Right to Withhold

Case No. 06 – Tutoy

Milan vs. NLRC, G.R. No. 202961
Facts:
Solid Mills’ employees, petitioners and their families were allowed to occupy SMI Village, a property
owned by Solid Mills, which was “out of liberality and for the convenience of its employees…and on the
condition that the employees…would vacate the premises anytime the Company deems fit.” In 2003,
petitioners were informed that Solid Mills would cease operations due to serious business losses and were
sent notices to vacate SMI Village. Petitioners were required to sign a memorandum of agreement with
release and quitclaim before their vacation and sick leaves benefits, 13 th month pay and separation pay
would be released, and in signing so meant agreeing to vacate SMI Village. Hence, petitioners filed
complaint before the Labor Arbiter arguing that their possession of Solid Mills property is not an
accountability that is subject to clearance procedures, and the LA ruled in favor of petitioners alleging
that petitioners right to the payment of their benefits and etc. was vested by the law and contract. On
appeal, NLRC reversed LA’s decision, ruling that the termination of Solid Mills and petitioners’
employee-employer relationship made it incumbent upon petitioners to turn over the property to Solid
Mills. When elevated to the CA, the decision of the NLRC was affirmed. Hence, this petition.

Issue: W/N the payment of the monetary claims of petitioners should be held in abeyance
pending the compliance of petitioners’ accountabilities to Solid Mills by turning over the subject
lots they respectively occupy at the SMI Village.

Ruling:
Yes. Requiring clearance before the release of last payments to the employee is a standard
procedure among employers, whether public or private. As a general rule, Art. 116 of the Labor
Code prohibits employees from withholding wages from employees. However, Art. 113 supports
the employers’ institution of clearance procedures before the release of wages; in addition, Art.
1706 of the Civil Code provides that the employer is authorized to withhold wages for debts due.

Main Point:
As long as the debt or obligation was incurred by virtue of the employer-employee relationship,
generally, it shall be included in the employee’s accountabilities that are subject to clearance
procedures. The return of the property’s possession became an obligation on the part of the
employees when the employer-employee relationship ceased. Thus, Solid Mills has the right to
withhold petitioners’ wages and benefits because of this existing debt or liability.