LEGEND

RED—AS PER STUDY GUIDE

HIGHLIGHTS OF YELLOW—CASES
BLUE—NOT FOUND CASES

While an employer has management prerogative, it has no right to withhold salary/wages without consent of
the employee (Article 116, cited in 2010 SHS Perforated Materials, Inc.)

SHS Perforated Materials, Inc. et al., vs. Diaz, GR No. 185814, Oct. 13, 2010 1

FACTS

Petitioner SHS Perforated Materials, Inc. (SHS) is a start-up corporation organized and existing under the laws of
the Republic of the Philippines and registered with the Philippine Economic Zone Authority. Petitioner Winfried
Hartmannshenn (Hartmannshenn), a German national, is its president. Thus, the wages of SHS employees are paid
out by ECCP, through its Accounting Services Department headed by Juliet Taguiang (Taguiang). Manuel F. Diaz
(respondent) was hired by petitioner SHS as Manager for Business Development on probationary status

During respondent’s employment, Hartmannshenn was often abroad and, because of business exigencies, his
instructions to respondent were either sent by electronic mail or relayed through telephone or mobile phone.
During meetings with the respondent, Hartmannshenn expressed his dissatisfaction over respondent’s poor
performance. respondent acknowledged his poor performance and offered to resign from the company.

On November 18, 2005, Hartmannshenn arrived in the Philippines from Germany, and on November 22 and 24,
2005, notified respondent of his arrival through electronic mail messages and advised him to get in touch with him.
Respondent claimed that he never received the messages. Hartmannshenn instructed Taguiang not to release
respondent’s salary.

Respondent served on SHS a demand letter and a resignation letter. It is precisely because of illegal and unfair
labor practices such as these that I offer my resignation with neither regret nor remorse.

Appealing for the release of his salary respondent filed a Complaint against the petitioners for illegal dismissal;
non-payment of salaries/wages and 13th month pay with prayer for reinstatement and full backwages; exemplary
damages, and attorney’s fees, costs of suit, and legal interest.

ISSUES

Whether or not the temporary withholding of respondent’s salary/wages by petitioners was a valid exercise of
management prerogative.

RULING

Withholding respondent’s salary was not a valid exercise of management prerogative.

1
Management prerogative refers “to the right of an employer to regulate all aspects of employment, such as the
freedom to prescribe work assignments, working methods, processes to be followed, regulation regarding transfer
of employees, supervision of their work, lay-off and discipline, and dismissal and recall of work.” Although
management prerogative refers to “the right to regulate all aspects of employment,” it cannot be understood to
include the right to temporarily withhold salary/wages without the consent of the employee.

Any withholding of an employee’s wages by an employer may only be allowed in the form of wage deductions
under the circumstances provided in Article 113 of the Labor Code, as set forth below:

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

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

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

(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor.

There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an employer becomes so
unbearable on the part of the employee that it would foreclose any choice by him except to forego his continued
employment. It exists where there is cessation of work because continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in pay.

In this case, the withholding of respondent’s salary does not fall under any of the circumstances provided under
Article 113. Neither was it established with certainty that respondent did not work from November 16 to
November 30, 2005. Hence, the Court agrees with the LA and the CA that the unlawful withholding of
respondent’s salary amounts to constructive dismissal.

Doctrine; Principle of Law

Deductions for loss or damage to tools, materials, etc., supplied by employer or requiring deposit to answer for
such loss or damage (5J Taxi; 2000 Jardin)

Jardin vs. NLRC, G.R. No. 119268, February 23,2000 2

FACTS:

Petitioners were drivers of respondent, a domestic corporation engaged in the operation of "Goodman Taxi".
Petitioners used to drive respondent's taxicabs every other day on a 24 – hour work schedule under the boundary
system. Under this arrangement, petitioners earned an average of P400 daily. Nevertheless, respondent
admittedly regularly deducts from petitioners, daily earnings the amount of P30 supposedly for the washing of the
taxi units. Believing that the deduction is illegal, petitioners decided to form a labor union to protect their rights
and interests.

2
Upon learning about the plan of petitioners, respondent refused to let petitioners drive their taxicabs when they
reported for work. Petitioners suspected that they were singled out because they were the leaders and active
members of the proposed union. Aggrieved, petitioners filed with the labor arbiter a complaint against respondent
for unfair labor practice, illegal dismissal and illegal deduction of washing fees. In a decision, the labor arbiter
dismissed the complaint for lack of merit.

On appeal, the NLRC, in a decision, reversed and set aside the judgment of the labor arbiter. The labor tribunal
declared that petitioners are employees of respondent and, as such, their dismissal must be for just cause and
after due process.

Respondent's first motion for reconsideration was denied. Respondent filed another motion for reconsideration.
The NLRC, in its decision, granted the second motion for reconsideration. It ruled that it lacks jurisdiction over the
case as petitioners and respondent have no employer – employee relationship. It held that the relationship of the
parties is leasehold which is covered by the Civil Code rather than the Labor Code.

ISSUE:

Whether or not there is an employer – employee relationship so as to entitle them to payment of backwages.

RULING:

The court ruled that the relationship between jeepney owners/ operators on one hand and jeepney drivers on the
other under the boundary system is that of employer – employee and not of lessor – lessee. The court has
explained that in the lease of chattels, the lessor loses complete control over the chattel leased although the lessee
cannot be reckless in the use thereof, otherwise he would be responsible for the damages to the lessor. In the case
of jeepney owners/ operators and jeepney drivers, the former exercise supervision and control over the latter. The
management of the business is in the owner's hands. The owner as holder of the certificate of public convenience
must see to it that the driver follows the route prescribed by the franchising authority and the rules promulgated
as regards its operation. Now, the fact that the drivers do not receive fixed wages but get only that in excess of the
so-called "boundary" they pay to the owner/ operator is not sufficient to withdraw the relationship between them
from that of employer and employee. The court has applied by analogy the doctrine to the relationships between
bus owner/ operator and bus conductor, auto-calesa owner/ operator and driver and between taxi owners/
operators and taxi drivers. Hence, petitioners are undoubtedly employees of respondent because as taxi drivers
they perform activities which are usually necessary or desirable in the usual business or trade of their employer.

As consistently held by the court, termination of employment must be effected in accordance with law. The just
and authorized causes for termination of employment are enumerated under Articles 282, 283 and 284 of the
Labor Code. The requirement of notice and hearing is set-out in Article 277 of the said Code. Hence, petitioners,
being employees of respondent, can be dismissed only for just and authorized cause and after affording them
notice and hearing prior to termination. In the instant case, respondent had no valid cause to terminate the
employment of petitioners. Neither were there two written notices sent by respondent informing each of the
petitioners that they had been dismissed from work. These lack of valid cause and failure on the part of
respondent to comply with the twin-notice requirement underscored the illegality surrounding petitioners'
dismissal.

Under the law, 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. It must be emphasized though that recent judicial pronouncements distinguish between
employees illegally dismissed prior to the effectivity of Republic Act No. 6715 on March 21, 1989 and those whose
illegal dismissals were effected after such date. Thus, employees illegally dismissed prior to March 21, 1989, are
entitled to backwages up to three years without deduction or qualification, while those illegally dismissed after
that date are granted full backwages inclusive of allowances and other benefits or their monetary equivalent from
the time their actual compensation was withheld from them up to the time of their actual reinstatement. The
legislative policy behind Republic 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. Considering that petitioners were terminated from work on August 1, 1991, they are entitled to
full backwages on the basis of their last daily earnings.

With regard to the amount deducted daily by respondent from petitioners for washing of the taxi units, the court is
of the view that the same is not illegal in the context of the law. The court notes that after a tour of duty, it is
incumbent upon the driver to restore the unit he has driven to the same clean condition when he took it out. Car
washing after a tour of duty is indeed a practice in the taxi industry and is in fact dictated by fair play. Hence, the
drivers are not entitled to reimbursement of washing charges.

The employer's policy must be authorized by law, or regulations issued by the Sec/DOLE. It must be proved to be
a recognized practice in the jewelry manufacturing business, or that the Sec/DOLE has come up with the
appropriate rules that such policy is necessary or desirable (2012 Nina Jewelry Manufacturing case)

Nina Jewelry Manufacturing of Metal Arts Inc. vs. Montecillo, G.R. No. 188169, November 28, 2011

FACTS:

Respondents were employed as goldsmiths by the petitioner Niña Jewelry Manufacturing of Metal Arts, Inc.

There were incidents of theft involving goldsmiths in Niña Jewelry's employ:

The petitioner imposed a policy for goldsmiths, which were intended to answer for any loss or damage which Niña
Jewelry may sustain by reason of the goldsmiths' fault or negligence in handling the gold entrusted to them,
requiring them to post cash bonds or deposits in varying amounts but in no case exceeding 15% of the latter's
salaries per week.

The petitioner alleged that the goldsmiths were given the option not to post deposits, but to sign authorizations
allowing the former to deduct from the latter's salaries amounts not exceeding 15% of their take home pay should
it be found that they lost the gold entrusted to them. The deposits shall be returned upon completion of the
goldsmiths' work and after an accounting of the gold received.

The respondents claimed otherwise insisting that petitioner left the goldsmiths with no option but to post the
deposits

The next day after the policy was imposed, the respondents no longer reported for work and signified their
defiance against the new policy which at that point had not even been implemented yet.
The respondents alleged that they were constructively dismissed by the petitioner as their continued employments
were made dependent on their readiness to post the required deposits.

The respondents then filed a complaint for illegal dismissal and for the award of separation pay against the
petitioner, and later filed their amended complaint which excluded their earlier prayer for separation pay but
sought reinstatement and payment of backwages, attorney's fees and 13th month pay.

ISSUES:

1) Whether or not Niña Jewelry Manufacturing of Metal Arts, Inc. may impose the policy for their goldsmiths
requiring them to post cash bonds or deposits; and

2) Whether or not there is constructive dismissal.

HELD:

1) NO, the Niña Jewelry may not impose the policy. Articles 113 and 114 of the Labor Code are clear as to what are
the exceptions to the general prohibition against requiring deposits and effecting deductions from the employees'
salaries.

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

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

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

(c)In cases where the employer is authorized by law or regulations issued by the Secretary of Labor.

Article 114.Deposits for loss or damage — No employer shall require his worker to make deposits from
which deductions shall be made for the reimbursement of loss of or damage to tools, materials, or
equipment supplied by the employer, except when the employer is engaged in such trades, occupations
or business where the practice of making deposits is a recognized one, or is necessary or desirable as
determined by the Secretary of Labor in appropriate rules and regulations.

The petitioners should first establish that the making of deductions from the salaries is authorized by law, or
regulations issued by the Secretary of Labor. The petitioners failed to prove that their imposition of the new policy
upon the goldsmiths under Niña Jewelry's employ falls under the exceptions specified in Articles 113 and 114 of
the Labor Code.

2) There is NO constructive dismissal. Constructive dismissal occurs when there is cessation of work because
continued employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank or
diminution in pay or both; or when a clear discrimination, insensibility, or disdain by an employer becomes
unbearable to the employee.
The petitioners did not whimsically or arbitrarily impose the policy to post cash bonds or make deductions from
the workers' salaries. As attested to by the respondents' fellow goldsmiths in their Joint Affidavit, the workers were
convened and informed of the reason behind the implementation of the new policy. Instead of airing their
concerns, the respondents just promptly stopped reporting for work.

13th month pay (1993 Davao Fruits; 2005 Honda Phils.)

--wasn’t able to find the facts

Thus in Davao Fruits Corporation v.  Associated Labor Unions, et where an employer had freely and continuously
included in the computation of the 13th month pay those items that were expressly excluded by the law, we held
that the act which was  favorable to the employees though not conforming to law had thus ripened into a practice
and could not  be withdrawn, reduced, diminished, discontinued or eliminated. 

HONDA PHILIPPINES vs. SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA

Facts:

Petitioner Honda and Respondent union forged a Collective Bargaining Agreement which averred that Honda shall
maintain the present practice in the implementation of the 13 th and 14th month pay. Such CBA is effective until
2000. In the later part of 1998, the parties started re-negotiations.

However, when the talk between the parties did not go well, respondent union filed a Notice to Strike on the
ground of bargaining deadlock. Honda then filed a notice of Lockout in which the DOLE ordered the party to cease
and desist from committing acts.

The union filed a second Notice of Strike on ground of unfair labor, in which they went into pocketing of the
premises of Honda. DOLE then assumed jurisdiction and subjected the issue to the NLRC for compulsory arbitration
for which the employees were ordered to return to work.

The management of Honda, on 22 Nov. 1999, then issued a memorandum announcing its new computation of the
13th and 14th month pay to be granted to employees whereby the 31-day strike shall be considered unworked days
for purposes of computing said benefits.

Thus, the union opposed the pro-rated computation of the bonuses and the matter was brought before the
Grievance Machinery. The Labor Arbiter ordered Honda to compute each provision in full month basic pay. Ca
affirmed the decision of the labor arbiter.

Issue:

WON the pro-rated computation of the 13th month pay and the other bonuses in question is valid and lawful
Ruling:

Such pro-rated computation is invalid.

It is well noted that the CBA refers to the negotiated contract between a legitimate labor organization and the
employer. It is the law between the parties and compliance therewith is mandated by express policy of the law.

Honda did not adduce evidence to show that the 13 th month, 14th month and financial assistance benefits were
previously subject to pro-rating. Thus, such was an implicit acceptance that prior to the strike, a full month basic
pay computation was the “present practice” intended to be maintained in the CBA.

Lastly, to allow pro-ration of the 13 th month pay is to undermine the wisdom behind the law and the mandate
that the workingman’s welfare should be the primordial and paramount consideration.

DENIED.

Gas and uniform allowance (1997 Manila Bank)

(1991 Nestle)

Nestle Phils. vs. NLRC

FACTS:
The private respondents were employed by the petitioner either as sales representatives or medical
representatives. By reason of the nature of their work they were each allowed to avail of the company's car loan
policy. Under that policy, the company advances the purchase price of a car to be paid back by the employee
through monthly deductions from his salary, the company retaining the ownership of the motor vehicle until it
shall have been fully paid for. All of the private respondents availed of the petitioner's car loan policy.
Respondents were dismissed from service because of their participation in the strike/ certain
irregularities. As such, they filed a case of illegal dismissal before the NLRC. In the Notices of Dismissal, they were
asked by the Company to settle the accounts payable of their car loans or return the car for proper disposition. The
Company filed a civil suit to recover possession of the cars. Private respondents sought a temporary restraining
order in the NLRC to stop the company from cancelling their car loans and collecting their monthly amortizations
pending the final resolution of their appeals in the illegal dismissal case. NLRC granted the TRO.
ISSUE:
Whether or not NLRC is correct in granting the TRO in favor of the respondents pending the case of illegal
dismissal.
RULING:
Nestlé's demand for payment of the private respondents' amortizations on their car loans, or, in the
alternative, the return of the cars to the company, is not a labor, but a civil, dispute. It involves debtor-creditor
relations, rather than employee-employer relations. The NLRC gravely abused its discretion and exceeded its
jurisdiction by issuing the writ of injunction to stop the company from enforcing the civil obligation of the private
respondents under the car loan agreements and from protecting its interest in the cars which, by the terms of
those agreements, belong to it (the company) until their purchase price shall have been fully paid by the employee.
The terms of the car loan agreements are not in issue in the labor case. The rights and obligations of the parties
under those contracts may be enforced by a separate civil action in the regular courts, not in the NLRC.
(1999 Philippine Veterans Bank; 2001 Producers Bank)

PHILIPPINE VETERANS BANK, petitioner, vs. HONORABLE NATIONAL LABOR RELATIONS COMMISSION, HON.
POTENCIANO CAÑIZARES, JR., and DR. TEODORICO V. MOLINA, respondents.

FACTS:

In 1983, petitioner Philippine Veterans Bank was placed under receivership by the Central Bank (now Bangko
[3]
Sentral) by virtue of Resolution No. 334 issued by the Monetary Board. Petitioner was subsequently placed
under liquidation on 15 June 1985. Consequently, its employees, including private respondent Dr. Jose Teodorico
V. Molina (MOLINA), were terminated from work and given their respective separation pay and other benefits .
To assist in the liquidation, some of petitioner’s former employees were rehired, among them MOLINA, whose re-
employment commenced on 15 June 1985.

[4] [5]
On 11 May 1991, MOLINA filed a complaint against Renan V. Santos, Pacifico U. Cervantes and Alfredo L.
[6]
Dizon, members of the liquidation team. Docketed as NLRC-NCR Case No. 05-02940-91, the complaint
demanded the implementation of Wage Orders Nos. NCR-01 and NCR-02 (hereafter W.O. 1 and W.O. 2) as well as
moral damages and attorney’s fees in the amount of P300,000.

In his position paper, MOLINA alleged that he started working for petitioner as a legal assistant on 17 March 1974.
When petitioner was placed under liquidation in 1985, he was retained as Manager II in the Legal Department,
where he continued to receive a monthly salary of P3,754.60.

Meanwhile, W.O. 1 took effect on 10 November 1990, prescribing a P17-increase in the daily wage of employees
whose monthly salary did not exceed P3,802.08. On the other hand, W.O. 2, which became effective on 8
January 1991, mandated a P12-increase in the daily wage of employees whose monthly salary did not exceed
P4,319.16. MOLINA claimed that his salary should have been adjusted in compliance with said wage orders.

In their position paper, the liquidation team countered that MOLINA was not entitled to any salary increase
because he was already receiving a monthly salary ofP6,654.60 broken down as follows: P3,754.60 as basic
compensation, P2,000 as representation and transportation allowance (RATA), and a special allowance of P900.

[7]
In his decision, Labor Arbiter Potenciano S. Cañizares, Jr. rejected the 26.16 factor used by the liquidators in
computing the daily wage of MOLINA, adopting instead the factor of “365 days.” Consequently, they were ordered
to pay MOLINA P4,136.64 and P2,190 representing the wage differentials due him under W.O. 1 and W.O. 2. They
were also required to pay him P100,000 in moral damages and attorney’s fees.

On appeal, the NLRC sustained the labor arbiter’s ruling after concluding that MOLINA was a regular employee of
petitioner with a basic monthly salary of P3,754.60 at the time of his dismissal on 31 January 1992. He was,
therefore, entitled to the wage increases mandated by the aforesaid wage orders.

In its assailed resolution of 7 April 1997, the NLRC decreed thus:

WHEREFORE, the respondents [members of herein petitioner’s liquidation team] are hereby directed to pay the
complainant [MOLINA] the total sum [sic] of P112,501.20

ISSUE: Are W.O. 1 and W.O. 2 applicable to MOLINA?

RULING:

We see no reason to disturb the factual finding of the labor arbiter, and affirmed by the NLRC, that MOLINA’s
salary was within the coverage of the cited wage orders. Well-settled is the rule that the findings of fact of quasi-
[11]
judicial bodies are generally accorded respect and finality where they are supported by substantial evidence.
Indeed, MOLINA’s monthly salary of P3,754.60 was never at issue. What was in dispute was the computation of his
daily wage.

W.O. 1 expressly states that employees having a monthly salary of not more than P3,802.08 are entitled to receive
the mandated wage increase. Undeniably, MOLINA was receiving a monthly salary ofP3,754.60. This fact alone
leaves no doubt that he should benefit from said wage order.

On the other hand, W.O. 2 raised the ceiling for entitlement to the wage increase. If MOLINA was covered by the
earlier wage order, with more reason should the later wage order apply to him.

[12]
Worth mentioning is the opinion rendered by the National Wages Council on the query of the Philippines
Veterans Bank Retained Employees, on whether they were entitled to a wage increase under Republic Act No.
[13]
6640, viz.:

The documents attached to your query show that the Bank has been consistently using the factor of 365 days in
computing your equivalent monthly salary prior to its being placed under receivership by the Central Bank. This is
evident in the wage and allowance increases granted under previous Presidential Decrees and Wage Orders, which
were given by the Bank on monthly basis, i.e., where the rest days are unworked [sic] but paid. This is also
indicated in the appointment and service records of bank personnel who started out as daily paid employees and
were eventually promoted as permanent employees with fixed monthly salaries. However, when R.A. 6640 went
into force, the Bank unilaterally reduced the factor to 262 instead of maintaining factor 365 as was the
practice/policy long before the effectivity of the Act. And when R.A 6727 took effect, the Bank reverted to the old
practice/policy of using factor 365 days in computing your equivalent monthly rate salary. xxx

May we add that the old practice of the bank in using factor 365 days in a year in determining your equivalent
monthly salary cannot unilaterally be changed by your employer without the consent of the
employees,suchpracticebeingnowapartofthetermsandconditionsofyouremployment. An employment agreement,
whether written or unwritten, is a bilateral contract and as such either party thereto cannot change or amend the
terms thereof without the consent of the other party thereto.

From the foregoing, it is clear that you are entitled to the wage increase under R.A. 6440 computed on the basis of
365 paid days and to the corresponding salary differentials as a result of the application of this factor. [Emphasis
supplied]

Evidently, the use of the 365 factor is binding and conclusive, forming as it did part of the employment contract.
Petitioner can no longer invoke the 26.16 factor after it voluntarily adopted the 365 factor as a policy even prior to
its receivership. To abandon such policy and revert to its old practice of using the 26.16 factor would be a
[14]
diminution of a labor benefit, which is prohibited by the Labor Code. It cannot be doubted that the 365 factor
favors petitioner’s employees, including MOLINA, because it results in a higher determination of their monthly
salary.

Producers Bank of the Philippines vs. NLRC and Producers Bank Employees Association
G.R. No. 100701. March 28, 2001
FACTS: A complaint was filed by private respondent, the Employees Association, charging petitioner with
diminution of benefits for the unpaid mid-year and Christmas bonus and 13 th month pay, non-compliance with
Wage Order and non-payment of holiday pay. This arose from the fact that as the result of financial distress, the
bank only gave a mid-year bonus equivalent to one-half month basic, Christmas bonus to one-half month basic and
13th month pay equivalent to one month basic pay.
The contention of petitioner as to the bonus is that it cannot be compelled to pay the bonus differentials
due to its depressed financial condition as it was placed under conservatorship. Respondent however alleged that
the bonuses have ripened into a vested right and as such can no loner be unilaterally withdrawn by petitioner
without violating Article 100.

ISSUE: Whether or not the petitioner can be compelled to grant the bonus/holiday pay.

RULING: The court held that the rule is that the granting of bonus is a management prerogative and hence not a
demandable and enforceable obligation, except when it is made part of the wage or salary of the employee. But an
employer cannot be forced to distribute bonuses which it can no longer afford to pay. To hold otherwise would be
to penalize the employer for his past generosity.
As to the 13th month pay, PD 851 requires all employers to pay their employees receiving a basic salary of
not more than 1000 a month a 13 th month pay. But employers already paying their employees a 13 th month pay or
its equivalent are not covered by the law. The term equivalent shall include Christmas bonus, mid-year bonus, cash
bonuses and other payments. To impose upon an employer already giving its employees the equivalent of a 13 th
month pay would be to penalize him for his liberality. In the instant case, the total amount given by the employer
from the mid-year bonus, Christmas bonus and 13 th month pay would still exceed or at least equal to one month
basic salary and thus may be considered as an equivalent of the 13 th month pay mandated by PD 851.
As to holiday pay the divisor used by petitioner in arriving at the employees’ daily rate for the purpose of
computing salary related benefits is 314. However the divisor was reduced to 303 by virtue of a memorandum. The
sole purpose however for the reduction of the divisor was to increase the employees’ overtime pay and was not
meant to replace the use of 314 as the divisor in the computation of the daily rate for salary-related benefits and
was not meant to exclude holiday pay monthly salary of petitioner’s employees. In fact, the memorandum stated
that the divisor of 314 will still be used in the computation for cash conversion and in the determination of the
daily rate. Hence petitioner complied with the provision of the Labor Code.

Bonus (1999 Manila Electric Co.)

The overtime pay was not given consistently, deliberately and unconditionally bit as a compensation for
additional services rendered (2007 Manila Jockey Club Employees Labor Union-PTGWO)

Manila Jockey’s Club Employees Labor Union vs. Manila Jockey Club, G.R. No. 167601, March 7, 2007 3

FACTS:

Manila Jockey Club, Inc., a corporation with a legislative franchise to conduct, operate and maintain horse races,
entered into a Collective Bargaining Agreement (CBA) with Manila Jockey Club Employees Labor Union-PTGWO.
Under Section 1 Article IV of their CBA, the parties agreed to a 7-hour work schedule from 9:00 a.m. to 12:00 noon

3
and from 1:00 p.m. to 5:00 p.m. on a work week of Monday to Saturday. All work performed in excess of seven (7)
hours work schedule and on days not included within the work week shall be considered overtime and paid as such
with exception to those monthly compensation which includes work performed during Saturday, Sunday, and
Holiday when races are held at the Club. The CBA likewise reserved in management prerogatives including the
determination of the work schedule. An inter-office memorandum was later issued declaring that the hours of
work of regular monthly-paid employees shall be from 1:00 p.m. to 8:00 p.m. when horse races are held, that is,
every Tuesday and Thursday. The memorandum, however, sustained the 9:00 a.m. to 5:00 p.m. schedule for non-
race days.

Before the voluntary arbitrators of the National Conciliation and Mediation Board, petitioners questioned the
memorandum as violative of the prohibition against non-diminution of wages and benefits guaranteed the CBA
which specified the work schedule of respondent's employees to be from 9:00 a.m. to 5:00 p.m. They claimed that
as a result of the memorandum, the employees are precluded from rendering their usual overtime work from 5:00
p.m. to 9:00 p.m.

ISSUE:

Whether or not the change in the work schedule violated Article 100 of the Labor Code on the non-diminution of
wages and benefits guaranteed under the parties’ CBA.

RULING:

No. It was evident that the change in work schedule was justified, it being a management prerogative. Respondent,
as employer, cited the change in the program of horse races as reason for the adjustment of the employees’ work
schedule. It rationalized that when the CBA was signed, the horse races started at 10:00 a.m. When the races were
moved to 2:00 p.m., there was no other choice for management but to change the employees' work schedule as
there was no work to be done in the morning. It is true that Section 1, Article IV of the CBA provides for a 7-hour
work schedule from 9:00 a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. from Mondays to Saturdays.
However, Section 2, Article XI expressly reserves on respondent the prerogative to change existing methods or
facilities to change the schedules of work.

Moreover, Manila Jockey Club was not obliged to allow all its employees to render overtime work everyday for the
whole year, but only those employees whose services were needed after their regular working hours and only
upon the instructions of management. The overtime pay was not given to each employee consistently, deliberately
and unconditionally, but as a compensation for additional services rendered. Thus, overtime pay does not fall
within the definition of benefits under Article 100 of the Labor Code on prohibition against elimination or
diminution of benefits.

The rule on company practice is generally used with respect to grant of additional benefits to employees, not to
issues involving diminution of benefits. (2011 University of the East)

Form (1995 Congson; 2004 National Federation of Labor)

 Check is valid form of payment ONCE it is encashed.
Place (1996 North Davao Mining); Bank (RA 6727); ATM (DOLE Labor Advisory, S. 1996)
 SC held that North Davao Mining should reimburse the transportation expenses of the
employees who had to travel for about 2 1/2 hours to collect their salaries.
Congson vs. NLRC
G.R. No. 114250; April 5, 1995

FACTS:

Dominico C. Congson is the registered owner of Southern Fishing Industry. Respondents were hired as
piece-rate employees uniformly paid at a rate of P1.00 per tuna weighing thirty (30) to eighty (80) kilos per
movement. They work for 7 days a week. Due to alleged scarcity of tuna, Congson notified his proposal to reduce
the rate-per-tuna movement. When they reported the following day, they found out that they were already
replaced with new set of workers. They wanted to have a dialogue with the management, but they waited in vain.
Thus, they filed a case before NLRC for underpayment of wages (violation of the minimum wage law) and non-
payment of overtime pay, 13th month pay, holiday pay, rest day pay, and five (5)-day service incentive leave pay;
and for constructive dismissal.
Petitioner conceded that his payment of wages falls below the minimum wage law. He averred that NLRC
should have considered as forming a substantial part of private respondents' total wages the cash value of the tuna
liver and intestines private respondents were entitled to retrieve. He argued that the combined value of the cash
wage and monetary value of the tuna liver and intestines clearly exceeded the minimum wage fixed by law.
Both the Labor Arbiter and the NLRC ruled in favor of the respondents.

ISSUE:

Whether or not the form of payment by Congson is valid pursuant to Article 102 of the Labor Code.

RULING:

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

North Davao Mining vs. NLRC

G.R. No. 112546; March 13, 1996

FACTS:
Due to financial losses, North Davao Mining Corporation laid off workers. Respondent Wilfredo Guillema
is one among several employees of North Davao who were separated by reason of the company’s closure on May
31, 1992. It appears that, during the life of the petitioner corporation, from the beginning of its operations in 1981
until its closure in 1992, it had been giving separation pay equivalent to thirty (30) days’ pay for every year of
service.  Moreover, inasmuch as the region where North Davao operated was plagued by insurgency and other
peace and order problems, the employees had to collect their salaries at a bank in Tagum, Davao del Norte, some
58 kilometers from their workplace and about 2 ½hours’ travel time by public transportation; this arrangement
lasted from 1981 up to 1990.
ISSUE:

Whether or not time spent in collecting wages in a place other than the place of employment is
compensable notwithstanding that the same is done during official time.

RULING:

SC, affirming the decision of the Labor Arbiter, finds that the hours spent by complainants in collecting
salaries at a bank in Tagum, Davao del Norte shall be considered compensable hours worked.   Considering further
the distance between Amacan, Maco to Tagum which is 2½ hours by travel and the risks in commuting all the time
in collecting complainants’ salaries, would justify the granting of backwages equivalent to two (2) days in a month
as prayed for. Corollary, we likewise hold respondents liable for the transportation expenses incurred by
complainants at P40.00 round trip fare during pay days.

Unjust Enrichment Principle

Where workers' advances exceeded their unpaid salaries, the overpaid amount made by the employer should be
paid back to the latter to avoid unjust enrichment (2006 Business Services of the Future Today)

Meal period (Article 85); shortened meal period (1998 Sime Darby)

Simedarby vs. NLRC, 289 SCRA 86 [1998]4

FACTS:

Prior to the present controversy, the factory employees of Sime Darby Pilipinas, Inc. enjoyed a 30-minute paid “on
call” lunch break in their daily work schedule of 7:45 am to 3:45 pm. The petitioner company passed a
memorandum dated Aug 12 1992 advising all factory-based workers, except those in the Warehouse and Quality
Assurance Department, of a change in work schedule that discontinued the 30-minute paid “on call” lunch break
and set an uninterrupted 1 hour lunch break in lieu thereof.

Private respondents then filed a complaint for unfair labor practice, discrimination, and evasion of liability with the
Labor Arbiter who dismissed the complaint, ruling that the elimination of the 30-minute lunch break was a valid
exercise of management prerogative. Appeal was made to respondent NLRC who reversed the decision of the
Labor Arbiter, declaring that the new work schedule deprived the employees of the benefits of a time-honored
company practice and that such change also resulted in an unjust diminution of employee benefits.

The OSG recommended the present petition to be granted, alleging that the new memorandum containing the
work schedule was not discriminatory not did it constitute unfair labor practice.

ISSUE:

Whether or not the memorandum dated Aug 14 1992 discontinuing the 30-minute paid “on call” lunch break
constituted unfair labor practice and diminution of benefits

HELD:

4
The Supreme Court sustained petitioner, holding that it is clearly a management prerogative to fix the work
schedules of company employees. Under the old schedule, the employees are compensated during their 30-
minute lunch break, but in essence it is still working time since the workers could be called upon to work. Whereas
in the new schedule, the employees are given a longer break of 1 hour, though uncompensated, it is uninterrupted
as workers on their break are no longer “on call”. The change in schedule would improve company productivity as
well as enhance the comfort of workers who could enjoy an uninterrupted break.

The Supreme Court also reiterated the policy that while social justice and the protection of the working class is
ensured by the Constitution, the same fundamental law also protects the right of the management to regulate all
aspects of employment as well as to retain the prerogative of changing work schedules according to the exigencies
of the enterprise. So long as this prerogative is exercised in good faith, the Court upholds such exercise.

*** Health Personnel: workweek (1997 San Juan de Dios case)

San Juan De Dios Hospital vs. NLRC, 282 SCRA 316 [1997]5

FACTS:

Petitioners, the rank-and-file employee-union officers and members of San Juan De Dios Hospital Employees
Association, sent a letter requesting for the expeditious implementation and payment by respondent, San Juan De
Dios Hospital, of the '40-hours/5-day workweek' with compensable weekly two (2) days off provided for by Policy
Instruction No. 54 issued by the Secretary of Labor. Said policy instruction purports to implement R.A. No. 5901,
otherwise known as “An Act Prescribing Forty Hours A Week of Labor For Government and Private Hospitals Or
Clinic Personnel.” Respondent hospital failed to give a favorable response; thus, petitioners filed a complaint
regarding their claims for statutory benefits under the above-cited law and policy issuance. However, the Labor
Arbiter and, subsequently, NLRC dismissed the complaint. Hence, this petition ascribing grave abuse of discretion
on the part of NLRC in concluding that Policy Instructions No. 54 proceeds from a wrong interpretation of R.A.
5901 and Article 83 of the Labor Code.

ISSUE:

Whether or not Policy Instruction No. 54, entitling a full weekly wage of 7 days upon completion of 40-hour/5-day
workweek, is valid based on existing labor laws.

RULING:

Policy Instruction No. 54 is void, it being inconsistent with and repugnant to the provision of Article 83 of the Labor
Code, as well as to R.A. No. 5901.

A perusal of R. A. No. 5901 reveals nothing therein that gives two days off with pay for health personnel who
complete a 40-hour work or 5-day workweek. In fact, the Explanatory Note of House Bill No. 16630 (later passed
into law as Republic Act No. 5901) explicitly states that the bill's sole purpose is to shorten the working hours of
health personnel and not to dole out a two days off with pay. Petitioners' position is also negated by the very rules
and regulations promulgated by the Bureau of Labor Standards which implement Republic Act No. 5901. Section
15 of aforementioned implementing rules grants specific rate of additional compensation for work performed on

5
Sunday or for work performed in excess of forty hours a week. Policy Instruction No. 54 unduly extended the
statute.

Article 83 merely provides: (1) the regular office hour of eight hours a day, five days per week for health personnel,
and (2) where the exigencies of service require that health personnel work for six days or forty-eight hours then
such health personnel shall be entitled to an additional compensation of at least thirty percent of their regular
wage for work on the sixth day. There is nothing in the law that supports then Secretary of Labor and petitioner’s
assertion. The Secretary of Labor exceeded his authority by including a two days off with pay in contravention of
the clear mandate of the statute. Administrative interpretation of the law is at best merely advisory, and the Court
will not hesitate to strike down an administrative interpretation that deviates from the provision of the statute.

Jurisprudence
Illegal compressed workweek when work days were reduced from 6 to 3 days a week, resulting to illegal
reduction of work hours, as there was no adequate proof of losses (2007 Linton Commercial and 2009 Rosa)

Linton Commercial Co., Inc., vs. Hellera et al., G.R. No. 163147, October 10, 2007 6

FACTS:

On 17 December 1997, Linton issued a memorandum addressed to its employees informing them of the company's
decision to suspend its operations from December 18, 1997 to January 5, 1998 due to the currency crisis that
affected its business operations. Linton submitted an establishment termination report to the Department of Labor
and Employment (DOLE) regarding the temporary closure of the establishment covering the said period. The
company's operation was to resume on January 6, 1998. On January 7, 1997, Linton issued another memorandum
informing them that effective January 12, 1998, it would implement a new compressed workweek of three (3)
days on a rotation basis. In other words, each worker would be working on a rotation basis for three working days
only instead for six days a week. On the same day, Linton submitted an establishment termination report
concerning the rotation of its workers. Linton proceeded with the implementation of the new policy without
waiting for its approval by DOLE. Aggrieved, sixty-eight (68) workers (workers) filed a Complaint for illegal
reduction of workdays.

ISSUE:

WON there was an illegal reduction of work when Linton implemented a compressed workweek by reducing from
six to three the number of working days with the employees working on a rotation basis.

HELD:

The compressed workweek arrangement was unjustified and illegal.

The Bureau of Working Conditions of the DOLE, moreover, released a bulletin providing for in determining when
an employer can validly reduce the regular number of working days. The said bulletin states that a reduction of the
number of regular working days is valid where the arrangement is resorted to by the employer to prevent serious
losses due to causes beyond his control, such as when there is a substantial slump in the demand for his goods or
services or when there is lack of raw materials. Although the bulletin stands more as a set of directory guidelines
than a binding set of implementing rules, it has one main consideration, consistent with the ruling in Philippine

6
Graphic Arts Inc., in determining the validity of reduction of working hours — that the company was suffering from
losses.

Certainly, management has the prerogative to come up with measures to ensure profitability or loss minimization.
However, such privilege is not absolute. Management prerogative must be exercised in good faith and with due
regard to the rights of labor. As previously stated, financial losses must be shown before a company can validly opt
to reduce the work hours of its employees. However, to date, no definite guidelines have yet been set to
determine whether the alleged losses are sufficient to justify the reduction of work hours. If the standards set in
determining the justifiability of financial losses under Article 283 (i.e., retrenchment) or Article 286 (i.e., suspension
of work) of the Labor Code were to be considered, petitioners would end up failing to meet the standards. On the
one hand, Article 286 applies only when there is a bona fide suspension of the employer's operation of a business
or undertaking for a period not exceeding six (6) months.

Records show that Linton continued its business operations during the effectivity of the compressed workweek,
which spanned more than the maximum period. On the other hand, for retrenchment to be justified, any claim of
actual or potential business losses must satisfy the following standards: (1) the losses incurred are substantial and
not de minimis; (2) the losses are actual or reasonably imminent; (3) the retrenchment is reasonably necessary and
is likely to be effective in preventing the expected losses; and (4) the alleged losses, if already incurred, or the
expected imminent losses sought to be forestalled, are proven by sufficient and convincing evidence. Linton failed
to comply with these standards.

Employees excluded from labor standards (Article 82; 1993 National Sugar Refineries; 1996 Salazar)
*shift engineer, no right to overtime and premium pay as he is an officer or member of managerial staff (2006
Peneranda)

National Sugar Refinery Corp., vs. NLRC, 220 SCRA 452 [1993] 7

FACTS:

Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully owned and controlled
by the Government, operates three (3) sugar refineries located at Bukidnon, Iloilo and Batangas. The Batangas
refinery was privatized on April 11, 1992 pursuant to Proclamation No. 50.

Private respondent union represents the former supervisors of the NASUREFCO Batangas Sugar Refinery, namely,
the Technical Assistant to the Refinery Operations Manager, Shift Sugar Warehouse Supervisor, Senior
Financial/Budget Analyst, General Accountant, Cost Accountant, Sugar Accountant, Junior Financial/Budget
Analyst, Shift Boiler Supervisor,, Shift Operations Chemist, Shift Electrical Supervisor, General Services Supervisor,
Instrumentation Supervisor, Community Development Officer, Employment and Training Supervisor, Assistant
Safety and Security Officer, Head and Personnel Services, Head Nurse, Property Warehouse Supervisor, Head of
Inventory Control Section, Shift Process Supervisor, Day Maintenance Supervisor and Motorpool Supervisor.

On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees, from rank-and-file
to department heads which was designed to rationalized the duties and functions of all positions, reestablish levels
of responsibility, and recognize both wage and operational structures. Jobs were ranked according to effort,

7
responsibility, training and working conditions and relative worth of the job. As a result, all positions were re-
evaluated, and all employees including the members of respondent union were granted salary adjustments and
increases in benefits commensurate to their actual duties and functions.

The Courts glean from the records that for about ten years prior to the JE Program, the members of respondent
union were treated in the same manner as rank-and file employees. As such, they used to be paid overtime, rest
day and holiday pay pursuant to the provisions of Articles 87, 93 and 94 of the Labor Code as amended. On May
11, 1990, petitioner NASUREFCO recognized herein respondent union, which was organized pursuant to Republic
Act NO. 6715 allowing supervisory employees to form their own unions, as the bargaining representative of all the
supervisory employees at the NASUREFCO Batangas Sugar Refinery. Two years after the implementation of the JE
Program, specifically on June 20, 1990, the members of herein respondent union filed a complainant with the
executive labor arbiter for non-payment of overtime, rest day and holiday pay allegedly in violation of Article 100
of the Labor Code.

ISSUE:

Whether or not the members of respondent union are entitled to overtime, rest day and holiday pay.

RULING:

The members of the union are not entitled to overtime, rest and holiday pay since they fall within the classification
of managerial employees which makes them a part of the exempted employees.

It must of necessity be ascertained first whether or not the union members, as supervisory employees, are to be
considered as officers or members of the managerial staff who are exempt from the coverage of Article 82 of the
Labor Code.

It is not disputed that the members of respondent union are supervisory employees, as defined employees, as
defined under Article 212(m), Book V of the Labor Code on Labor Relations, which reads: “'Managerial employee' is
one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharged, assign or discipline employees. Supervisory employees are those who,
in the interest of the employer effectively recommend such managerial actions if the exercise of such authority is
not merely routinary or clerical in nature but requires the use of independent judgment. All employees not falling
within any of those above definitions are considered rank-and-file employees of this Book."

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

As used herein, 'managerial employees' refer to those whose primary duty consists of the management of the
establishment in which they are employed or of a department or subdivision thereof, and to other officers or
members of the managerial staff.

'Sec. 2. Exemption. — The provisions of this rule shall not apply to the following persons if they qualify
for exemption under the condition set forth herein:
 (b) Managerial employees, if they meet all of the following conditions, namely:

(1) Their primary duty consists of the management of the establishment in which they are employed
or of a department or subdivision thereof:

(2) They customarily and regularly direct the work of two or more employees therein:

(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and
recommendations as to the hiring and firing and as to the promotion or any other change of status of
other employees are given particular weight.

(c) Officers or members of a managerial staff if they perform the following duties and
responsibilities:

(1) The primary duty consists of the performance of work directly related to management policies of
their employer;

(2) Customarily and regularly exercise discretion and independent judgment;

(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty
consists of the management of the establishment in which he is employed or subdivision thereof; or

(ii) execute under general supervision work along specialized or technical lines requiring special training,
experience, or knowledge; or

(iii) execute under general supervision special assignments and tasks;

(4) Who do not devote more 20 percent of their hours worked in a work-week to activities which are
not directly and closely related to the performance of the work described in paragraphs (1), (2), and
above."

They are clearly officers or members of the managerial staff because they meet all the conditions prescribed by law
and, hence, they are not entitled to overtime, rest day and supervisory employees under Article 212 (m) should be
made to apply only to the provisions on Labor Relations, while the right of said employees to the questioned
benefits should be considered in the light of the meaning of a managerial employee and of the officers or members
of the managerial staff, as contemplated under Article 82 of the Code and Section 2, Rule I Book III of the
implementing rules.

In other words, for purposes of forming and joining unions, certification elections, collective bargaining, and so
forth, the union members are supervisory employees. In terms of working conditions and rest periods and
entitlement to the questioned benefits, however, they are officers or members of the managerial staff, hence they
are not entitled thereto.

The union members will readily show that these supervisory employees are under the direct supervision of their
respective department superintendents and that generally they assist the latter in planning, organizing, staffing,
directing, controlling communicating and in making decisions in attaining the company's set goals and objectives.
These supervisory employees are likewise responsible for the effective and efficient operation of their respective
departments.
More specifically, their duties and functions include, among others, the following operations whereby the
employee:

1) assists the department superintendent in the following:

a) planning of systems and procedures relative to department activities;

b) organizing and scheduling of work activities of the department, which

includes employee shifting scheduled and manning complement;

c) decision making by providing relevant information data and other inputs;

d) attaining the company's set goals and objectives by giving his full support;

e) selecting the appropriate man to handle the job in the department; and

f) preparing annual departmental budget;

2) observes, follows and implements company policies at all times and recommends disciplinary action on
erring subordinates;

3) trains and guides subordinates on how to assume responsibilities and become more productive;

4) conducts semi-annual performance evaluation of his subordinates and recommends necessary action
for their development/advancement;

5) represents the superintendent or the department when appointed and authorized by the former;

6) coordinates and communicates with other inter and intra department supervisors when necessary;

7) recommends disciplinary actions/promotions;

8) recommends measures to improve work methods, equipment performance, quality of service and
working conditions;

9) sees to it that safety rules and regulations and procedure and are implemented and followed by all
NASUREFCO employees, recommends revisions or modifications to said rules when deemed necessary,
and initiates and prepares reports for any observed abnormality within the refinery;

10) supervises the activities of all personnel under him and goes to it that instructions to subordinates are
properly implemented; and

11) performs other related tasks as may be assigned by his immediate superior.

From the foregoing, it is apparent that the members of respondent union discharge duties and responsibilities
which ineluctably qualify them as officers or members of the managerial staff, as defined in Section 2, Rule I Book
III of the aforestated Rules to Implement the Labor Code, viz.:

(1) their primary duty consists of the performance of work directly related to management policies of
their employer;
 (2) they customarily and regularly exercise discretion and independent judgment;

(3) they regularly and directly assist the managerial employee whose primary duty consist of the
management of a department of the establishment in which they are employed

(4) they execute, under general supervision, work along specialized or technical lines requiring special
training, experience, or knowledge;

(5) they execute, under general supervision, special assignments and tasks; and

(6) they do not devote more than 20% of their hours worked in a work-week to activities which are not
directly and clearly related to the performance of their work hereinbefore described.

Under the facts obtaining in this case, The Court is constrained to agree with petitioner that the union members
should be considered as officers and members of the managerial staff and are, therefore, exempt from the
coverage of Article 82. Perforce, they are not entitled to overtime, rest day and holiday.

Salazar vs. NLRC, 256 SCRA 273 [1996]8

FACTS:

17 April 1990. HL Carlos Construction Inc (HLCC), private respondent, employed the petitioner, Engr. Leoncio V.
Salazar (Engr. S), as construction/project engineer for the construction of a building in QC at a monthly salary of
P4,500.

16 April 1991. Engr. S received a memorandum informing him of the termination of his services effective on 30
April 1991.

13 September 1991. Engr. S filed a complaint against HLCC for illegal dismissal, unfair labor practice, illegal
deduction, non-payment of wages, overtime rendered, service incentive leave pay, commission, allowances, profit-
sharing and separation pay with the NLRC.

The Labor Arbiter ruled that Engr. S was a managerial employee and therefore exempt from payment of benefits
such as overtime pay, service incentive leave pay and premium pay for holidays and rest days. Engr. S was also not
entitled to separation pay. He was hired as a project employee and his services were terminated due to the
completion of the project.

ISSUES:

1) Whether or not petitioner is entitled to overtime pay, premium pay for services rendered on rest days and
holidays and service incentive leave pay, pursuant to Articles 87, 93, 94 and 95 of the Labor Code;

2) Whether or not petitioner is a field personnel since he performs his duties in the project site or away from the
principal place of business of his employer.

3) Whether or not petitioner is entitled to separation pay.

RULING:
8
(1) On the first issue, the NLRC concurred with the Labor Arbiter’s ruling that petitioner was a managerial
employee and, therefore, exempt from payment of overtime pay, premium pay for holidays and rest days and
service incentive leave pay under the law. The NLRC declared that:

Book III on conditions of employment exempts managerial employees from its coverage on the grant of certain
economic benefits, which are the ones the complainant-appellant was demanding from respondent. It is an
undisputed fact that appellant was a managerial employee and such, he was not entitled to the economic benefits
he sought to recover.

(2) Petitioner claims that since he performs his duties in the project site or away from the principal place of
business of his employer (herein private respondent), he falls under the category of “field personnel.” However,
petitioner accentuates that his case constitutes the exception to the exception because his actual working hours
can be determined as evidenced by thedisbursement vouchers containing payments of petitioner’s salaries and
overtime services. Strangely, petitioner is of the view that field personnel may include managerial
employees.

We are constrained to disagree with petitioner.

In his original complaint, petitioner stated that the nature of his work is ”supervisory-engineering.” Similarly, in his
own petition and in other pleadings submitted to this Court, petitioner confirmed that his job was to supervise the
laborers in the construction project. Hence, although petitioner cannot strictly be classified as a managerial
employee under Art. 82 of the Labor Code, and Sec. 2(b), Rule 1, Book III of the Omnibus Rules Implementing the
Labor Code, nonetheless he is still not entitled to payment of the aforestated benefits because he falls squarely
under another exempt category - “officers or members of a managerial staff” as defined under Sec. 2(c) of the
abovementioned implementing rules:

Sec. 2. Exemption. - The provisions of this Rule shall not apply to the following persons if the qualify for
exemption under the condition set forth herein:

xxx xxx xxx

(c) Officers or members of a managerial staff if they perform the following duties and responsibilities:

(1) The primary duty consists of the performance of work directly related to management policies of their
employer;

(2) Customarily and regularly exercise discretion and independent judgment;

(3) [i] Regularly and directly assist a proprietor or a managerial employee whose primary duty consists
of the management of the establishment in which he is employed or subdivision thereof; or

[ii] execute under general supervision work along specialized or technical lines requiring special training,
experience, or knowledge; or [iii] execute under general supervision special assignments and tasks; and

(4) who do not devote more than 20 percent of their hours worked in a work-week to activities which are
not directly and closely related to the performance of the work described in paragraphs (1), (2), and (3)
above.

(3) On the last issue, we rule that petitioner is a project employee and, therefore, not entitled to separation pay.
The applicable provision is Article 280 of the Labor Code which defines the term “project employee,” thus:

ART. 280. Regular and Casual Employment. - The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to
be regular where the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the employment has been fixed for
a specific project or undertaking the completion or termination of which has been determined at the time
of the engagement of the employee or where the work or services to be performed is seasonal in nature
and the employment is for the duration of the season. (Italics ours.)

In the case at bench, it was duly established that private respondent hired petitioner as project or construction
engineer specifically for its Monte de Piedad building project. In his own words, petitioner declared:

2. That complainant-petitioner herein, by virtue of an oral agreement entered into with private
respondent herein through its proprietor, president and general manager, Engr. Honorio L. Carlos, on
April 17, 1990, began to work as a duly licensed Civil Engineer as construction or project engineer of its
contracted project, the Monte de Piedad Bank Building, at Cubao, Quezon City, on the following terms
and conditions, to wit:

Accordingly, as project employee, petitioner’s services are deemed co-terminous with the project, that is,
petitioner’s services may be terminated as soon as the project for which he was hired is completed.

There can be no dispute that petitioner’s dismissal was due to the completion of the construction of the Monte de
Piedad building. Petitioner himself stated that it took him and his assisting laborers until 15 May 1991 to complete
the “finishing touches” on the said building.28

Petitioner, thus, has no legal right to demand separation pay. Policy Instruction No. 20 entitled “Stabilizing
Employer-Employee Relations in the Construction Industry” explicitly mandates that:

Project employees are not entitled to termination pay if they are terminated as a result of the completion
of the project or any phase thereof in which they are employed, regardless of the number of projects in
which they have been employed by a particular construction company. Moreover, the company is not
required to obtain a clearance from the Secretary of Labor in connection with such termination. What is
required of the company is a report to the nearest Public Employment Office for statistical purposes.

Penaranda vs. Baganga Plywood Corp., G.R. No. 159577, May 3, 2006 9

FACTS:

Sometime in June 1999, Petitioner Charlito Peñaranda was hired as an employee of Baganga Plywood Corporation
(BPC) to take charge of the operations and maintenance of its steam plant boiler. In May 2001, Peñaranda filed a
Complaint for illegal dismissal with money claims against BPC and its general manager, Hudson Chua, before the
NLRC.

After the parties failed to settle amicably, the labor arbiter directed the parties to file their position papers and
submit supporting documents.

9
Peñaranda alleges that he was employed by respondent Banganga on March 15, 1999 with a monthly salary of
P5,000.00 as Foreman/Boiler Head/Shift Engineer until he was illegally terminated on December 19, 2000. he
alleges that his services were terminated without the benefit of due process and valid grounds in accordance with
law. Furthermore, he was not paid his overtime pay, premium pay for working during holidays/rest days, night shift
differentials and finally claimed for payment of damages and attorney's fees having been forced to litigate the
present complaint.

Respondent BPC is a domestic corporation duly organized and existing under Philippine laws and is represented
herein by its General Manager HUDSON CHUA, the individual respondent. Respondents allege that complainant's
separation from service was done pursuant to Art. 283 of the Labor Code. The respondent BPC was on temporary
closure due to repair and general maintenance and it applied for clearance with the Department of Labor and
Employment, Regional Office No. XI, to shut down and to dismiss employees. And due to the insistence of herein
complainant he was paid his separation benefits.

Consequently, when respondent BPC partially reopened in January 2001, Peñaranda failed to reapply.

The labor arbiter ruled that there was no illegal dismissal and that petitioner's Complaint was premature because
he was still employed by BPC. Petitioner’s money claims for illegal dismissal was also weakened by his quitclaim
and admission during the clarificatory conference that he accepted separation benefits, sick and vacation leave
conversions and thirteenth month pay.

ISSUE:

Whether or not Peñaranda is a regular, common employee entitled to monetary benefits under Art. 82 of the
Labor Code and is entitled to the payment of overtime pay and other monetary benefits.

RULING:

The petitioner is not entitled to overtime pay and other monetary benefits.

The Court disagrees with the NLRC's finding that petitioner was a managerial employee. However, petitioner was a
member of the managerial staff, which also takes him out of the coverage of labor standards. Like managerial
employees, officers and member of the managerial staff are not entitled to the provisions of law on labor
standards.

The Implementing Rules of the Labor Code define members of a managerial staff as those with the following duties
and responsibilities:

(1) The primary duty consists of the performance of work directly related to management policies of
the employer;

(2) Customarily and regularly exercise discretion and independent judgment;

(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty
consists of the management of the establishment in which he is employed or subdivision thereof; or (ii)
execute under general supervision work along specialized or technical lines requiring special training,
experience, or knowledge; or (iii) execute under general supervision special assignments and tasks; and
 (4) who do not devote more than 20 percent of their hours worked in a workweek to activities which
are not directly and closely related to the performance of the work described in paragraphs (1), (2), and
(3) above."

The petitioner’s work involves:

1. To supply the required and continuous steam to all consuming units at minimum cost.

2. To supervise, check and monitor manpower workmanship as well as operation of boiler and
accessories.

3. To evaluate performance of machinery and manpower.

4. To follow-up supply of waste and other materials for fuel.

5. To train new employees for effective and safety white working.

6. Recommend parts and suppliers purchases. acEHSI

7. To recommend personnel actions such as: promotion, or disciplinary action.

8. To check water from the boiler, feedwater and softener, regenerate softener if beyond hardness
limit.

9. Implement Chemical Dosing.

10. Perform other task as required by the superior from time to time." 34

The foregoing enumeration, particularly items, 1, 2, 3, 5 and 7 illustrates that petitioner was a member of the
managerial staff. His duties and responsibilities conform to the definition of a member of a managerial staff under
the Implementing Rules.

Petitioner supervised the engineering section of the steam plant boiler. His work involved overseeing the operation
of the machines and the performance of the workers in the engineering section. This work necessarily required the
use of discretion and independent judgment to ensure the proper functioning of the steam plant boiler. As
supervisor, petitioner is deemed a member of the managerial staff.

Noteworthy, even petitioner admitted that he was a supervisor. In his Position Paper, he stated that he was the
foreman responsible for the operation of the boiler. The term foreman implies that he was the representative of
management over the workers and the operation of the department. Petitioner's evidence also showed that he
was the supervisor of the steam plant. His classification as supervisors is further evident from the manner his
salary was paid. He belonged to the 10% of respondent's 354 employees who were paid on a monthly basis; the
others were paid only on a daily basis.
Doctrine; Principle of Law
o ** categories of workers paid by result; supervised and unsupervised xxx (1999 Lambo and 2002
Tan cases)

Lambo vs. NLRC

G.R. No. 111042; October 26, 1999
FACTS:
Petitioners Avelino Lambo and Vicente Belocura were employed as tailors by private respondents J.C. Tailor
Shop and/or Johnny Co on September 10, 1985 and March 3, 1985, respectively. They worked from 8:00 a.m.
to 7:00 p.m. daily, including Sundays and holidays. As in the case of the other 100 employees of private
respondents, petitioners were paid on a piece-work basis, according to the style of suits they made.
Regardless of the number of pieces they finished in a day, they were each given a daily pay of at least P64.00.
On January 17, 1989, petitioners filed a complaint against private respondents for illegal dismissal and sought
recovery of overtime pay, holiday pay, premium pay on holiday and rest day, service incentive leave pay,
separation pay, 13th month pay, and attorney’s fees. After hearing, Labor Arbiter found private respondents
guilty of illegal dismissal and accordingly ordered them to pay petitioners’ claims. On appeal, the NLRC
reversed the decision of the Labor Arbiter. The NLRC held petitioners guilty of abandonment of work and
accordingly dismissed their claims except that for 13th month pay.
Petitioners allege that they were dismissed by private respondents as they were about to file a petition with
the Department of Labor and Employment (DOLE) for the payment of benefits such as Social Security System
(SSS) coverage, sick leave and vacation leave. They deny that they abandoned their work.
ISSUE:
Whether or not the petitioners are entitled to the minimum benefits provided by law.
RULING:
The petitioners are entitled to the minimum benefits provided by law. There is no dispute that petitioners
were employees of private respondents although they were paid not on the basis of time spent on the job but
according to the quantity and the quality of work produced by them. There are two categories of employees
paid by results: (1) those whose time and performance are supervised by the employer. (Here, there is an
element of control and supervision over the manner as to how the work is to be performed. A piece-rate
worker belongs to this category especially if he performs his work in the company premises.); and (2) those
whose time and performance are unsupervised. (Here, the employer’s control is over the result of the work.
Workers on pakyao and takay basis belong to this group.) Both classes of workers are paid per unit
accomplished.
Piece-rate payment is generally practiced in garment factories where work is done in the company premises,
while payment on pakyao and takay basis is commonly observed in the agricultural industry, such as in sugar
plantations where the work is performed in bulk or in volumes difficult to quantify. 4 Petitioners belong to the
first category, i.e., supervised employees.
In this case, private respondents exercised control over the work of petitioners. As tailors, petitioners worked
in the company’s premises from 8:00 a.m. to 7:00 p.m. daily, including Sundays and holidays. The mere fact
that they were paid on a piece-rate basis does not negate their status as regular employees of private
respondents. The term "wage" is broadly defined in Art. 97 of the Labor Code as remuneration or earnings,
capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece or
commission basis. Payment by the piece is just a method of compensation and does not define the essence of
the relations. Nor does the fact that petitioners are not covered by the SSS affect the employer-employee
relationship.
As petitioners were illegally dismissed, they are entitled to reinstatement with back wages. The Arbiter applied
the rule in the Mercury Drug case, according to which the recovery of back wages should be limited to three
years without qualifications or deductions. Any award in excess of three years is null and void as to the excess.
The Labor Arbiter correctly ordered private respondents to give separation pay.
Considerable time has lapsed since petitioners’ dismissal, so that reinstatement would now be impractical and
hardly in the best interest of the parties. In lieu of reinstatement, separation pay should be awarded to
petitioners at the rate of one month salary for every year of service, with a fraction of at least six (6) months of
 service being considered as one (1) year. The awards for overtime pay, holiday pay and 13th month pay are in
accordance with our finding that petitioners are regular employees, although paid on a piece-rate basis.

Tan vs. Lagrama

FACTS:
Petitioner Rolando Tan is the president of Supreme Theater Corporation and the general manager of
Crown and Empire Theaters in Butuan City. Private respondent Leovigildo Lagrama is a painter, making ad
billboards and murals for the motion pictures shown at the Empress, Supreme, and Crown Theaters for more than
10 years, from September 1, 1988 to October 17, 1998.
On October 17, 1998, private respondent Lagrama was summoned by Tan and upbraided: "Nangihi na
naman ka sulod sa imong drawinganan." ("You again urinated inside your work area.") When Lagrama asked what
Tan was saying, Tan told him, "Ayaw daghang estorya. Dili ko gusto nga mo-drawing ka pa. Guikan karon, wala nay
drawing. Gawas." ("Don't say anything further. I don't want you to draw anymore. From now on, no more drawing.
Get out.")
Lagrama denied the charge against him. He claimed that he was not the only one who entered the
drawing area and that, even if the charge was true, it was a minor infraction to warrant his dismissal. However,
everytime he spoke, Tan shouted "Gawas" ("Get out"), leaving him with no other choice but to leave the premises.
Lagrama filed a complaint with the National Labor Relations Commission (NLRC) in Butuan City. He alleged that he
had been illegally dismissed and sought reinvestigation and payment of 13th month pay, service incentive leave
pay, salary differential, and damages.
As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi directed the parties to file
their position papers. It declared that the dismissal illegal and order the payment of monetary benefits. Tan
appealed to the NLRC and reversing the decision of the Labor Arbiter.
ISSUE:
Whether or not the respondent was illegally dismissed and thus entitled to payment of benefits provided
by law.
RULING:
The respondent was illegally dismissed and entitled to benefits. The Implementing Rules of the Labor
Code provide that no worker shall be dismissed except for a just or authorized cause provided by law and after due
process. This provision has two aspects: (1) the legality of the act of dismissal, that is, dismissal under the grounds
provided for under Article 282 of the Labor Code and (2) the legality in the manner of dismissal. The illegality of the
act of dismissal constitutes discharge without just cause, while illegality in the manner of dismissal is dismissal
without due process.
In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get out of his sight as the
latter tried to explain his side, petitioner made it plain that Lagrama was dismissed. Urinating in a work place other
than the one designated for the purpose by the employer constitutes violation of reasonable regulations intended
to promote a healthy environment under Art. 282(1) of the Labor Code for purposes of terminating employment,
but the same must be shown by evidence. Here there is no evidence that Lagrama did urinate in a place other than
a rest room in the premises of his work.
Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the Labor Arbiter found
that the relationship between the employer and employee has been so strained that the latter's reinstatement
would no longer serve any purpose. The parties do not dispute this finding. Hence, the grant of separation pay in
lieu of reinstatement is appropriate.
This is of course in addition to the payment of backwages which, in accordance with the ruling in
Bustamante v. NLRC should be computed from the time of Lagrama's dismissal up to the time of the finality of this
decision, without any deduction or qualification.
 The Bureau of Working Conditions 32 classifies workers paid by results into two groups, namely; (1) those
whose time and performance is supervised by the employer, and (2) those whose time and performance is
unsupervised by the employer. The first involves an element of control and supervision over the manner the work
is to be performed, while the second does not. If a piece worker is supervised, there is an employer-employee
relationship, as in this case. However, such an employee is not entitled to service incentive leave pay since, as
pointed out in Makati Haberdashery v. NLRC 33 and Mark Roche International v. NLRC, 34 he is paid a fixed
amount for work done, regardless of the time he spent in accomplishing such work.

"driver-conductor" is not a field personnel (2005 Autobus Transport System)

Driver who is required to be at a specific place and time with fixed hours of work, not a field
personnel (2007 Duterte) as his time and performance if supervised.

Autobus Transport System vs. Bautista, G.R. No. 156364, May 16, 2005 10

FACTS:

Respondent Antonio Bautista has been employed by petitioner Auto Bus Transport Systems, Inc., since May 1995,
as driver-conductor with travel routes Manila-Tuguegarao via Baguio, Baguio-Tuguegarao via Manila and Manila-
Tabuk via Baguio. Respondent was paid on commission basis, seven percent (7%) of the total gross income per
travel, on a twice a month basis.

On January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya, the bus he was
driving accidentally bumped the rear portion of Autobus No. 124, as the latter vehicle suddenly stopped at a sharp
curve without giving any warning. Respondent averred that the accident happened because he was compelled by
the management to go back to Roxas, Isabela, although he had not slept for almost twenty-four (24) hours, as he
had just arrived in Manila from Roxas, Isabela.

Respondent further alleged that he was not allowed to work until he fully paid the amount of P75,551.50,
representing thirty percent (30%) of the cost of repair of the damaged buses and that despite respondent's pleas
for reconsideration, the same was ignored by management. After a month, management sent him a letter of
termination. Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money Claims
for nonpayment of 13th month pay and service incentive leave pay against Autobus.

On 29 September 2000, based on the pleadings and supporting evidence presented by the parties, Labor Arbiter
decided that the complaint be dismissed where the respondent must pay to the complainant

ISSUE:

Whether or not respondent is entitled to service incentive leave.

RULING:

The respondent is entitled to service incentive leave.

The disposition of the issue revolves around the proper interpretation of Article 95 of the Labor Code vis-à-vis
Section 1(D), Rule V, Book III of the Implementing Rules and Regulations of the Labor Code which provides: RIGHT

10
TO SERVICE INCENTIVE LEAVE, (a) Every employee who has rendered at least one year of service shall be entitled
to a yearly service incentive leave of five days with pay.

Moreover, Book III, Rule V: SERVICE INCENTIVE LEAVE also states that this rule shall apply to all employees except:
(d) Field personnel and other employees whose performance is unsupervised by the employer including those who
are engaged on task or contract basis, purely commission basis, or those who are paid in a fixed amount for
performing work irrespective of the time consumed in the performance thereof;

A careful examination of said provisions of law will result in the conclusion that the grant of service incentive leave
has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees
not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, Service Incentive Leave shall
not apply to employees classified as "field personnel."

The phrase "other employees whose performance is unsupervised by the employer" must not be understood as a
separate classification of employees to which service incentive leave shall not be granted. Rather, it serves as an
amplification of the interpretation of the definition of field personnel under the Labor Code as those "whose actual
hours of work in the field cannot be determined with reasonable certainty."

The same is true with respect to the phrase "those who are engaged on task or contract basis, purely commission
basis." Said phrase should be related with "field personnel," applying the rule on ejusdem generis that general and
unlimited terms are restrained and limited by the particular terms that they follow. Hence, employees engaged on
task or contract basis or paid on purely commission basis are not automatically exempted from the grant of service
incentive leave, unless, they fall under the classification of field personnel.

What must be ascertained in order to resolve the issue of propriety of the grant of service incentive leave to
respondent is whether or not he is a field personnel.

According to Article 82 of the Labor Code, "field personnel" shall refer to non-agricultural employees who regularly
perform their duties away from the principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty. This definition is further elaborated in
the Bureau of Working Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical Commercial Employees
Association 10 which states that:

As a general rule, field personnel are those whose performance of their job/service is not supervised by the
employer or his representative, the workplace being away from the principal office and whose hours and days of
work cannot be determined with reasonable certainty; hence, they are paid specific amount for rendering specific
service or performing specific work. If required to be at specific places at specific times, employees including
drivers cannot be said to be field personnel despite the fact that they are performing work away from the principal
office of the employee.

At this point, it is necessary to stress that the definition of a "field personnel" is not merely concerned with the
location where the employee regularly performs his duties but also with the fact that the employee's performance
is unsupervised by the employer. As discussed above, field personnel are those who regularly perform their duties
away from the principal place of business of the employer and whose actual hours of work in the field cannot be
determined with reasonable certainty. Thus, in order to conclude whether an employee is a field employee, it is
also necessary to ascertain if actual hours of work in the field can be determined with reasonable certainty by the
employer. In so doing, an inquiry must be made as to whether or not the employee's time and performance are
constantly supervised by the employer. Respondent is not a field personnel but a regular employee who performs
tasks usually necessary and desirable to the usual trade of petitioner's business. Accordingly, respondent is entitled
to the grant of service incentive leave.

The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments, subject to
a few exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations provides that "every
employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five
days with pay."

Service incentive leave is a right which accrues to every employee who has served "within 12 months, whether
continuous or broken reckoned from the date the employee started working, including authorized absences and
paid regular holidays unless the working days in the establishment as a matter of practice or policy, or that
provided in the employment contracts, is less than 12 months, in which case said period shall be considered as one
year." It is also "commutable to its money equivalent if not used or exhausted at the end of the year." In other
words, an employee who has served for one year is entitled to it. He may use it as leave days or he may collect its
monetary value. To limit the award to three years, as the solicitor general recommends, is to unduly restrict such
right.

Actual work (1991 Cagampan; 1996 Stolt Nielsen Services)

Waiver (1993 Lagatic; 2008 Bisig ng Manggagawa sa Tryco) under CWW

Bisig Manggagawa sa Tryco vs. NLRC, G.R. No. 151309, Oct. 15, 2008 11

FACTS:

Tryco Pharma Corporation (Tryco) is a manufacturer of veterinary medicines and its principal office is located in
Caloocan City. Petitioners are its regular employees, occupying the positions of helper, shipment helper and
factory workers, assigned to the Production Department. They are members of Bisig Manggagawa sa Tryco (BMT),
the exclusive bargaining representative of the rank-and-file employees.

Tryco and the petitioners signed a Memorandum of Agreement (MOA), providing for a compressed workweek
schedule to be implemented in the company effective May 20, 1996. As provided, 8:00 a.m. to 6:12 p.m., from
Monday to Friday, shall be considered as the regular working hours, and no overtime pay shall be due and payable
to the employee for work rendered during those hours. The MOA specifically stated that the employee waives the
right to claim overtime pay for work rendered after 5:00 p.m. until 6:12 p.m. from Monday to Friday considering
that the compressed workweek schedule is adopted in lieu of the regular workweek schedule which also consists
of 46 hours. However, should an employee be permitted or required to work beyond 6:12 p.m., such employee
shall be entitled to overtime pay.

On a letter dated March 26, 1997, the Bureau of Animal Industry of the Department of Agriculture reminded Tryco
that its production should be conducted in San Rafael, Bulacan, not in Caloocan City.

Accordingly, Tryco issued a Memorandum dated April 7, 1997 which directed petitioner Aya-ay to report to the
company’s plant site in Bulacan. When petitioner Aya-ay refused to obey, Tryco reiterated the order on April 18,

11
1997. Subsequently, through a Memorandum dated May 9, 1997, Tryco also directed the other petitioners Egera,
Lariño and Barte to report to the company’s plant site in Bulacan.

BMT opposed the transfer of its members to San Rafael, Bulacan, contending that it constitutes unfair labor
practice. In protest, BMT declared a strike on May 26, 1997.

In August 1997, petitioners filed their separate complaints for illegal dismissal, underpayment of wages,
nonpayment of overtime pay and service incentive leave, and refusal to bargain against Tryco and its President,
Wilfredo C. Rivera. Petitioners alleged that the company acted in bad faith during the CBA negotiations because it
sent representatives without authority to bind the company, and this was the reason why the negotiations failed.
Also, the management transferred petitioners from Caloocan to San Rafael, Bulacan to paralyze the union. They
prayed for the company to pay them their salaries from May 26 to 31, 1997, service incentive leave, and overtime
pay, and to implement Wage Order No. 4.

ISSUE:

Whether or not the company committed Unfair Labor Practices

HELD:

NO.

Petitioners mainly contend that the transfer orders amount to a constructive dismissal. They maintain that the
letter of the Bureau of Animal Industry is not credible because it is not authenticated; it is only a ploy, solicited by
respondents to give them an excuse to effect a massive transfer of employees. There is not proof to support this
claim. Absent any evidence, the allegation is not only highly irresponsible but is grossly unfair to the government
agency concerned.

Also, Tryco’s decision to transfer its production activities to San Rafael, Bulacan, regardless of whether it was made
pursuant to the letter of the Bureau of Animal Industry, was within the scope of its inherent right to control and
manage its enterprise effectively.

When the transfer is not unreasonable, or inconvenient, or prejudicial to the employee, and it does not involve a
demotion in rank or diminution of salaries, benefits, and other privileges, the employee may not complain that it
amounts to a constructive dismissal. In this case, the transfer orders do not entail a demotion in rank or diminution
of salaries, benefits and other privileges of the petitioners. Petitioners, therefore, anchor their objection solely on
the ground that it would cause them great inconvenience since they are all residents of Metro Manila and they
would incur additional expenses to travel daily from Manila to Bulacan. Such contention is untenable because the
Court has previously declared that mere incidental inconvenience is not sufficient to warrant a claim of
constructive dismissal. The distance from Caloocan to San Rafael, Bulacan is not considerably great so as to compel
petitioners to seek living accommodations in the area and prevent them from commuting to Metro Manila daily to
be with their families.

Finally, MOA is enforceable and binding against the petitioners. Where it is shown that the person making the
waiver did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is
credible and reasonable, the transaction must be recognized as a valid and binding undertaking. In addition, D.O.
No. 21 sanctions the waiver of overtime pay in consideration of the benefits that the employees will derive from
the adoption of a compressed workweek scheme. Moreover, the adoption of a compressed workweek scheme in
the company will help temper any inconvenience that will be caused the petitioners by their transfer to a farther
workplace. Notably, the MOA complied with the following conditions set by the DOLE, under D.O. No. 21, to
protect the interest of the employees in the implementation of a compressed workweek scheme

Considering that the MOA clearly states that the employee waives the payment of overtime pay in exchange of a
five-day workweek, there is no room for interpretation and its terms should be implemented as they are written.

DOLE Explanatory Bulletin dated March 11, 1993 affirmed as valid, on two (2) regular holidays falling on the
same day (2004 Asian Transmission Corp.) as there is no reduction of number of holidays.

Asian Transmission vs. CA, 425 SCRA 478 [2004]12

FACTS:

The Department of Labor and Employment (DOLE), through Undersecretary Cresenciano B. Trajano, issued an
Explanatory Bulletin dated March 11, 1993 wherein it clarified, inter alia, that employees are entitled to 200% of
their basic wage on April 9, 1993, whether unworked, which[,] apart from being Good Friday [and, therefore, a
legal holiday], is also Araw ng Kagitingan [which is also a legal holiday].

Said bulletin was reproduced on January 23, 1998, when April 9, 1998 was both Maundy Thursday and Araw ng
Kagitingan.

Despite the explanatory bulletin, petitioner, Asian Transmission Corporation, opted to pay its daily paid employees
only 100% of their basic pay on April 9, 1998. Respondent Bisig ng Asian Transmission Labor Union (BATLU)
protested.

The Voluntary Arbitrator favored the Bisig ng Asian Transmission Labor Union (BATLU), and held that Article 94 of
the Labor Code provides for holiday pay for every regular holiday, the computation of which is determined by a
legal formula which is not changed by the fact that there are two holidays falling on one day, like on April 9, 1998
when it was Araw ng Kagitingan and at the same time was Maundy Thursday.

In the assailed decision, the Court of Appeals upheld the findings of the Voluntary Arbitrator.

ISSUE:

Whether or not daily-paid employees are entitled to be paid for two regular holidays which fall on the same day.

RULING:

The Court dismissed the petition and ruled that petitioners should pay its employees “200% and not just 100% of
their regular daily wages for the unworked April 9, 1998 which covers two regular holidays, namely, Araw ng
Kagitingan and Maundy Thursday.”

Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that the State shall afford
protection to labor. Its purpose is not merely "to prevent diminution of the monthly income of the workers on
12
account of work interruptions. In other words, although the worker is forced to take a rest, he earns what he
should earn, that is, his holiday pay."

The provision is mandatory, regardless of whether an employee is paid on a monthly or daily basis. Unlike a bonus,
which is a management prerogative, holiday pay is a statutory benefit demandable under the law.

Applicability of Mslim holidays to non-muslims in Muslim regions (2002 San Miguel Corp.)

San Miguel Corp., vs. CA, G.R. No. 146775, Jan. 30, 2002 13

FACTS:

On 17 October 1992, the Department of Labor and Employment (DOLE), Iligan District Office, conducted a routine
inspection in the premises of San Miguel Corporation (SMC) in Sta. Filomena, Iligan City. It was discovered that
there was underpayment by SMC of regular Muslim holiday pay to its employees. DOLE sent a copy of the
inspection result to SMC and it was received by and explained to its personnel officer Elena dela Puerta. SMC
contested the findings and DOLE conducted summary hearings on 19 November 1992, 28 May 1993 and 4 and 5
October 1993. Still, SMC failed to submit proof that it was paying regular Muslim holiday pay to its employees.
Hence, Alan M. Macaraya, Director IV of DOLE Iligan District Office issued a compliance order, dated 17 December
1993, directing SMC to consider Muslim holidays as regular holidays and to pay both its Muslim and non-Muslim
employees holiday pay within thirty (30) days from the receipt of the order.

SMC appealed to the DOLE main office in Manila. However, the appeal was dismissed for lack of merit and the
order of Director Macaraya was affirmed. SMC went to SC for relief via a petition for certiorari, which the Court
referred to the Court of Appeals. The appellate court modified the order with regards the payment of Muslim
holiday pay from 200% to 150% of the employee's basic salary. Its motion for reconsideration having been denied
for lack of merit, SMC filed a petition for certiorari before the SC

ISSUES:

(a) Whether or not public respondents seriously erred and committed grave abuse of discretion when they granted
Muslim Holiday Pay to non-Muslim employees of SMC.

(b) Whether or not SMC was not accorded with due process of law in the issuance of the compliance order.

(c) Whether or not regional director Macaraya, undersecretary Trajano and undersecretary Espanol have
jurisdiction in issuing the assailed compliance orders.

RULING:

The court ruled the issues in negative.

Muslim holidays are provided under Articles 169 and 170, Title I, Book V, of Presidential Decree No. 1083,
otherwise known as the Code of Muslim Personal Laws, which states:

13
Rosolada 2014
 Art. 169. Official Muslim holidays. - The following are hereby recognized as legal Muslim holidays:

(a) ‘Amun Jadīd (New Year), which falls on the first day of the first lunar month of Muharram;

(b) Maulid-un-Nabī (Birthday of the Prophet Muhammad), which falls on the twelfth day of the third lunar
month of Rabi-ul-Awwal;

(c) Lailatul Isrā Wal Mi’rāj (Nocturnal Journey and Ascension of the Prophet Muhammad), which falls on
the twenty-seventh day of the seventh lunar month of Rajab;

(d) ‘Īd-ul-Fitr (Hari Raya Puasa), which falls on the first day of the tenth lunar month of Shawwal,
commemorating the end of the fasting season; and

(e) ‘Īd-ūl-Adhā (Hari Raya Haji),which falls on the tenth day of the twelfth lunar month of Dhū’l-Hijja.

Art. 170. Provinces and cities where officially observed. - (1) Muslim holidays shall be officially observed in
the Provinces of Basilan, Lanao del Norte, Lanao del Sur, Maguindanao, North Cotabato, Iligan, Marawi,
Pagadian, and Zamboanga and in such other Muslim provinces and cities as may hereafter be created;

(2) Upon proclamation by the President of the Philippines, Muslim holidays may also be officially observed
in other provinces and cities.

The foregoing provisions should be read in conjunction with Article 94 of the Labor Code, which provides:

Art. 94. Right to holiday pay. -

(a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;

(b) The employer may require an employee to work on any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate.

Petitioner asserts that Article 3(3) of Presidential Decree No. 1083 provides that "the provisions of this Code shall
be applicable only to Muslims." However, there should be no distinction between Muslims and non-Muslims as
regards payment of benefits for Muslim holidays. Wages and other emoluments granted by law to the working
man are determined on the basis of the criteria laid down by laws and certainly not on the basis of the worker’s
faith or religion. In addition, the 1999 Handbook on Workers’ Statutory Benefits, categorically stated: Considering
that all private corporations, offices, agencies, and entities or establishments operating within the designated
Muslim provinces and cities are required to observe Muslim holidays, both Muslim and Christians working within
the Muslim areas may not report for work on the days designated by law as Muslim holidays.

On the question regarding the jurisdiction of the Regional Director Allan M. Macaraya, Article 128, Section B of the
Labor Code, as amended by Republic Act No. 7730, provides: Article 128. Visitorial and enforcement power. -

(b) Notwithstanding the provisions of Article 129 and 217 of this Code to the contrary, and in cases where
the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly
authorized representatives shall have the power to issue compliance orders to give effect to the labor
standards provisions of this Code and other labor legislation based on the findings of labor employment
and enforcement officers or industrial safety engineers made in the course of the inspection. The
Secretary or his duly authorized representative shall issue writs of execution to the appropriate authority
 for the enforcement of their orders, except in cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by documentary proofs which were not
considered in the course of inspection.

In the case before us, Regional Director Macaraya acted as the duly authorized representative of the Secretary of
Labor and Employment and it was within his power to issue the compliance order to SMC. In addition, the Court
agrees with the Solicitor General that the petitioner did not deny that it was not paying Muslim holiday pay to its
non-Muslim employees. Indeed, petitioner merely contends that its non-Muslim employees are not entitled to
Muslim holiday pay. Hence, the issue could be resolved even without documentary proofs. In any case, there was
no indication that Regional Director Macaraya failed to consider any documentary proof presented by SMC in the
course of the inspection.

Anent the allegation that petitioner was not accorded due process, the court finds that SMC was furnished a copy
of the inspection order and it was received by and explained to its Personnel Officer. Further, a series of summary
hearings were conducted by DOLE on 19 November 1992, 28 May 1993 and 4 and 5 October 1993. Thus, SMC
could not claim that it was not given an opportunity to defend itself.

o Driver who is paid on a boundary basis, not entitled to 13th month pay (G and E case)
o Commissions not part of basic salary if in the form of profit sharing payments, and absence of
clear, direct or necessary relation to the amount of work actually performed (2007 Reyes case)

Reyes vs. NLRC et al.

G.R. No. 160233; August 8, 2007

FACTS:

Petitioner was employed as a salesman at private respondent's Grocery Division in Davao City on August 12, 1977.
He was eventually appointed as unit manager of Sales Department-South Mindanao District, a position he held
until his retirement on November 30, 1997. Thereafter, he received a letter regarding the computation of his
separation pay. Insisting that his retirement benefits and 13th month pay must be based on the average monthly
salary of P42,766.19, which consists of P10,919.22 basic salary and P31,846.97 average monthly commission,
petitioner refused to accept the check issued by private respondent in the amount of P200,322.21. Instead, he
filed a complaint before the arbitration branch of the NLRC for retirement benefits, 13th month pay, tax refund,
earned sick and vacation leaves, financial assistance, service incentive leave pay, damages and attorney's fees.

Petitioner contends that the commissions form part of the basic salary, citing the case of Philippine Duplicators,
Inc. v. National Labor Relations Commission, wherein the Court held that commissions earned by salesmen form
part of their basic salary. Private respondent counters that petitioner knew that the overriding commission is not
included in the basic salary because it had not been considered as such for a long time in the computation of the
13th month pay, leave commissions, absences and tardiness.

ISSUE:

Whether or not the average monthly sales commission of thirty one thousand eight hundred forty six and 97/100
(Php31,846.97) should be included in the computation of his retirement benefits and 13 th month pay.

RULING:
This Court has held, in Philippine Duplicators that, the salesmen's commissions, comprising a pre-determined
percentage of the selling price of the goods sold by each salesman, were properly included in the term basic salary
for purposes of computing the 13th month pay. The salesmen's commission are not overtime payments, nor profit-
sharing payments nor any other fringe benefit but a portion of the salary structure which represents an automatic
increment to the monetary value initially assigned to each unit of work rendered by a salesman.

Contrarily, 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, which are generally tied to the productivity, or capacity for revenue production, of a corporation and
such bonuses closely resemble profit-sharing payments and have no clear direct or necessary relation to the
amount of work actually done by each individual employee. Further, 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 the salesmen their sales commissions. Medical representatives are not salesmen; they do not
effect any sale of any article at all.
In fine, whether or not a commission forms part of the basic salary depends upon the circumstances or conditions
for its payment, which indubitably are factual in nature for they will require a re-examination and calibration of the
evidence on record.

As to the main issue whether petitioner's commissions be considered in the computation of his retirement benefits
and 13th month pay, we rule in the negative. Article 287 of the Labor Code, as amended by Republic Act No. 7641,
otherwise known as The New Retirement Law, 22 provides: Retirement. — Any employee may be retired upon
reaching the retirement age established in the collective bargaining agreement or other applicable employment
contract… In the absence of a retirement plan or agreement providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty five (65) years
which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to retirement pay equivalent to at least one half (1/2) month salary
for every year of service, a fraction of at least six (6) months being considered as one whole year. Unless the
parties provide for broader inclusions, the term one half (1/2) month salary shall mean fifteen (15) days plus one
twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive
leaves.

Petitioner filed for optional retirement upon reaching the age of 60. However, the basis in computing his
retirement benefits is his latest salary rate of P10,919.22 as the commissions he received are in the form of profit-
sharing payments specifically excluded by the foregoing rules. Case law has it that when these earnings and
remuneration are closely akin to fringe benefits, overtime pay or profit-sharing statements, they are properly
excluded in computing retirement pay. However, sales commissions which are effectively an integral portion of the
basic salary structure of an employee, shall be included in determining the retirement pay.

At bar, petitioner Rogelio J. Reyes was receiving a monthly sum of P10,919.22 as salary corresponding to his
position as Unit Manager. Thus, as correctly ruled by public respondent NLRC, the "overriding commissions" paid
to him by Universal Robina Corp. could not have been 'sales commissions' in the same sense that Philippine
Duplicators paid its salesmen sales commissions. Unit Managers are not salesmen; they do not effect any sale of
article at all. Therefore, any commission which they receive is certainly not the basic salary which measures the
standard or amount of work of complainant as Unit Manager. Accordingly, the additional payments made to
petitioner were not in fact sales commissions but rather partook of the nature of profit-sharing business. Certainly,
from the foregoing, the doctrine in Boie-Takeda Chemicals and Philippine Fuji Xerox Corporation, which
pronounced that commissions are additional pay that does not form part of the basic salary, applies to the present
case. Aside from the fact that as unit manager petitioner did not enter into actual sale transactions, but merely
supervised the salesmen under his control, the disputed commissions were not regularly received by him. Only
when the salesmen were able to collect from the sale transactions can petitioner receive the commissions.
Conversely, if no collections were made by the salesmen, then petitioner would receive no commissions at all. In
fine, the commissions which petitioner received were not part of his salary structure but were profit-sharing
payments and had no clear, direct or necessary relation to the amount of work he actually performed. The
collection made by the salesmen from the sale transactions was the profit of private respondent from which
petitioner had a share in the form of a commission. Hence, petition is denied.

o Overload pay, excluded from the 13th month pay, as it is paid for additional work in excess of
the regular teaching load (2008 Letran Calamba Faculty and Employees Association )

Letran Calamba Faculty and Employees Association vs. NLRC (1997) G.R. 156225

Facts:

The Letran Calamba Faculty and Employees Association (petitioner) filed a complaint against Colegio de San Juan
de Letran, Calamba, Inc. (respondent) for collection of various monetary claims due its members. One of the
allegations that petitioner alleged in its Position Paper is that: In the computation of the thirteenth month pay of
its academic personnel, respondent does not include as basis therefor their compensation for overloads. It only
takes into account the pay the faculty members receive for their teaching loads not exceeding eighteen (18) units.
The teaching overloads are rendered within eight (8) hours a day. The Labor Arbiter (LA) handling the consolidated
cases, denied and dismissed the respective complaints.

Issue: WON the pay of the faculty members for teaching overloads should be included as basis in the computation
of their 13th month pay?

Held: Teaching overload may not be considered part of basic salary.

Under the Rules and Regulations Implementing PD 851, the following compensations are deemed not part of the
basic salary: a) cost-of-living allowances granted pursuant to PD 525 and Letter of Instruction No. 174; b) profit
sharing payments; c) all allowances and monetary benefits which are not considered or integrated as part of the
regular basic salary of the employee at the time of the promulgation of the Decree on Dec 16, 1975.

Under a later set of Supplementary Rules and Regulations Implementing PD 851 issued by the then Labor Secretary
Blas Ople, overtime pay, earnings and other remunerations are excluded as part of the basic salary and in the
computation of the 13th-month pay.

The all-embracing phrase "earnings and other remunerations" which are deemed not part of the basic salary
includes within its meaning payments for sick, vacation, or maternity leaves, premium for works performed on rest
days and special holidays, pay for regular holidays and night differentials. As such they are deemed not part of the
basic salary and shall not be considered in the computation of the 13 th-month pay.

As provided for by Art 87 of the Labor Code, it is clear that overtime pay is an additional compensation other than
and added to the regular wage or basic salary, for reason of which such is categorically excluded from the
definition of basic salary under the Supplementary Rules and Regulations Implementing PD 851.

In the same manner that payment for overtime work and work performed during special holidays is considered as
additional compensation apart and distinct from an employee's regular wage or basic salary, an overload pay,
owing to its very nature and definition, may not be considered as part of a teacher's regular or basic salary,
because it is being paid for additional work performed in excess of the regular teaching load.