORENCIO
B. DELIZO, MILAN M. ETES, GONZALO C. PADILLO, LEONARDO
CAGAKIT, JOSEFINO E. DULGUIME, PEPITO G. ARREZA, AMADOR G.
CAGALAWAN, GAUDENCIO C. SARMIENTO, FLORENTINO J.
BRACAMONTE, DOMINADOR H. TY, LEOPOLDO T. SUPIL, JOSE A.
DOHINOG, ANIANO T. REYES, CARLITO G. UY, PLACIDO D. PADILLO,
TERESITA C. ADRIANO, CANDIDO S. ADRIANO, and AVELINO G.
VENERACION, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, (FIFTH DIVISION) and
PAPER INDUSTRIES CORPORATION OF THE PHILIPPINES
(PICOP) respondents.
BELLOSILLO, J.:
Petitioners numbering one hundred sixteen (116) 1 occupied the position of
Technical Staff, Unit Manager, Section Manager, Department Manager,
Division Manager and Vice President in the mill site of respondent Paper
Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur.
In 1992 PICOP suffered a major financial setback allegedly brought about by
the joint impact of restrictive government regulations on logging and the
economic crisis. To avert further losses, it undertook a retrenchment program
and terminated the services of petitioners. Accordingly, petitioners received
separation pay computed at the rate of one (1) month basic pay for every
year of service. Believing however that the allowances they allegedly
regularly received on a monthly basis during their employment 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 —
Respondent PICOP provides free housing facilities to
supervisory and managerial employees assigned in
Bislig. The privilege includes free water and electric
consumption. 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
24
to fill the vacancy. For Unit, Section and Department
Managers, respondent PICOP gives an additional
amount to meet the same kind of expenses called
Manager's allowance.
2. Transportation Allowance —
To relieve respondent 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.
The recipients of this kind of allowance are required to
liquidate it by submitting a report with a detailed
enumeration of expenses incurred.
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.
Applying Art. 97, par. (f), of the Labor Code which defines "wage," the
Executive Labor Arbiter opined that the subject allowances, being
customarily furnished by respondent PICOP and regularly received by
petitioners, formed part of the latter's wages. Resolving the controversy from
another angle, on the strength of the ruling in Santos v. NLRC 2 and Soriano
v. NLRC 3 that in the computation of separation pay account should be taken
not just of the basic salary but also of the regular allowances that the
employee had been receiving, he concluded that the allowances should be
included in petitioners' base pay. Thus respondent PICOP was ordered on
28 April 1994 to pay petitioners Four Million Four Hundred Eighty-One
Thousand Pesos P(4,481,000.00) representing separation pay differentials
plus ten per cent (10%) thereof as attorney's fees. 4
The National Labor Relations Commission (NLRC) did not the view of the
Executive Labor Arbiter. On 7 October 1994 it set aside the assailed decision
by decreeing that the allowances did not form part of the salary base used in
computing separation pay. 5 Its ruling was based on the finding that the
cases relied upon by the Executive Labor Arbiter were inapplicable since
they involved illegal dismissal where separation pay was granted in lieu of
reinstatement which was no longer feasible. Instead, what it considered in
point was Estate of the late Eugene J. Kneebone v. NLRC 6 where the Court
held that representation and transportation allowances were deemed not part
of salary and should therefore be excluded in the computation of separation
benefits. Relating the present case with Art. 97, par. (f), of the Labor Code,
the NLRC likewise found that petitioners' allowances were contingency-
based and thus not included in their salaries. On 26 September 1995
reconsideration was denied.7
In this petition for certiorari, petitioners submit that their allowances are
included in the definition of "facilities" in Art. 97, par. (f), of the Labor Code,
being necessary and indispensable for their existence and subsistence.
Furthermore they claim that their availment of the monetary equivalent of
those "facilities" on a monthly basis was characterized by permanency,
regularity and customariness. And to fortify their arguments they insist on the
applicability of Santos, 8 Soriano, 9 The Insular Life Assurance
Company, 10 Planters Products, Inc.11 and Songco 12 which are all against
the NLRC holding that the salary base in computing separation pay includes
not just the basic salary but also the regular allowances.
There is no showing of grave abuse of discretion on the part of the NLRC. In
case of retrenchment to prevent losses, Art. 283 of the Labor Code imposes
on the employer an obligation to grant to the affected employees separation
pay equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. Since the law speaks of "pay," the
question arises, "What exactly does the term connote?" We correlate Art.
283 with Art. 97 of the same Code on definition of terms. "Pay" is not defined
therein but "wage." In Songco the Court explained that both words (as well
as salary) generally refer to one and the same meaning, i.e., a reward or
recompense for services performed. Specifically, "wage" is defined in letter
(f) as the remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the same, which
is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services rendered
or to be rendered and includes the fair and reasonable value, as determined
by the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee.
We invite attention to the above-underlined clause. Stated differently, when
an employer customarily furnishes his employee board, lodging or other
facilities, the fair and reasonable value thereof, as determined by the
Secretary of Labor and Employment, 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 reasonable value as determined by the
Secretary of Labor."
"Customary" is founded on long-established and constant
practice 13 connoting regularity. 14 The receipt of an allowance on a monthly
basis does not ipso facto characterize it as regular and forming part of
salary 15 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 . . . .
On the other hand, the transportation allowance is in the form of
advances for actual transportation expenses subject to liquidation . .
. 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. 16
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. The finding
of the NLRC along the same line likewise merits concurrence, i.e.,
petitioners' continuous enjoyment of the disputed allowances was based on
contingencies the occurrence of which wrote finis to such enjoyment.
Although it is quite easy to comprehend "board" and "lodging," it is not so
with "facilities." Thus Sec. 5, Rule VII, Book III, of the Rules Implementing the
Labor Code gives meaning to the term as including articles or services for
the benefit of the employee or his family but excluding tools of the trade or
articles or service primarily for the benefit of the employer or necessary to the
conduct of the employer's business. The Staff/Manager's allowance may fall
under "lodging" but the transportation and Bislig allowances are not
embraced in "facilities" on the main consideration that they are granted as
well as the Staff/Manager's allowance for respondent PICOP's benefit and
convenience, i.e., to insure that petitioners render quality performance. In
determining whether a privilege is a facility, the criterion is not so much its
kind but its purpose. 17 That the assailed allowances were for the benefit and
convenience of respondent company was supported by the circumstance
that they were not subjected to withholding tax. Revenue Audit Memo Order
No. 1-87 pertinently provides —
3.2. . . . transportation, representation or entertainment expenses shall
not constitute taxable compensation if:
(a) It is for necessary travelling and representation or entertainment
expenses paid or incurred by the employee in the pursuit of the trade
or business of the employer, and
(b) The employee is required to, and does, make an
accounting/liquidation for such expense in accordance with the
specific requirements of substantiation for such category or expense.
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. 18
25
The Secretary of Labor and Employment under Sec. 6, Rule VII, Book III, of
the Rules Implementing the Labor Code may from time to time fix in
appropriate issuances the "fair and reasonable value of board, lodging and
other facilities customarily furnished by an employer to his employees."
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 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.
In Santos 19 the Court decreed that in the computation of separation pay
awarded in lieu of reinstatement, account must be taken not only of the basic
salary but also of transportation and emergency living allowances. Later, the
Court in Soriano, citing Santos, was general in its holding that the salary
base properly used in computing separation pay where reinstatement was no
longer feasible should include not just the basic salary but also the regular
allowances that the employee had been receiving. Insular merely reiterated
the aforementioned rulings. The rationale is not difficult to discern. It is the
obligation of the employer to pay an illegally dismissed employee the whole
amount of his salaries plus all other benefits, bonuses and general increases
to which he would have been normally entitled had he not been dismissed
and had not stopped working. 20 The same holds true in case of retrenched
employees. And thus we applied Insular and Soriano in Planters in the
computation of separation pay of retrenched employees. Songco likewise
involved retrenchment and was relied upon in Planters, Soriano and Santos
in determining the proper amount of separation pay. As culled from the
foregoing jurisprudence, separation pay when awarded to an illegally
dismissed employee in lieu of reinstatement or to a retrenched employee
should be computed based not only on the basic salary but also on
the regular allowances that the employee had been receiving. But in view of
the previous discussion that the disputed allowances
were not regularly received by petitioners herein, there was no reason at all
for petitioners to resort to the above cases.
Neither is Kneebone applicable, contrary to the finding of the NLRC, because
of the difference in factual circumstances. In Kneebone, the Court was
tasked to resolve the issue whether there presentation and transportation
allowances formed part of salary as to be considered in the computation
of retirement benefits. The ruling was in the negative on the main ground that
the retirement plan of the company expressly excluded such allowances from
salary.
WHEREFORE, the petition is DISMISSED. The resolution of public
respondent National Labor Relations Commission dated 7 October 1994
holding that the Staff/Manager's, transportation and Bislig allowances did not
form part of the salary base used in computing the separation pay of
petitioners, as well as its resolution dated 26 September 1995 denying
reconsideration, is AFFIRMED. No costs.
SO ORDERED.
Puno, Mendoza, Quisumbing and Buena, JJ., concur.
G.R. No. 118506 April 18, 1997
NORMA MABEZA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, PETER NG/HOTEL
SUPREME, respondents.
KAPUNAN, J.:
This petition seeking the nullification of a resolution of public respondent
National Labor Relations Commission dated April 28, 1994 vividly illustrates
why courts should be ever vigilant in the preservation of the constitutionally
enshrined rights of the working class. Without the protection accorded by our
laws and the tempering of courts, the natural and historical inclination of
capital to ride roughshod over the rights of labor would run unabated.
The facts of the case at bar, culled from the conflicting versions of petitioner
and private respondent, are illustrative.
Petitioner Norma Mabeza contends that around the first week of May, 1991,
she and her co-employees at the Hotel Supreme in Baguio City were asked
by the hotel's management to sign an instrument attesting to the latter's
compliance with minimum wage and other labor standard provisions of
law. 1 The instrument provides: 2
JOINT AFFIDAVIT
We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY,
MACARIA JUGUETA, ADELAIDA NONOG, NORMA MABEZA,
JONATHAN PICART and JOSE DIZON, all of legal ages (sic), Filipinos
and residents of Baguio City, under oath, depose and say:
1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme
situated at No. 416 Magsaysay Ave., Baguio City.
2. That the said Hotel is separately operated from the Ivy's Grill and
Restaurant;
3. That we are all (8) employees in the hotel and assigned in each
respective shifts;
4. That we have no complaints against the management of the Hotel
Supreme as we are paid accordingly and that we are treated well.
5. That we are executing this affidavit voluntarily without any force or
intimidation and for the purpose of informing the authorities concerned
and to dispute the alleged report of the Labor Inspector of the
Department of Labor and Employment conducted on the said
establishment on February 2, 1991.
IN WITNESS WHEREOF, we have hereunto set our hands this 7th day
of May, 1991 at Baguio City, Philippines.
(Sgd.) (Sgd.) (Sgd.)
SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN
OGOY
(Sgd.) (Sgd.) (Sgd.)
MACARIA JUGUETA ADELAIDA NONOG NORMA
MABEZA.
(Sgd.) (Sgd.)
JONATHAN PICART JOSE DIZON
SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at
Baguio City, Philippines.
Asst. City Prosecutor
Petitioner signed the affidavit but refused to go to the City Prosecutor's Office
to swear to the veracity and contents of the affidavit as instructed by
management. The affidavit was nevertheless submitted on the same day to
26
the Regional Office of the Department of Labor and Employment in Baguio
City.
As gleaned from the affidavit, the same was drawn by management for the
sole purpose of refuting findings of the Labor Inspector of DOLE (in an
inspection of respondent's establishment on February 2, 1991) apparently
adverse to the private respondent. 3
After she refused to proceed to the City Prosecutor's Office — on the same
day the affidavit was submitted to the Cordillera Regional Office of DOLE —
petitioner avers that she was ordered by the hotel management to turn over
the keys to her living quarters and to remove her belongings from the hotel
premises. 4 According to her, respondent strongly chided her for refusing to
proceed to the City Prosecutor's Office to attest to the affidavit. 5 She
thereafter reluctantly filed a leave of absence from her job which was denied
by management. When she attempted to return to work on May 10, 1991, the
hotel's cashier, Margarita Choy, informed her that she should not report to
work and, instead, continue with her unofficial leave of absence.
Consequently, on May 13, 1991, three days after her attempt to return to
work, petitioner filed a complaint for illegal dismissal before the Arbitration
Branch of the National Labor Relations Commission — CAR Baguio City. In
addition to her complaint for illegal dismissal, she alleged underpayment of
wages, non-payment of holiday pay, service incentive leave pay, 13th month
pay, night differential and other benefits. The complaint was docketed as
NLRC Case No. RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe
P. Pati.
Responding to the allegations made in support of petitioner's complaint for
illegal dismissal, private respondent Peter Ng alleged before Labor Arbiter
Pati that petitioner "surreptitiously left (her job) without notice to the
management" 6 and that she actually abandoned her work. He maintained
that there was no basis for the money claims for underpayment and other
benefits as these were paid in the form of facilities to petitioner and the
hotel's other employee. 7 Pointing to the Affidavit of May 7, 1991, the private
respondent asserted that his employees actually have no problems with
management. In a supplemental answer submitted eleven (11) months after
the original complaint for illegal dismissal was filed, private respondent raised
a new ground, loss of confidence, which was supported by a criminal
complaint for Qualified Theft he filed before the prosecutor's office of the City
of Baguio against petitioner on July 4, 1991. 8
On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing
petitioner's complaint on the ground of loss of confidence. His disquisitions in
support of his conclusion read as follows:
It appears from the evidence of respondent that complainant carted
away or stole one (1) blanket, 1 piece bedsheet, 1 piece thermos, 2
pieces towel (Exhibits "9", "9-A," "9-B," "9-C" and "10" pages 12-14 TSN,
December 1, 1992).
In fact, this was the reason why respondent Peter Ng lodged a criminal
complaint against complainant for qualified theft and perjury. The fiscal's
office finding a prima facie evidence that complainant committed the
crime of qualified theft issued a resolution for its filing in court but
dismissing the charge of perjury (Exhibit "4" for respondent and Exhibit
"B-7" for complainant). As a consequence, complainant was charged in
court for the said crime (Exhibit "5" for respondent and Exhibit "B-6" for
the complainant).
With these pieces of evidence, complainant committed serious
misconduct against her employer which is one of the just and valid
grounds for an employer to terminate an employee (Article 282 of the
Labor Code as amended). 9
On April 28, 1994, respondent NLRC promulgated its assailed
Resolution 10 — affirming the Labor Arbiter's decision. The resolution
substantially incorporated the findings of the Labor Arbiter. 11 Unsatisfied,
petitioner instituted the instant special civil action for certiorari under Rule 65
of the Rules of Court on the following grounds: 12
1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR
RELATIONS COMMISSION COMMITTED A PATENT AND
PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN ITS FAILURE TO CONSIDER THAT THE ALLEGED
LOSS OF CONFIDENCE IS A FALSE CAUSE AND AN
AFTERTHOUGHT ON THE PART OF THE RESPONDENT-
EMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY, THE DISMISSAL OF
THE COMPLAINANT FROM HER EMPLOYMENT;
 2. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR
RELATIONS COMMISSION COMMITTED A PATENT AND
PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN ADOPTING THE RULING OF THE LABOR
ARBITER THAT THERE WAS NO UNDERPAYMENT OF WAGES
AND BENEFITS ON THE BASIS OF EXHIBIT "8" (AN UNDATED
SUMMARY OF COMPUTATION PREPARED BY ALLEGEDLY BY
RESPONDENT'S EXTERNAL ACCOUNTANT) WHICH IS TOTALLY
INADMISSIBLE AS AN EVIDENCE TO PROVE PAYMENT OF
WAGES AND BENEFITS;
3. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR
RELATIONS COMMISSION COMMITTED A PATENT AND
PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN FAILING TO CONSIDER THE EVIDENCE
ADDUCED BEFORE THE LABOR ARBITER AS CONSTITUTING
UNFAIR LABOR PRACTICE COMMITTED BY THE RESPONDENT.
The Solicitor General, in a Manifestation in lieu of Comment dated August 8,
1995 rejects private respondent's principal claims and defenses and urges
this Court to set aside the public respondent's assailed resolution. 13
We agree.
It is settled that in termination cases the employer bears the burden of proof
to show that the dismissal is for just cause, the failure of which would mean
that the dismissal is not justified and the employee is entitled to
reinstatement. 14
In the case at bar, the private respondent initially claimed that petitioner
abandoned her job when she failed to return to work on May 8, 1991.
Additionally, in order to strengthen his contention that there existed sufficient
cause for the termination of petitioner, he belatedly included a complaint for
loss of confidence, supporting this with charges that petitioner had stolen a
blanket, a bedsheet and two towels from the hotel. 15 Appended to his last
complaint was a suit for qualified theft filed with the Baguio City prosecutor's
office.
From the evidence on record, it is crystal clear that the circumstances upon
which private respondent anchored his claim that petitioner "abandoned" her
job were not enough to constitute just cause to sanction the termination of
her services under Article 283 of the Labor Code. For abandonment to arise,
there must be concurrence of two things: 1) lack of intention to work; 16 and
2) the presence of overt acts signifying the employee's intention not to
work. 17
In the instant case, respondent does not dispute the fact that petitioner tried
to file a leave of absence when she learned that the hotel management was
displeased with her refusal to attest to the affidavit. The fact that she made
this attempt clearly indicates not an intention to abandon but an intention to
return to work after the period of her leave of absence, had it been granted,
shall have expired.
Furthermore, while absence from work for a prolonged period may suggest
abandonment in certain instances, mere absence of one or two days would
not be enough to sustain such a claim. The overt act (absence) ought
to unerringly point to the fact that the employee has no intention to return to
work, 18 which is patently not the case here. In fact, several days after she
had been advised to take an informal leave, petitioner tried to resume
working with the hotel, to no avail. It was only after she had been repeatedly
rebuffed that she filed a case for illegal dismissal. These acts militate against
the private respondent's claim that petitioner abandoned her job. As the
Solicitor General in his manifestation observed:
Petitioner's absence on that day should not be construed as
abandonment of her job. She did not report because the cashier told
her not to report anymore, and that private respondent Ng did not want
to see her in the hotel premises. But two days later or on the 10th of
May, after realizing that she had to clarify her employment status, she
again reported for work. However, she was prevented from working by
private respondents. 19
We now come to the second cause raised by private respondent to support
his contention that petitioner was validly dismissed from her job.
Loss of confidence as a just cause for dismissal was never intended to
provide employers with a blank check for terminating their employees. Such
27
a vague, all-encompassing pretext as loss of confidence, if unqualifiedly
given the seal of approval by this Court, could readily reduce to barren form
the words of the constitutional guarantee of security of tenure. Having this in
mind, loss of confidence should ideally apply only to cases involving
employees occupying positions of trust and confidence or to those situations
where the employee is routinely charged with the care and custody of the
employer's money or property. To the first class belong managerial
employees, i.e., those vested with the powers or prerogatives to lay down
management policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees or effectively recommend such
managerial actions; and to the second class belong cashiers, auditors,
property custodians, etc., or those who, in the normal and routine exercise of
their functions, regularly handle significant amounts of money or property.
Evidently, an ordinary chambermaid who has to sign out for linen and other
hotel property from the property custodian each day and who has to account
for each and every towel or bedsheet utilized by the hotel's guests at the end
of her shift would not fall under any of these two classes of employees for
which loss of confidence, if ably supported by evidence, would normally
apply. Illustrating this distinction, this Court in Marina Port Services,
Inc. vs. NLRC, 20 has stated that:
To be sure, every employee must enjoy some degree
of trust and confidence from the employer as that is
one reason why he was employed in the first place.
One certainly does not employ a person he distrusts.
Indeed, even the lowly janitor must enjoy that trust and
confidence in some measure if only because he is the
one who opens the office in the morning and closes it
at night and in this sense is entrusted with the care or
protection of the employer's property. The keys he
holds are the symbol of that trust and confidence.
By the same token, the security guard must also be
considered as enjoying the trust and confidence of his
employer, whose property he is safeguarding. Like the
janitor, he has access to this property. He too, is
charged with its care and protection.
Notably, however, and like the janitor again, he is
entrusted only with the physical task of protecting that
property. The employer's trust and confidence in him is
limited to that ministerial function. He is not entrusted,
in the Labor Arbiter's words, with the duties of
safekeeping and safeguarding company policies,
management instructions, and company secrets such
as operation devices. He is not privy to these
confidential matters, which are shared only in the
higher echelons of management. It is the persons on
such levels who, because they discharge these
sensitive duties, may be considered holding positions
of trust and confidence. The security guard does not
belong in such category. 21
More importantly, we have repeatedly held that loss of confidence should not
be simulated in order to justify what would otherwise be, under the provisions
of law, an illegal dismissal. "It should not be used as a subterfuge for causes
which are illegal, improper and unjustified. It must be genuine, not a mere
afterthought to justify an earlier action taken in bad faith." 22
In the case at bar, the suspicious delay in private respondent's filing of
qualified theft charges against petitioner long after the latter exposed the
hotel's scheme (to avoid its obligations as employer under the Labor Code)
by her act of filing illegal dismissal charges against the private respondent
would hardly warrant serious consideration of loss of confidence as a valid
ground for dismissal. Notably, the Solicitor General has himself taken a
position opposite the public respondent and has observed that:
If petitioner had really committed the acts charged against her by private
respondents (stealing supplies of respondent hotel), private respondents
should have confronted her before dismissing her on that ground.
Private respondents did not do so. In fact, private respondent Ng did not
raise the matter when petitioner went to see him on May 9, 1991, and
handed him her application for leave. It took private respondents 52 days
or up to July 4, 1991 before finally deciding to file a criminal complaint
against petitioner, in an obvious attempt to build a case against her.
The manipulations of private respondents should not
be countenanced. 23
Clearly, the efforts to justify petitioner's dismissal — on top of the private
respondent's scheme of inducing his employees to sign an affidavit absolving
him from possible violations of the Labor Code — taints with evident bad faith
and deliberate malice petitioner's summary termination from employment.
Having said this, we turn to the important question of whether or not the
dismissal by the private respondent of petitioner constitutes an unfair labor
practice.
The answer in this case must inevitably be in the affirmative.
The pivotal question in any case where unfair labor practice on the part of the
employer is alleged is whether or not the employer has exerted pressure, in
the form of restraint, interference or coercion, against his employee's right to
institute concerted action for better terms and conditions of employment.
Without doubt, the act of compelling employees to sign an instrument
indicating that the employer observed labor standards provisions of law when
he might have not, together with the act of terminating or coercing those who
refuse to cooperate with the employer's scheme constitutes unfair labor
practice. The first act clearly preempts the right of the hotel's workers to seek
better terms and conditions of employment through concerted action.
We agree with the Solicitor General's observation in his manifestation that
"[t]his actuation . . . is analogous to the situation envisaged in paragraph (f)
of Article 248 of the Labor Code" 24 which distinctly makes it an unfair labor
practice "to dismiss, discharge or otherwise prejudice or discriminate against
an employee for having given or being about to give testimony" 25 under the
Labor Code. For in not giving positive testimony in favor of her employer,
petitioner had reserved not only her right to dispute the claim and proffer
evidence in support thereof but also to work for better terms and conditions
of employment.
For refusing to cooperate with the private respondent's scheme, petitioner
was obviously held up as an example to all of the hotel's employees, that
they could only cause trouble to management at great personal
inconvenience. Implicit in the act of petitioner's termination and the
subsequent filing of charges against her was the warning that they would not
only be deprived of their means of livelihood, but also possibly, their personal
liberty.
This Court does not normally overturn findings and conclusions of quasi-
judicial agencies when the same are ably supported by the evidence on
record. However, where such conclusions are based on a misperception of
facts or where they patently fly in the face of reason and logic, we will not
hesitate to set aside those conclusions. Going into the issue of petitioner's
money claims, we find one more salient reason in this case to set things
right: the labor arbiter's evaluation of the money claims in this case incredibly
ignores existing law and jurisprudence on the matter. Its blatant one-
sidedness simply raises the suspicion that something more than the facts,
the law and jurisprudence may have influenced the decision at the level of
the Arbiter.
Labor Arbiter Pati accepted hook, line and sinker the private respondent's
bare claim that the reason the monetary benefits received by petitioner
between 1981 to 1987 were less than minimum wage was because petitioner
did not factor in the meals, lodging, electric consumption and water she
received during the period in her computations. 26 Granting that meals and
lodging were provided and indeed constituted facilities, such facilities could
not be deducted without the employer complying first with certain legal
requirements. Without satisfying these requirements, the employer simply
cannot deduct the value from the employee's ages. First, proof must be
shown that such facilities are customarily furnished by the trade. Second, the
provision of deductible facilities must be voluntarily accepted in writing by the
employee. Finally, facilities must be charged at fair and reasonable value. 27
These requirements were not met in the instant case. Private respondent
"failed to present any company policy or guideline to show that the meal and
lodging . . . (are) part of the salary;" 28 he failed to provide proof of the
employee's written authorization; and, he failed to show how he arrived at the
valuations. 29
Curiously, in the case at bench, the only valuations relied upon by the labor
arbiter in his decision were figures furnished by the private respondent's own
accountant, without corroborative evidence. On the pretext that records prior
to the July 16, 1990 earthquake were lost or destroyed, respondent failed to
produce payroll records, receipts and other relevant documents, where he
could have, as has been pointed out in the Solicitor General's manifestation,
28
"secured certified copies thereof from the nearest regional office of the
Department of Labor, the SSS or the BIR." 30
More significantly, the food and lodging, or the electricity and water
consumed by the petitioner were not facilities but supplements. A benefit or
privilege granted to an employee for the convenience of the employer is not a
facility. The criterion in making a distinction between the two not so much lies
in the kind (food, lodging) but the purpose. 31 Considering, therefore, that
hotel workers are required to work different shifts and are expected to be
available at various odd hours, their ready availability is a necessary matter
in the operations of a small hotel, such as the private respondent's hotel.
It is therefore evident that petitioner is entitled to the payment of the
deficiency in her wages equivalent to the full wage applicable from May 13,
1988 up to the date of her illegal dismissal.
Additionally, petitioner is entitled to payment of service incentive leave pay,
emergency cost of living allowance, night differential pay, and 13th month
pay for the periods alleged by the petitioner as the private respondent has
never been able to adduce proof that petitioner was paid the aforestated
benefits.
However, the claims covering the period of October 1987 up to the time of
filing the case on May 13, 1988 are barred by prescription as P.D. 442 (as
amended) and its implementing rules limit all money claims arising out of
employer-employee relationship to three (3) years from the time the cause of
action accrues. 32
We depart from the settled rule that an employee who is unjustly dismissed
from work normally should be reinstated without loss of seniority rights and
other privileges. Owing to the strained relations between petitioner and
private respondent, allowing the former to return to her job would only subject
her to possible harassment and future embarrassment. In the instant case,
separation pay equivalent to one month's salary for every year of continuous
service with the private respondent would be proper, starting with her job at
the Belfront Hotel.
In addition to separation pay, backwages are in order. Pursuant to R.A. 6715
and our decision in Osmalik Bustamante, et al. vs. National Labor Relations
Commission, 33 petitioner is entitled to full backwages from the time of her
illegal dismissal up to the date of promulgation of this decision without
qualification or deduction.
Finally, in dismissal cases, the law requires that the employer must furnish
the employee sought to be terminated from employment with two written
notices before the same may be legally effected. The first is a written notice
containing a statement of the cause(s) for dismissal; the second is a notice
informing the employee of the employer's decision to terminate him stating
the basis of the dismissal. During the process leading to the second notice,
the employer must give the employee ample opportunity to be heard and
defend himself, with the assistance of counsel if he so desires.
Given the seriousness of the second cause (qualified theft) of the petitioner's
dismissal, it is noteworthy that the private respondent never even bothered to
inform petitioner of the charges against her. Neither was petitioner given the
opportunity to explain the loss of the articles. It was only almost two months
after petitioner had filed a complaint for illegal dismissal, as an afterthought,
that the loss was reported to the police and added as a supplemental answer
to petitioner's complaint. Clearly, the dismissal of petitioner without the
benefit of notice and hearing prior to her termination violated her
constitutional right to due process. Under the circumstance an award of One
Thousand Pesos (P1,000.00) on top of payment of the deficiency in wages
and benefits for the period aforestated would be proper.
WHEREFORE, premises considered, the RESOLUTION of the National
Labor Relations Commission dated April 24, 1994 is REVERSED and SET
ASIDE, with costs. For clarity, the economic benefits due the petitioner are
hereby summarized as follows:
1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the
date of petitioner's illegal dismissal;
2) Service incentive leave pay; night differential pay and 13th month pay for
the same period;
3) Separation pay equal to one month's salary for every year of petitioner's
continuous service with the private respondent starting with her job at the
Belfront Hotel;
4) Full backwages, without qualification or deduction, from the date of
petitioner's illegal dismissal up to the date of promulgation of this decision
pursuant to our ruling in Bustamante vs. NLRC. 34
5) P1,000.00.

ORDERED.

Padilla, Bellosillo and Vitug, JJ., concur.

Hermosisima, Jr., J., is on leave.

29
G.R. No. 168654 March 25, 2009
ZAYBER JOHN B. PROTACIO, Petitioner,
vs.
LAYA MANANGHAYA & CO. and/or MARIO T.
MANANGHAYA, Respondents.
TINGA, J.:
Before the Court is a petition for review on certiorari1 under Rule 45 of the
1997 Rules of Civil Procedure, assailing the decision2 and resolution3 of the
Court of Appeals in CA-G.R. SP No. 85038. The Court of Appeals’ decision
reduced the monetary award granted to petitioner by the National Labor
Relations Commission (NLRC) while the resolution denied petitioner’s motion
for reconsideration for lack of merit.
The following factual antecedents are matters of record.
Respondent KPMG Laya Mananghaya & Co. (respondent firm) is a general
professional partnership duly organized under the laws of the Philippines.
Respondent firm hired petitioner Zayber John B. Protacio as Tax Manager on
01 April 1996. He was subsequently promoted to the position of Senior Tax
Manager. On 01 October 1997, petitioner was again promoted to the position
of Tax Principal.4
However, on 30 August 1999, petitioner tendered his resignation effective 30
September 1999. Then, on 01 December 1999, petitioner sent a letter to
respondent firm demanding the immediate payment of his 13th month pay,
the cash commutation of his leave credits and the issuance of his 1999
Certificate of Income Tax Withheld on Compensation. Petitioner sent to
respondent firm two more demand letters for the payment of his
reimbursement claims under pain of the legal action.5
Respondent firm failed to act upon the demand letters. Thus, on 15
December 1999, petitioner filed before the NLRC a complaint for the non-
issuance of petitioner’s W-2 tax form for 1999 and the non-payment of the
following benefits: (1) cash equivalent of petitioner’s leave credits in the
amount of ₱55,467.60; (2) proportionate 13th month pay for the year 1999;
(3) reimbursement claims in the amount of ₱19,012.00; and (4) lump sum
pay for the fiscal year 1999 in the amount of ₱674,756.70. Petitioner also
sought moral and exemplary damages and attorney’s fees. Respondent
Mario T. Managhaya was also impleaded in his official capacity as
respondent firm’s managing partner.6
In his complaint,7 petitioner averred, inter alia, that when he was promoted to
the position of Tax Principal in October 1997, his compensation package had
consisted of a monthly gross compensation of ₱60,000.00, a 13th month pay
and a lump sum payment for the year 1997 in the amount of ₱240,000.00
that was paid to him on 08 February 1998.
According to petitioner, beginning 01 October 1998, his compensation
package was revised as follows: (a) monthly gross compensation of
₱95,000.00, inclusive of nontaxable allowance; (b) 13th month pay; and (c) a
lump sum amount in addition to the aggregate monthly gross compensation.
On 12 April 1999, petitioner received the lump sum amount of ₱573,000.00
for the fiscal year ending 1998.8
Respondent firm denied it had intentionally delayed the processing of
petitioner’s claims but alleged that the abrupt departure of petitioner and
three other members of the firm’s Tax Division had created problems in the
determination of petitioner’s various accountabilities, which could be finished
only by going over voluminous documents. Respondents further averred that
they had been taken aback upon learning about the labor case filed by
petitioner when all along they had done their best to facilitate the processing
of his claims.9
During the pendency of the case before the Labor Arbiter, respondent firm on
three occasions sent check payments to petitioner in the following amounts:
(1) ₱71,250.00, representing petitioner’s 13th month pay; (2) ₱54,824.18, as
payments for the cash equivalent of petitioner’s leave credits and
reimbursement claims; and (3) ₱10,762.57, for the refund of petitioner’s
taxes withheld on his vacation leave credits. Petitioner’s copies of his
withholding tax certificates were sent to him along with the check
payments.10 Petitioner acknowledged the receipt of the 13th month pay but
disputed the computation of the cash value of his vacation leave credits and
reimbursement claims.11
30
On 07 June 2002, Labor Arbiter Eduardo J. Carpio rendered a decision,12 the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering respondents to jointly
and solidarily pay complainant the following:
₱12,681.00 - representing the reimbursement claims of complainant;
₱28,407.08 - representing the underpayment of the cash equivalent of
the unused leave credits of complainant;
₱573,000.00 - representing complainant’s 1999 year-end lump sum
payment; and
10% of the total judgment awards way of attorney’s fees.
SO ORDERED.13
The Labor Arbiter awarded petitioner’s reimbursement claims on the ground
that respondent firm’s refusal to grant the same was not so much because
the claim was baseless but because petitioner had failed to file the requisite
reimbursement forms. He held that the formal defect was cured when
petitioner filed several demand letters as well as the case before him.14
The Labor Arbiter held that petitioner was not fully paid of the cash
equivalent of the leave credits due him because respondent firm had
erroneously based the computation on a basic pay of ₱61,000.00. He held
that the evidence showed that petitioner’s monthly basic salary was
₱95,000.00 inclusive of the other benefits that were deemed included and
integrated in the basic salary and that respondent firm had computed
petitioner’s 13th month pay based on a monthly basic pay of ₱95,000.00;
thus, the cash commutation of the leave credits should also be based on this
figure.15
The Labor Arbiter also ruled that petitioner was entitled to a year-end
payment of ₱573,000.00 on the basis of the company policy of granting
yearly lump sum payments to petitioner during all the years of service and
that respondent firm had failed to give petitioner the same benefit for the year
1999 without any explanation.16
Aggrieved, respondent firm appealed to the NLRC. On 21 August 2003, the
NLRC rendered a modified judgment,17 the dispositive portion of which
states:
WHEREFORE, the Decision dated June 7, 2002 is hereby Affirmed with the
modification that the complainant is only entitled to receive ₱2,301.00 as
reimbursement claims. The award of ₱12,681.00 representing the
reimbursement claims of complainant is set aside for lack of basis.
SO ORDERED.18
From the amount of ₱12,681.00 awarded by the Labor Arbiter as payment
for the reimbursement claims, the NLRC lowered the same to ₱2,301.00
representing the amount which remained unpaid.19 As regards the issues on
the lump sum payments and cash equivalent of the leave credits, the NLRC
affirmed the findings of the Labor Arbiter.
Respondents filed a motion for reconsideration20 but the NLRC denied the
motion for lack of merit.21 Hence, respondents elevated the matter to the
Court of Appeals via a petition for certiorari.22
In the assailed Decision dated 19 April 2005, the Court of Appeals further
reduced the total money award to petitioner, to wit:
WHEREFORE, in the light of the foregoing, the assailed resolution of public
respondent NLRC dated August 21, 2003 in NLRC NCR Case No. 30-12-
00927-99 (CA No. 032304-02) is hereby MODIFIED, ordering petitioner firm
to pay private respondent the following:
(1) ₱2,301.00 representing private respondent’s reimbursement
claims;
(2) ₱9,802.83 representing the underpayment of the cash equivalent
of private respondent’s unused leave credits;
 (3) ₱10,000.00 attorney’s fees.
SO ORDERED.23
Petitioner sought reconsideration. In the assailed Resolution dated 27 June
2005, the Court of Appeals denied petitioner’s motion for reconsideration for
lack of merit.
Hence, the instant petition, raising the following issues:
I.
WHETHER PUBLIC RESPONDENT COURT OF APPEALS’ SUMMARY
DENIAL OF PETITIONER’S MOTION FOR RECONSIDERATION
VIOLATES THE CONSTITUTIONAL REQUIREMENT THAT COURT
DECISIONS MUST STATE THE LEGAL AND FACTUAL BASIS
[THEREOF].
II
WHETHER PUBLIC RESPONDENT COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION AND ACTED IN WANTON EXCESS OF
JURISDICTION IN TAKING COGNIZANCE OF [RESPONDENTS]
PETITION FOR CERTIORARI WHEN THE RESOLUTION THEREOF
HINGES ON MERE EVALUATION OF EVIDENCE.
III.
WHETHER PUBLIC RESPONDENT COURT OF APPEALS WANTONLY
ABUSED ITS DISCRETION IN EMPLOYING A LARGER DIVISOR TO
COMPUTE PETITIONER’S DAILY SALARY RATE THEREBY DIMINISHING
HIS BENEFITS, IN [VIOLATION] OF THE LABOR CODE.
IV.
WHETHER PUBLIC RESPONDENT COURT OF APPEALS
CAPRICIOUSLY ABUSED ITS DISCRETION IN REVERSING THE
[CONCURRING] FINDINGS OF BOTH LABOR ARBITER AND NLRC ON
THE COMPENSABLE NATURE OF PETITIONER’S YEAR END [LUMP]
SUM PLAY [sic] CLAIM.24
Before delving into the merits of the petition, the issues raised by petitioner
adverting to the Constitution must be addressed. Petitioner contends that the
Court of Appeals’ resolution which denied his motion for reconsideration
violated Article VIII, Section 14 of the Constitution, which states:
Section 14. No decision shall be rendered by any court without expressing
therein clearly and distinctly the facts and the law on which it is based.
No petition for review or motion for reconsideration of a decision of the court
shall be refused due course or denied without stating the legal basis therefor.
Obviously, the assailed resolution is not a "decision" within the meaning of
the Constitutional requirement. This mandate is applicable only in cases
"submitted for decision," i.e., given due course and after filing of briefs or
memoranda and/or other pleadings, as the case may be.25 The requirement
is not applicable to a resolution denying a motion for reconsideration of the
decision. What is applicable is the second paragraph of the above-quoted
Constitutional provision referring to "motion for reconsideration of a decision
of the court." The assailed resolution complied with the requirement therein
that a resolution denying a motion for reconsideration should state the legal
basis of the denial. It sufficiently explained that after reading the pleadings
filed by the parties, the appellate court did not find any cogent reason to
reverse itself.
Next, petitioner argues that the Court of Appeals erred in giving due course
to the petition for certiorari when the resolution thereof hinged on mere
evaluation of evidence. Petitioner opines that respondents failed to make its
case in showing that the Labor Arbiter and the NLRC had exercised their
discretion in an arbitrary and despotic manner.
As a general rule, in certiorari proceedings under Rule 65 of the Rules of
Court, the appellate court does not assess and weigh the sufficiency of
evidence upon which the Labor Arbiter and the NLRC based their conclusion.
The query in this proceeding is limited to the determination of whether or not
31
the NLRC acted without or in excess of its jurisdiction or with grave abuse of
discretion in rendering its decision. However, as an exception, the appellate
court may examine and measure the factual findings of the NLRC if the same
are not supported by substantial evidence.26 The Court has not hesitated to
affirm the appellate court’s reversals of the decisions of labor tribunals if they
are not supported by substantial evidence.27
The Court is not unaware that the appellate court had reexamined and
weighed the evidence on record in modifying the monetary award of the
NLRC. The Court of Appeals held that the amount of the year-end lump sum
compensation was not fully justified and supported by the evidence on
record. The Court fully agrees that the lump sum award of ₱573,000.00 to
petitioner seemed to have been plucked out of thin air. Noteworthy is the fact
that in his position paper, petitioner claimed that he was entitled to the
amount of ₱674,756.70.28 The variance between the claim and the amount
awarded, with the record bereft of any proof to support either amount only
shows that the appellate court was correct in holding that the award was a
mere speculation devoid of any factual basis. In the exceptional
circumstance as in the instant case, the Court finds no error in the appellate
court’s review of the evidence on record.
After an assessment of the evidence on record, the Court of Appeals
reversed the findings of the NLRC and the Labor Arbiter with respect to the
award of the year-end lump sum pay and the cash value of petitioner’s leave
credits. The appellate court held that while the lump sum payment was in the
nature of a proportionate share in the firm’s annual income to which
petitioner was entitled, the payment thereof was contingent upon the
financial position of the firm. According to the Court of Appeals, since no
evidence was adduced showing the net income of the firm for fiscal year
ending 1999 as well as petitioner’s corresponding share therein, the amount
awarded by the labor tribunals was a baseless speculation and as such must
be deleted.29
On the other hand, the NLRC affirmed the Labor Arbiter’s award of the lump
sum payment in the amount of ₱573,000.00 on the basis that the payment
thereof had become a company policy which could not be withdrawn
arbitrarily. Furthermore, the NLRC held that respondent firm had failed to
controvert petitioner’s claim that he was responsible for generating some
₱7,365,044.47 in cash revenue during the fiscal year ending 1999.
The evidence on record establishes that aside from the basic monthly
compensation,30 petitioner received a yearly lump sum amount during the
first two years31 of his employment, with the payments made to him after the
annual net incomes of the firm had been determined. Thus, the amounts
thereof varied and were dependent on the firm’s cash position and financial
performance.32 In one of the letters of respondent Mananghaya to petitioner,
the amount was referred to as petitioner’s "share in the incentive
compensation program."33
While the amount was drawn from the annual net income of the firm, the
distribution thereof to non-partners or employees of the firm was not, strictly
speaking, a profit-sharing arrangement between petitioner and respondent
firm contrary to the Court of Appeals’ finding. The payment thereof to non-
partners of the firm like herein petitioner was discretionary on the part of the
chairman and managing partner coming from their authority to fix the
compensation of any employee based on a share in the partnership’s net
income.34 The distribution being merely discretionary, the year-end lump sum
payment may properly be considered as a year-end bonus or incentive.
Contrary to petitioner’s claim, the granting of the year-end lump sum amount
was precisely dependent on the firm’s net income; hence, the same was
payable only after the firm’s annual net income and cash position were
determined.
By definition, a "bonus" is a gratuity or act of liberality of the giver. It is
something given in addition to what is ordinarily received by or strictly due
the recipient.35 A bonus is granted and paid to an employee for his industry
and loyalty which contributed to the success of the employer’s business and
made possible the realization of profits.36 Generally, a bonus is not a
demandable and enforceable obligation. It is so only when it is made part of
the wage or salary or compensation. When considered as part of the
compensation and therefore demandable and enforceable, the amount is
usually fixed. If the amount would be a contingent one dependent upon the
realization of the profits, the bonus is also not demandable and
enforceable.37
In the instant case, petitioner’s claim that the year-end lump sum represented
the balance of his total compensation package is incorrect. The fact remains
that the amounts paid to petitioner on the two occasions varied and were
always dependent upon the firm’s financial position.
Moreover, in Philippine Duplicators, Inc. v. NLRC,38 the Court held that if the
bonus is paid only if profits are realized or a certain amount of productivity
achieved, it cannot be considered part of wages. If the desired goal of
production is not obtained, of the amount of actual work accomplished, the
bonus does not accrue.39 Only when the employer promises and agrees to
give without any conditions imposed for its payment, such as success of
business or greater production or output, does the bonus become part of the
wage.40
Petitioner’s assertion that he was responsible for generating revenues
amounting to more than ₱7 million remains a mere allegation in his
pleadings. The records are absolutely bereft of any supporting evidence to
substantiate the allegation.
by enlarging the scope of their exclusion.44 In any case, the provision is
inapplicable to the instant case because it referred to the computation of
holiday pay for monthly-paid employees.
Petitioner’s claim that respondent firm used a 26-working day divisor is
supported by the evidence on record. In a letter addressed to
petitioner,45 respondents’ counsel expressly admitted that respondent used a
26-working day divisor. The Court is perplexed why the tribunals below used
a 30-day divisor when there was an express admission on respondents’ part
that they used a 26-day divisor in the cash commutation of leave credits.
Thus, with a monthly compensation of ₱95,000.00 and using a 26-working
day divisor, petitioner’s daily rate is ₱3,653.85.46 Based on this rate,
petitioner’s cash equivalent of his leave credits of 23.5 is
₱85,865.48.47 Since petitioner has already received the amount ₱46,009.67,
a balance of ₱39,855.80 remains payable to petitioner.

The granting of a bonus is basically a management prerogative which cannot WHEREFORE, the instant petition for review on certiorari is PARTLY
be forced upon the employer who may not be obliged to assume the onerous GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 85038
burden of granting bonuses or other benefits aside from the employees’ is AFFIRMED with the MODIFICATION that respondents are liable for the
basic salaries or wages.41 Respondents had consistently maintained from the underpayment of the cash equivalent of petitioner’s leave credits in the
start that petitioner was not entitled to the bonus as a matter of right. The amount of ₱39,855.80.
payment of the year-end lump sum bonus based upon the firm’s productivity
or the individual performance of its employees was well within respondent SO ORDERED.
firm’s prerogative. Thus, respondent firm was also justified in declining to
give the bonus to petitioner on account of the latter’s unsatisfactory
performance. DANTE O. TINGA
Associate Justice
Petitioner failed to present evidence refuting respondents’ allegation and
proof that they received a number of complaints from clients about
petitioner’s "poor services." For purposes of determining whether or not
petitioner was entitled to the year-end lump sum bonus, respondents were
not legally obliged to raise the issue of substandard performance with
petitioner, unlike what the Labor Arbiter had suggested. Of course, if what
was in question was petitioner’s continued employment vis-à-vis the
allegations of unsatisfactory performance, then respondent firm was required
under the law to give petitioner due process to explain his side before
instituting any disciplinary measure. However, in the instant case, the
granting of the year-end lump sum bonus was discretionary and conditional,
thus, petitioner may not question the basis for the granting of a mere
privilege.1avvph!1

With regard to the computation of the cash equivalent of petitioner’s leave

credits, the Court of Appeals used a base figure of ₱71,250.00 representing
petitioner’s monthly salary as opposed to ₱95,000.00 used by the Labor
Arbiter and NLRC. Meanwhile, respondents insist on a base figure of only
₱61,000.00, which excludes the advance incentive pay of ₱15,000.00,
transportation allowance of ₱15,000.00 and representation allowance of
₱4,000.00, which petitioner regularly received every month. Because of a
lower base figure (representing the monthly salary) used by the appellate
court, the cash equivalent of petitioner’s leave credits was lowered from
₱28,407.08 to ₱9,802.83.lawphil.net

The monthly compensation of ₱71,250.00 used as base figure by the Court

of Appeals is totally without basis. As correctly held by the Labor Arbiter and
the NLRC, the evidence on record reveals that petitioner was receiving a
monthly compensation of ₱95,000.00 consisting of a basic salary of
₱61,000.00, advance incentive pay of ₱15,000.00, transportation allowance
of ₱15,000.00 and representation allowance of ₱4,000.00. These amounts
totaling ₱95,000.00 are all deemed part of petitioner’s monthly compensation
package and, therefore, should be the basis in the cash commutation of the
petitioner’s leave credits. These allowances were customarily furnished by
respondent firm and regularly received by petitioner on top of the basic
monthly pay of ₱61,000.00. Moreover, the Labor Arbiter noted that
respondent firm’s act of paying petitioner a 13th month-pay at the rate of
₱95,000.00 was an admission on its part that petitioner’s basic monthly
salary was ₱95,000.00

The Court of Appeals, Labor Arbiter and NLRC used a 30-working day
divisor instead of 26 days which petitioner insists. The Court of Appeals
relied on Section 2, Rule IV, Book III42 of the implementing rules of the Labor
Code in using the 30-working day divisor. The provision essentially states
that monthly-paid employees are presumed to be paid for all days in the
month whether worked or not.

The provision has long been nullified in Insular Bank of Asia and American
Employees’ Union (IBAAEU) v. Hon. Inciong, etc., et al.,43 where the Court
ruled that the provision amended the Labor Code’s provisions on holiday pay
32
G.R. No. 121927 April 22, 1998 6. Apolinario Gimena 8,312.24
7. Jesus Bandilao 14,729.50
ANTONIO W. IRAN (doing business under the name and style of Tones 8. Pepito Tecson. 9,126.55
Iran Enterprises), petitioner, ————
vs. Attorney's Fees (10%) 74,116.63
NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), of the gross award 7,411.66
GODOFREDO O. PETRALBA, MORENO CADALSO, PEPITO TECSON, ————
APOLINARIO GOTHONG GEMINA, JESUS BANDILAO, EDWIN MARTIN, GRAND TOTAL AWARD P81,528.29
CELSO LABIAGA, DIOSDADO GONZALGO, FERNANDO M. ========
COLINA, respondents.
The other claims are dismissed for lack of merit.
ROMERO, J.:
SO ORDERED. 1
Whether or not commissions are included in determining compliance with the
minimum wage requirement is the principal issue presented in this petition. Both parties seasonably appealed to the NLRC, with petitioner contesting the
labor arbiter's refusal to include the commissions he paid to private
Petitioner Antonio Iran is engaged in softdrinks merchandising and respondents in determining compliance with the minimum wage requirement.
distribution in Mandaue City, Cebu, employing truck drivers who double as He also presented, for the first time on appeal, vouchers denominated as
salesmen, truck helpers, and non-field personnel in pursuit thereof. Petitioner 13th month pay signed by private respondents, as proof that petitioner had
hired private respondents Godofredo Petralba, Moreno Cadalso, Celso already paid the latter their 13th month pay. Private respondents, on the
Labiaga and Fernando Colina as drivers/salesmen while private respondents other hand, contested the findings of the labor arbiter holding that they had
Pepito Tecson, Apolinario Gimena, Jesus Bandilao, Edwin Martin and not been illegally dismissed, as well as mathematical errors in computing
Diosdado Gonzalgo were hired as truck helpers. Drivers/salesmen drove Jesus Bandilao's wage differentials. The NLRC, in its decision of December
petitioner's delivery trucks and promoted, sold and delivered softdrinks to 21, 1994, affirmed the validity of private respondent's dismissal, but found
various outlets in Mandaue City. The truck helpers assisted in the delivery of that said dismissal did not comply with the procedural requirements for
softdrinks to the different outlets covered by the driver/salesmen. dismissing employees. Furthermore, it corrected the labor arbiter's award of
wage differentials to Jesus Bandilao. The dispositive portion of said decision
reads:
As part of their compensation, the driver/salesmen and truck helpers of
petitioner received commissions per case of softdrinks sold at the following
rates: WHEREFORE, premises considered, the decision is
hereby MODIFIED in that complainant Jesus
Bandilao's computation for wage differential is
SALESMEN: corrected from P154.00 to P4,550.00. In addition to all
the monetary claim (sic) originally awarded by the
Ten Centavos (P0.10) per case of Regular softdrinks. Labor Arbiter a quo, P1,000.00 is hereby granted to
Twelve Centavos (P0.12) per case of Family Size softdrinks. each complainants (sic) as indemnity fee for failure of
respondents to observe procedural due process.
TRUCK HELPERS:
SO ORDERED.2
Eight Centavos (P0.08) per case of Regular softdrinks.
Ten Centavos (P0.10) per case of Family Size softdrinks. Petitioner's motion for reconsideration of said decision was denied on July
31, 1995, prompting him to elevate this case to this Court, raising the
following issues:
Sometime in June 1991, petitioner, while conducting an audit of his
operations, discovered cash shortages and irregularities allegedly committed
by private respondents. Pending the investigation of irregularities and 1. THE HONORABLE COMMISSION ACTED WITH
settlement of the cash shortages, petitioner required private respondents to GRAVE ABUSE OF DISCRETION AND CONTRARY
report for work everyday. They were not allowed, however, to go on their TO LAW AND JURISPRUDENCE IN AFFIRMING THE
respective routes. A few days thereafter, despite aforesaid order, private DECISION OF THE LABOR ARBITER A
respondents stopped reporting for work, prompting petitioner to conclude that QUO EXCLUDING THE COMMISSIONS RECEIVED
the former had abandoned their employment. Consequently, petitioner BY THE PRIVATE RESPONDENTS IN COMPUTING
terminated their services. He also filed on November 7, 1991, a complaint for THEIR WAGES;
estafa against private respondents.
2. THE HONORABLE COMMISSION ACTED WITH
On the other hand, private respondents, on December 5, 1991, filed GRAVE ABUSE OF DISCRETION IN FINDING
complaints against petitioner for illegal dismissal, illegal deduction, PETITIONER GUILTY OF PROCEDURAL LAPSES IN
underpayment of wages, premium pay for holiday and rest day, holiday pay, TERMINATING PRIVATE RESPONDENTS AND IN
service incentive leave pay, 13th month pay, allowances, separation pay, AWARDING EACH OF THE LATTER P1,000.00 AS
recovery of cash bond, damages and attorney's fees. Said complaints were INDEMNITY FEE;
consolidated and docketed as Rab VII-12-1791-91, RAB VII-12-1825-91 and
RAB VII-12-1826-91, and assigned to Labor Arbiter Ernesto F. Carreon. 3. THE HONORABLE COMMISSION GRAVELY
ERRED IN NOT CREDITING THE ADVANCE
The labor arbiter found that petitioner had validly terminated private AMOUNT RECEIVED BY THE PRIVATE
respondents, there being just cause for the latter's dismissal. Nevertheless, RESPONDENTS AS PART OF THEIR 13TH MONTH
he also ruled that petitioner had not complied with minimum wage PAY.
requirements in compensating private respondents, and had failed to pay
private respondents their 13th month pay. The labor arbiter, thus, rendered a The petition is impressed with merit.
decision on February 18, 1993, the dispositive portion of which reads:
The NLRC, in denying petitioner's claim that commissions be included in
WHEREFORE, premises considered, judgment is determining compliance with the minimum wage ratiocinated thus:
hereby rendered ordering the respondent Antonio W.
Iran to pay the complainants the following:
Respondent (petitioner herein) insist assiduously that
the commission should be included in the computation
1. Celso Labiaga P10,033.10 of actual wages per agreement. We will not fall prey to
2. Godofredo Petralba 1,250.00 this fallacious argument. An employee should receive
3. Fernando Colina 11,753.10 the minimum wage as mandated by law and that the
4. Moreno Cadalso 11,753.10 attainment of the minimum wage should not be
5. Diosdado Gonzalgo 7,159.04 dependent on the commission earned by an employee.
33
 A commission is an incentive for an employee to work
harder for a better production that will benefit both the
employer and the employee. To include the
commission in the computation of wage in order to
comply with labor standard laws is to negate the
practice that a commission is granted after an
employee has already earned the minimum wage or
even beyond it.3
This holding is unsupported by law and jurisprudence. Article 97(f) of the
Labor Code defines wage as follows:
Art. 97(f) — "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 reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the
employee.
xxx xxx xxx (Emphasis supplied)
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.4
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.
The NLRC asserts that the inclusion of commissions in the computation of
wages would negate the practice of granting commissions only after an
employee has earned the minimum wage or over. While such a practice does
exist, the universality and prevalence of such a practice is questionable at
best. In truth, this Court has taken judicial notice of the fact that some
salesmen do not receive any basic salary but depend entirely on
commissions and allowances or commissions alone, although an employer-
employee relationship exists. 5 Undoubtedly, this salary structure is intended
for the benefit of the corporation establishing such, on the apparent
assumption that thereby its salesmen would be moved to greater enterprise
and diligence and close more sales in the expectation of increasing their
sales commissions. This, however, does not detract from the character of
such commissions as part of the salary or wage paid to each of its salesmen
for rendering services to the corporation.6
Likewise, 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. This conclusion is bolstered
by Philippine Agricultural Commercial and Industrial Workers Union
vs. NLRC, 7 where this Court acknowledged that 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. It follows then that commissions are included in determining compliance
with minimum wage requirements.
With regard to the second issue, it is settled that in terminating employees,
the employer must furnish the worker with two written notices before the
latter can be legally terminated: (a) a notice which apprises the employee of
34
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. 8 (Emphasis ours) Petitioner asseverates that no procedural
lapses were committed by him in terminating private respondents. In his own
words:
. . . when irregularities were discovered, that is, when
the misappropriation of several thousands of pesos
was found out, the petitioner instructed private
respondents to report back for work and settle their
accountabilities but the latter never reported for work.
This instruction by the petitioner to report back for work
and settle their accountabilities served as notices to
private respondents for the latter to explain or account
for the missing funds held in trust by them before they
disappeared. 9
Petitioner considers this 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 by petitioner's own admission, private respondents
were never told in said notice that their dismissal was being sought, only that
they should settle their accountabilities. In petitioner's incriminating words:
It should be emphasized here that at the time the
misappropriation was discovered and subsequently
thereafter, the petitioner's first concern was not
effecting the dismissal of private respondents but the
recovery of the misappropriated funds thus the latter
were advised to report back to work. 10
As above-stated, the first notice should inform the employee that his
dismissal is being sought. Its absence in the present case makes the
termination of private respondents defective, for which petitioner must be
sanctioned for his non-compliance with the requirements of or for failure to
observe due process. 11 The twin requirements of notice and hearing
constitute the essential elements of due process, and neither of these
elements can be disregarded without running afoul of the constitutional
guarantee. Not being mere technicalities but the very essence of due
process, to which every employee is entitled so as to ensure that the
employer's prerogative to dismiss is not exercised arbitrarily, 12 these
requisites must be complied with strictly.
Petitioner makes much capital of private respondents' failure to report to
work, construing the same as abandonment which thus authorized the
latter's dismissal. As correctly pointed out by the NLRC, to which the Solicitor
General agreed, Section 2 of Book V, Rule XIV of the Omnibus Rules
Implementing the Labor Code requires that in cases of abandonment of
work, notice should be sent to the worker's last known address. If indeed
private respondents had abandoned their jobs, it was incumbent upon
petitioner to comply with this requirement. This, petitioner failed to do,
entitling respondents to nominal damages in the amount of P5,000.00 each,
in accordance with recent jurisprudence, 13 to vindicate or recognize their
right to procedural due process which was violated by petitioner.
Lastly, petitioner argues that the NLRC gravely erred when it disregarded the
vouchers presented by the former as proof of his payment of 13th month pay
to private respondents. While admitting that said vouchers covered only a
ten-day period, petitioner argues that the same should be credited as
amounts received by private respondents as part of their 13th month pay,
Section 3(e) of the Rules and Regulations Implementing P.D. No. 851
providing that the employer shall pay the difference when he pays less than
1/12th of the employee's basic salary. 14
While it is true that the vouchers evidencing payments of 13th month pay
were submitted only on appeal, it would have been more in keeping with the
directive of Article 221 15 of the Labor Code for the NLRC to have taken the
same into account. 16 Time and again, we have allowed evidence to be
submitted on appeal, emphasizing that, in labor cases, technical rules of
evidence are not binding. 17 Labor officials should use every and all
reasonable means to ascertain the facts in each case speedily and
objectively, without regard to technicalities of law or procedure. 18
It must also be borne in mind that the intent of P.D. No. 851 is the granting of
additional income in the form of 13th month pay to employees not as yet
receiving the same and not that a double burden should be imposed on the
employer who is already paying his employees a 13th month pay or its
equivalent. 19 An employer who pays less than 1/12th of the employees basic
salary as their 13th month pay is only required to pay the difference. 20
The foregoing notwithstanding, the vouchers presented by petitioner covers
only a particular year. It does not cover amounts for other years claimed by
private respondents. It cannot be presumed that the same amounts were
given on said years. Hence, petitioner is entitled to credit only the amounts
paid for the particular year covered by said vouchers.

WHEREFORE, in view of the foregoing, 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.

SO ORDERED.

Narvasa, C.J., Kapunan and Purisima, JJ., concur.

35
March 6, 2017
G.R. No. 197899
JOAQUIN LU, Petitioner
vs
TIRSO ENOPIA, ROBERTO ABANES, ALEJANDRE BAGAS, SALVADOR
BERNAL, SAMUEL CAHAYAG, ALEJANDRO CAMPUGAN, RUPERTO
CERNA, JR., REYNALDO CERNA, PETER CERVANTES, LEONARDO CO
ND ES TABLE, ROLANDO ESLOPOR, ROLLY FERNANDEZ, EDDIE
FLORES, ROLANDO FLORES, JUDITO FUDOLIN, LEO GRAPANI, FELIX
HUBAHIB, JERRY JUAGPAO, MARCIANO LANUTAN, JOVENTINO
MATOBATO, ALFREDO MONIVA, VICTORIANO ORTIZ, JR., RENALDO
PIALAN, ALFREDO PRUCIA, PONCIANO REANDO, HERMENIO
REMEGIO, DEMETRIO RUAYA, EDGARDO RUSIANA, NESTOR SALILI,
VICENTE SASTRELLAS, ROMEO SUMAYANG, and DESIDERIO TABAY,
Respondents
DECISION
PERALTA, J.:
Before us is a petition for review on certiorari filed by Joaquin Lu which seeks
to reverse and set aside the Decision1 dated October 22, 2010 and the
Resolution2 dated May 12, 2011, respectively, of the Court of Appeals issued
in CA-G.R. SP No. 55486-MIN.
The facts of the case, as stated by the Court of Appeals, are as follows:
Petitioners (now herein respondents) were hired from January 20, 1994 to
March 20, 1996 as crew members of the fishing mother boat F/B MG-28
owned by respondent Joaquin "Jake" Lu (herein petitioner Lu) who is the
sole proprietor of Mommy Gina Tuna Resources [MGTR] based in General
Santos City. Petitioners and Lu had an income-sharing arrangement wherein
55% goes to Lu, 45% to the crew members, with an additional 4% as
"backing incentive." They also equally share the expenses for the
maintenance and repair of the mother boat, and for the purchase of nets,
ropes and payaos.
Sometime in August 1997, Lu proposed the signing of a Joint Venture
Fishing Agreement between them, but petitioners refused to sign the same
as they opposed the one-year term provided in the agreement. According to
petitioners, during their dialogue on August 18, 1997, Lu terminated their
services right there and then because of their refusal to sign the agreement.
On the other hand, Lu alleged that the master fisherman (piado) Ruben Salili
informed him that petitioners still refused to sign the agreement and have
decided to return the vessel F/B MG-28.
On August 25, 1997, petitioners filed their complaint for illegal dismissal,
monetary claims and damages. Despite serious efforts made by Labor
Arbiter (LA) Arturo P. Aponesto, the case was not amicably settled, except
for the following matters: (1) Balansi 8 and 9; (2) 10% piado share; (3) sud-
anon refund; and (4) refund of payment of motorcycle in the amount of
₱15,000.00. LA Aponesto further inhibited himself from the case out of
"delicadeza," and the case was raffled to LA Amado M. Solamo.
In their Position Paper, petitioners alleged that their refusal to sign the Joint
Venture Fishing Agreement is not a just cause for their termination.
Petitioners also asked for a refund of the amount of ₱8,700,407.70 that was
taken out of their 50% income share for the repair and maintenance of boat
as well as the purchase of fishing materials, as Lu should not benefit from
such deduction.
On the other hand, Lu denied having dismissed petitioners, claiming that
their relationship was one of joint venture where he provided the vessel and
other fishing paraphernalia, while petitioners, as industrial partners, provided
labor by fishing in the high seas. Lu alleged that there was no employer-
employee relationship as its elements were not present, viz.: it was
the piado who hired petitioners; they were not paid wages but shares in the
catch, which they themselves determine; they were not subject to his
discipline; and respondent had no control over the day-to-day fishing
operations, although they stayed in contact through respondent's radio
operator or checker. Lu also claimed that petitioners should not be
reimbursed for their share in the expenses since it was their joint venture that
shouldered these expenses.3
36
On June 30, 1998, the LA rendered a Decision4 dismissing the case for lack
of merit finding that there was no employer-employee relationship existing
between petitioner and the respondents but a joint venture.
In so ruling, the LA found that: (1) respondents were not hired by petitioner
as the hiring was done by the piado or master fisherman; (2) the earnings of
the fishermen from the labor were in the form of wages they earned based on
their respective shares; (3) they were never disciplined nor sanctioned by the
petitioner; and, (4) the income-sharing and expense-splitting was no doubt a
working set up in the nature of an industrial partnership. While petitioner
issued memos, orders and directions, however, those who were related more
on the aspect of management and supervision of activities after the actual
work was already done for purposes of order in hauling and sorting of fishes,
and thus, not in the nature of control as to the means and method by which
the actual fishing operations were conducted as the same was left to the
hands of the master fisherman.
The LA also ruled that the checker and the use of radio were for the purpose
of monitoring and supplying the logistics requirements of the fishermen while
in the sea; and that the checkers were also tasked to monitor the recording of
catches and ensure that the proper sharing system was implemented; thus,
all these did not mean supervision on how, when and where to fish.
Respondents appealed to the National Labor Relations
Commission (NLRC), which affirmed the LA Decision in its Resolution5 dated
March 12, 1999. Respondents' motion for reconsideration was denied in a
Resolution6 dated July 9, 1999.
Respondents filed a petition for certiorari with the CA which dismissed7 the
same for having been filed beyond the 60-day reglementary period as
provided under Rule 65 of the Rules of Court, and that the sworn certification
of non-forum shopping was signed only by two (2) of the respondents who
had not shown any authority to sign in behalf of the other respondents. As
their motion for reconsideration was denied, they went to Us via a petition
for certiorari assailing the dismissal which We granted in a Resolution8 dated
July 31, 2006 and remanded the case to the CA for further proceedings.
Petitioner filed its Comment to the petition. The parties submitted their
respective memoranda as required by the CA.
On October 22, 2010, the CA rendered its assailed Decision reversing the
NLRC, the decretal portion of which reads as follows:
WHEREFORE, premises considered, the assailed March 12, 1999
Resolution of public respondent National Labor Relations Commission
(NLRC), Fifth Division, Cagayan de Oro City, is hereby REVERSED and SET
ASIDE, and a new one is entered.
Thus, private respondent Mommy Gina Tuna Resources (MGTR) thru its sole
proprietor/general manager, Joaquin T. Lu (Lu), is hereby ORDERED to pay
each of the petitioners, namely, TIRSO ENOPIA, ROBERTO ABANES,
ALEJANDRE BAGAS, SALVADOR BERNAL,
SAMUEL CAHAYAG, ALEJANDRO CAMPUNGAN, RUPERTO CERNA, JR.,
REYNALDO CERNA, PETER CERVANTES, LEONARDO CONDESTABLE,
ROLANDO ESLOPOR, ROLLY FERNANDEZ, EDDIE FLORES, ROLANDO
FLORES, JUDITO FUDOLIN, LEO GRAPANI, FELIX HUBAHIB, JERRY
JUAGPAO, MARCIANO LANUTAN, JOVENTINO MATOBATO, ALFREDO
MONIVA, VICTORIANO ORTIZ, JR., RENALDO PIALAN, SEVERO PIALAN,
ALFREDO PRUCIA, POCIANO REANDO, HERMENIO REMEGIO,
DEMETRIO RUAYA, EDGARDO RUSIANA, NESTOR SALILI, RICHARD
SALILI, SAMUEL SALILI, VICENTE SASTRELLAS, ROMEO SUMAYANG
and DESIDERIO TABAY the following:
(1) SEPARATION PAY (in lieu of the supposed reinstatement) equivalent to
one (1) month pay for every year of service reckoned from the very moment
each petitioner was hired as fishermen-crew member of FIB MG-28 by
MGTR until the finality of this judgment. A fraction of at least six (6) months
shall be considered one (l) whole year. Any fraction below six months shall
be paid pro rata;
(2) FULL BACKWAGES (inclusive of all allowances and other benefits
required by law or their monetary equivalent) computed from the time they
were dismissed from employment on August 18, 1997 until finality of this
Judgment;
(3) EXEMPLARY DAMAGES in the sum of Fifty Thousand Pesos
(₱50,000.00);
(4) ATTORNEY'S FEES equivalent to 10% of the total monetary award.
Considering that a person's income or earning is his "lifeblood," so to
speak, i.e., equivalent to life itself, this Decision is deemed immediately
executory pending appeal should MGTR decide to elevate this case to the
Supreme Court.
Let this case be referred back to the Office of the Labor Arbiter for proper
computation of the awards.9
The CA found that petitioner exercised control over respondents based on
the following: (1) respondents were the fishermen crew members of
petitioner's fishing vessel, thus, their services to the latter were so
indispensable and necessary that without them, petitioner's deep-sea fishing
industry would not have come to existence much less fruition; (2) he had
control over the entire fishing operations undertaken by the respondents
through the master fisherman (piado) and the assistant master
fisherman (assistant piado) employed by him; (3) respondents were paid
based on a percentage share of the fish catch did not in any way affect their
regular employment status; and (4) petitioner had already invested millions of
pesos in its deep-sea fishing industry, hence, it is highly improbable that he
had no control over respondents' fishing operations.
Petitioner's motion for reconsideration was denied by the CA in its Resolution
dated May 12, 2011.
Aggrieved, petitioner filed the instant petition for review on certiorari citing the
following as reasons for granting the same, to wit:
I Here, the LA's factual findings was affirmed by the NLRC, however, the CA
THE HONORABLE COURT OF APPEALS RENDERED THE ASSAILED
DECISION CONTRARY TO LAW AND LOGIC BY CITING THE ABSENCE
OF PROOF OF REQUISITES OF A VALID DISMISSAL AS BASIS FOR
CONCLUDING THAT THE NLRC GRAVELY ABUSED ITS DISCRETION.
II
THE HONORABLE COURT OF APPEALS EXCEEDED ITS JURISDICTION
BY TREATING RESPONDENTS' PETITION FOR CERTIORARI UNDER
RULE 65 AS AN ORDINARY APPEAL, AND BY INSISTING ON ITS OWN
EVALUATION OF THE EVIDENCE.
III
THE HONORABLE COURT OF APPEALS RENDERED THE DECISION
DATED 22 OCTOBER 2010 CONTRARY TO LAW AND THE EVIDENCE
ON RECORD.
IV
THE HONORABLE COURT OF APPEALS HAS DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS BY
MAKING ITS ASSAILED DECISION IMMEDIATELY EXECUTORY
PENDING APPEAL IN SPITE OF THE FACT THAT RESPONDENTS DID
NOT ASK FOR IMMEDIATE PAYMENT OF SEPARATION PAY AND
OTHER CLAIMS, AND DESPITE THE CLAIM OF RESPONDENTS THAT
MOST OF THEM ARE CURRENTLY EMPLOYED IN OTHER DEEP-SEA
FISHING COMPANIES.10
Petitioner contends that no grave abuse of discretion can be attributed to the
NLRC's finding affirming that of the LA that the arrangement between
petitioner and respondents was a joint venture partnership; and that the CA,
in assuming the role of an appellate body, had re-examined the facts and re-
evaluated the evidence thereby treating the case as an appeal instead of an
original action for certiorari under Rule 65.
We are not persuaded.
In Prince Transport, Inc. v. Garcia,11 We held:
37
The power of the CA to review NLRC decisions via a petition
for certiorari under Rule 65 of the Rules of Court has been settled as early as
this Court's decision in St. Martin Funeral Homes v. NLRC. In said case, the
Court held that the proper vehicle for such review is a special civil action
for certiorari under Rule 65 of the said Rules, and that the case should be
filed with the CA in strict observance of the doctrine of hierarchy of courts.
Moreover, it is already settled that under Section 9 of Batas Pambansa Blg.
129, as amended by Republic Act No. 7902, the CA, pursuant to the exercise
of its original jurisdiction over petitions for certiorari, is specifically given the
power to pass upon the evidence, if and when necessary, to resolve factual
issues. Section 9 clearly states:
xxxx
The Court of Appeals shall have the power to try cases and conduct
hearings, receive evidence and perform any and all acts necessary to
resolve factual issues raised in cases falling within its original and appellate
jurisdiction, including the power to grant and conduct new trials or further
proceedings.x x x.
However, equally settled is the rule that factual findings of labor officials, who
are deemed to have acquired expertise in matters within their jurisdiction, are
generally accorded not only respect but even finality by the courts when
supported by substantial evidence, i.e., the amount of relevant evidence
which a reasonable mind might accept as adequate to justify a conclusion.
But these findings are not infallible. When there is a showing that they were
arrived at arbitrarily or in disregard of the evidence on record, they may be
examined by the courts. The CA can grant the petition for certiorari if it finds
that the NLRC, in its assailed decision or resolution, made a factual finding
not supported by substantial evidence. It is within the jurisdiction of the CA,
whose jurisdiction over labor cases has been expanded to review the
findings of the NLRC.12
found that the latter's resolution did not critically examine the facts and
rationally assess the evidence on hand, and thus found that the NLRC
gravely abused its discretion when it sustained the LA's decision dismissing
respondents' complaint for illegal dismissal on the ground of lack of merit.
The judicial function of the CA in the exercise of its certiorari jurisdiction over
the NLRC extends to the careful review of the NLRC's evaluation of the
evidence because the factual findings of the NLRC are accorded great
respect and finality only when they rest on substantial
evidence.13 Accordingly, the CA is not to be restrained from revising or
correcting such factual findings whenever warranted by the circumstances
simply because the NLRC is not infallible. Indeed, to deny to the CA this
power is to diminish its corrective jurisdiction through the writ of certiorari.14
The main issue for resolution is whether or not an employer-employee
relationship existed between petitioner and respondents.
At the outset, We reiterate the doctrine that the existence of an employer-
employee relationship is ultimately a question of fact. Generally, We do not
review errors that raise factual questions. However, when there is a conflict
among the factual findings of the antecedent deciding bodies like the LA, the
NLRC and the CA, it is proper, in the exercise of Our equity jurisdiction, to
review and re-evaluate the factual issues and to look into the records of the
case and re-examine the questioned findings. In dealing with factual issues
in labor cases, substantial evidence or that amount of relevant evidence
which a reasonable mind might accept as adequate to justify a conclusion is
sufficient.15
In determining the existence of an employer-employee relationship, the
following elements are considered: (1) the selection and engagement of the
workers; (2) the power to control the worker's conduct; (3) the payment of
wages by whatever means; and (4) the power of dismissal.16 We find all
these elements present in this case.
It is settled that no particular form of evidence is required to prove the
existence of an employer-employee relationship. Any competent and relevant
evidence to prove the relationship may be admitted.17
In this case, petitioner contends that it was the piado who hired respondents,
however, it was shown by the latter's evidence that the employer stated in
their Social Security System (SSS) online inquiry system printouts was
MGTR, which is owned by petitioner. We have gone over these printouts and
found that the date of the SSS remitted contributions coincided with the date
of respondents' employment with petitioner. Petitioner failed to rebut such
evidence. Thus, the fact that petitioner had registered the respondents with
SSS is proof that they were indeed his employees. The coverage of the
Social Security Law is predicated on the existence of an employer-employee
relationship.18
Moreover, the records show that the 4% backing incentive fee which was
divided among the fishermen engaged in the fishing operations approved by
petitioner was paid to respondents after deducting the latter's
respective vale or cash advance.19 Notably, even the piado's name was
written in the backing incentive fee sheet with the corresponding vale which
was deducted from his incentive fee. If indeed a joint venture was agreed
upon between petitioner and respondents, why would these fishermen
obtain vale or cash advance from petitioner and not from the piado who
allegedly hired and had control over them.
It was established that petitioner exercised control over respondents. It
should be remembered that the control test merely calls for the existence of
the right to control, and not necessarily the exercise thereof. It is not
essential that the employer actually supervises the performance of duties by
the employee. It is enough that the former has a right to wield the power.20
Petitioner admitted in his pleadings that he had contact with respondents at
sea via the former's radio operator and their checker. He claimed that the
use of the radio was only for the purpose of receiving requisitions for the
needs of the fishermen in the high seas and to receive reports of fish catch
so that they can then send service boats to haul the same. However, such
communication would establish that he was constantly monitoring or
checking the progress of respondents' fishing operations throughout the
duration thereof, which showed their control and supervision over
respondents' activities. Consequently, We give more credence to
respondents' allegations in their petition filed with the CA on how such
control was exercised, to wit:
The private respondent (petitioner) controls the entire fishing operations. For
each mother fishing boat, private respondent assigned a master fisherman
(pi ado) and assistant master fisherman (assistant pi ado), who every now
and then supervise the fishing operations. Private respondent also assigned
a checker and assistant checker based on the office to monitor and contact
every now and then the crew at sea through radio. The checker and assistant
checker advised then the private respondent of the condition. Based on the
report of the checker, the private respondent, through radio, will then instruct
the "piado" how to conduct the fishing operations.21
Such allegations are more in consonance with the fact that, as the CA found,
MGTR had already invested millions of pesos in its deep-sea fishing industry.
The payment of respondents' wages based on the percentage share of the
fish catch would not be sufficient to negate the employer-employee
relationship existing between them. As held in Ruga v. NLRC:22
x x x [I]t must be noted that petitioners received compensation on a
percentage commission based on the gross sale of the fish-catch, i.e., 13%
of the proceeds of the sale if the total proceeds exceeded the cost of the
crude oil consumed during the fishing trip, otherwise, only 10% of the
proceeds of the sale. Such compensation falls within the scope and meaning
of the term "wage" as defined under Article 97(f) of the Labor Code, thus:
(f) "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 included the
fair and reasonable value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the employer to the
employee. x x x23
Petitioner wielded the power of dismissal over respondents when he
dismissed them after they refused to sign the joint fishing venture agreement.
The primary standard for determining regular employment is the reasonable
connection between the particular activity performed by the employee in
relation to the usual trade or business of the employer.24 Respondents' jobs
as fishermen-crew members of FIB MG 28 were directly related and
necessary to petitioner's deep-sea fishing business and they had been
38
performing their job for more than one year. We quote with approval what the
CA said, to wit:
Indeed, it is not difficult to see the direct linkage or causal connection
between the nature of petitioners' (now respondents) work visa- vis MGTR's
line of business. In fact, MGTR's line of business could not possibly exist, let
alone flourish without people like the fishermen crew members of its fishing
vessels who actually undertook the fishing activities in the high
seas.1âwphi1 Petitioners' services to MGTR are so indispensable and
necessary that without them MGTR's deep-sea fishing industry would not
have come to existence, much less fruition. Thus, We do not see any reason
why the ruling of the Supreme Court in Ruga v. National Labor Relations
Commission should not apply squarely to the instant case, viz.:
x x x The hiring of petitioners to perform work which is necessary or desirable
in the usual business or trade of private respondent x x x [qualifies] them as
regular employees within the meaning of Article 28025 of the Labor Code as
they were indeed engaged to perform activities usually necessary or
desirable in the usual fishing business or occupation of private respondent.26
As respondents were petitioner's regular employees, they are entitled to
security of tenure under Section 3,27 Article XIII of the 1987 Constitution. It is
also provided under Article 279 of the Labor Code, that the right to security of
tenure guarantees the right of employees to continue in their employment
absent a just or authorized cause for termination. Considering that
respondents were petitioner's regular employees, the latter's act of asking
them to sign the joint fishing venture agreement which provides that the
venture shall be for a period of one year from the date of the agreement,
subject to renewal upon mutual agreement of the parties, and may be pre-
terminated by any of the parties before the expiration of the one-year period,
is violative of the former's security of tenure. And respondents' termination
based on their refusal to sign the same, not being shown to be one of those
just causes for termination under Article 282,28 is, therefore, illegal.
An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his
full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement.29
Respondents who were unjustly dismissed from work are entitled to
reinstatement and backwages, among others. However, We agree with the
CA that since most (if not all) of the respondents are already employed in
different deep-sea fishing companies, and considering the strained relations
between MGTR and the respondents, reinstatement is no longer viable.
Thus, the CA correctly ordered the payment to each respondent his
separation pay equivalent to one month for every year of service reckoned
from the time he was hired as fishermen-crew member of FIB MG-28 by
MGTR until the finality of this judgment.
The CA correctly found that respondents are entitled to the payment of
backwages from the time they were dismissed until the finality of this
decision.
The CA's award of exemplary damages to each respondent is likewise
affirmed. Exemplary damages are granted by way of example or correction
for the public good if the employer acted in a wanton, fraudulent, reckless,
oppressive or malevolent manners.30
We also agree with the CA that respondents are entitled to attorney's fees in
the amount of 10% of the total monetary award.1âwphi1 It is settled that
where an employee was forced to litigate and, thus, incur expenses to
protect his rights and interest, the award of attorney's fees is legally and
morally justifiable.31
The legal interest shall be imposed on the monetary awards herein granted
at the rate of six percent (6%) per annum from the finality of this judgment
until fully paid.32
Petitioner's contention that there is no justification to incorporate in the CA
decision the immediate execution pending appeal of its decision is not
persuasive. The petition for certiorari filed with the CA contained a general
prayer for such other relief and remedies just and equitable under the
premises. And this general prayer is broad enough to justify extension of a
remedy different from or together with the specific remedy sought.33 Indeed,
a court may grant relief to a party, even if the party awarded did not pray for it
in his pleadings.34
WHEREFORE, the petition for review on certiorari is DENIED. The Decision
dated October 22, 2010 and the Resolution dated May 12, 2011 of the Court
of Appeals in CA-G.R. SP No. 55486-MIN are hereby AFFIRMED. The
monetary awards which are herein granted shall earn legal interest at the
rate of six percent (6%) per annum from the date of the finality of this
Decision until fully paid.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

39
G.R. No. 110068 February 15, 1995
PHILIPPINE DUPLICATORS, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE
DUPLICATORS EMPLOYEES UNION-TUPAS, respondents.
RESOLUTION
FELICIANO, J.:
On 11 November 1993, this Court, through its Third Division, rendered a
decision dismissing the Petition for Certiorari filed by petitioner Philippine
Duplicators, Inc. (Duplicators) in G.R. No. 110068. The Court upheld the
decision of public respondent National Labor Relations Commission (NLRC),
which affirmed the order of Labor Arbiter Felipe T. Garduque II directing
petitioner to pay 13th month pay to private respondent employees computed
on the basis of their fixed wages plus sales commissions. The Third Division
also denied with finality on 15 December 1993 the Motion for
Reconsideration filed (on 12 December 1993) by petitioner.
On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to
Admit Second Motion for Reconsideration and (b) a Second Motion for
Reconsideration. This time, petitioner invoked the decision handed down by
this Court, through its Second Division, on 10 December 1993 in the two (2)
consolidated cases of Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la
Serna and Philippine Fuji Xerox Corp. vs. Hon. Cresenciano B. Trajano, in
G.R. Nos. 92174 and 102552, respectively. In its decision, the Second
Division inter alia declared null and void the second paragraph of Section 5
(a)1 of the Revised Guidelines issued by then Secretary of Labor Drilon.
Petitioner submits that the decision in the Duplicators case should now be
considered as having been abandoned or reversed by the Boie-
Takeda decision, considering that the latter went "directly opposite and
contrary to" the conclusion reached in the former. Petitioner prays that the
decision rendered in Duplicators be set aside and another be entered
directing the dismissal of the money claims of private respondent Philippine
Duplicators' Employees' Union.
In view of the nature of the issues raised, the Third Division of this Court
referred the petitioner's Second Motion for Reconsideration, and its Motion
for Leave to Admit the Second Motion for Reconsideration, to the Court en
banc en consulta. The Court en banc, after preliminary deliberation, and
inorder to settle the condition of the relevant case law, accepted G.R. No.
110068 as a banc case.
Deliberating upon the arguments contained in petitioner's Second Motion for
Reconsideration, as well as its Motion for Leave to Admit the Second Motion
for Reconsideration, and after review of the doctrines embodied,
respectively, in Duplicators and Boie-Takeda, we consider that these Motions
must fail.
The decision rendered in Boie-Takeda cannot serve as a precedent under
the doctrine of stare decisis. The Boie-Takeda decision was promulgated a
month after this Court, (through its Third Division), had rendered the decision
in the instant case. Also, the petitioner's (first) Motion for Reconsideration of
the decision dated 10 November 1993 had already been denied, with finality,
on 15 December 1993, i.e.; before the Boie-Takeda decision became final on
5 January 1994.
In the instant case, there is no question that the sales commission
earned by the salesmen who make or close a sale of duplicating
machines distributed by petitioner corporation, constitute part of the
compensation or remuneration paid to salesmen for serving as
salesmen, and hence as part of the "wage" or salary of petitioner's
salesmen. Indeed, it appears that petitioner pays its salesmen a small
fixed or guaranteed wage; the greater part of the salesmen's wages or
salaries being composed of the sales or incentive commissions earned
on actual sales closed by them. No doubt this particular galary structure
was intended for the benefit of the petitioner corporation, on the
apparent assumption that thereby its salesmen would be moved to
greater enterprise and diligence and close more sales in the expectation
of increasing their sales commissions. This, however, does not detract
from the character of such commissions as part of the salary or wage
paid to each of its salesmen for rendering services to petitioner
corporation.
In other words, the sales commissions received for every duplicating
machine sold constituted part of the basic compensation or remuneration
of the salesmen of Philippine Duplicators for doing their job. The portion
of the salary structure representing commissions simply comprised an
automatic increment to the monetary value initially assigned to each unit
of work rendered by a salesman. Especially significant here also is the
fact that the fixed or guaranteed portion of the wages paid to the
Philippine Duplicators' salesmen represented only 15%-30% of an
employee's total earnings in a year. We note the following facts on
record:
Salesmen's Total Earnings and 13th Month Pay
For the Year 19862
Name of Total Amount Paid Montly Fixed
Salesman Earnings as 13th Month Pay Wages x 123
Baylon, P76,610.30 P1,350.00 P16,200.00
Benedicto
Bautista 90,780.85 1,182.00 14,184.00
Salvador
Brito, 64,382.75 1,238.00 14,856.00
Tomas
Bunagan, 89,287.75 1,266.00 15,192.00
Jorge
Canilan, 74,678.17 1,350.00 16,200.00
Rogelio
Dasig, 54,625.16 1,378,00 16,536.00
Jeordan
Centeno, 51,854.15 1,266.04 15,192.00
Melecio, Jr.
De los Santos 73,551.39 1,322.00 15,864.00
Ricardo

Preliminarily, we note that petitioner Duplicators did not put in issue the del Mundo, 108,230.35 1,406.00 16,872.00
validity of the Revised Guidelines on the Implementary on of the 13th Month Wilfredo
Pay Law, issued on November 16, 1987, by then Labor Secretary Franklin M.
Drilon, either in its Petition for Certiorari or in its (First) Motion for Garcia, 93,753.75 1,294.00 15,528.00
Reconsideration. In fact, petitioner's counsel relied upon these Guidelines Delfin
and asserted their validity in opposing the decision rendered by public
respondent NLRC. Any attempted change in petitioner's theory, at this late
stage of the proceedings, cannot be allowed. Navarro, 98,618.71 1,266.00 15,192.00
Ma. Teresa
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 Ochosa, 66,275.65 1,406.00 16,872.00
(Philippine Duplicators). To the contrary, the doctrines enunciated in these Rolano
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 Quisumbing, 101,065.75 1,406.00 16,872.00
used or invoked) the legal characterizations of which must accordingly differ. Teofilo

The Third Division in Durplicators found that: Rubina, 42,209.73 1,266.00 15,192.00
Emma
40
 Salazar, 64,643.65 1,238.00 14,856.00
Celso
Sopelario, 52,622.27 1,350.00 16,200.00
Ludivico
Tan, 30,127.50 1,238.00 14,856.00
Leynard
Talampas, 146,510.25 1,434.00 17,208.00
Pedro
Villarin, 41,888.10 1,434.00 17,208.00
Constancio
Carrasco, 50,201.20 403.75*
Cicero
Punzalan, 24,351.89 1,266.00 15,192.00
Reynaldo
Poblador, 25,516.75 323.00*
Alberto
Cruz, 32,950.45 323.00*
Danilo
Baltazar, 15,681.35 323.00*
Carlito
Considering the above circumstances, the Third Division held, correctly, that
the sales commissions were an integral part of the basic salary structure of
Philippine Duplicators' employees salesmen. These commissions are not
overtime payments, nor profit-sharing payments nor any other fringe benefit.
Thus, the salesmen's commissions, comprising a 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.
In Boie-Takeda the so-called commissions "paid to or received by medical
representatives of Boie-Takeda Chemicals or by the rank and file employees
of Philippine Fuji Xerox Co.," were excluded from the term "basic salary"
because these were paid to the medical representatives and rank-and-file
employees as "productivity bonuses."4 The Second Division characterized
these payments as additional monetary benefits not properly included in the
term "basic salary" in computing their 13th month pay. We note that
productivity bonuses are generally tied to the productivity, or capacity for
revenue production, of a corporation; such bonuses closely resemble profit-
sharing payments and have no clear director necessary relation to the
amount of work actually done by each individual employee. More generally, a
bonus is an amount granted and paid ex gratia to the employee; its payment
constitutes an act of enlightened generosity and self-interest on the part of
the employer, rather than as a demandable or enforceable obligation.
In Philippine Education Co. Inc. (PECO) v. Court of Industrial Relations,5 the
Court explained the nature of a bonus in the following general terms:
As a rule a bonus is an amount granted and paid to an
employee for his industry loyalty which contributed to
the success of the employer's business and made
possible the realization of profits. It is an act of
generosity of the employer for which the employee
ought to be thankful and grateful. It is also granted by
an enlightened employer to spur the employee to
greater efforts for the success of the business and
realization of bigger profits. . . . . From the legal point
of view a bonus is not and mandable and enforceable
obligation. It is so when It is made part of the wage or
salary or compensation. In such a case the latter would
be a fixed amount and the former would be a
contingent one dependent upon the realization of
profits. . . .6 (Emphasis supplied)
In Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual Benefit
Association,7 the Court amplified:
. . . . Whether or not [a] bonus forms part of waqes
depends upon the circumstances or conditions for its
41
payment. If it is an additional compensation which the
employer promised and agreed to give without any
conditions imposed for its payment, such as success of
business or greater production or output, then it is part
of the wage. But if it is paid only if profits are realized
or a certain amount of productivity achieved, it cannot
be considered part of wages. . . . It is also paid on the
basis of actual or actual work accomplished. If the
desired goal of production is not obtained, or the
amount of actual work accomplished, the bonus does
not accrue. . . . 8 (Emphasis supplied)
More recently, the non-demandable character of a bonus was stressed by
the Court in Traders Royal Bank v. National Labor Relations Commission:9
A bonus is a "gratuity or act of liberality of the giver
which the recipient has no right to demand as a matter
of right." (Aragon v. Cebu Portland Cement Co., 61
O.G. 4567). "It is something given in addition to what is
ordinarily received by or strictly due the recipient." The
granting of a bonus is basically a management
prerogative which cannot be forced upon the
employer "who may not be obliged to assume the
onerous burden of granting bonuses or other benefits
aside from the employee's basic salaries or wages . . ."
(Kamaya Point Hotel v. NLRC, 177 SCRA 160
[1989]). 10 (Emphasis supplied)
If an employer cannot be compelled to pay a productivity bonus to his
employees, it should follow that such productivity bonus, when given, should
not be deemed to fall within the "basic salary" of employees when the time
comes to compute their 13th month pay.
It is also important to note that the purported "commissions" paid by the Boie-
Takeda Company to its medical representatives could not have been "sales
commissions" in the same sense that Philippine Duplicators paid its
salesmen Sales commissions. Medical representatives are not salesmen;
they do not effect any sale of any article at all. In common commercial
practice, in the Philippines and elsewhere, of which we take judicial notice,
medical representatives are employees engaged in the promotion of
pharmaceutical products or medical devices manufactured by their employer.
They promote such products by visiting identified physicians and inform
much physicians, orally and with the aid of printed brochures, of the
existence and chemical composition and virtues of particular products of their
company. They commonly leave medical samples with each physician
visited; but those samples are not "sold" to the physician and the physician
is, as a matter of professional ethics, prohibited from selling such samples to
their patients. Thus, the additional payments made to Boie-Takeda's medical
representatives were not in fact sales commissions but rather partook of the
nature of profit-sharing bonuses.
The doctrine set out in the decision of the Second Division is, accordingly,
that additional payments made to employees, to the extent they partake of
the nature of profit-sharing payments, are properly excluded from the ambit
of the term "basic salary" for purposes of computing the 13th month pay due
to employees. Such additional payments are not "commissions" within the
meaning of the second paragraph of Section 5 (a) of the Revised Guidelines
Implementing 13th Month Pay.
The Supplementary Rules and Regulations Implementing P.D. No. 851
subsequently issued by former Labor Minister Ople sought to clarify the
scope of items excluded in the computation of the 13th month pay; viz.:
Sec. 4. Overtime pay, earnings and other
remunerations which are not part of the basic
salary shall not be included in the computation of the
13th month pay.
We observe that the third item excluded from the term "basic salary" is cast
in open ended and apparently circular terms: "other remunerations which are
not part of the basic salary." However, what particular types of earnings and
remuneration are or are not properly included or integrated in the basic
salary are questions to be resolved on a case to case basis, in the light of the
specific and detailed facts of each case. In principle, where these earnings
and remuneration are closely akin to fringe benefits, overtime pay or profit-
sharing payments, they are properly excluded in computing the 13th month
pay. However, sales commissions which are effectively an integral portion of
the basic salary structure of an employee, shall be included in determining
his 13th month pay.

We recognize that both productivity bonuses and sales commissions may

have an incentive effect. But there is reason to distinguish one from the other
here. Productivity bonuses are generally tied to the productivity or profit
generation of the employer corporation. Productivity bonuses are not directly
dependent on the extent an individual employee exerts himself. A
productivity bonus is something extra for which no specific additional
services are rendered by any particular employee and hence not legally
demandable, absent a contractual undertaking to pay it. Sales commissions,
on the other hand, such as those paid in Duplicators, are intimately related to
or directly proportional to the extent or energy of an employee's endeavors.
Commissions are paid upon the specific results achieved by a salesman-
employee. It is a percentage of the sales closed by a salesman and operates
as an integral part of such salesman's basic pay.

Finally, the statement of the Second Division in Boie-Takeda declaring null

and void the second paragraph of Section 5(a) of the Revised Guidelines
Implementing the 13th Month Pay issued by former Labor Secretary Drilon, is
properly understood as holding that that second paragraph provides no legal
basis for including within the term "commission" there used additional
payments to employees which are, as a matter of fact, in the nature of profit-
sharing payments or bonuses. If and to the extent that such second
paragraph is so interpreted and applied, it must be regarded as invalid as
having been issued in excess of the statutory authority of the Secretary of
Labor. That same second paragraph however, correctly recognizes that
commissions, like those paid in Duplicators, may constitute part of the basic
salary structure of salesmen and hence should be included in determining
the 13th month pay; to this extent, the second paragraph is and remains
valid.

ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for
Reconsideration and the (b) aforesaid Second Reconsideration are DENIED
for lack of merit. No further pleadings will be entertained.

Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo,
Quiason, Puno, Vitug, Kapunan, Mendoza and Francisco, JJ., concur.

42