G.R. No.

L-50999 March 23, 1990

JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners,

vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER FLAVIO
AGUAS, and F.E. ZUELLIG (M), INC., respondents.

Raul E. Espinosa for petitioners.

Lucas Emmanuel B. Canilao for petitioner A. Manuel.

Atienza, Tabora, Del Rosario & Castillo for private respondent.

MEDIALDEA, J.:

This is a petition for certiorari seeking to modify the decision of the National Labor Relations
Commission in NLRC Case No. RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres,
Complainants-Appellants, v. F.E. Zuellig (M), Inc., Respondent-Appellee" and NLRC Case No. RN- IV-
20855-78-T entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M), Inc., Respondent-
Appellee," which dismissed the appeal of petitioners herein and in effect affirmed the decision of the
Labor Arbiter ordering private respondent to pay petitioners separation pay equivalent to their one
month salary (exclusive of commissions, allowances, etc.) for every year of service.

The antecedent facts are as follows:

Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with the Department
of Labor (Regional Office No. 4) an application seeking clearance to terminate the services of
petitioners Jose Songco, Romeo Cipres, and Amancio Manuel (hereinafter referred to as petitioners)
allegedly on the ground of retrenchment due to financial losses. This application was seasonably
opposed by petitioners alleging that the company is not suffering from any losses. They alleged
further that they are being dismissed because of their membership in the union. At the last hearing
of the case, however, petitioners manifested that they are no longer contesting their dismissal. The
parties then agreed that the sole issue to be resolved is the basis of the separation pay due to
petitioners. Petitioners, who were in the sales force of Zuellig received monthly salaries of at least
P40,000. In addition, they received commissions for every sale they made.

The collective Bargaining Agreement entered into between Zuellig and F.E. Zuellig Employees
Association, of which petitioners are members, contains the following provision (p. 71, Rollo):

ARTICLE XIV — Retirement Gratuity

Section l(a)-Any employee, who is separated from employment due to old age, sickness, death or
permanent lay-off not due to the fault of said employee shall receive from the company a retirement
gratuity in an amount equivalent to one (1) month's salary per year of service. One month
of salary as used in this paragraph shall be deemed equivalent to the salary at date of retirement;
years of service shall be deemed equivalent to total service credits, a fraction of at least six months
being considered one year, including probationary employment. (Emphasis supplied)

On the other hand, Article 284 of the Labor Code then prevailing provides:

Art. 284. Reduction of personnel. — The termination of employment of any employee due to the
installation of labor saving-devices, redundancy, retrenchment to prevent losses, and other similar
causes, shall entitle the employee affected thereby to separation pay. In case of termination due to
the installation of labor-saving devices or redundancy, the separation pay shall be equivalent to one
(1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and other similar causes, the separation pay shall be equivalent to
one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher.
A fraction of at least six (6) months shall be considered one (1) whole year. (Emphasis supplied)

In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the Labor Code provide:

xxx

Sec. 9(b). Where the termination of employment is due to retrechment initiated by the employer to
prevent losses or other similar causes, or where the employee suffers from a disease and his
continued employment is prohibited by law or is prejudicial to his health or to the health of his co-
employees, the employee shall be entitled to termination pay equivalent at least to his one month
salary, or to one-half month pay for every year of service, whichever is higher, a fraction of at least six
(6) months being considered as one whole year.

xxx

Sec. 10. Basis of termination pay. — The computation of the termination pay of an employee as
provided herein shall be based on his latest salary rate, unless the same was reduced by the
employer to defeat the intention of the Code, in which case the basis of computation shall be the rate
before its deduction. (Emphasis supplied)

On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of which reads (p.
78, Rollo):

RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby, ordered to pay the

complainants separation pay equivalent to their one month salary (exclusive of commissions,
allowances, etc.) for every year of service that they have worked with the company.

SO ORDERED.

The appeal by petitioners to the National Labor Relations Commission was dismissed for lack of
merit.

Hence, the present petition.

On June 2, 1980, the Court, acting on the verified "Notice of Voluntary Abandonment and Withdrawal
of Petition dated April 7, 1980 filed by petitioner Romeo Cipres, based on the ground that he wants
"to abide by the decision appealed from" since he had "received, to his full and complete satisfaction,
his separation pay," resolved to dismiss the petition as to him.

The issue is whether or not earned sales commissions and allowances should be included in the
monthly salary of petitioners for the purpose of computation of their separation pay.

The petition is impressed with merit.

Petitioners' position was that in arriving at the correct and legal amount of separation pay due them,
whether under the Labor Code or the CBA, their basic salary, earned sales commissions and
allowances should be added together. They cited Article 97(f) of the Labor Code which includes
commission as part on one's salary, to wit;

(f) 'Wage' paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered, and includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the
employee. 'Fair reasonable value' shall not include any profit to the employer or to any person
affiliated with the employer.
Zuellig argues that if it were really the intention of the Labor Code as well as its implementing rules
to include commission in the computation of separation pay, it could have explicitly said so in clear
and unequivocal terms. Furthermore, in the definition of the term "wage", "commission" is used only
as one of the features or designations attached to the word remuneration or earnings.

Insofar as the issue of whether or not allowances should be included in the monthly salary of
petitioners for the purpose of computation of their separation pay is concerned, this has been settled
in the case of Santos v. NLRC, et al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where We
ruled that "in the computation of backwages and separation pay, account must be taken not only of
the basic salary of petitioner but also of her transportation and emergency living allowances." This
ruling was reiterated in Soriano v. NLRC, et al., G.R. No. 75510, October 27, 1987, 155 SCRA 124 and
recently, in Planters Products, Inc. v. NLRC, et al., G.R. No. 78524, January 20, 1989.

We shall concern ourselves now with the issue of whether or not earned sales commission should be
included in the monthly salary of petitioner for the purpose of computation of their separation pay.

Article 97(f) by itself is explicit that commission is included in the definition of the term "wage". It has
been repeatedly declared by the courts that where the law speaks in clear and categorical language,
there is no room for interpretation or construction; there is only room for application (Cebu Portland
Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August 22, 1968, 24 SCRA 708; Gonzaga v.
Court of Appeals, G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A plain and unambiguous statute
speaks for itself, and any attempt to make it clearer is vain labor and tends only to obscurity. How
ever, it may be argued that if We correlate Article 97(f) with Article XIV of the Collective Bargaining
Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the Implementing Rules, there
appears to be an ambiguity. In this regard, the Labor Arbiter rationalized his decision in this manner
(pp. 74-76, Rollo):

The definition of 'wage' provided in Article 96 (sic) of the Code can be correctly be (sic) stated as a
general definition. It is 'wage ' in its generic sense. A careful perusal of the same does not show any
indication that commission is part of salary. We can say that commission by itself may be considered
a wage. This is not something novel for it cannot be gainsaid that certain types of employees like
agents, field personnel and salesmen do not earn any regular daily, weekly or monthly salaries, but
rely mainly on commission earned.

Upon the other hand, the provisions of Section 10, Rule 1, Book VI of the implementing rules in
conjunction with Articles 273 and 274 (sic) of the Code specifically states that the basis of the
termination pay due to one who is sought to be legally separated from the service is 'his latest salary
rates.

x x x.

Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly salary'.

The above terms found in those Articles and the particular Rules were intentionally used to express
the intent of the framers of the law that for purposes of separation pay they mean to be specifically
referring to salary only.

.... Each particular benefit provided in the Code and other Decrees on Labor has its own pecularities
and nuances and should be interpreted in that light. Thus, for a specific provision, a specific meaning
is attached to simplify matters that may arise there from. The general guidelines in (sic) the formation
of specific rules for particular purpose. Thus, that what should be controlling in matters concerning
termination pay should be the specific provisions of both Book VI of the Code and the Rules. At any
rate, settled is the rule that in matters of conflict between the general provision of law and that of a
particular- or specific provision, the latter should prevail.

On its part, the NLRC ruled (p. 110, Rollo):

From the aforequoted provisions of the law and the implementing rules, it could be deduced that
wage is used in its generic sense and obviously refers to the basic wage rate to be ascertained on a
time, task, piece or commission basis or other method of calculating the same. It does not, however,
mean that commission, allowances or analogous income necessarily forms part of the employee's
salary because to do so would lead to anomalies (sic), if not absurd, construction of the word "salary."
For what will prevent the employee from insisting that emergency living allowance, 13th month pay,
overtime, and premium pay, and other fringe benefits should be added to the computation of their
separation pay. This situation, to our mind, is not the real intent of the Code and its rules.

We rule otherwise. The ambiguity between Article 97(f), which defines the term 'wage' and Article XIV
of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the
Implementing Rules, which mention the terms "pay" and "salary", is more apparent than real.
Broadly, the word "salary" means a recompense or consideration made to a person for his pains or
industry in another man's business. Whether it be derived from "salarium," or more fancifully from
"sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for
services rendered. Indeed, there is eminent authority for holding that the words "wages" and "salary"
are in essence synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing Hopkins vs.
Cromwell, 85 N.Y.S. 839,841,89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of which is
the Latin word "salarium," is often used interchangeably with "wage", the etymology of which is the
Middle English word "wagen". Both words generally refer to one and the same meaning, that is, a
reward or recompense for services performed. Likewise, "pay" is the synonym of "wages" and "salary"
(Black's Law Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and "salary" have the same
meaning, and commission is included in the definition of "wage", the logical conclusion, therefore, is,
in the computation of the separation pay of petitioners, their salary base should include also their
earned sales commissions.

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

We agree with the Solicitor General that granting, in gratia argumenti, that the commissions were in
the form of incentives or encouragement, so that the petitioners would be inspired to put a little more
industry on the jobs particularly assigned to them, still these commissions are direct remuneration
services rendered which contributed to the increase of income of Zuellig . Commission is the
recompense, compensation or reward of an agent, salesman, executor, trustees, receiver, factor,
broker or bailee, when the same is calculated as a percentage on the amount of his transactions or
on the profit to the principal (Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217 Md. 123,
141 A.2d 749, 750). The nature of the work of a salesman and the reason for such type of
remuneration for services rendered demonstrate clearly that commission are part of petitioners' wage
or salary. We take judicial notice of the fact that some salesmen do not receive any basic salary but
depend on commissions and allowances or commissions alone, are part of petitioners' wage or salary.
We take judicial notice of the fact that some salesman do not received any basic salary but depend on
commissions and allowances or commissions alone, although an employer-employee relationship
exists. Bearing in mind the preceeding dicussions, if we adopt the opposite view that commissions, do
not form part of wage or salary, then, in effect, We will be saying that this kind of salesmen do not
receive any salary and therefore, not entitled to separation pay in the event of discharge from
employment. Will this not be absurd? This narrow interpretation is not in accord with the liberal
spirit of our labor laws and considering the purpose of separation pay which is, to alleviate the
difficulties which confront a dismissed employee thrown the the streets to face the harsh necessities
of life.

Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base that should be
used in computing the separation pay, We held that:
The commissions also claimed by petitioner ('override commission' plus 'net deposit incentive') are not
properly includible in such base figure since such commissions must be earned by actual market
transactions attributable to petitioner.

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

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

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

SO ORDERED.

G.R. No. 179654 September 22, 2014

HACIENDA LEDDY/RICARDO GAMBOA, JR., Petitioner,

vs.
PAQUITA VILLEGAS, Respondent.

DECISION

PERALTA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of
the Decision1 dated May 25, 2007 and Resolution2 dated August 10, 2007 of the Court of Appeals in
CA-G.R. SP No. 01923,3 which granted the Petition for Certiorari under Rule 65 of the 1997 Rules of
Civil Procedure filed by Villegas, and reversed the January 26, 2006 and March 31, 2006 Orders of
the National Labor Relations Commission (NLRC). These two Orders issued by the NLRC reversed the
December 3, 2003 Decision of Executive Labor Arbiter Danilo Acosta.

The facts, as culled from the records, are as follows:

Villegas is an employee at the Hacienda Leddy as early as 1960, when it was still named Hacienda
Teresa. Later on named Hacienda Leddy owned by Ricardo Gamboa Sr., the same was succeeded by
his son Ricardo Gamboa, Jr. During his employment up to the time of his dismissal, Villegas
performed sugar farming job 8 hours a day, 6 days a week work, continuously for not less than 302
days a year, and for which services he was paid ₱45.00 per day. He likewise worked in petitioner's
coconut lumber business where he was paid ₱34.00 a day for 8 hours work.
On June 9, 1993, Gamboa went toVillegas' house and told him that his services were no longer
needed without prior notice or valid reason. Hence, Villegas filed the instant complaint for illegal
dismissal.

Gamboa, on the other hand, denied having dismissed Villegas but admitted in his earlier position
paper thatVillegas indeed worked with the said farm owned by his father, doing casual and odd jobs
until the latter's death in 1993.4 He was even given the benefit of occupying a small portion of the
land where his house was erected. He, however, maintained that Villegas ceased working at the farm
as early as 1992, contrary to his allegation that he was dismissed.5

However, later, Gamboaapparently retracted and instead insisted that the farm records reveal that
the only time Villegas rendered service for the hacienda was only in the year 1993,specifically
February 9, 1993 and February 11, 1993 when he was contracted by the farm to cut coconut lumber
which were given to regular workers for the repairs of their houses. 6 Gamboa added that they
informed Villegas that they need the property, hence, they requested that he vacateit, but he refused.
Thus, Gamboa surmised that Villegas filed the instant complaint to gain leverage so he would not be
evicted from the land he is occupying. He further argued that during his employment, Villegas was
paid in accordance with the rate mandated by law and that his claim for illegal dismissal was merely
a fabrication as he was the one who opted not to work. The Labor Arbiter found thatthere was illegal
dismissal.7 The dispositive portion of the decision reads:

WHEREFORE, in view of all the foregoing, respondent Ricardo Gamboa, Jr., is hereby ordered to pay
complainant Paquito Villegas the amount of One Hundred Forty Thousand Three Hundred Eight
Pesos and Eighty-Four/00 (₱140,308.84), representing his wage differential, backwages and
separation pay, the award to be deposited with this office within ten (10) days from receipt of this
decision.

SO ORDERED.8

On appeal, on January 26, 2006, the NLRC set aside and vacated the Labor Arbiter's
decision.9 Complainant moved for reconsideration, but was denied. 10

Thus, viapetition for certiorariunder Rule 65 of the Rules of Court, raising grave abuse of discretion
as ground, Villegas appealed before the Court of Appeals and sought the annulment of the
Resolutions of the NLRC.

In the disputed Decision11 dated May 25, 2007, the Court of Appeals granted the petition and
annulled and set aside the NLRC Decision dated January 26, 2006 and Resolution dated March 31,
2006. It further reinstated the Labor Arbiter's Decision dated December 3, 2003.

Hence, this appeal anchored on the following grounds:

WHETHER THE COURT OFAPPEALS COMMITTED REVERSIBLE ERROR, BASED ON SUBSTANTIAL

QUESTIONS OF LAW, IN REVERSING THE DECISION OF THE NLRC AND AFFIRMING THE
DECISION OF the EXECUTIVE LABOR ARBITER DECLARING THAT RESPONDENT IS A REGULAR
WORKER, THE FINDINGS NOT BEING IN ACCORD WITH LAW;

II

WHETHER THE COURT OFAPPEALS COMMITTED REVERSIBLE ERROR, BASED ON SUBSTANTIAL

QUESTIONS OF LAW, IN REVERSING THE DECISION OF THE NLRC AND AFFIRMING THE
DECISION OF THE EXECUTIVE LABOR ARBITER AND FAILED TO CONSIDER THE MOTIVE OF THE
RESPONDENT IN FILING THE CASE AND THE CREDIBILITY OF HIS WITNESS;

III
THAT ASSUMING WITHOUT ADMITTING THAT RESPONDENT IS A REGULAR WORKER, THE
HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON SUBSTANTIAL
QUESTIONS OF LAW, IN REVERSING THE DECISION OF THE NLRC AND AFFIRMING THE
DECISION OF THE EXECUTIVE LABOR ARBITER IN DIRECTING A STRAIGHT COMPUTATION FOR
WAGE DIFFERENTIALS, BACKWAGES AND SEPARATION PAY, THE FINDINGS NOT BEING
INACCORD WITH LAW.

Petitioner disputed that there exists an employer-employee relationship between him and Villegas. He
claimed that respondent was paid on a piece-rate basis without supervision.12 Petitioner added that
since his job was not necessary or desirable in the usual business or trade of the hacienda, he cannot
be considered as a regular employee. Petitioner insisted that it was Villegas who has stopped working
in the hacienda and that he was not dismissed.

We deny the petition.

The issue of Villegas' alleged illegal dismissal is anchored on the existence of an employer-employee
relationship between him and Gamboa; thus, essentially a question of fact. Generally, the Court does
not review errors that raise factual questions. However, when there is conflict among the factual
findings of the antecedent deciding bodies like the LA, the NLRC and the CA, "it is proper, in the
exercise of Our equity jurisdiction, to review and re-evaluate the factual issues and to look into the
records of the case and re-examine the questioned findings."13

A perusal of the records would show that respondent, having been employed in the subject Hacienda
while the same was still being managed by petitioner's father until the latter's death in 1993, is
undisputed as the same was even admitted by Gamboa in his earlier pleadings. 14 While refuting that
Villegas was a regular employee, petitioner however failed to categorically deny that Villegas was
indeed employed in their hacienda albeit he insisted that Villegas was merely a casual employee
doing odd jobs.

The rule is long and well settled that, in illegal dismissal cases like the one at bench, the burden of
proof is upon the employer to show that the employee’s termination from service is for a just and
valid cause. The employer’s case succeeds or fails on the strength of its evidence and not the
weakness of that adduced by the employee, in keeping with the principle that the scales of justice
should be tilted in favor of the latter in case of doubt in the evidence presented by them. Often
described as more than a mere scintilla, the quantum of proof is substantial evidence which is
understood as such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion, even if other equally reasonable minds might conceivably opine otherwise. 15

In the instant case, if we are to follow the length of time that Villegas had worked with the Gamboas,
it should be more than 20 years of service. Even Gamboa admitted that by act of generosity and
compassion, Villegas was given a privilege of erecting his house inside the hacienda during his
employment.16 While it may indeed be an act of good will on the part of the Gamboas, still, such act is
usually done by the employer either out of gratitude for the employee’s service orfor the employer's
convenience as the nature of the work calls for it. Indeed, petitioner's length of service is an
indication of the regularity of his employment. Even assuming that he was doing odd jobs around the
farm, such long period of doing said odd jobs is indicative that the same was either necessary or
desirable to petitioner's trade or business. Owing to the length ofservice alone, he became a regular
employee, by operation of law, one year after he was employed.

Article 280 of the Labor Code, describes a regular employee as one who is either (1) engaged to
perform activities which are necessary or desirable in the usual business or trade of the employer;
and (2) those casual employees who have rendered at least one year of service, whether continuous or
broken, with respect to the activity in which he is employed.

In Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations Commission,17 we
held that the testto determine whether employment is regular or not is the reasonable connection
between the particular activity performed by the employee in relation to the usual business or trade
of the employer. If the employee has been performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law deems the repeated and continuing
need for its performance as sufficient evidence of the necessity, if not indispensability of that activity
to the business. Clearly,with more than 20 years of service, Villegas, without doubt, passed this test
to attain employment regularity.

While length of time may not be the controlling test to determine if Villegas is indeed a regular
employee, it is vital in establishing if he was hired to perform tasks which are necessary and
indispensable to the usual business or trade of the employer. If it was true that Villegas worked in the
hacienda only in the year 1993, specifically February 9,1993 and February 11, 1993, why would then
hebe given the benefit toconstruct his house in the hacienda? More significantly, petitioner admitted
that Villegas had worked in the hacienda until his father'sdemise. Clearly, even assuming that
Villegas' employment was only for a specific duration, the fact that he was repeatedly re-hired over a
long periodof time shows that his job is necessary and indispensable to the usual business or trade of
the employer.

Gamboa likewise argued that Villegas was paid on a piece-rate basis.18 However, payment on a piece-
ratebasis does not negate regular employment. "The term ‘wage’ is broadly defined in Article 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." 19

We are likewise unconvinced thatit was Villegas who suddenly stopped working. Considering that
hewas employed with the Gamboas for more than 20 years and was even given a place to call his
home, it does not make sense why Villegas would suddenly stop working therein for no apparent
reason. To justify a finding of abandonment of work, there must be proof of a deliberate and
unjustified refusal on the part of an employee to resume his employment. The burden of proof is on
the employer to show an unequivocal intent on the part of the employee to discontinue employment.
Mere absence is not sufficient. It must be accompanied by manifest acts unerringly pointing to the
fact that the employee simply does not want to work anymore. 20

Petitioner failed to discharge this burden. Other than the self-serving declarations in the affidavit of
his employee, petitioner did not adduce proof of overt acts of Villegas showing his intention to
abandon his work. Abandonment is a matter of intention;it cannot be inferred or presumed from
equivocal acts. On the contrary, the filing of the instant illegal dismissal complaint negates any
intention on his part to sever their employment relationship. The delay of morethan 1 year infiling the
instant illegal dismissal case likewise is non-issue considering that the complaint was filed within a
reasonable period during the three-year period provided under Article 291 of the Labor Code.21 As
aptly observed by the appellate court, Villegas appeared tobe without educational attainment. He
could not have known that he has rights as a regular employee that is protected by law.

The Labor Code draws a fine line between regular and casual employees to protect the interests of
labor. We ruled in Baguio Country Club Corporation v. NLRC22 that "its language evidently manifests
the intent to safeguard the tenurial interest of the worker who may be denied the rights and benefits
due a regular employee by virtue of lopsided agreements with the economically powerful employer
who can maneuver to keep an employee on a casual status for as long as convenient." Thus,
notwithstanding any agreements to the contrary, what determines whether a certain employment is
regular or casual is not the will and word of the employer, to which the desperate worker often
accedes, much less the procedure of hiring the employee or the manner of paying his salary. It is the
nature of the activities performed in relation to the particular business or trades considering all
circumstances, and in some cases the length of time of its performance and itscontinued existence. 23
All these having discussed, as a regular worker, Villegas is entitled to security of tenure under Article
279 ofthe Labor Code and can only be removed for cause. We found no valid cause attending to his
dismissal and found also that his dismissal was without due process.

Article 277(b) of the Labor Code provides that:

x x x Subject to the constitutional right of workers to security of tenure and their right to be protected
against dismissal except for a just and authorized cause and without prejudice to the requirement of
notice under Article 283 of this Code, the employer shall furnish the worker whose employment is
sought to be terminated a written notice containing a statement of the causes for termination and
shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his
representative if he so desires in accordance with company rules and regulations promulgated
pursuant to guidelines set by the Department of Labor and Employment.

The failure of the petitioner to comply with these procedural guidelines renders its dismissal of
Villegas illegal.1âwphi1 An illegally dismissed employee should be entitled to either reinstatement - if
viable, or separation pay if reinstatement is no longer viable, plus backwages in either
instance.24 Considering that reinstatement is no longer feasible because of strained relations between
the employee and the employer, separation pay should be granted. The basis for computing
separation pay is usually the length of the employee's past service, while that for backwages is the
actual period when the employee was unlawfully prevented from working. 25 It should be emphasized,
however, that the finality of the illegal dismissal decision becomes the reckoning point. In allowing
separation pay, the final decision effectively declares that the employment relationship ended so that
separation pay and backwages are to be computed up to that point. The decision also becomes a
judgment for money from which another consequence flows - the payment of interest in case of
delay.26

WHEREFORE, premises considered, the Decision dated May 25, 2007 and Resolution dated August
10, 2007 of the Court of Appeals are hereby AFFIRMED. The Decision dated December 3, 2003 of the
Labor Arbiter in RAB Case No. 06-08-10480-94 is hereby REINSTATED. This case is hereby
REMANDED to the Labor Arbiter for the recomputation of respondent's separation pay and
backwages with legal interest.

SO ORDERED.

G.R. No. 157634 May 16, 2005

MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO LAM, petitioners,

vs.
ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE, EDUARDO ALAMARES, AMADO
ALAMARES, EDGARDO TORREFRANCA, LOURDES CAMIGLA, TEODORO LAURENARIA,
WENEFREDO LOVERES, LUIS GUADES, AMADO MACANDOG, PATERNO LLARENA, GREGORIO
NICERIO, JOSE ATRACTIVO, MIGUEL TORREFRANCA, and SANTOS BROÑOLA, respondents.

DECISION

PUNO, J.:

This is a petition for certiorari to reverse and set aside the Decision issued by the Court of Appeals
(CA)1 in CA-G.R. SP No. 68642, entitled "Rolando Adana, Wenefredo Loveres, et. al. vs. National Labor
Relations Commission (NLRC), Mayon Hotel & Restaurant/Pacita O. Po, et al.," and the
Resolution2 denying petitioners' motion for reconsideration. The assailed CA decision reversed the
NLRC Decision which had dismissed all of respondents' complaints, 3 and reinstated the Joint
Decision of the Labor Arbiter4 which ruled that respondents were illegally dismissed and entitled to
their money claims.
The facts, culled from the records, are as follows: 5

Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the name of
petitioner Pacita O. Po,6 whose mother, petitioner Josefa Po Lam, manages the establishment. 7 The
hotel and restaurant employed about sixteen (16) employees.

Records show that on various dates starting in 1981, petitioner hotel and restaurant hired the
following people, all respondents in this case, with the following jobs: 8

1. Wenefredo Loveres Accountant and Officer-in-

charge

2. Paterno Llarena Front Desk Clerk

3. Gregorio Nicerio Supervisory Waiter

4. Amado Macandog Roomboy

5. Luis Guades Utility/Maintenance Worker

6. Santos Broñola Roomboy

7. Teodoro Laurenaria Waiter

8. Eduardo Alamares Roomboy/Waiter

9. Lourdes Camigla Cashier

10. Chona Bumalay Cashier

11. Jose Atractivo Technician

12. Amado Alamares Dishwasher and Kitchen

Helper

13. Roger Burce Cook

14. Rolando Adana Waiter

15. Miguel Torrefranca Cook

16. Edgardo Torrefranca Cook

Due to the expiration and non-renewal of the lease contract for the rented space occupied by the said
hotel and restaurant at Rizal Street, the hotel operations of the business were suspended on March
31, 1997.9 The operation of the restaurant was continued in its new location at Elizondo Street,
Legazpi City, while waiting for the construction of a new Mayon Hotel & Restaurant at Peñaranda
Street, Legazpi City.10 Only nine (9) of the sixteen (16) employees continued working in the Mayon
Restaurant at its new site.11

On various dates of April and May 1997, the 16 employees filed complaints for underpayment of
wages and other money claims against petitioners, as follows: 12

Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for illegal dismissal,
underpayment of wages, nonpayment of holiday and rest day pay; service incentive leave pay (SILP)
and claims for separation pay plus damages;
Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for underpayment of wages;
nonpayment of cost of living allowance (COLA) and overtime pay; premium pay for holiday and rest
day; SILP; nightshift differential pay and separation pay plus damages;

Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment of wages; nonpayment
of holiday and rest day pay and SILP;

Rolando Adana, Roger Burce and Amado Alamares for underpayment of wages; nonpayment of COLA,
overtime, holiday, rest day, SILP and nightshift differential pay;

Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest day and SILP and night
shift differential pay;

Santos Broñola for illegal dismissal, underpayment of wages, overtime pay, rest day pay, holiday pay,
SILP, and damages;13 and

Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and overtime pay; premium
pay for holiday and rest day, and SILP.

On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a Joint Decision in favor of
the employees. The Labor Arbiter awarded substantially all of respondents' money claims, and held
that respondents Loveres, Macandog and Llarena were entitled to separation pay, while respondents
Guades, Nicerio and Alamares were entitled to their retirement pay. The Labor Arbiter also held that
based on the evidence presented, Josefa Po Lam is the owner/proprietor of Mayon Hotel &
Restaurant and the proper respondent in these cases.

On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and all the complaints were
dismissed.

Respondents filed a motion for reconsideration with the NLRC and when this was denied, they filed a
petition for certiorari with the CA which rendered the now assailed decision.

After their motion for reconsideration was denied, petitioners now come to this Court, seeking the
reversal of the CA decision on the following grounds:

I. The Honorable Court of Appeals erred in reversing the decision of the National Labor Relations
Commission (Second Division) by holding that the findings of fact of the NLRC were not supported by
substantial evidence despite ample and sufficient evidence showing that the NLRC decision is indeed
supported by substantial evidence;

II. The Honorable Court of Appeals erred in upholding the joint decision of the labor arbiter which
ruled that private respondents were illegally dismissed from their employment, despite the fact that
the reason why private respondents were out of work was not due to the fault of petitioners but to
causes beyond the control of petitioners.

III. The Honorable Court of Appeals erred in upholding the award of monetary benefits by the labor
arbiter in his joint decision in favor of the private respondentS, including the award of damages to six
(6) of the private respondents, despite the fact that the private respondents have not proven by
substantial evidence their entitlement thereto and especially the fact that they were not illegally
dismissed by the petitioners.

IV. The Honorable Court of Appeals erred in holding that Pacita Ong Po is the owner of the business
establishment, petitioner Mayon Hotel and Restaurant, thus disregarding the certificate of
registration of the business establishment ISSUED by the local government, which is a public
document, and the unqualified admissions of complainants-private respondents.14

In essence, the petition calls for a review of the following issues:

1. Was it correct for petitioner Josefa Po Lam to be held liable as the owner of petitioner Mayon Hotel
& Restaurant, and the proper respondent in this case?

2. Were respondents Loveres, Guades, Macandog, Atractivo, Llarena and Nicerio illegally dismissed?

3. Are respondents entitled to their money claims due to underpayment of wages, and nonpayment of
holiday pay, rest day premium, SILP, COLA, overtime pay, and night shift differential pay?

It is petitioners' contention that the above issues have already been threshed out sufficiently and
definitively by the NLRC. They therefore assail the CA's reversal of the NLRC decision, claiming that
based on the ruling in Castillo v. NLRC,15 it is non sequitur that the CA should re-examine the
factual findings of both the NLRC and the Labor Arbiter, especially as in this case the NLRC's findings
are allegedly supported by substantial evidence.

We do not agree.

There is no denying that it is within the NLRC's competence, as an appellate agency reviewing
decisions of Labor Arbiters, to disagree with and set aside the latter's findings. 16 But it stands to
reason that the NLRC should state an acceptable cause therefore, otherwise it would be a whimsical,
capricious, oppressive, illogical, unreasonable exercise of quasi-judicial prerogative, subject to
invalidation by the extraordinary writ of certiorari.17 And when the factual findings of the Labor
Arbiter and the NLRC are diametrically opposed and this disparity of findings is called into question,
there is, necessarily, a re-examination of the factual findings to ascertain which opinion should be
sustained.18 As ruled in Asuncion v. NLRC,19

Although, it is a legal tenet that factual findings of administrative bodies are entitled to great weight
and respect, we are constrained to take a second look at the facts before us because of the diversity
in the opinions of the Labor Arbiter and the NLRC. A disharmony between the factual findings of the
Labor Arbiter and those of the NLRC opens the door to a review thereof by this Court. 20

The CA, therefore, did not err in reviewing the records to determine which opinion was supported by
substantial evidence.

Moreover, it is explicit in Castillo v. NLRC21 that factual findings of administrative bodies like the
NLRC are affirmed only if they are supported by substantial evidence that is manifest in the
decision and on the records. As stated in Castillo:

[A]buse of discretion does not necessarily follow from a reversal by the NLRC of a decision of a Labor
Arbiter. Mere variance in evidentiary assessment between the NLRC and the Labor Arbiter does not
automatically call for a full review of the facts by this Court. The NLRC's decision, so long as it is not
bereft of substantial support from the records, deserves respect from this Court. As a rule, the
original and exclusive jurisdiction to review a decision or resolution of respondent NLRC in a petition
for certiorari under Rule 65 of the Rules of Court does not include a correction of its evaluation of the
evidence but is confined to issues of jurisdiction or grave abuse of discretion. Thus, the NLRC's
factual findings, if supported by substantial evidence, are entitled to great respect and even
finality, unless petitioner is able to show that it simply and arbitrarily disregarded the evidence before
it or had misappreciated the evidence to such an extent as to compel a contrary conclusion if such
evidence had been properly appreciated. (citations omitted)22

After careful review, we find that the reversal of the NLRC's decision was in order precisely because it
was not supported by substantial evidence.

1. Ownership by Josefa Po Lam

The Labor Arbiter ruled that as regards the claims of the employees, petitioner Josefa Po Lam is, in
fact, the owner of Mayon Hotel & Restaurant. Although the NLRC reversed this decision, the CA, on
review, agreed with the Labor Arbiter that notwithstanding the certificate of registration in the name
of Pacita Po, it is Josefa Po Lam who is the owner/proprietor of Mayon Hotel & Restaurant, and the
proper respondent in the complaints filed by the employees. The CA decision states in part:

[Despite] the existence of the Certificate of Registration in the name of Pacita Po, we cannot fault the
labor arbiter in ruling that Josefa Po Lam is the owner of the subject hotel and restaurant. There
were conflicting documents submitted by Josefa herself. She was ordered to submit additional
documents to clearly establish ownership of the hotel and restaurant, considering the testimonies
given by the [respondents] and the non-appearance and failure to submit her own position paper by
Pacita Po. But Josefa did not comply with the directive of the Labor Arbiter. The ruling of the
Supreme Court in Metropolitan Bank and Trust Company v. Court of Appeals applies to Josefa Po
Lam which is stated in this wise:

When the evidence tends to prove a material fact which imposes a liability on a party, and he has it in
his power to produce evidence which from its very nature must overthrow the case made against him
if it is not founded on fact, and he refuses to produce such evidence, the presumption arises that the
evidence[,] if produced, would operate to his prejudice, and support the case of his adversary.

Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and restaurant, the labor
arbiter relied also on the testimonies of the witnesses, during the hearing of the instant case. When
the conclusions of the labor arbiter are sufficiently corroborated by evidence on record, the same
should be respected by appellate tribunals, since he is in a better position to assess and evaluate the
credibility of the contending parties. 23 (citations omitted)

Petitioners insist that it was error for the Labor Arbiter and the CA to have ruled that petitioner
Josefa Po Lam is the owner of Mayon Hotel & Restaurant. They allege that the documents they
submitted to the Labor Arbiter sufficiently and clearly establish the fact of ownership by petitioner
Pacita Po, and not her mother, petitioner Josefa Po Lam. They contend that petitioner Josefa Po
Lam's participation was limited to merely (a) being the overseer; (b) receiving the month-to-month
and/or year-to-year financial reports prepared and submitted by respondent Loveres; and (c)
visitation of the premises.24 They also put emphasis on the admission of the respondents in their
position paper submitted to the Labor Arbiter, identifying petitioner Josefa Po Lam as the manager,
and Pacita Po as the owner.25 This, they claim, is a judicial admission and is binding on respondents.
They protest the reliance the Labor Arbiter and the CA placed on their failure to submit additional
documents to clearly establish ownership of the hotel and restaurant, claiming that there was no
need for petitioner Josefa Po Lam to submit additional documents considering that the Certificate of
Registration is the best and primary evidence of ownership.

We disagree with petitioners. We have scrutinized the records and find the claim that petitioner
Josefa Po Lam is merely the overseer is not borne out by the evidence.

First. It is significant that only Josefa Po Lam appeared in the proceedings with the Labor Arbiter.
Despite receipt of the Labor Arbiter's notice and summons, other notices and Orders, petitioner
Pacita Po failed to appear in any of the proceedings with the Labor Arbiter in these cases, nor file her
position paper.26 It was only on appeal with the NLRC that Pacita Po signed the pleadings. 27 The
apathy shown by petitioner Pacita Po is contrary to human experience as one would think that the
owner of an establishment would naturally be concerned when all her employees file complaints
against her.

Second. The records of the case belie petitioner Josefa Po Lam's claim that she is merely an overseer.
The findings of the Labor Arbiter on this question were based on credible, competent and substantial
evidence. We again quote the Joint Decision on this matter:

Mayon Hotel and Restaurant is a [business name] of an enterprise. While [petitioner] Josefa Po Lam
claims that it is her daughter, Pacita Po, who owns the hotel and restaurant when the latter
purchased the same from one Palanos in 1981, Josefa failed to submit the document of sale from
said Palanos to Pacita as allegedly the sale was only verbal although the license to operate said hotel
and restaurant is in the name of Pacita which, despite our Order to Josefa to present the same, she
failed to comply (p. 38, tsn. August 13, 1998). While several documentary evidences were submitted
by Josefa wherein Pacita was named therein as owner of the hotel and restaurant (pp. 64, 65, 67 to
69; vol. I, rollo)[,] there were documentary evidences also that were submitted by Josefa showing her
ownership of said enterprise (pp. 468 to 469; vol. II, rollo). While Josefa explained her participation
and interest in the business as merely to help and assist her daughter as the hotel and restaurant
was near the former's store, the testimonies of [respondents] and Josefa as well as her demeanor
during the trial in these cases proves (sic) that Josefa Po Lam owns Mayon Hotel and Restaurant.
[Respondents] testified that it was Josefa who exercises all the acts and manifestation of ownership of
the hotel and restaurant like transferring employees from the Greatwall Palace Restaurant which she
and her husband Roy Po Lam previously owned; it is Josefa to whom the employees submits (sic)
reports, draws money for payment of payables and for marketing, attending (sic) to Labor Inspectors
during ocular inspections. Except for documents whereby Pacita Po appears as the owner of Mayon
Hotel and Restaurant, nothing in the record shows any circumstance or manifestation that Pacita Po
is the owner of Mayon Hotel and Restaurant. The least that can be said is that it is absurd for a
person to purchase a hotel and restaurant in the very heart of the City of Legazpi verbally. Assuming
this to be true, when [petitioners], particularly Josefa, was directed to submit evidence as to the
ownership of Pacita of the hotel and restaurant, considering the testimonies of [respondents], the
former should [have] submitted the lease contract between the owner of the building where Mayon
Hotel and Restaurant was located at Rizal St., Legazpi City and Pacita Po to clearly establish
ownership by the latter of said enterprise. Josefa failed. We are not surprised why some employers
employ schemes to mislead Us in order to evade liabilities. We therefore consider and hold Josefa Po
Lam as the owner/proprietor of Mayon Hotel and Restaurant and the proper respondent in these
cases.28

Petitioners' reliance on the rules of evidence, i.e., the certificate of registration being the best proof of
ownership, is misplaced. Notwithstanding the certificate of registration, doubts were cast as to the
true nature of petitioner Josefa Po Lam's involvement in the enterprise, and the Labor Arbiter had the
authority to resolve this issue. It was therefore within his jurisdiction to require the additional
documents to ascertain who was the real owner of petitioner Mayon Hotel & Restaurant.

Article 221 of the Labor Code is clear: technical rules are not binding, and the application of technical
rules of procedure may be relaxed in labor cases to serve the demand of substantial justice. 29 The
rule of evidence prevailing in court of law or equity shall not be controlling in labor cases and it is the
spirit and intention of the Labor Code that the Labor Arbiter shall use every and all reasonable means
to ascertain the facts in each case speedily and objectively and without regard to technicalities of law
or procedure, all in the interest of due process.30 Labor laws mandate the speedy administration of
justice, with least attention to technicalities but without sacrificing the fundamental requisites of due
process.31

Similarly, the fact that the respondents' complaints contained no allegation that petitioner Josefa Po
Lam is the owner is of no moment. To apply the concept of judicial admissions to respondents — who
are but lowly employees - would be to exact compliance with technicalities of law that is contrary to
the demands of substantial justice. Moreover, the issue of ownership was an issue that arose only
during the course of the proceedings with the Labor Arbiter, as an incident of determining
respondents' claims, and was well within his jurisdiction. 32

Petitioners were also not denied due process, as they were given sufficient opportunity to be heard on
the issue of ownership.33 The essence of due process in administrative proceedings is simply an
opportunity to explain one's side or an opportunity to seek reconsideration of the action or ruling
complained of.34 And there is nothing in the records which would suggest that petitioners had
absolute lack of opportunity to be heard. 35 Obviously, the choice not to present evidence was made by
petitioners themselves.36
But more significantly, we sustain the Labor Arbiter and the CA because even when the case was on
appeal with the NLRC, nothing was submitted to negate the Labor Arbiter's finding that Pacita Po is
not the real owner of the subject hotel and restaurant. Indeed, no such evidence was submitted in the
proceedings with the CA nor with this Court. Considering that petitioners vehemently deny ownership
by petitioner Josefa Po Lam, it is most telling that they continue to withhold evidence which would
shed more light on this issue. We therefore agree with the CA that the failure to submit could only
mean that if produced, it would have been adverse to petitioners' case. 37

Thus, we find that there is substantial evidence to rule that petitioner Josefa Po Lam is the owner of
petitioner Mayon Hotel & Restaurant.

2. Illegal Dismissal: claim for separation pay

Of the sixteen employees, only the following filed a case for illegal dismissal: respondents Loveres,
Llarena, Nicerio, Macandog, Guades, Atractivo and Broñola. 38

The Labor Arbiter found that there was illegal dismissal, and granted separation pay to respondents
Loveres, Macandog and Llarena. As respondents Guades, Nicerio and Alamares were already 79, 66
and 65 years old respectively at the time of the dismissal, the Labor Arbiter granted retirement
benefits pursuant to Article 287 of the Labor Code as amended. 39 The Labor Arbiter ruled that
respondent Atractivo was not entitled to separation pay because he had been transferred to work in
the restaurant operations in Elizondo Street, but awarded him damages. Respondents Loveres,
Llarena, Nicerio, Macandog and Guades were also awarded damages. 40

The NLRC reversed the Labor Arbiter, finding that "no clear act of termination is attendant in the case
at bar" and that respondents "did not submit any evidence to that effect, but the finding and
conclusion of the Labor Arbiter [are] merely based on his own surmises and conjectures." 41 In turn,
the NLRC was reversed by the CA.

It is petitioners contention that the CA should have sustained the NLRC finding that none of the
above-named respondents were illegally dismissed, or entitled to separation or retirement pay.
According to petitioners, even the Labor Arbiter and the CA admit that when the illegal dismissal case
was filed by respondents on April 1997, they had as yet no cause of action. Petitioners therefore
conclude that the filing by respondents of the illegal dismissal case was premature and should have
been dismissed outright by the Labor Arbiter. 42 Petitioners also claim that since the validity of
respondents' dismissal is a factual question, it is not for the reviewing court to weigh the conflicting
evidence.43

We do not agree. Whether respondents are still working for petitioners is a factual question. And the
records are unequivocal that since April 1997, when petitioner Mayon Hotel & Restaurant suspended
its hotel operations and transferred its restaurant operations in Elizondo Street, respondents Loveres,
Macandog, Llarena, Guades and Nicerio have not been permitted to work for petitioners. Respondent
Alamares, on the other hand, was also laid-off when the Elizondo Street operations closed, as were all
the other respondents. Since then, respondents have not been permitted to work nor recalled, even
after the construction of the new premises at Peñaranda Street and the reopening of the hotel
operations with the restaurant in this new site. As stated by the Joint Decision of the Labor Arbiter
on July 2000, or more than three (3) years after the complaint was filed: 44

[F]rom the records, more than six months had lapsed without [petitioner] having resumed operation
of the hotel. After more than one year from the temporary closure of Mayon Hotel and the temporary
transfer to another site of Mayon Restaurant, the building which [petitioner] Josefa allege[d] w[h]ere
the hotel and restaurant will be transferred has been finally constructed and the same is operated as
a hotel with bar and restaurant nevertheless, none of [respondents] herein who were employed at
Mayon Hotel and Restaurant which was also closed on April 30, 1998 was/were recalled by
[petitioner] to continue their services...
Parenthetically, the Labor Arbiter did not grant separation pay to the other respondents as they had
not filed an amended complaint to question the cessation of their employment after the closure of
Mayon Hotel & Restaurant on March 31, 1997. 45

The above factual finding of the Labor Arbiter was never refuted by petitioners in their appeal with
the NLRC. It confounds us, therefore, how the NLRC could have so cavalierly treated this
uncontroverted factual finding by ruling that respondents have not introduced any evidence to show
that they were illegally dismissed, and that the Labor Arbiter's finding was based on conjecture. 46 It
was a serious error that the NLRC did not inquire as to the legality of the cessation of employment.
Article 286 of the Labor Code is clear — there is termination of employment when an otherwise bona
fide suspension of work exceeds six (6) months. 47 The cessation of employment for more than six
months was patent and the employer has the burden of proving that the termination was for a just or
authorized cause.48

Moreover, we are not impressed by any of petitioners' attempts to exculpate themselves from the
charges. First, in the proceedings with the Labor Arbiter, they claimed that it could not be illegal
dismissal because the lay-off was merely temporary (and due to the expiration of the lease contract
over the old premises of the hotel). They specifically invoked Article 286 of the Labor Code to argue
that the claim for separation pay was premature and without legal and factual basis. 49 Then, because
the Labor Arbiter had ruled that there was already illegal dismissal when the lay-off had exceeded the
six-month period provided for in Article 286, petitioners raise this novel argument, to wit:

It is the firm but respectful submission of petitioners that reliance on Article 286 of the Labor Code is
misplaced, considering that the reason why private respondents were out of work was not due to the
fault of petitioners. The failure of petitioners to reinstate the private respondents to their former
positions should not likewise be attributable to said petitioners as the private respondents did not
submit any evidence to prove their alleged illegal dismissal. The petitioners cannot discern why they
should be made liable to the private respondents for their failure to be reinstated considering that the
fact that they were out of work was not due to the fault of petitioners but due to circumstances
beyond the control of petitioners, which are the termination and non-renewal of the lease contract
over the subject premises. Private respondents, however, argue in their Comment that petitioners
themselves sought the application of Article 286 of the Labor Code in their case in their Position
Paper filed before the Labor Arbiter. In refutation, petitioners humbly submit that even if they invoke
Article 286 of the Labor Code, still the fact remains, and this bears stress and emphasis, that the
temporary suspension of the operations of the establishment arising from the non-renewal of the
lease contract did not result in the termination of employment of private respondents and, therefore,
the petitioners cannot be faulted if said private respondents were out of work, and consequently, they
are not entitled to their money claims against the petitioners. 50

It is confounding how petitioners have fashioned their arguments. After having admitted, in effect,
that respondents have been laid-off since April 1997, they would have this Court excuse their refusal
to reinstate respondents or grant them separation pay because these same respondents purportedly
have not proven the illegality of their dismissal.

Petitioners' arguments reflect their lack of candor and the blatant attempt to use technicalities to
muddle the issues and defeat the lawful claims of their employees. First, petitioners admit that since
April 1997, when hotel operations were suspended due to the termination of the lease of the old
premises, respondents Loveres, Macandog, Llarena, Nicerio and Guades have not been permitted to
work. Second, even after six months of what should have been just a temporary lay-off, the same
respondents were still not recalled to work. As a matter of fact, the Labor Arbiter even found that as
of the time when he rendered his Joint Decision on July 2000 — or more than three (3) years after
the supposed "temporary lay-off," the employment of all of the respondents with petitioners had
ceased, notwithstanding that the new premises had been completed and the same operated as a
hotel with bar and restaurant. This is clearly dismissal — or the permanent severance or complete
separation of the worker from the service on the initiative of the employer regardless of the reasons
therefor.51

On this point, we note that the Labor Arbiter and the CA are in accord that at the time of the filing of
the complaint, respondents had no cause of action to file the case for illegal dismissal. According to
the CA and the Labor Arbiter, the lay-off of the respondents was merely temporary, pending
construction of the new building at Peñaranda Street. 52

While the closure of the hotel operations in April of 1997 may have been temporary, we hold that the
evidence on record belie any claim of petitioners that the lay-off of respondents on that same date
was merely temporary. On the contrary, we find substantial evidence that petitioners intended the
termination to be permanent. First, respondents Loveres, Macandog, Llarena, Guades, Nicerio and
Alamares filed the complaint for illegal dismissal immediately after the closure of the hotel
operations in Rizal Street, notwithstanding the alleged temporary nature of the closure of the hotel
operations, and petitioners' allegations that the employees assigned to the hotel operations knew
about this beforehand. Second, in their position paper submitted to the Labor Arbiter, petitioners
invoked Article 286 of the Labor Code to assert that the employer-employee relationship was merely
suspended, and therefore the claim for separation pay was premature and without legal or factual
basis.53 But they made no mention of any intent to recall these respondents to work upon
completion of the new premises. Third, the various pleadings on record show that petitioners held
respondents, particularly Loveres, as responsible for mismanagement of the establishment and for
abuse of trust and confidence. Petitioner Josefa Po Lam's affidavit on July 21, 1998, for example,
squarely blamed respondents, specifically Loveres, Bumalay and Camigla, for abusing her leniency
and causing petitioner Mayon Hotel & Restaurant to sustain "continuous losses until it is closed."
She then asserts that respondents "are not entitled to separation pay for they were not terminated
and if ever the business ceased to operate it was because of losses." 54 Again, petitioners make the
same allegation in their memorandum on appeal with the NLRC, where they alleged that three (3)
years prior to the expiration of the lease in 1997, the operation of the Hotel had been sustaining
consistent losses, and these were solely attributed to respondents, but most especially due to
Loveres's mismanagement and abuse of petitioners' trust and confidence. 55 Even the petition filed in
this court made reference to the separation of the respondents due to "severe financial losses and
reverses," again imputing it to respondents' mismanagement. 56 The vehemence of petitioners'
accusation of mismanagement against respondents, especially against Loveres, is inconsistent with
the desire to recall them to work. Fourth, petitioners' memorandum on appeal also averred that the
case was filed "not because of the business being operated by them or that they were supposedly not
receiving benefits from the Labor Code which is true, but because of the fact that the source of their
livelihood, whether legal or immoral, was stopped on March 31, 1997, when the owner of the
building terminated the Lease Contract." 57 Fifth, petitioners had inconsistencies in their pleadings
(with the NLRC, CA and with this Court) in referring to the closure, 58 i.e., in the petition filed with this
court, they assert that there is no illegal dismissal because there was "only a temporary cessation or
suspension of operations of the hotel and restaurant due to circumstances beyond the control of
petitioners, and that is, the non-renewal of the lease contract..."59 And yet, in the same petition, they
also assert that: (a) the separation of respondents was due to severe financial losses and reverses
leading to the closure of the business; and (b) petitioner Pacita Po had to close shop and was
bankrupt and has no liquidity to put up her own building to house Mayon Hotel &
Restaurant.60 Sixth, and finally, the uncontroverted finding of the Labor Arbiter that petitioners
terminated all the other respondents, by not employing them when the Hotel and Restaurant
transferred to its new site on Peñaranda Street.61 Indeed, in this same memorandum, petitioners
referred to all respondents as "former employees of Mayon Hotel & Restaurant." 62

These factors may be inconclusive individually, but when taken together, they lead us to conclude
that petitioners really intended to dismiss all respondents and merely used the termination of the
lease (on Rizal Street premises) as a means by which they could terminate their employees.
Moreover, even assuming arguendo that the cessation of employment on April 1997 was merely
temporary, it became dismissal by operation of law when petitioners failed to reinstate respondents
after the lapse of six (6) months, pursuant to Article 286 of the Labor Code.

We are not impressed by petitioners' claim that severe business losses justified their failure to
reinstate respondents. The evidence to prove this fact is inconclusive. But more important, serious
business losses do not excuse the employer from complying with the clearance or report required
under Article 283 of the Labor Code and its implementing rules before terminating the employment of
its workers.63 In the absence of justifying circumstances, the failure of petitioners to observe the
procedural requirements set out under Article 284, taints their actuations with bad faith, especially
since they claimed that they have been experiencing losses in the three years before 1997. To say the
least, if it were true that the lay-off was temporary but then serious business losses prevented the
reinstatement of respondents, then petitioners should have complied with the requirements of written
notice. The requirement of law mandating the giving of notices was intended not only to enable the
employees to look for another employment and therefore ease the impact of the loss of their jobs and
the corresponding income, but more importantly, to give the Department of Labor and Employment
(DOLE) the opportunity to ascertain the verity of the alleged authorized cause of termination. 64

And even assuming that the closure was due to a reason beyond the control of the employer, it still
has to accord its employees some relief in the form of severance pay. 65

While we recognize the right of the employer to terminate the services of an employee for a just or
authorized cause, the dismissal of employees must be made within the parameters of law and
pursuant to the tenets of fair play. 66 And in termination disputes, the burden of proof is always on
the employer to prove that the dismissal was for a just or authorized cause. 67 Where there is no
showing of a clear, valid and legal cause for termination of employment, the law considers the case a
matter of illegal dismissal. 68

Under these circumstances, the award of damages was proper. As a rule, moral damages are
recoverable where the dismissal of the employee was attended by bad faith or fraud or constituted an
act oppressive to labor, or was done in a manner contrary to morals, good customs or public
policy.69 We believe that the dismissal of the respondents was attended with bad faith and meant to
evade the lawful obligations imposed upon an employer.

To rule otherwise would lead to the anomaly of respondents being terminated from employment in
1997 as a matter of fact, but without legal redress. This runs counter to notions of fair play,
substantial justice and the constitutional mandate that labor rights should be respected. If doubts
exist between the evidence presented by the employer and the employee, the scales of justice must be
tilted in favor of the latter — the employer must affirmatively show rationally adequate evidence that
the dismissal was for a justifiable cause.70 It is a time-honored rule that in controversies between a
laborer and his master, doubts reasonably arising from the evidence, or in the interpretation of
agreements and writing should be resolved in the former's favor. 71 The policy is to extend the doctrine
to a greater number of employees who can avail of the benefits under the law, which is in consonance
with the avowed policy of the State to give maximum aid and protection of labor.72

We therefore reinstate the Labor Arbiter's decision with the following modifications:

(a) Separation pay for the illegal dismissal of respondents Loveres, Macandog and Llarena; (Santos
Broñola cannot be granted separation pay as he made no such claim);

(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who at the time of dismissal were
entitled to their retirement benefits pursuant to Article 287 of the Labor Code as amended; 73 and

(c) Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broñola.

3. Money claims
The CA held that contrary to the NLRC's ruling, petitioners had not discharged the burden of proving
that the monetary claims of the respondents have been paid. 74 The CA thus reinstated the Labor
Arbiter's grant of respondents' monetary claims, including damages.

Petitioners assail this ruling by repeating their long and convoluted argument that as there was no
illegal dismissal, then respondents are not entitled to their monetary claims or separation pay and
damages. Petitioners' arguments are not only tiring, repetitive and unconvincing, but confusing and
confused — entitlement to labor standard benefits is a separate and distinct concept from payment of
separation pay arising from illegal dismissal, and are governed by different provisions of the Labor
Code.

We agree with the CA and the Labor Arbiter. Respondents have set out with particularity in their
complaint, position paper, affidavits and other documents the labor standard benefits they are
entitled to, and which they alleged that petitioners have failed to pay them. It was therefore
petitioners' burden to prove that they have paid these money claims. One who pleads payment has
the burden of proving it, and even where the employees must allege nonpayment, the general rule is
that the burden rests on the defendant to prove nonpayment, rather than on the plaintiff to prove
non payment.75 This petitioners failed to do.

We also agree with the Labor Arbiter and the CA that the documents petitioners submitted, i.e.,
affidavits executed by some of respondents during an ocular inspection conducted by an inspector of
the DOLE; notices of inspection result and Facility Evaluation Orders issued by DOLE, are not
sufficient to prove payment.76 Despite repeated orders from the Labor Arbiter,77 petitioners failed to
submit the pertinent employee files, payrolls, records, remittances and other similar documents
which would show that respondents rendered work entitling them to payment for overtime work,
night shift differential, premium pay for work on holidays and rest day, and payment of these as well
as the COLA and the SILP – documents which are not in respondents' possession but in the custody
and absolute control of petitioners.78 By choosing not to fully and completely disclose information and
present the necessary documents to prove payment of labor standard benefits due to respondents,
petitioners failed to discharge the burden of proof.79 Indeed, petitioners' failure to submit the
necessary documents which as employers are in their possession, inspite of orders to do so, gives rise
to the presumption that their presentation is prejudicial to its cause. 80 As aptly quoted by the CA:

[W]hen the evidence tends to prove a material fact which imposes a liability on a party, and he has it
in his power to produce evidence which from its very nature must overthrow the case made against
him if it is not founded on fact, and he refuses to produce such evidence, the presumption arises that
the evidence, if produced, would operate to his prejudice, and support the case of his adversary. 81

Petitioners next claim that the cost of the food and snacks provided to respondents as facilities
should have been included in reckoning the payment of respondents' wages. They state that although
on the surface respondents appeared to receive minimal wages, petitioners had granted respondents
other benefits which are considered part and parcel of their wages and are allowed under existing
laws.82 They claim that these benefits make up for whatever inadequacies there may be in
compensation.83 Specifically, they invoked Sections 5 and 6, Rule VII-A, which allow the deduction of
facilities provided by the employer through an appropriate Facility Evaluation Order issued by the
Regional Director of the DOLE. 84 Petitioners also aver that they give five (5) percent of the gross
income each month as incentives. As proof of compliance of payment of minimum wages, petitioners
submitted the Notice of Inspection Results issued in 1995 and 1997 by the DOLE Regional Office. 85

The cost of meals and snacks purportedly provided to respondents cannot be deducted as part of
respondents' minimum wage. As stated in the Labor Arbiter's decision: 86

While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol. II, rollo) issued by the
DOLE Regional Office whereby the cost of meals given by [petitioners] to [respondents] were specified
for purposes of considering the same as part of their wages, We cannot consider the cost of meals in
the Orders as applicable to [respondents]. [Respondents] were not interviewed by the DOLE as to the
quality and quantity of food appearing in the applications of [petitioners] for facility evaluation prior
to its approval to determine whether or not [respondents] were indeed given such kind and quantity
of food. Also, there was no evidence that the quality and quantity of food in the Orders were
voluntarily accepted by [respondents]. On the contrary; while some [of the respondents] admitted that
they were given meals and merienda, the quality of food serve[d] to them were not what were provided
for in the Orders and that it was only when they filed these cases that they came to know about said
Facility Evaluation Orders (pp. 100; 379[,] vol. II, rollo; p. 40, tsn[,] June 19, 1998). [Petitioner] Josefa
herself, who applied for evaluation of the facility (food) given to [respondents], testified that she did
not inform [respondents] concerning said Facility Evaluation Orders (p. 34, tsn[,] August 13, 1998).

Even granting that meals and snacks were provided and indeed constituted facilities, such facilities
could not be deducted without compliance with certain legal requirements. As stated in Mabeza v.
NLRC,87 the employer simply cannot deduct the value from the employee's wages without satisfying
the following: (a) proof that such facilities are customarily furnished by the trade; (b) the provision of
deductible facilities is voluntarily accepted in writing by the employee; and (c) the facilities are
charged at fair and reasonable value. The records are clear that petitioners failed to comply with
these requirements. There was no proof of respondents' written authorization. Indeed, the Labor
Arbiter found that while the respondents admitted that they were given meals and merienda, the
quality of food served to them was not what was provided for in the Facility Evaluation Orders and it
was only when they filed the cases that they came to know of this supposed Facility Evaluation
Orders.88 Petitioner Josefa Po Lam herself admitted that she did not inform the respondents of the
facilities she had applied for.89

Considering the failure to comply with the above-mentioned legal requirements, the Labor Arbiter
therefore erred when he ruled that the cost of the meals actually provided to respondents should be
deducted as part of their salaries, on the ground that respondents have availed themselves of the food
given by petitioners.90 The law is clear that mere availment is not sufficient to allow deductions from
employees' wages.

More important, we note the uncontroverted testimony of respondents on record that they were
required to eat in the hotel and restaurant so that they will not go home and there is no interruption
in the services of Mayon Hotel & Restaurant. As ruled in Mabeza, food or snacks or other
convenience provided by the employers are deemed as supplements if they are granted for the
convenience of the employer. The criterion in making a distinction between a supplement and a
facility does not so much lie in the kind (food, lodging) but the purpose.91 Considering, therefore, that
hotel workers are required to work different shifts and are expected to be available at various odd
hours, their ready availability is a necessary matter in the operations of a small hotel, such as
petitioners' business.92 The deduction of the cost of meals from respondents' wages, therefore, should
be removed.

We also do not agree with petitioners that the five (5) percent of the gross income of the establishment
can be considered as part of the respondents' wages. We quote with approval the Labor Arbiter on
this matter, to wit:

While complainants, who were employed in the hotel, receive[d] various amounts as profit share, the
same cannot be considered as part of their wages in determining their claims for violation of labor
standard benefits. Although called profit share[,] such is in the nature of share from service charges
charged by the hotel. This is more explained by [respondents] when they testified that what they
received are not fixed amounts and the same are paid not on a monthly basis (pp. 55, 93, 94, 103,
104; vol. II, rollo). Also, [petitioners] failed to submit evidence that the amounts received by
[respondents] as profit share are to be considered part of their wages and had been agreed by them
prior to their employment. Further, how can the amounts receive[d] by [respondents] be considered
as profit share when the same [are] based on the gross receipt of the hotel[?] No profit can as yet be
determined out of the gross receipt of an enterprise. Profits are realized after expenses are deducted
from the gross income.

On the issue of the proper minimum wage applicable to respondents, we sustain the Labor Arbiter.
We note that petitioners themselves have admitted that the establishment employs "more or less
sixteen (16) employees,"93 therefore they are estopped from claiming that the applicable minimum
wage should be for service establishments employing 15 employees or less.

As for petitioners repeated invocation of serious business losses, suffice to say that this is not a
defense to payment of labor standard benefits. The employer cannot exempt himself from liability to
pay minimum wages because of poor financial condition of the company. The payment of minimum
wages is not dependent on the employer's ability to pay. 94

Thus, we reinstate the award of monetary claims granted by the Labor Arbiter.

4. Conclusion

There is no denying that the actuations of petitioners in this case have been reprehensible. They have
terminated the respondents' employment in an underhanded manner, and have used and abused the
quasi-judicial and judicial processes to resist payment of their employees' rightful claims, thereby
protracting this case and causing the unnecessary clogging of dockets of the Court. They have also
forced respondents to unnecessary hardship and financial expense. Indeed, the circumstances of this
case would have called for exemplary damages, as the dismissal was effected in a wanton, oppressive
or malevolent manner,95 and public policy requires that these acts must be suppressed and
discouraged.96

Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary damages of P10,000.00
each to all respondents. While it is true that other forms of damages under the Civil Code may be
awarded to illegally dismissed employees, 97 any award of moral damages by the Labor Arbiter cannot
be based on the Labor Code but should be grounded on the Civil Code.98 And the law is clear that
exemplary damages can only be awarded if plaintiff shows proof that he is entitled to moral,
temperate or compensatory damages.99

As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo and Broñola specifically
claimed damages from petitioners, then only they are entitled to exemplary damages. sjgs1

Finally, we rule that attorney's fees in the amount to P10,000.00 should be granted to each
respondent. It is settled that in actions for recovery of wages or where an employee was forced to
litigate and incur expenses to protect his rights and interest, he is entitled to an award of attorney's
fees.100 This case undoubtedly falls within this rule.

IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January 17, 2003 of the Court
of Appeals in CA-G.R. SP No. 68642 upholding the Joint Decision of July 14, 2000 of the Labor
Arbiter in RAB V Case Nos. 04-00079-97 and 04-00080-97 is AFFIRMED, with the following
MODIFICATIONS:

(1) Granting separation pay of one-half (1/2) month for every year of service to respondents Loveres,
Macandog and Llarena;

(2) Granting retirement pay for respondents Guades, Nicerio, and Alamares;

(3) Removing the deductions for food facility from the amounts due to all respondents;

(4) Awarding moral damages of P20,000.00 each for respondents Loveres, Macandog, Llarena,
Guades, Nicerio, Atractivo, and Broñola;

(5) Deleting the award of exemplary damages of P10,000.00 from all respondents except Loveres,
Macandog, Llarena, Guades, Nicerio, Atractivo, and Broñola; and
(6) Granting attorney's fees of P10,000.00 each to all respondents.

The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total monetary benefits
awarded and due to the employees concerned in accordance with the decision. The Labor Arbiter is
ORDERED to submit his compliance thereon within thirty (30) days from notice of this decision, with
copies furnished to the parties.

SO ORDERED.

G.R. No. 204651, August 06, 2014

OUR HAUS REALTY DEVELOPMENT CORPORATION, Petitioner, v. ALEXANDER PARIAN, JAY C.

ERINCO, ALEXANDER CANLAS, BERNARD TENEDERO AND JERRY SABULAO, Respondents.

DECISION

BRION, J.:

We resolve in this petition for review on certiorari1 the challenge to the May 7, 2012 decision2 and the
November 27, 2012 resolution3 (assailed CA rulings) of the Court of Appeals (CA) in CA-G.R. SP No.
123273. These assailed CA rulings affirmed the July 20, 2011 decision 4 and the December 2, 2011
resolution5 (NLRC rulings) of the National Labor Relations Commission (NLRC) in NLRC LAC No. 02-
000489-11 (NLRC NCR Case No. 06-08544-10). The NLRC rulings in turn reversed and set aside the
December 10, 2010 decision6 of the labor arbiter (LA).

Factual Antecedents

Respondents Alexander Parian, Jay Erinco, Alexander Canlas, Jerry Sabulao and Bernardo Tenedero
were all laborers working for petitioner Our Haus Realty Development Corporation (Our Haus), a
company engaged in the construction business. The respondents’ respective employment records
and daily wage rates from 2007 to 2010 are summarized in the table7 below:cralawlawlibrary

Name Date Years of Year and Place of Daily Rate

Hired Service Assignment

Alexander M. October 1999 10 years 2007-2010- Quezon City P353.50

Parian

Jay C. Erinco January 2000 10 years 2008- Quezon City P342.00

2009- Antipolo
2010- Quezon City

Alexander R. 2005 5 years 2007-2010- Quezon City P312.00

Canlas

Jerry Q. Sabulao August 1999 10 years 2008- Quezon City P342.00

2009- Antipolo
2010- Quezon City

Bernardo N. 1994 16 years 2007-2010- Quezon City P383.50

Tenedero
Sometime in May 2010, Our Haus experienced financial distress. To alleviate its condition, Our Haus
suspended some of its construction projects and asked the affected workers, including the
respondents, to take vacation leaves. 8cralawred

Eventually, the respondents were asked to report back to work but instead of doing so, they filed with
the LA a complaint for underpayment of their daily wages. They claimed that except for respondent
Bernardo N. Tenedero, their wages were below the minimum rates prescribed in the following wage
orders from 2007 to 2010:chanRoblesvirtualLawlibrary

1. Wage Order No. NCR-13, which provides for a daily minimum wage rate of P362.00 for the
non-agriculture sector (effective from August 28, 2007 until June 13, 2008);
andChanRoblesVirtualawlibrary

2. Wage Order No. NCR-14, which provides for a daily minimum wage rate of P382.00 for the
non-agriculture sector (effective from June 14, 2008 until June 30, 2010).

The respondents also alleged that Our Haus failed to pay them their holiday, service incentive leave
(SIL), 13th month and overtime pays.9cralawred

The Labor Arbitration Rulings

Before the LA, Our Haus primarily argued that the respondents’ wages complied with the law’s
minimum requirement. Aside from paying the monetary amount of the respondents’ wages, Our Haus
also subsidized their meals (3 times a day), and gave them free lodging near the construction project
they were assigned to.10 In determining the total amount of the respondents’ daily wages, the value of
these benefits should be considered, in line with Article 97(f) 11 of the Labor Code.

Our Haus also rejected the respondents’ other monetary claims for lack of proof that they were
entitled to it.12cralawred

On the other hand, the respondents argued that the value of their meals should not be considered in
determining their wages’ total amount since the requirements set under Section 4 13 of
DOLE14 Memorandum Circular No. 215 were not complied with.

The respondents pointed out that Our Haus never presented any proof that they agreed in writing to
the inclusion of their meals’ value in their wages. 16 Also, Our Haus failed to prove that the value of
the facilities it furnished was fair and reasonable.17 Finally, instead of deducting the maximum
amount of 70% of the value of the meals, Our Haus actually withheld its full value (which was
Php290.00 per week for each employee).18cralawred

The LA ruled in favor of Our Haus. He held that if the reasonable values of the board and lodging
would be taken into account, the respondents’ daily wages would meet the minimum wage rate. 19 As
to the other benefits, the LA found that the respondents were not able to substantiate their claims for
it.20cralawred

The respondents appealed the LA’s decision to the NLRC, which in turn, reversed it. Citing the case
of Mayon Hotel & Restaurant v. Adana, 21 the NLRC noted that the respondents did not authorize Our
Haus in writing to charge the values of their board and lodging to their wages. Thus, the same cannot
be credited.

The NLRC also ruled that the respondents are entitled to their respective proportionate 13th month
payments for the year 2010 and SIL payments for at least three years, immediately preceding May 31,
2010, the date when the respondents left Our Haus. However, the NLRC sustained the LA’s ruling
that the respondents were not entitled to overtime pay since the exact dates and times when they
rendered overtime work had not been proven. 22cralawred

Our Haus moved for the reconsideration23 of the NLRC’s decision and submitted new evidence (the
five kasunduans) to show that the respondents authorized Our Haus in writing to charge the values
of their meals and lodging to their wages.

The NLRC denied Our Haus’ motion, thus it filed a Rule 65 petition 24 with the CA. In its petition, Our
Haus propounded a new theory. It made a distinction between deduction and charging. A written
authorization is only necessary if the facility’s value will be deducted and will not be needed if it will
merely be charged or included in the computation of wages. 25 Our Haus claimed that it did not
actually deduct the values of the meals and housing benefits. It only considered these in computing
the total amount of wages paid to the respondents for purposes of compliance with the minimum
wage law. Hence, the written authorization requirement should not apply.

Our Haus also asserted that the respondents’ claim for SIL pay should be denied as this was not
included in their pro forma complaint. Lastly, it questioned the respondents’ entitlement to attorney’s
fees because they were not represented by a private lawyer but by the Public Attorney’s Office (PAO).

The CA’s Ruling

The CA dismissed Our Haus’ certiorari petition and affirmed the NLRC rulings in toto. It found no real
distinction between deduction and charging, 26 and ruled that the legal requirements before any
deduction or charging can be made, apply to both. Our Haus, however, failed to prove that it
complied with any of the requirements laid down in Mabeza v. National Labor Relations
Commission.27 Accordingly, it cannot consider the values of its meal and housing facilities in the
computation of the respondents’ total wages.

Also, the CA ruled that since the respondents were able to allege non-payment of SIL in their position
paper, and Our Haus, in fact, opposed it in its various pleadings,28 then the NLRC properly
considered it as part of the respondents’ causes of action. Lastly, the CA affirmed the respondent’s
entitlement to attorney’s fees.29cralawred

Our Haus filed a motion for reconsideration but the CA denied its motion, prompting it to file the
present petition for review on certiorari under Rule 45.

The Petition

Our Haus submits that the CA erred in ruling that the legal requirements apply without distinction —
whether the facility’s value will be deducted or merely included in the computation of the wages. At
any rate, it complied with the requirements for deductibility of the value of the facilities. First, the
five kasunduans executed by the respondents constitute the written authorization for the inclusion of
the board and lodging’s values to their wages. Second, Our Haus only withheld the amount of
P290.00 which represents the food’s raw value; the weekly cooking cost (cook’s wage, LPG, water) at
P239.40 per person is a separate expense that Our Haus did not withhold from the respondents’
wages.30 This disproves the respondents’ claim that it deducted the full amount of the meals’ value.

Lastly, the CA erred in ruling that the claim for SIL pay may still be granted though not raised in the
complaint; and that the respondents are entitled to an award of attorney’s fees. 31cralawred

The Case for the Respondents

The respondents prayed for the denial of the petition. 32 They maintained that the CA did not err in
ruling that the values of the board and lodging cannot be deducted from their wages for failure to
comply with the requirements set by law. 33 And though the claim for SIL pay was not included in
their pro forma complaint, they raised their claims in their position paper and Our Haus had the
opportunity to contradict it in its pleadings. 34cralawred

Finally, under the PAO law, the availment of the PAO’s legal services does not exempt its clients from
an award of attorney’s fees.35cralawred

The Court’s Ruling

We resolve to DENY the petition.

The nature of a Rule 45 petition — only questions of law

Basic is the rule that only questions of law may be raised in a Rule 45 petition.36 However, in this
case, we are confronted with mixed questions of fact and law that are subsumed under the issue of
whether Our Haus complied with the legal requirements on the deductibility of the value of facilities.
Strictly, factual issues cannot be considered under Rule 45 except in the course of resolving if the CA
correctly determined whether or not the NLRC committed grave abuse of discretion in considering
and appreciating the factual issues before it. 37cralawred

In ruling for legal correctness, we have to view the CA decision in the same context that the petition
for certiorari it ruled upon was presented to it; we have to examine the CA decision from the prism of
whether it correctly determined the presence or absence of grave abuse of discretion in the NLRC
decision before it, not on the basis of whether the NLRC decision, on the merits of the case, was
correct. In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a
review on appeal, of the NLRC decision challenged before it. This is the approach that should be basic
in a Rule 45 review of a CA ruling in a labor case. In question form, the question to ask in the present
case is: did the CA correctly determine that the NLRC did not commit grave abuse of discretion
in ruling on the case?38 We rule that the CA correctly did.

No substantial distinction between

deducting and charging a facility’s
value from the employee’s wage;
the legal requirements for creditability
apply to both

To justify its non-compliance with the requirements for the deductibility of a facility, Our Haus asks
us to believe that there is a substantial distinction between the deduction and the charging of a
facility’s value to the wages. Our Haus explains that in deduction, the amount of the wage (which
may already be below the minimum) would still be lessened by the facility’s value, thus needing the
employee’s consent. On the other hand, in charging, there is no reduction of the employee’s wage
since the facility’s value will just be theoretically added to the wage for purposes of complying with
the minimum wage requirement. 39cralawred

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

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

As the CA correctly ruled, these requirements, as summarized in Mabeza, are the

following:chanRoblesvirtualLawlibrary

a. proof must be shown that such facilities are customarily furnished by the trade;

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

c. The facilities must be charged at fair and reasonable value.40

We examine Our Haus’ compliance with each of these requirements in seriatim.

The facility must be customarily
furnished by the trade
In a string of cases, we have concluded that one of the badges to show that a facility is customarily
furnished by the trade is the existence of a company policy or guideline showing that provisions
for a facility were designated as part of the employees’ salaries.41 To comply with this, Our Haus
presented in its motion for reconsideration with the NLRC the joint sinumpaang salaysay of four of
its alleged employees. These employees averred that they were recipients of free lodging, electricity
and water, as well as subsidized meals from Our Haus.42cralawred

We agree with the NLRC’s finding that the sinumpaang salaysay statements submitted by Our Haus
are self-serving. For one, Our Haus only produced the documents when the NLRC had already earlier
determined that Our Haus failed to prove that it was traditionally giving the respondents their board
and lodging. This document did not state whether these benefits had been consistently enjoyed by the
rest of Our Haus’ employees. Moreover, the records reveal that the board and lodging were given on a
per project basis. Our Haus did not show if these benefits were also provided in its other
construction projects, thus negating its claimed customary nature.

Even assuming the sinumpaang salaysay to be true, this document would still work against Our
Haus’ case. If Our Haus really had the practice of freely giving lodging, electricity and water
provisions to its employees, then Our Haus should not deduct its values from the respondents’
wages. Otherwise, this will run contrary to the affiants’ claim that these benefits were traditionally
given free of charge.

Apart from company policy, the employer may also prove compliance with the first requirement by
showing the existence of an industry-wide practice of furnishing the benefits in question among
enterprises engaged in the same line of business. If it were customary among construction
companies to provide board and lodging to their workers and treat their values as part of their wages,
we would have more reason to conclude that these benefits were really facilities.

However, Our Haus could not really be expected to prove compliance with the first requirement since
the living accommodation of workers in the construction industry is not simply a matter of business
practice. Peculiar to the construction business are the occupational safety and health (OSH) services
which the law itself mandates employers to provide to their workers. This is to ensure the humane
working conditions of construction employees despite their constant exposure to hazardous working
environments. Under Section 16 of DOLE Department Order (DO) No. 13, series of 1998,43 employers
engaged in the construction business are required to provide the following welfare
amenities:chanRoblesvirtualLawlibrary

16.1 Adequate supply of safe drinking water

16.2 Adequate sanitary and washing facilities

16.3 Suitable living accommodation for workers, and as may be applicable, for their families

16.4 Separate sanitary, washing and sleeping facilities for men and women workers. [emphasis
ours]chanrobleslaw

Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for the implementation of
DOLE DO No. 13, mandates that the cost of the implementation of the requirements for the
construction safety and health of workers, shall be integrated to the overall project cost.44 The
rationale behind this is to ensure that the living accommodation of the workers is not substandard
and is strictly compliant with the DOLE’s OSH criteria.

As part of the project cost that construction companies already charge to their clients, the value of
the housing of their workers cannot be charged again to their employees’ salaries. Our Haus cannot
pass the burden of the OSH costs of its construction projects to its employees by deducting it as
facilities. This is Our Haus’ obligation under the law.

Lastly, even if a benefit is customarily provided by the trade, it must still pass the purpose test set by
jurisprudence. Under this test, if a benefit or privilege granted to the employee is clearly for the
employer’s convenience, it will not be considered as a facility but a supplement. 45 Here, careful
consideration is given to the nature of the employer’s business in relation to the work performed by
the employee. This test is used to address inequitable situations wherein employers consider a
benefit deductible from the wages even if the factual circumstances show that it clearly redounds to
the employers’ greater advantage.

While the rules serve as the initial test in characterizing a benefit as a facility, the purpose test
additionally recognizes that the employer and the employee do not stand at the same bargaining
positions on benefits that must or must not form part of an employee’s wage. In the ultimate
analysis, the purpose test seeks to prevent a circumvention of the minimum wage law.

a1. The purpose test in jurisprudence

Under the law,46 only the value of the facilities may be deducted from the employees’ wages but not
the value of supplements. Facilities include articles or services for the benefit of the employee or his
family but exclude tools of the trade or articles or services primarily for the benefit of the employer or
necessary to the conduct of the employer’s business. 47cralawred

The law also prescribes that the computation of wages shall exclude whatever
benefits, supplements or allowances given to employees. Supplements are paid to employees on top
of their basic pay and are free of charge.48 Since it does not form part of the wage, a supplement’s
value may not be included in the determination of whether an employer complied with the prescribed
minimum wage rates.

In the present case, the board and lodging provided by Our Haus cannot be categorized as facilities
but as supplements. In SLL International Cables Specialist v. National Labor Relations
Commission,49 this Court was confronted with the issue on the proper characterization of the free
board and lodging provided by the employer. We explained:chanRoblesvirtualLawlibrary

The Court, at this point, makes a distinction between “facilities” and “supplements”. It is of the view
that the food and lodging, or the electricity and water allegedly consumed by private respondents in
this case were not facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big Wedge
Co., the two terms were distinguished from one another in this wise:cralawlawlibrary
“Supplements”, therefore, constitute extra remuneration or special privileges or benefits given to or
received by the laborers over and above their ordinary earnings or wages. “Facilities”, on the other
hand, are items of expense necessary for the laborer's and his family's existence and subsistence so
that by express provision of law (Sec. 2[g]), they form part of the wage and when furnished by the
employer are deductible therefrom, since if they are not so furnished, the laborer would spend and
pay for them just the same.

In short, the benefit or privilege given to the employee which constitutes an extra remuneration above
and over his basic or ordinary earning or wage is supplement; and when said benefit or privilege is
part of the laborers' basic wages, it is a facility. The distinction lies not so much in the kind of
benefit or item (food, lodging, bonus or sick leave) given, but in the purpose for which it is
given. In the case at bench, the items provided were given freely by SLL for the purpose of
maintaining the efficiency and health of its workers while they were working at their
respective projects.50

Ultimately, the real difference lies not on the kind of the benefit but on the purpose why it was given
by the employer. If it is primarily for the employee’s gain, then the benefit is a facility; if its provision
is mainly for the employer’s advantage, then it is a supplement. Again, this is to ensure that
employees are protected in circumstances where the employer designates a benefit as deductible from
the wages even though it clearly works to the employer’s greater convenience or advantage.

Under the purpose test, substantial consideration must be given to the nature of the employer’s
business in relation to the character or type of work performed by the employees involved.

Our Haus is engaged in the construction business, a labor-intensive enterprise. The success of its
projects is largely a function of the physical strength, vitality and efficiency of its laborers. Its
business will be jeopardized if its workers are weak, sickly, and lack the required energy to perform
strenuous physical activities. Thus, by ensuring that the workers are adequately and well fed, the
employer is actually investing on its business.

Unlike in office enterprises where the work is focused on desk jobs, the construction industry relies
heavily and directly on the physical capacity and endurance of its workers. This is not to say that
desk jobs do not require muscle strength; we simply emphasize that in the construction business,
bulk of the work performed are strenuous physical activities.

Moreover, in the construction business, contractors are usually faced with the problem of meeting
target deadlines. More often than not, work is performed continuously, day and night, in order to
finish the project on the designated turn-over date. Thus, it will be more convenient to the employer if
its workers are housed near the construction site to ensure their ready availability during urgent or
emergency circumstances. Also, productivity issues like tardiness and unexpected absences would be
minimized. This observation strongly bears in the present case since three of the respondents are not
residents of the National Capital Region. The board and lodging provision might have been a
substantial consideration in their acceptance of employment in a place distant from their provincial
residences.

Based on these considerations, we conclude that even under the purpose test, the subsidized meals
and free lodging provided by Our Haus are actually supplements. Although they also work to benefit
the respondents, an analysis of the nature of these benefits in relation to Our Haus’ business shows
that they were given primarily for Our Haus’ greater convenience and advantage. If weighed on a
scale, the balance tilts more towards Our Haus’ side. Accordingly, their values cannot be considered
in computing the total amount of the respondents’ wages.
Under the circumstances, the daily wages paid to the respondents are clearly below the prescribed
minimum wage rates in the years 2007-2010.

The provision of deductible facilities

must be voluntarily accepted in writing
by the employee In Mayon Hotel, we reiterated that a facility may only be deducted from the wage if
the employer was authorized in writing by the concerned employee.51 As it diminishes the take-
home pay of an employee, the deduction must be with his express consent.

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

Moreover, in the earlier sinumpaang salaysay by Our Haus’ four employees, it was not mentioned
that they also executed a kasunduan for their board and lodging benefits. Because of these
surrounding circumstances and the suspicious timing when the five kasunduans were submitted as
evidence, we agree with the CA that the NLRC committed no grave abuse of discretion in disregarding
these documents for being self serving.
The facility must be charged at
a fair and reasonable value Our Haus admitted that it deducted the amount of P290.00 per week
from each of the respondents for their meals. But it now submits that it did not actually withhold the
entire amount as it did not figure in the computation the money it expended for the salary of the
cook, the water, and the LPG used for cooking, which amounts to P249.40 per week per person. From
these, it appears that the total meal expense per week for each person is P529.40, making Our Haus’
P290.00 deduction within the 70% ceiling prescribed by the rules.

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

Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his
decision were figures furnished by the private respondent's own accountant, without
corroborative evidence. On the pretext that records prior to the July 16, 1990 earthquake were lost
or destroyed, respondent failed to produce payroll records, receipts and other relevant
documents, where he could have, as has been pointed out in the Solicitor General's
manifestation, “secured certified copies thereof from the nearest regional office of the
Department of Labor, the SSS or the BIR”.52 [emphasis ours]

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

A claim not raised in the pro forma

complaint may still be raised in the
position paper.

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

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

The respondents’ entitlement to

the other monetary benefits

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

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

Respondents are entitled to

attorney’s fees.

Finally, we affirm that respondents are entitled to attorney’s fees. Our Haus’ asserts that
respondents’ availment of free legal services from the PAO disqualifies them from such award. We find
this untenable.

It is settled that in actions for recovery of wages or where an employee was forced to litigate and,
thus, incur expenses to protect his rights and interest, the award of attorney’s fees is legally and
morally justifiable.56 Moreover, under the PAO Law or Republic Act No. 9406, the costs of the
suit, attorney’s fees and contingent fees imposed upon the adversary of the PAO clients after a
successful litigation shall be deposited in the National Treasury as trust fund and shall be disbursed for
special allowances of authorized officials and lawyers of the PAO. 57cralawred

Thus, the respondents are still entitled to attorney’s fees. The attorney’s fees awarded to them shall
be paid to the PAO. It serves as a token recompense to the PAO for its provision of free legal services
to litigants who have no means of hiring a private lawyer.

WHEREFORE, in light of these considerations, we conclude that the Court of Appeals correctly found
that the National Labor Relations Commission did not abuse its discretion in its decision of July 20,
2011 and Resolution of December 2, 2011. Consequently we DENY the petition and AFFIRM the
Court of Appeals’ decision dated May 7, 2012 and resolution dated November 27, 2012 in CA-G.R. SP
No. 123273. No costs.

SO ORDERED.

[G.R. No. 128845. June 1, 2000.]

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), Petitioner, v. HON. LEONARDO A.

QUISUMBING in his capacity as the Secretary of Labor and Employment; HON. CRESENCIANO
B. TRAJANO in his capacity as the Acting Secretary of Labor and Employment; DR. BRIAN
MACCAULEY in his capacity as the Superintendent of International School-Manila; and
INTERNATIONAL SCHOOL, INC., Respondents.

DECISION

KAPUNAN, J.:

Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent
School, mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their
colleagues in other schools is, of course, beside the point. The point is that employees should be
given equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a
principle that rests on fundamental notions of justice. That is the principle we uphold today.

Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree
732, is a domestic educational institution established primarily for dependents of foreign diplomatic
personnel and other temporary residents. 1 To enable the School to continue carrying out its
educational program and improve its standard of instruction, Section 2(c) of the same decree
authorizes the School to

employ its own teaching and management personnel selected by it either locally or abroad, from
Philippine or other nationalities, such personnel being exempt from otherwise applicable laws and
regulations attending their employment, except laws that have been or will be enacted for the
protection of employees.

Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the
same into two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine
whether a faculty member should be classified as a foreign-hire or a local hire:chanrob1es virtual
1aw library
a. What is one’s domicile?

b. Where is one’s home economy?

c. To which country does one owe economic allegiance?

d. Was the individual hired abroad specifically to work in the School and was the School responsible
for bringing that individual to the Philippines? 2

Should the answer to any of these queries point to the Philippines, the faculty member is classified as
a local hire; otherwise, he or she is deemed a foreign-hire.chanroblesvirtuallawlibrary

The School grants foreign-hires certain benefits not accorded local- hires. These include housing,
transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a
salary rate twenty-five percent (25%) more than local-hires. The School justifies the difference on two
"significant economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation factor"
and (b) limited tenure. The School explains:chanrob1es virtual 1aw library

A foreign-hire would necessarily have to uproot himself from his home country, leave his family and
friends, and take the risk of deviating from a promising career path — all for the purpose of pursuing
his profession as an educator, but this time in a foreign land. The new foreign hire is faced with
economic realities: decent abode for oneself and/or for one’s family, effective means of transportation,
allowance for the education of one’s children, adequate insurance against illness and death, and of
course the primary benefit of a basic salary/retirement compensation.

Because of a limited tenure, the foreign hire is confronted again with the same economic reality after
his term: that he will eventually and inevitably return to his home country where he will have to
confront the uncertainty of obtaining suitable employment after a long period in a foreign land.

The compensation scheme is simply the School’s adaptive measure to remain competitive on an
international level in terms of attracting competent professionals in the field of international
education. 3

When negotiations for a new collective bargaining agreement were held on June 1995, petitioner
International School Alliance of Educators, "a legitimate labor union and the collective bargaining
representative of all faculty members" 4 of the School, contested the difference in salary rates
between foreign and local-hires. This issue, as well as the question of whether foreign-hires should be
included in the appropriate bargaining unit, eventually caused a deadlock between the parties.

On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and
Mediation Board to bring the parties to a compromise prompted the Department of Labor and
Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting
Secretary, Cresenciano B. Trajano, issued an Order resolving the parity and representation issues in
favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied petitioner’s
motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in this
Court.

Petitioner claims that the point-of-hire classification employed by the School is discriminatory to
Filipinos and that the grant of higher salaries to foreign-hires constitutes racial discrimination.

The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all,
with nationalities other than Filipino, who have been hired locally and classified as local hires. 5 The
Acting Secretary of Labor found that these non-Filipino local-hires received the same benefits as the
Filipino local-hires:chanrob1es virtual 1aw library

The compensation package given to local-hires has been shown to apply to all, regardless of race.
Truth to tell, there are foreigners who have been hired locally and who are paid equally as Filipino
local hires. 6

The Acting Secretary upheld the point-of-hire classification for the distinction in salary
rates:chanrob1es virtual 1aw library

The principle "equal pay for equal work" does not find application in the present case. The
international character of the School requires the hiring of foreign personnel to deal with different
nationalities and different cultures, among the student population.

We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired
personnel which system is universally recognized. We agree that certain amenities have to be
provided to these people in order to entice them to render their services in the Philippines and in the
process remain competitive in the international market.

Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike
the local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits
would also require parity in other terms and conditions of employment which include the employment
contract.chanrobles.com.ph:red

A perusal of the parties’ 1992-1995 CBA points us to the conditions and provisions for salary and
professional compensation wherein the parties agree as follows:chanrob1es virtual 1aw library

All members of the bargaining unit shall be compensated only in accordance with Appendix C hereof
provided that the Superintendent of the School has the discretion to recruit and hire expatriate
teachers from abroad, under terms and conditions that are consistent with accepted international
practice.

Appendix C of said CBA further provides:chanrob1es virtual 1aw library

The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS) salary
schedule. The 25% differential is reflective of the agreed value of system displacement and contracted
status of the OSRS as differentiated from the tenured status of Locally Recruited Staff (LRS).

To our mind, these provisions demonstrate the parties’ recognition of the difference in the status of
two types of employees, hence, the difference in their salaries.

The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an
established principle of constitutional law that the guarantee of equal protection of the laws is not
violated by legislation or private covenants based on reasonable classification. A classification is
reasonable if it is based on substantial distinctions and apply to all members of the same class.
Verily, there is a substantial distinction between foreign hires and local hires, the former enjoying
only a limited tenure, having no amenities of their own in the Philippines and have to be given a good
compensation package in order to attract them to join the teaching faculty of the School. 7

We cannot agree.

That public policy abhors inequality and discrimination is beyond contention. Our Constitution and
laws reflect the policy against these evils. The Constitution 8 in the Article on Social Justice and
Human Rights exhorts Congress to "give highest priority to the enactment of measures that protect
and enhance the right of all people to human dignity, reduce social, economic, and political
inequalities." The very broad Article 19 of the Civil Code requires every person, "in the exercise of his
rights and in the performance of his duties, [to] act with justice, give everyone his due, and observe
honesty and good faith."cralaw virtua1aw library

International law, which springs from general principles of law, 9 likewise proscribes discrimination.
General principles of law include principles of equity, 10 i.e., the general principles of fairness and
justice, based on the test of what is reasonable. 11 The Universal Declaration of Human Rights, 12
the International Covenant on Economic, Social. and Cultural Rights, 13 the International
Convention on the Elimination of All Forms of Racial Discrimination, 14 the Convention against
Discrimination in Education, 15 the Convention (No. 111) Concerning Discrimination in Respect of
Employment and Occupation 16 — all embody the general principle against discrimination, the very
antithesis of fairness and justice. The Philippines, through its Constitution, has incorporated this
principle as part of its national laws.

In the workplace, where the relations between capital and labor are often skewed in favor of capital,
inequality and discrimination by the employer are all the more reprehensible.

The Constitution 17 specifically provides that labor is entitled to "humane conditions of work." These
conditions are not restricted to the physical workplace — the factory, the office or the field — but
include as well the manner by which employers treat their employees.

The Constitution 18 also directs the State to promote "equality of employment opportunities for all."
Similarly, the Labor Code 19 provides that the State shall "ensure equal work opportunities
regardless of sex, race or creed." It would be an affront to both the spirit and letter of these provisions
if the State, in spite of its primordial obligation to promote and ensure equal employment
opportunities, closes its eyes to unequal and discriminatory terms and conditions of employment. 20

Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for
example, prohibits and penalizes 21 the payment of lesser compensation to a female employee as
against a male employee for work of equal value. Article 248 declares it an unfair labor practice for an
employer to discriminate in regard to wages in order to encourage or discourage membership in any
labor organization.

Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7
thereof, provides:chanrob1es virtual 1aw library

The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just
and favorable conditions of work, which ensure, in particular:chanrob1es virtual 1aw library

a. Remuneration which provides all workers, as a minimum, with:chanrob1es virtual 1aw library

i. Fair wages and equal remuneration for work of equal value without distinction of any kind, in
particular women being guaranteed conditions of work not inferior to those enjoyed by men, with
equal pay for equal work;

x x x

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal
truism of "equal pay for equal work." Persons who work with substantially equal qualifications, skill,
effort and responsibility, under similar conditions, should be paid similar salaries. 22 This rule
applies to the School, its "international character" notwithstanding.
The School contends that petitioner has not adduced evidence that local-hires perform work equal to
that of foreign-hires. 23 The Court finds this argument a little cavalier. If an employer accords
employees the same position and rank, the presumption is that these employees perform equal work.
This presumption is borne by logic and human experience. If the employer pays one employee less
than the rest, it is not for that employee to explain why he receives less or why the others receive
more. That would be adding insult to injury. The employer has discriminated against that employee;
it is for the employer to explain why the employee is treated unfairly.

The employer in this case has failed to discharge this burden. There is no evidence here that foreign-
hires perform 25% more efficiently or effectively than the local-hires. Both groups have similar
functions and responsibilities, which they perform under similar working conditions.

The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the
distinction in salary rates without violating the principle of equal work for equal pay.

"Salary" is defined in Black’s Law Dictionary (5th ed.) as "a reward or recompense for services
performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the" [c]onsideration
paid at regular intervals for the rendering of services." In Songco v. National Labor Relations
Commission, 24 we said that:jgc:chanrobles.com.ph

"salary" means a recompense or consideration made to a person for his pains or industry in another
man’s business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the
Roman soldier, it carries with it the fundamental idea of compensation for services rendered.
(Emphasis supplied.)

While we recognize the need of the School to attract foreign-hires, salaries should not be used as an
enticement to the prejudice of local- hires. The local-hires perform the same services as foreign-hires
and they ought to be paid the same salaries as the latter. For the same reason, the "dislocation
factor" and the foreign-hires’ limited tenure also cannot serve as valid bases for the distinction in
salary rates. The dislocation factor and limited tenure affecting foreign-hires are adequately
compensated by certain benefits accorded them which are not enjoyed by local-hires, such as
housing, transportation, shipping costs, taxes and home leave travel allowances.

The Constitution enjoins the State to "protect the rights of workers and promote their welfare," 25 "to
afford labor full protection." 26 The State, therefore, has the right and duty to regulate the relations
between labor and capital. 27 These relations are not merely contractual but are so impressed with
public interest that labor contracts, collective bargaining agreements included, must yield to the
common good. 28 Should such contracts contain stipulations that are contrary to public policy,
courts will not hesitate to strike down these stipulations.

In this case, we find the point-of-hire classification employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is
no reasonable distinction between the services rendered by foreign-hires and local-hires. The practice
of the School of according higher salaries to foreign-hires contravenes public policy and, certainly,
does not deserve the sympathy of this Court.

We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-
hires.chanrobles.com : chanrobles.com.ph

A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the
entire body of employees, consistent with equity to the employer indicate to be the best suited to
serve the reciprocal rights and duties of the parties under the collective bargaining provisions of the
law." 29 The factors in determining the appropriate collective bargaining unit are (1) the will of the
employees (Globe Doctrine); (2) affinity and unity of the employees’ interest, such as substantial
similarity of work and duties, or similarity of compensation and working conditions (Substantial
Mutual Interests Rule); (3) prior collective bargaining history; and (4) similarity of employment status.
30 The basic test of an asserted bargaining unit’s acceptability is whether or not it is fundamentally
the combination which will best assure to all employees the exercise of their collective bargaining
rights. 31

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

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

SO ORDERED.

511 Phil. 232

AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari filed by C. Planas Commercial and/or Marcial Cohu,
(petitioners) assailing the Decision of the Court of Appeals (CA) dated January 19, 2000 [1] which
affirmed in toto the decision of the National Labor Relations Commission (NLRC) and the Resolution
dated August 15, 2000[2] denying petitioners' motion for reconsideration.

On September 14, 1993, Dioleto Morente, Rudy Allauigan and Alfredo Ofialda (private respondents)
together with 5 others[3] filed a complaint for underpayment of wages, nonpayment of overtime pay,
holiday pay, service incentive leave pay and premium pay for holiday and rest day and night shift
differential against petitioners with the Arbitration Branch of the NLRC. The case was docketed as
NLRC Case No. 00-09-05804-93.[4]

In their position paper, private respondents alleged that petitioner Cohu, owner of C. Planas
Commercial, is engaged in wholesale of plastic products and fruits of different kinds with more than
24 employees; that private respondents were hired by petitioners on January 14, 1990, May 14, 1990
and July 1, 1991, respectively, as helpers/laborers; that they were paid below the minimum wage law
for the past 3 years; that they were required to work for more than 8 hours a day without overtime
pay; that they never enjoyed holiday pay and did not have a rest day as they worked for 7 days a
week; and they were not paid service incentive leave pay although they had been working for more
than one year. Private respondent Ofialda asked for night shift differential as he had worked from 8
p.m. to 8 a.m. the following day for more than one year.

Petitioners filed their comment admitting that private respondents were their helpers who used to
accompany the delivery trucks and helped in the loading and unloading of merchandise being
distributed to clients; that they usually started their work from 10 a.m. to 6 p.m.; that private
respondents stopped working with petitioners sometime in September 1993 as they were already
working in other establishments/stalls in Divisoria; that they only worked for 6 days a week; that
they were not entitled to holiday and service incentive leave pays for they were employed in a retail
and service establishment regularly employing less than ten workers.

On December 6, 1994, a decision[5] was rendered by the Labor Arbiter dismissing private respondents'
money claims for lack of factual and legal basis. He made the following findings:

The basic issue raised before us is whether or not complainants are entitled to the money claims.

The rule in this jurisdiction is that employers who are regularly employing not more than ten workers
in retail establishments are exempt from the coverage of the minimum wage law.

In connection therewith and in consonance with Sec. 1, Rule 131 of the Rules of Court, it is
incumbent upon the party to support affirmative allegation that an employer regularly employs more
than ten (10) workers.

In the case at bar, complainants failed to substantiate their claim that the respondent establishment
regularly employs twenty (sic) (24) workers.

Accordingly, we have no factual basis to grant salary differentials to complainants. In the same
context, under Sec. 1 (b), Rule IV and Sec. 1(g), Rule V of the Implementing Rules of the Labor Code,
complainants are not entitled to legal holiday pay and service incentive leave pay.

We also do not have sufficient factual basis to award overtime pay and premium pay for holiday and
rest day because complainants failed to substantiate that they rendered overtime and during rest
days.[6]

Private respondents filed their appeal with the NLRC which was opposed by petitioners. However,
pending the appeal, private respondents Morente [7] and Allauigan[8] filed their respective motions to
dismiss with release and quitclaim before the NLRC.

On September 30, 1997, the NLRC rendered its decision,[9] the dispostive portion of which reads:

WHEREFORE, in view of all the foregoing considerations, the decision appealed from should be, as it
is hereby, MODIFIED by directing the respondent to pay Alfredo Ofialda, Diolito Morente and Rudy
Allauigan the total amount of Seventy-Five Thousand One Hundred Twenty Five Pesos (P75,125.00)
representing their combined salary differentials, holiday pay, and service incentive leave pay.

The NLRC made the following ratiocinations:

... On claims for underpayment/non-payment of legally mandated wages and fringe benefits where
exemption from coverage of the minimum wage law is put up as a defense, he who invokes such an
exemption (usually the employer) has the burden of showing the basis for the exemption like for
instance the fact of employing regularly less than ten workers.

In the instant case, complainants alleged that despite employing more than twenty-four (24) workers
in his establishment, hence covered by the minimum wage law, nevertheless the individual
respondent did not pay his workers the legal rates and benefits due them since their employment. By
way of answer, respondents countered that they employ less than ten (10) persons, hence the money
claims of complainants lack factual and legal basis.
Stated differently, against complainants' charge of underpayment in wages and non-payment of fringe
benefits legally granted to them, the respondents raised the defense of exemption from coverage of the
minimum wage law and in support thereof alleged that they regularly employed less than ten (10)
workers to serve as basis for their exemption under the law, they (respondents) must prove that they
employed less than ten workers, instead of more than twenty-four (24) workers as alleged by the
complainants.

However, apart from their allegation, respondents presented no evidence to show the number of
workers they employed regularly. This failure is fatal to respondents' defense. This in turn brings us
to the question of whether the complainants were underpaid and unpaid of legal holiday pay and
service incentive leave pay due them.

Stated earlier are the different amounts that each complainant was receiving by way of salary on
certain periods of their employment with respondents, which amounts according to complainants are
"way below the minimum wage then prevailing." Considering that respondents failed to present the
payrolls or vouchers which could prove otherwise, the money claims deserve favorable consideration.

Taking note of the 3 year prescription, the period covered is from September 14, 1990 to September
14, 1993 when the instant case was filed, and based on a 6-day work per week, the underpayment
(salary differential), legal holiday pay, and service incentive leave pay due to complainants, as
computed, are as follows:

Salary Diff. HolidayPay SILP

1. A. OFIALDA P14,934.00 P2,362.00 P1,180.00

2. D. MORENTE 23,964.00 3,258.00 1,730.00

3. ALLAUIGAN 22,609.00 3,258.00 1,730.00

With respect to the other claims, i.e., overtime pay and premium pay for holiday and rest day, We find
no reason to disturb the Labor Arbiter's ruling thereon, that there is no sufficient factual basis to
award the claims because complainants failed to substantiate that they rendered overtime and during
rest days. These claims, unlike claims for underpayment and non-payment of fringe benefits
mandated by law, need to be proven by the claimants. [10]

Petitioners filed a petition for certiorari [11] with prayer for temporary restraining order and
preliminary injunction before this Court on November 26, 1997. Respondents were required to file
their Comment but only public respondent NLRC, through the Solicitor General, complied
therewith. In a Resolution dated June 28, 1999,[12] the petition was referred to the CA pursuant to
our ruling in St. Martin Funeral Homes vs. NLRC.

On January 19, 2000,[13] the CA denied the petition for lack of merit and affirmed in toto the NLRC
decision. It said:

Having claimed exemption from the coverage of the minimum wage laws or order, it was incumbent
upon petitioner to prove such claim. Apart from simply denying private respondents' allegation that
it employs more than 24 workers in its business, petitioner failed to adduce evidence to prove that it
is, indeed, a "retail establishment" which employs less than ten (10) employees. Its failure to present
records of its workers and their respective wages gives rise to the presumption that these are adverse
to its claims. Indeed, it is hard to believe that petitioner does not keep such records. More so,
considering private respondents claim that petitioner "employs more than twenty four (24) employees
and engaged in both wholesale and retail business of fruits by volume on CONTAINER BASIS, not by
price of fruit, but by container size retail, involving millions of pesos capital, fruits coming from
China, Australia and the United States" (p. 170, Rollo).

Needless to say, the inclusion of respondents Morente and Allauigan in the NLRC award is in
order. In its decision, public respondent awarded P75,125.00, representing the combined salary
differentials, holiday pay and service incentive leave pay of all three (3) private respondents. Of this,
P28,952.00 is earmarked for respondent Morente, and P27,597.00 for respondent Allauigan, both of
whom executed quitclaims after receiving P3,000.00 and P6,000.00 respectively, from petitioner.

On this score, the Court quotes with approval the arguments advanced by the Solicitor General thus:

While a compromise agreement or amicable settlement is not against public policy per se it must be
shown however that it was "voluntarily entered into and represents a reasonable settlement, and the
consideration for the quitclaim is credible and reasonable" (Santiago v. NLRC, 198 SCRA 111
[1991]). For the law usually looks with disfavor upon quitclaims and releases executed by employees
usually resulting from a compromise with their employers. (Velasco v. DOLE, 200 SCRA 201
[1991]). This is so because the employers and the employees obviously do not stand on equal
footing. Driven against the wall by the employer, the employee is in no position to resist the money
offered. (Lopez Sugar Corp v. FFW-PLU, 189 SCRA 179 [1990]).

Thus, Fuentes v. NLRC, 167 SCRA 767 (1988) enunciates:

In the absence of any showing that the compromise settlement and the quitclaims and releases
entered into and made by the employees were free, fair and reasonable- especially as to the amount
or consideration given by the employer in exchange therefore, the fact that they executed the same
and received their monetary benefits thereunder does not militate against them. The Law does not
consider as valid any agreement to receive less compensation than what a worker is entitled to
receive.

In the case at bar, it will be noticed that the vouchers dated September 13, 1995 and September 20,
1996 (pp. 194 and 197, NLRC Record), submitted by petitioners (pp. 191-192, Record), show that
private respondent Allauigan was only paid P6,000.00 and Morente, P3,000.00 --- when they are
legally entitled to receive P28,952.00 and P27,597.00, respectively. Under the circumstances, subject
compromise settlements cannot be considered valid and binding upon the NLRC as they do not
represent fair and reasonable settlements, nor do they demonstrate voluntariness on the part of
private respondents Morente and Allauigan. These employees should still be paid the full amounts of
their salary differentials, holiday pay and service incentive leave pay less the amounts they had
already received under the compromise settlements with petitioners (pp. 174-175, Rollo).

Parenthetically, the Court notes that petitioner availed itself of this remedy without first seeking a
reconsideration of the assailed decision. As a general rule, certiorari will not lie unless an inferior
court, has through a motion for reconsideration, a chance to correct the errors imputed to it. While
the rule admits of exceptions, petitioner has not shown any reason for this Court not to apply said
rule, which would have justified outright dismissal of the petition were it not for the Court's desire to
resolve the case not on a technicality but on the merits. [14]

Petitioners' motion for reconsideration was denied in a Resolution dated August 15, 2000.[15]

Hence, the instant petition for review on certiorari filed by petitioners.

Petitioners insist that C. Planas Commercial is a retail establishment principally engaged in the sale
of plastic products and fruits to the customers for personal use, thus exempted from the application
of the minimum wage law; that it merely leases and occupies a stall in the Divisoria Market and the
level of its business activity requires and sustains only less than ten employees at a time. Petitioners
contend that private respondents were paid over and above the minimum wage required for a retail
establishment, thus the Labor Arbiter is correct in ruling that private respondents' claim for
underpayment has no factual and legal basis. Petitioners claim that since private respondents
alleged that petitioners employed 24 workers, it was incumbent upon them to prove such allegation
which private respondents failed to do.

Petitioners also contend that the CA erred in applying strictly the rules of evidence against them by
holding that it was incumbent upon them to prove that their company is exempted from the
minimum wage law. They contend that they could not present records of their workers and their
respective wages because by the very nature of their business, the system of management is very
loose and informal, thus salaries and wages are paid by merely handing the money to the worker
without the latter being required to sign anything as proof of receipt. Thus, it would be unreasonable
to insist upon petitioner to present documents that they do not possess or keep in the first place.

We are not persuaded.

R.A. No. 6727 known as the Wage Rationalization Act provides for the statutory minimum wage rate
of all workers and employees in the private sector. Section 4 of the Act provides for exemption from
the coverage, thus:

Sec. 4.

...

(c) Exempted from the provisions of this Act are household or domestic helpers and persons employed
in the personal service of another, including family drivers.

Retail/service establishments regularly employing not more than ten (10) workers may be exempted
from the applicability of this Act upon application with and as determined by the appropriate
Regional Board in accordance with the applicable rules and regulations issued by the
Commission. Whenever an application for exemption has been duly filed with the appropriate
Regional Board, action on any complaint for alleged non-compliance with this Act shall be deferred
pending resolution of the application for exemption by the appropriate Regional Board.

In the event that applications for exemptions are not granted, employees shall receive the appropriate
compensation due them as provided for by this Act plus interest of one percent (1%) per month
retroactive to the effectivity of this Act.

Clearly, for a retail/service establishment to be exempted from the coverage of the minimum wage
law, it must be shown that the establishment is regularly employing not more than ten (10) workers
and had applied for exemptions with and as determined by the appropriate Regional Board in
accordance with the applicable rules and regulations issued by the Commission. Petitioners' main
defense in controverting private respondents' claim for underpayment of wages is that they are
exempted from the application of the minimum wage law, thus the burden of proving [16] such
exemption rests on petitioners. Petitioners had not shown any evidence to show that they had
applied for such exemption and if they had applied, the same was granted.

In Murillo vs. Sun Valley Realty, Inc.[17] where the respondents claim that petitioners therein are not
entitled to service incentive leave pay inasmuch as establishment employing less than ten (10)
employees are exempted by the Labor Code and the Implementing Rules from paying service incentive
leave pay, we held:

.....the clear policy of the Labor Code is to include all establishments, except a few classes, under the
coverage of the provision granting service incentive leave to workers. Private respondents' claim is
that they fell within the exception. Hence, it was incumbent upon them to prove that they belonged
to a class excepted by law from the general rule. Specifically, it was the duty of respondents, not of
petitioners, to prove that there were less than ten (10) employees in the company. Having failed to
discharge its task, private respondents must be deemed to be covered by the general rule,
notwithstanding the failure of petitioners to allege the exact number of employees of the
corporation. In other words, petitioners must be deemed entitled to service incentive leave. [18]

Moreover, in C. Planas Commercial vs. NLRC,[19] where herein petitioners are also involved in a case
filed by one of its employees, we ruled:

Petitioners invoke the exemption provided by law for retail establishments which employ not more
than ten (10) workers to justify their non-liability for the salary differentials in question. They insist
that PLANAS is a retail establishment leasing a very small and cramped stall in the Divisoria market
which cannot accommodate more than ten (10) workers in the conduct of its business.

We are unconvinced. The records disclose de los Reyes' clear entitlement to salary
differentials. Well-settled is the rule that factual findings of labor officials who are deemed to have
acquired expertise in matters within their jurisdiction are generally accorded not only respect but
even finality and bind this Court when supported by substantial evidence or that amount of relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion. Thus, as long as
their decisions are devoid of any unfairness or arbitratriness in the process of their deduction from
the evidence proferred by the parties before them, all that is left is our stamp of finality by affirming
the factual findings made by them. In this case, the award of salary differentials by the NLRC in
favor of de los Reyes was made pursuant to RA 6727 otherwise known as the Wage Rationalization
Act, and the Rules Implementing Wage Order Nos. NCR-01 and NCR-01-A and Wage Order Nos. NCR-
02 and NCR-02-A.

Petitioners claim exemption under the aforestated law. However, the best proof that they could have
adduced was their approved application for exemption in accordance with applicable guidelines
issued by the Commission. Section 4, subpar. (c) of RA 6727 categorically provides:

Retail/service establishments regularly employing not more than ten (10) workers may be exempted
from the applicability of this Act upon application with and as determined by the appropriate
Regional Board in accordance with the applicable rules and regulations issued by the
Commission. Whenever an application for exemption has been duly filed with the appropriate
Regional Board, action on any complaint for alleged non-compliance with this Act shall be deferred
pending resolution of the application for exemption by the appropriate Regional Board. In the event
that applications for exemptions are not granted, employees shall receive the appropriate
compensation due them as provided for by this Act plus interest of one percent (1%) per month
retroactive to the effectivity of this Act (emphasis supplied).

Extant in the records is the fact that petitioners had persistently raised the matter of their exemption
from any liability for underpayment without substantiating it by showing compliance with the
aforecited provision of law. It bears stressing that the NLRC affirmed the Labor Arbiter's award of
salary differentials due to underpayment on the ground that de los Reyes' claim therefor was not even
denied or rebutted by petitioners.

More importantly, NLRC correctly upheld the Labor Arbiter's finding that PLANAS employed around
thirty (30) workers. We have every reason to believe that petitioners need at least thirty (30) persons
to conduct their business considering that Manager Cohu did not submit any employment record to
prove otherwise. As employer, Manager Cohu ought to be the keeper of the employment records of all
his workers. Thus, it was well within his means to refute any monetary claim alleged to be
unpaid. His inability to produce the payrolls from their files without any satisfactory explanation can
be interpreted no less as suppression of vital evidence adverse to PLANAS.

Petitioners aver that the CA erred in ruling that private respondents Morente and Allauigan are still
entitled to monetary awards despite the latter's execution of release and quitclaims because the
settlement was not voluntarily entered into by private respondents. Petitioners insist that both
private respondents Morente and Allauigan voluntarily entered into an amicable settlement with them
on September 17 and 18, 1995, respectively; that they were the ones who initiated the talks for
settlement and who pegged the amount; that they both voluntarily appeared before the Labor Arbiter
to move for the dismissal of their case insofar as their claims are concerned as well as submitted to
the Labor Arbiter their respective quitclaims and releases which were duly subscribed before the
Labor Arbiter and duly notarized.

We find merit in petitioners' argument.

It has been held that not all quitclaims are per se invalid or against public policy, except (1) where
there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or (2) where
the terms of settlement are unconscionable on their face. In these cases, the law will step in to annul
the questionable transactions.[20] Such quitclaim and release agreements are regarded as ineffective
to bar the workers from claiming the full measure of their legal rights. [21]

We find these two instances not present in private respondents Allauigan and Morente's case. They
failed to refute petitioners' allegation that the settlement was voluntarily made as they had not filed
any pleadings before the CA. Notably, we have required private respondents to file their comment on
the instant petition, however, they failed to do so. They were then required to show cause why they
should not be disciplinarily dealt with or held in contempt.[22] However, they still failed to file their
comment, thus, they were imposed a fine of P1,000.00 [23] which was subsequently increased to
P2,000.00 as there was still no compliance. In a Resolution dated July 22, 2002, the Court ordered
the National Bureau of Investigation to arrest and detain private respondents and the private
respondents to file their comment. [24] As private respondents could not be located at their given
address and they are not known in their locality, the order of arrest and commitment was returned
unserved,[25] thus the Court required the Office of the Solicitor General to file the comment in behalf
of all the respondents.[26] The Court finds such inaction on the part of private respondents Allauigan
and Morente an indication that they already relented in their claims and gives credence to petitioners'
claim that they had voluntarily executed the release and quitclaim and the motion to dismiss.

The CA found that the subject compromise agreements are not valid considering that they did not
represent the fair and reasonable settlements, i.e., that private respondent Allauigan was only paid
P6,000.00 and Morente, P3,000.00 --- when they are legally entitled to receive P28,952.00 and
P27,597.00, respectively.

We do not agree. It bears stressing that at the time of the execution of the release and quitclaim, the
case filed by private respondents against petitioners was already dismissed by the Labor Arbiter and
it was pending appeal before the NLRC. Private respondents could have executed the release and
quitclaim because of a possibility that their appeal with the NLRC may not be successful. Since there
was yet no decision rendered by the NLRC when the quitclaims were executed, it could not be said
that the amount of the settlement is unconscionable. In any event, no deception has been
established that would justify the annulment of private respondents quitclaims. [27] In Mercer vs.
NLRC,[28] we held that:

In Samaniego v. NLRC, we ruled that: "A quitclaim executed in favor of a company by an employee
amounts to a valid and binding compromise agreement between them."

Recently, we held that in the absence of any showing that petitioner was "coerced or tricked" into
signing the above-quoted Quitclaim and Release or that the consideration thereof was very low, she is
bound by the conditions thereof.

As computed by the NLRC, private respondent Alfredo Ofialda is entitled to the payment of
P14,934.00 as salary differential, P2,362.00 as legal holiday pay and P1,180.00 as service incentive
leave pay, all in the total amount of P18,476.00.

WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appeals dated
January 19, 2000 and its Resolution dated August 15, 2000
are AFFIRMED with MODIFICATION that petitioners are ordered to pay private respondent Alfredo
Ofialda the total amount of P18,476.00 and the monetary awards in favor of private respondents
Rudy Allauigan and Dioleto Morente are hereby DELETED.

SO ORDERED.

G.R. No. 166647 March 31, 2006

PAG-ASA STEEL WORKS, INC., Petitioner,

vs.
COURT OF APPEALS, FORMER SIXTH DIVISION and PAG-ASA STEEL WORKERS UNION
(PSWU), Respondent.

DECISION

CALLEJO, SR., J.:

This is a Petition for Review on Certiorari of the Decision 1 of the Court of Appeals (CA) in CA-G.R. SP
No. 65171 ordering Pag-Asa Steel Works, Inc. to pay the members of Pag-Asa Steel Workers Union
(Union) the wage increase prescribed under Wage Order No. NCR-08. Also assailed in this petition is
the CA Resolution denying the corporation’s motion for reconsideration.

Petitioner Pag-Asa Steel Works, Inc. is a corporation duly organized and existing under Philippine
laws and is engaged in the manufacture of steel bars and wire rods. Pag-Asa Steel Workers Union is
the duly authorized bargaining agent of the rank-and-file employees of petitioner.

On January 8, 1998, the Regional Tripartite Wages and Productivity Board (Wage Board) of the
National Capital Region (NCR) issued Wage Order No. NCR-06.2 It provided for an increase of P13.00
per day in the salaries of employees receiving the minimum wage, and a consequent increase in the
minimum wage rate to P198.00 per day. Petitioner and the Union negotiated on how to go about the
wage adjustments. Petitioner forwarded a letter 3 dated March 10, 1998 to the Union with the list of
the salary adjustments of the rank-and-file employees after the implementation of Wage Order No.
NCR-06, and the notation that said "adjustments [were] in accordance with the formula [they] have
discussed and [were] designed so as no distortion shall result from the implementation of Wage Order
No. NCR-06."
NAME DATE PRESENT ADJUST NEW RATE
REGULAR RATE EFF
2/6/98

1. PEPINO EMMANUEL 08.01.97 191.00 13.00 204.00

2. SEVANDRA RODOLFO 01.17.98 192.00 13.00 205.00

3. BERNABE ALFREDO 10.24.97 200.00 13.00 213.00

4. UMBAL ADOLFO 08.18.97 215.00 12.00 227.00

5. AQUINO JONAS 08.25.97 215.00 12.00 227.00

6. AGCAOILI JAIME 01.08.98 220.00 11.00 231.00

7. BERMEJO JIMMY JR. 04.01.97 221.00 11.00 232.00

8. EDRADAN ELDEMAR P. 04.17.97 221.00 11.00 232.00

9. REBOTON RONILO 05.14.97 221.00 11.00 232.00

10. TABAOG ALBERT 04.10.97 221.00 11.00 232.00

11. SALEN EDILBERTO 02.10.97 221.00 11.00 232.00

13. PAEZ REYNALDO 02.27.97. 235.00 11.00 246.00

14. HERNANDEZ ALFREDO 03.23.96 246.00 10.00 256.00

15. BANIA LUIS JR. 12.08.95 246.00 10.00 256.00

16. MAGBOO VICTOR 05.25.96 246.00 10.00 256.00

17. NINORA BONIFACIO 03.22.96 246.00 10.00 256.00

18. ALANCADO RODERICK 11.10.95 246.00 10.00 256.00

19. PUTONG PASCUAL 06.23.96 246.00 10.00 256.00

20. PAR EULOGIO JR. 08.16.95 246.00 10.00 256.00

21. SALON FONDADOR 11.16.95 246.00 10.00 256.00

22. RODA GEORGE 10.11.95 246.00 10.00 256.00

23. RIOJA JOSEPH 12.28.95 246.00 10.00 256.00

24. RAYMUNDO ANTONIO 06.05.96 246.00 10.00 256.00

25. BUGTAI ROBERTO 04.10.96 246.00 10.00 256.00

26. RELATO RAMON 07.07.96 265.00 10.00 275.00

27. REGACHUELO DENNIS 11.30.95 265.00 10.00 275.00

28. ORNOPIA REYNALDO 08.09.94 268.00 10.00 278.00

29. PULPULAAN JAIME 01.18.96 275.00 10.00 285.00

30. PANLAAN FERDINAND 01.18.96 275.00 10.00 285.00

31.BAGASBAS EULOGIO JR. 01.18.96 275.00 10.00 285.00

32. ALEJANDRO OLIVER 12.03.95 275.00 10.00 285.00

33. PRIELA DANILO 11.30.95 280.00 10.00 290.00

34. NOBELJAS EDGAR 07.10.95 283.00 10.00 293.00

35. SAJOT RONNIE 10.02.93 288.00 10.00 298.00

36. WHITING JOEL 09.30.93 288.00 10.00 298.00

37. SURINGA FRANKLIN 12.19.93 288.00 10.00 298.00

38. SIBOL MICHAEL 12.11.93 288.00 10.00 298.00

39. SOLO JOSE 02.20.94 288.00 10.00 298.00

40. TIZON JOEL 12.23.93 288.00 10.00 298.00

41. SABATIN GILBERT 04.19.94 288.00 10.00 298.00

42. REYES RONALDO 04.14.94 288.00 10.00 298.00

43. AMANIA WILFREDO 01.06.94 288.00 10.00 298.00

44. QUIDATO ARISTON 12.12.93 288.00 10.00 298.00

45. LAROGA CLAUDIO JR. 10.13.93 288.00 10.00 298.00

46. MORALES LUIS 09.30.93 288.00 10.00 298.00

47. ANTOLO DANILO 12.26.93 288.00 10.00 298.00

48. EXMUNDO HERCULES 05.13.94 288.00 10.00 298.00

49. AMPER VALENTINO 08.02.93 288.00 10.00 298.00

50. BAYO-ANG ALDEN JR. 07.14.93 288.00 10.00 298.00

51. BASCONES NELSON 02.26.94 288.00 10.00 298.00

52. DECENA LAURO 09.18.93 288.00 10.00 298.00

53. CHUA MARLONITO 10.20.93 288.00 10.00 298.00

54. CATACUTAN JUNE 03.02.94 288.00 10.00 298.00

55.DE LOS SANTOS REYNALDO 12.23.93 288.00 10.00 298.00

56. REYES EFREN 10.23.93 288.00 10.00 298.00

57. CAGOMOC DANILO 01.13.94 288.00 10.00 298.00

58. DOROL ERWIN 09.16.93 288.00 10.00 298.00

59. CURAMBAO TIRSO 09.23.93 288.00 10.00 298.00

60. VENTURA FERDINAND 09.20.94 292.00 10.00 302.00

61. ALBANO JESUS 01.06.94 297.00 10.00 307.00

62. CALLEJA JOSEPH 05.10.93 303.00 10.00 313.00

63. PEREZ DANILO 03.01.93 303.00 10.00 313.00

64. BATOY ERNIE 06.15.93 305.00 10.00 315.00

65. SAMPAGA EDGARDO 06.07.93 307.00 10.00 317.00

66. SOLON ROBINSON 05.10.94 315.00 10.00 325.00

67. ELEDA FULGENIO 06.07.93 322.00 10.00 332.00

68. CASCARA RODRIGO 06.07.93 322.00 10.00 332.00

69. ROMANOS ARNULFO 06.07.93 322.00 10.00 332.00

70. LUMANSOC MARIANO 06.07.93 322.00 10.00 332.00

71. RAMOS GRACIANO 06.07.93 322.00 10.00 332.00

72. MAZON NESTOR 07.24.90 330.00 10.00 340.00

73. BRIN LUCENIO 07.26.90 330.00 10.00 340.00

74. SE FREDIE 03.25.90 340.00 10.00 350.00

75. RONCALES DIOSDADO 04.30.90 340.00 10.00 350.00

76. DISCAYA EDILBERTO 09.06.89 340.00 10.00 350.00

77. SUAREZ LUISTO 06.10.92 347.00 10.00 357.00

78. CASTRO PEDRO 10.30.92 348.00 10.00 358.00

79. CLAVECILLA AMBROSIO 09.09.88 351.00 10.00 361.00

80. YSON ROMEO 09.11.88 351.00 10.00 361.00

81. JUMAWAN URBANO JR. 12.20.87 354.00 10.00 364.00

82. MARASIGAN GRACIANO 05.20.88 354.00 10.00 364.00

83. MAGLENTE ROLANDO 09.03.87 354.00 10.00 364.00

84. NEBRIA CALIX 02.25.88 354.00 10.00 364.00

85. BARBIN DANIEL 09.03.87 354.00 10.00 364.00

86. CAMAING CARLITO 12.22.87 354.00 10.00 364.00

87. BUBAN JONATHAN 10.22.87 354.00 10.00 364.00

88. GUEVARRA ARNOLD 10.04.87 354.00 10.00 364.00

89. MALAPO MARCOS JR. 08.04.87 354.00 10.00 364.00

90. ZUNIEGA CARLOS 02.19.88 354.00 10.00 364.00

91. SABORNIDO JULITO 12.20.87 354.00 10.00 364.00

92. DALUYO LOTERIO 04.02.88 354.00 10.00 364.00

93. AGUILLON GRACIANO 05.27.87 359.00 10.00 369.00

94. CRISTY EMETERIO 04.06.87 359.50 10.00 369.50

95. FULGUERAS DOMINGO 01.25.87 362.00 10.00 372.00

96. ZIPAGAN NELSON 02.07.84 370.00 10.00 380.00

97. LAURIO JESUS 06.01.82 371.00 10.00 381.00

98. ACASIO PEDRO 11.21.79 372.00 10.00 382.00

99. MACALISANG EPIFANIO 02.01.88 372.00 10.00 382.00

100. OFILAN ANTONIO 03.12.79 374.50 10.00 384.50

101. SEVANDRA ALFREDO 05.02.69 374.50 10.00 384.50

102. VILLAMER JOEY 11.04.81 374.50 10.00 384.50

103. GRIPON GIL 01.17.76 374.75 10.00 384.75

104. CARLON HERMINIGILDO, JR. 04.17.87 375.00 10.00 385.00

105. MANLABAO HEROHITO 04.14.81 375.00 10.00 385.00

106. VILLANUEVA DOMINGO 12.01.77 375.50 10.00 385.50

107. APITAN NAZARIO 09.04.79 376.00 10.00 386.00

108. SALAMEDA EDUARDO 02.13.79 377.00 10.00 387.00

109. ARNALDO LOPE 05.02.69 378.50 10.00 388.50

110. SURIGAO HERNANDO 12.29.79 379.00 10.00 389.00

111. DE LA CRUZ CHARLIE 07.14.76 379.00 10.00 389.00

 112. ROSAURO JUAN 07.15.76 379.50 10.00 389.50

113 HILOTIN ARLEN 10.10.77 383.00 10.00 393.004

On September 23, 1999, petitioner and the Union entered into a Collective Bargaining Agreement
(CBA), effective July 1, 1999 until July 1, 2004. Section 1, Article VI (Salaries and Wage) of said CBA
provides:

Section 1. WAGE ADJUSTMENT - The COMPANY agrees to grant all the workers, who are already
regular and covered by this AGREEMENT at the effectivity of this AGREEMENT, a general wage
increase as follows:

July 1, 1999 . . . . . . . . . . . P15.00 per day per employee

July 1, 2000 . . . . . . . . . . . P25.00 per day per employee

July 1, 2001 . . . . . . . . . . . P30.00 per day per employee

The aforesaid wage increase shall be implemented across the board. Any Wage Order to be
implemented by the Regional Tripartite Wage and Productivity Board shall be in addition to the wage
increase adverted to above. However, if no wage increase is given by the Wage Board within six (6)
months from the signing of this AGREEMENT, the Management is willing to give the following
increases, to wit:

July 1, 1999 . . . . . . . . . . . P20.00 per day per employee

July 1, 2000 . . . . . . . . . . . P25.00 per day per employee

July 1, 2001 . . . . . . . . . . . P30.00 per day per employee

The difference of the first year adjustment to retroact to July 1, 1999.

The across-the-board wage increase for the 4th and 5th year of this AGREEMENT shall be subject for
a re-opening or renegotiation as provided for by Republic Act No. 6715. 5

For the first year of the CBA’s effectivity, the salaries of Union members were increased as follows:

NAME WAGE NAME WAGE

1. Pedro Acasio P427.00 53. Nestor Mazon P385.00

2. Roderick Alancado 301.00 54. Luis Morales 343.00

3. Jesus Albano 352.00 55. Calix Nebria 409.00

4. Oliver Alejandro 330.00 56. Bonifacio Ninora Jr. 301.00

5. Welfredo Amania 343.00 57. Edgar Noblejas 338.00

6. Valentino Amper 343.00 58. Antonio Ofilan 429.50

7. Danilo Antolo 343.00 59. Reynaldo Ornopia 323.00

8. Nazario Apitan 431.00 60. Reynaldo Paez 291.00

9. Jonas Aquino 272.00 61. Ferdinand Panlaan 330.00

10. Eulogio Bagasbas, Jr. 330.00 62. Eulogio Par Jr. 301.00
11. Luis Bania, Jr. 301.00 63. Marvin Peco 223.00

12. Daniel Barbin 409.00 64. Emmanuel Pepino 249.00

13. Nelson Bascones 343.00 65. Danilo Perez 358.00

14. Alden Bayo-ang, Jr. 343.00 66. Jaime Pulpulaan 330.00

15. Jimmy Bermejo 277.00 67. Ariston Quidato 343.00

16. Alfredo Bernabe 258.00 68. Graciano Ramos Jr. 377.00

17. Lucenio Brin 385.00 69. Antonio Raymundo 301.00

18. Jonathan Buban 409.00 70. Ronilo Reboton 277.00

19. Roberto Bugtai 301.00 71. Ramon Relato 320.00

20. Danilo Cagomoc 343.00 72. Efren Reyes 343.00

21. Joseph Calleja 358.00 73. Ronaldo Reyes 343.00

22. Carlito Camaing 409.00 74. Joseph Rioja 301.00

23. Hermenigildo Carlon,

430.00 75. George Roda 301.00
Jr.

24. June Catacutan 343.00 76. Diosdado Roncales 395.00

25. Marlonito Chua 343.00 77. Gilbert Sabatin 343.00

26. Ambrocio Clavecilla 406.00 78. Julito Sabornido 409.00

27. Emeterio Cristy 414.50 79. Ronnie Sajot 343.00

28. Tirso Curambao 343.00 80. Eduardo Salameda 432.00

29. Loterio Daluyo 409.00 81. Edilberto Salen 277.00

30. Lauro Decena 343.00 82. Fundador Salon 301.00

31. Charlie dela Cruz 434.00 83. Edgar Sampaga 362.00

32. Raynaldo delos Santos 343.00 84. Fredie Se 395.00

33. Edilberto Discaya 395.00 85. Rodolfo Sevandra 250.00

34. Erwin Dorol 343.00 86. Jose Solo 343.00

35. Eldemar Edradan 277.00 87. Robinson Solon 370.00

36. Fulgencio Eleda 377.00 88. Luisito Suarez 402.00

37. Hercules Exmundo 343.00 89. Jeriel Suico 223.00

38. Domingo Fulgueras 417.00 90. Hernando Surigao 434.00

39. Federico Garcia 277.00 91. Franklin Suringa 343.00

 40. Gil Gripon 429.75 92. Albert Tabaog 277.00

41. Arnold Guevarra 409.00 93. Joel Tizon 343.00

42. Arlen Hilotin 438.00 94. Alfredo Umbal 272.00

43. Urbano Jumawan, Jr. 409.00 95. Ferdinand Ventura 347.00

44. Ronilo Lacandoze 265.00 96. Joey Villamer 429.50

45. Claudio Laroga, Jr. 343.00 97.Domingo Villanueva 430.50

46. Jesus Laurio 426.00 98. Joel Whiting 343.00

47. Mariano Lumansoc 377.00 99. Romeo Yson 406.00

48. Victor Magboo 301.00 100. Carlos Zuniega 409.00

49. Rolando Maglente 409.00 101. Nelson Zipagan 425.00

50. Marcos Malapo Jr. 409.00 102. Michael Sibol 343.00

51. Herohito Manlabao 430.00 103. Renante Tangian 223.00

52. Graciano Marasigan 409.00 104. Rodrigo Cascara 377.006

On October 14, 1999, Wage Order No. NCR-077 was issued, and on October 26, 1999, its
Implementing Rules and Regulations. It provided for a P25.50 per day increase in the salary of
employees receiving the minimum wage and increased the minimum wage to P223.50 per day.
Petitioner paid the P25.50 per day increase to all of its rank-and-file employees.

On July 1, 2000, the rank-and-file employees were granted the second year increase provided in the
CBA in the amount of P25.00 per day.8

On November 1, 2000, Wage Order No. NCR-089 took effect. Section 1 thereof provides:

Section 1. Upon the effectivity of this Wage Order, private sector workers and employees in the
National Capital Region receiving the prescribed daily minimum wage rate of P223.50 shall receive an
increase of TWENTY SIX PESOS and FIFTY CENTAVOS (P26.50) per day, thereby setting the new
minimum wage rate in the National Capital Region at TWO HUNDRED FIFTY PESOS (P250.00) per
day.10

Then Union president Lucenio Brin requested petitioner to implement the increase under Wage Order
No. NCR-08 in favor of the company’s rank-and-file employees. Petitioner rejected the request,
claiming that since none of the employees were receiving a daily salary rate lower than P250.00 and
there was no wage distortion, it was not obliged to grant the wage increase.

The Union elevated the matter to the National Conciliation and Mediation Board. When the parties
failed to settle, they agreed to refer the case to voluntary arbitration. In the Submission Agreement,
the parties agreed that the sole issue is "[w]hether or not the management is obliged to grant wage
increase under Wage Order No. NCR #8 as a matter of practice," 11 and that the award of the
Voluntary Arbitrator (VA) shall be final and binding. 12

In its Position Paper, the Union alleged that it has been the company’s practice to grant a wage
increase under a government-issued wage order, aside from the yearly wage increases in the CBA. It
averred that petitioner paid the salary increases provided under the previous wage orders in full
(aside from the yearly CBA increases), regardless of whether there was a resulting wage distortion, or
whether Union members’ salaries were above the minimum wage rate. Wage Order No. NCR-06,
where rank-and-file employees were given different wage increases ranging from P10.00 to P13.00,
was an exception since the adjustments were the result of the formula agreed upon by the Union and
the employer after negotiations. The Union averred that all of their CBAs with petitioner had a
"collateral agreement" where petitioner was mandated to pay the equivalent of the wage orders
across-the-board, or at least to negotiate how much will be paid. It pointed out that an established
practice cannot be discontinued without running afoul of Article 100 of the Labor Code on non-
diminution of benefits.13

For its part, petitioner alleged that there is no such company practice and that it complied with the
previous wage orders (Wage Order Nos. NCR-01-05) because some of its employees were receiving
wages below the minimum prescribed under said orders. As for Wage Order No. NCR-07, petitioner
alleged that its compliance was in accordance with its verbal commitment to the Union during the
CBA negotiations that it would implement any wage order issued in 1999. Petitioner further averred
that it applied the wage distortion formula prescribed under Wage Order Nos. NCR-06 and NCR-07
because an actual distortion occurred as a result of their implementation. It asserted that at present,
all its employees enjoy regular status and that none receives a daily wage lower than the P250.00
minimum wage rate prescribed under Wage Order No. NCR-08.14

In reply to the Union’s position paper, petitioner contended that the full implementation of the
previous wage orders did not give rise to a company practice as it was not given to the workers within
the bargaining unit on a silver platter, but only per request of the Union and after a series of
negotiations. In fact, during CBA negotiations, it steadfastly rejected the following proposal of the
Union’s counsel, Atty. Florente Yambot, to include an across-the-board implementation of the wage
orders:15

x x x To supplement the above wage increases, the parties agree that additional wage increases equal
to the wage orders shall be paid across-the-board whenever the Regional Tripartite Wage and
Productivity Board issues wage orders. It is understood that these additional wage increases will be
paid not as wage orders but as agreed additional salary increases using the wage orders merely as a
device to fix or determine how much the additional wage increases shall be paid. 16

The Union, however, insisted that there was such a company practice. It pointed out that despite the
fact that all the employees were already receiving salaries above the minimum wage, the CBA still
provided for the payment of a wage increase using wage orders as the yardstick. It claimed that the
parties intended that petitioner-employer would pay the additional increases apart from those in the
CBA.17 The Union further asserted that the CBA did not include all the agreements of the parties;
hence, to determine the true intention of the parties, parol evidence should be resorted to. Thus, Atty.
Yambot’s version of the wage adjustment provision should be considered. 18

On June 6, 2001, the VA rendered judgment in favor of the company and ordered the case
dismissed.19 It held that there was no company practice of granting a wage order increase to
employees across-the-board, and that there is no provision in the CBA that would oblige petitioner to
grant the wage increase under Wage Order No. NCR–08 across-the-board.20

The Union filed a petition for review with the CA under Rule 43 of the Rules of Court. It defined the
issue for resolution as follows:

The principal issue in the present petition is whether or not the wage increase of P26.50 under Wage
Order No. NCR-08 must be paid to the union members as a matter of practice and whether or not
parol evidence can be resorted to in proving or explaining or elucidating the existence of a collateral
agreement/company practice for the payment of the wage increase under the wage order despite that
the employees were already receiving wages way above the minimum wage of P250.00/day as
prescribed by Wage Order No. NCR-08 and irrespective of whether wage distortion exists. 21

On September 23, 2004, the CA rendered judgment in favor of the Union and reversed that of the VA.
The fallo of the decision reads:
WHEREFORE, the assailed Decision dated June 6, 2001 of public respondent Voluntary Arbitrator is
REVERSED and SET ASIDE. Private respondent Pag-Asa Steel Works, Inc. is ordered to pay the
members of the petitioner union the P26.50 daily wage by applying the wage increase prescribed
under Wage Order No. NCR-08. Costs against private respondent.

SO ORDERED.22

The CA stressed that the CBA constitutes the law between the employer and the Union. It held that
the CBA is plain and clear, and leaves no doubt as to the intention of the parties, that is, to grant a
wage increase that may be ordered by the Wage Board in addition to the CBA-mandated salary
increases regardless of whether the employees are already receiving wages way above the minimum
wage. The appellate court further held that the employer has no valid reason not to implement the
wage increase mandated by Wage Order No. NCR-08 because prior thereto, it had been paying the
wage increase provided for in the CBA even though the employees concerned were already receiving
wages way above the applicable minimum wage. 23 Petitioner filed a motion for reconsideration which
the CA denied for lack of merit on January 11, 2005. 24

Petitioner then filed the instant petition in which it raises the following issues:

I. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR

IN NOT FINDING THAT THE INCREASES PROVIDED FOR UNDER WAGE ORDER NO. 8 CANNOT BE
DEMANDED AS A MATTER OF RIGHT BY THE RESPONDENT UNDER THE 1999 CBA, in that:

a) Issue not averred in the complaint nor raised during the trial cannot be raised for the first time on
appeal; and

b) The Rules of Statutory Construction, in relation to Article 1370 and 1374 of the New Civil Code, as
well as Section 11 of the Rules of Court, requires that contract must be read in its entirety and the
various stipulations in a contract must be read together to give effect to all.

II. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR
IN NOT FINDING THAT THE INCREASES PROVIDED FOR UNDER WAGE ORDER NO. 8 CANNOT BE
DEMANDED BY THE RESPONDENT UNION AS A MATTER OF PRACTICE. 25

Petitioner points out that the only issue agreed upon during the voluntary arbitration proceedings
was whether or not the company was obliged to grant the wage increase under Wage Order No. NCR-
08 as a matter of practice. It posits that the respondent did not anchor its claim for such wage
increase on the CBA but on an alleged company practice of granting the increase pursuant to a wage
order. According to petitioner, respondent Union changed its theory on appeal when it claimed before
the CA that the CBA is ambiguous. 26 Petitioner contends that respondent Union was precluded from
raising this issue as it was not raised during the voluntary arbitration. It insists that an issue cannot
be raised for the first time on appeal. 27

Petitioner further argues that there is no ambiguity in the CBA. It avers that Section 1, Article VI of
the CBA should be read in its entirety. 28 From the said provision, it is clear that the CBA
contemplated only the implementation of a wage order issued within six months from the execution of
the CBA, and not every wage order issued during its effectivity. Hence, petitioner complied with Wage
Order No. NCR-07 which was issued 28 days from the execution of the CBA. Petitioner emphasizes
that this was implemented not because it was a matter of practice but because it was agreed upon in
the CBA.29 It alleges that respondent Union in fact realized that it could not invoke the provisions of
the CBA to enforce Wage Order No. NCR-08, which is why it agreed to limit the issue for voluntary
arbitration to whether respondent Union is entitled to the wage increase as a matter of practice. The
fact that the "Yambot proposals" were left out in the final document simply means that the parties
never agreed to them.30
In any case, petitioner avers that respondent Union is not entitled to the wage increase provided
under Wage Order No. NCR-08 as a matter of practice. There is no company practice of granting a
wage-order-mandated increase in addition to the CBA-mandated wage increase. It points out that, as
admitted by respondent Union, the previous wage orders were not automatically implemented and
were made applicable only after negotiations. Petitioner argues that the previous wage orders were
implemented because at that time, some employees were receiving salaries below the minimum wage
and the resulting wage distortion had to be remedied. 31

For its part, respondent Union avers that the provision "[a]ny Wage Order to be implemented by the
Regional Tripartite Wage and Productivity Board shall be in addition to the wage increase adverted to
above" referred to a company practice of paying a wage increase whenever the government issues a
wage order even if the employees’ salaries were above the minimum wage and there is no resulting
wage distortion. According to respondent, the CBA contemplated all the salary increases that may be
mandated by wage orders to be issued in the future. Since the wage order was only a device to
determine exactly how much and when the increase would be given, these increases are, in effect,
CBA-mandated and not wage order increases. 32 Respondent further avers that the ambiguity in the
wage adjustment provision of the CBA can be clarified by resorting to parol evidence, that is, Atty.
Yambot’s version of said provision.33

The petition is meritorious. We rule that petitioner is not obliged to grant the wage increase under
Wage Order No. NCR-08 either by virtue of the CBA, or as a matter of company practice.

On the procedural issue, well-settled is the rule, also applicable in labor cases, that issues not raised
below cannot be raised for the first time on appeal. 34 Points of law, theories, issues and arguments
not brought to the attention of the lower court need not be, and ordinarily will not be, considered by
the reviewing court, as they cannot be raised for the first time at that late stage. Basic considerations
of due process impel this rule. 35

We agree with petitioner’s contention that the issue on the ambiguity of the CBA and its failure to
express the true intention of the parties has not been expressly raised before the voluntary
arbitration proceedings. The parties specifically confined the issue for resolution by the VA to whether
or not the petitioner is obliged to grant an increase to its employees as a matter of practice.
Respondent did not anchor its claim for an across-the-board wage increase under Wage Order No.
NCR-08 on the CBA. However, we note that it raised before the CA two issues, namely:

x x x whether or not the wage increase of P26.50 under Wage Order No. NCR-08 must be paid to the
union members as a matter of practice and whether or not parol evidence can be resorted to in
proving or explaining or elucidating the existence of a collateral agreement/company practice for the
payment of the wage increase under the wage order despite that the employees were already receiving
wages way above the minimum wage of P250.00/day as prescribed by Wage Order No. NCR-08 and
irrespective of whether wage distortion exists. 36

Petitioner, in its Comment on the petition, delved into these issues and elaborated on its contentions.
By so doing, it thereby agreed for the CA to take cognizance of such issues as defined by respondent
(petitioner therein). Moreover, a perusal of the records shows that the issue of whether or not the
CBA is ambiguous and does not reflect the true agreement of the parties was, in fact, raised before
the voluntary arbitration proceedings. Despite the submission agreement confining the issue to
whether petitioner was obliged to grant an increase pursuant to Wage Order No. NCR-08 as a matter
of practice, respondent Union nevertheless raised the same issues in its pleadings. In its Position
Paper, it asserted that the CBA consistently contained a collateral agreement to pay the equivalent of
the wage orders across-the-board; in its Reply, it claimed that such provision clearly provided that
petitioner would pay the additional increases apart from the CBA and that the wage order serves only
as a measure of said increase. These assertions indicate that respondent Union also relied on the
CBA to support its claim for the wage increase.
Central to the substantial issue is Article VI, Section I, of the CBA of the parties, dated September 23,
1999, viz:

SALARIES AND WAGE

Section 1. WAGE ADJUSTMENT – The COMPANY agrees to grant to all workers who are already
regular and covered by this AGREEMENT at the effectivity of this AGREEMENT a general wage
increase as follows:

July 1, 1999 ……. P15.00 per day per employee

July 1, 2000 ……. P25.00 per day per employee

July 1, 2001 ……. P 30.00 per day per employee

The aforesaid wage increase shall be implemented across the board. Any Wage Order to be
implemented by the Regional Tripartite Wage and Productivity Board shall be in addition to the wage
increase adverted to above. However, if no wage increase is given by the Wage Board within six (6)
months from the signing of this AGREEMENT, the Management is willing to give the following
increases, to wit:

July 1, 1999 ……. P 20.00 per day per employee

July 1, 2000 ……. P 25.00 per day per employee

July 1, 2001 …… P 30.00 per day per employee

The difference of the first year adjustment to retroact to July 1, 1999.

The across-the-board wage increase for the 4th and 5th year of this AGREEMENT shall be subject for
a reopening or renegotiation as provided for by Republic Act No. 6715. 37

On the other hand, Wage Order No. NCR-08 specifically provides that only those in the private sector
in the NCR receiving the prescribed daily minimum wage rate of P223.00 per day would receive an
increase of P26.50 a day, thereby setting the new minimum wage rate in said region to P250.00 per
day. There is no dispute that, when the order was issued, the lowest paid employee of petitioner was
receiving a wage higher than P250.00 a day. As such, its employees had no right to demand for an
increase under said order. As correctly ruled by the VA:

We now come to the core of this case. Is [petitioner] under an obligation to grant wage increase to its
workers under W.O. No. NCR-08 as a matter of practice? It is submitted that employers (unless
exempt) in Metro Manila (including the [petitioner]) are mandated to implement the said wage order
but limited to those entitled thereto. There is no legal basis to implement the same across-the-board.
A perusal of the record shows that the lowest paid employee before the implementation of Wage Order
#8 is P250.00/day and none was receiving below P223.50 minimum. This could only mean that the
union can no longer demand for any wage distortion adjustment. Neither could they insist for an
adjustment of P26.50 increase under Wage Order #8. The provision of wage order #8 and its
implementing rules are very clear as to who are entitled to the P26.50/day increase, i.e., "private
sector workers and employees in the National Capital Region receiving the prescribed daily minimum
wage rate of P223.50 shall receive an increase of Twenty-Six Pesos and Fifty Centavos (P26.50) per
day," and since the lowest paid is P250.00/day the company is not obliged to adjust the wages of the
workers.

With the above narration of facts and with the union not having effectively controverted the same, we
find no merit to the complainant’s assertion of such a company practice in the grant of wage order
increase applied across-the-board. The fact that it was shown the increases granted under the Wage
Orders were obtained thru request and negotiations because of the existence of wage distortion and
not as company practice as what the union would want.
Neither do we find merit in the argument that under the CBA, such increase should be implemented
across-the-board. The provision in the CBA that "Any Wage Order to be implemented by the Regional
Tripartite Wage and Productivity Board shall be in addition to the wage increase adverted above"
cannot be interpreted in support of an across-the-board increase. If such were the intentions of this
provision, then the company could have simply accepted the original demand of the union for such
across-the-board implementation, as set forth in their original proposal (Annex "2" union[‘]s counsel
proposal). The fact that the company rejected this proposal can only mean that it was never its
intention to agree, to such across-the-board implementation. Thus, the union will have to be
contented with the increase of P30.00 under the CBA which is due on July 31, 2001 barely a month
from now.38

The error of the CA lies in its considering only the CBA in interpreting the wage adjustment provision,
without taking into account Wage Order No. NCR-08, and the fact that the members of respondent
Union were already receiving salaries higher than P250.00 a day when it was issued. The CBA cannot
be considered independently of the wage order which respondent Union relied on for its claim.

Wage Order No. NCR-08 clearly states that only those employees receiving salaries below the
prescribed minimum wage are entitled to the wage increase provided therein, and not all employees
across-the-board as respondent Union would want petitioner to do. Considering therefore that none
of the members of respondent Union are receiving salaries below the P250.00 minimum wage,
petitioner is not obliged to grant the wage increase to them.

The ruling of the Court in Capitol Wireless, Inc. v. Bate 39 is instructive on how to construe a CBA vis-
à-vis a wage order. In that case, the company and the Union signed a CBA with a similar provision:
"[s]hould there be any government mandated wage increases and/or allowances, the same shall be
over and above the benefits herein granted."40 Thereafter, the Wage Board of the NCR issued several
wage orders providing for an across-the-board increase in the minimum wage of all employees in the
private sector. The company implemented the wage increases only to those employees covered by the
wage orders - those receiving not more than the minimum wage. The Union protested, contending
that, pursuant to said provision, any and all government-mandated increases in salaries and
allowance should be granted to all employees across-the-board. The Court held as follows:

x x x The wage orders did not grant across-the-board increases to all employees in the National
Capital Region but limited such increases only to those already receiving wage rates not more
than P125.00 per day under Wage Order Nos. NCR-01 and NCR-01-A and P142.00 per day under
Wage Order No. NCR-02. Since the wage orders specified who among the employees are entitled to the
statutory wage increases, then the increases applied only to those mentioned therein. The provisions
of the CBA should be read in harmony with the wage orders, whose benefits should be given only to
those employees covered thereby. (Emphasis added)41

In this case, as gleaned from the pleadings of the parties, respondent Union relied on a collateral
agreement between it and petitioner, an agreement extrinsic of the CBA based on an alleged
established practice of the latter as employer. The VA rejected this claim:

Complainant Pag-Asa Steel Workers Union additionally advances the arguments that "there exist a
collateral agreement to pay the equivalent of wage orders across the board or at least to negotiate how
much will be paid" and that "parol evidence is now applicable to show or explain what the unclean
provisions of the CBA means regarding wage adjustment." The respondent cites Article XXVII of the
CBA in effect, as follows:

"The parties acknowledged that during the negotiation which resulted in this AGREEMENT, each had
the unlimited right & opportunity to make demands, claims and proposals of every kind and nature
with respect to any subject or matter not removed by law from the Collective Bargaining and the
understanding and agreements arrived at by the parties after the exercise of that right & opportunity
are set forth in this AGREEMENT. Therefore, the COMPANY and the UNION, for the life of this
AGREEMENT, agrees that neither party shall not be obligated to bargain collectively with respect to
any subject matter not specifically referred to or covered in this AGREEMENT, and furthermore, that
each party voluntarily & unqualifiedly waives such right even though such subject may not have been
within the knowledge or contemplation of either or both of the parties at the time they signed this
AGREEMENT."

From the said CBA provision and upon an appreciation of the entire CBA, we find it to have more
than amply covered all aspects of the collective bargaining. To allow alleged collateral agreements or
parol/oral agreements would be violative of the CBA provision afore-quoted.42

We agree with petitioner’s contention that the rule excluding parol evidence to vary or contradict a
written agreement, does not extend so far as to preclude the admission of extrinsic evidence, to show
prior or contemporaneous collateral parol agreements between the parties. Such evidence may be
received regardless of whether or not the written agreement contains reference to such collateral
agreement.43 As the Court ruled in United Kimberly-Clark Employees Union, et al. v. Kimberly-Clark
Philippines, Inc.:44

A CBA is more than a contract; it is a generalized code to govern a myriad of cases which the
draftsmen cannot wholly anticipate. It covers the whole employment relationship and prescribes the
rights and duties of the parties. It is a system of industrial self-government with the grievance
machinery at the very heart of the system. The parties solve their problems by molding a system of
private law for all the problems which may arise and to provide for their solution in a way which will
generally accord with the variant needs and desires of the parties.

If the terms of a CBA are clear and have no doubt upon the intention of the contracting parties, the
literal meaning of its stipulation shall prevail. However, if, in a CBA, the parties stipulate that the
hirees must be presumed of employment qualification standards but fail to state such qualification
standards in said CBA, the VA may resort to evidence extrinsic of the CBA to determine the full
agreement intended by the parties. When a CBA may be expected to speak on a matter, but does not,
its sentence imports ambiguity on that subject. The VA is not merely to rely on the cold and cryptic
words on the face of the CBA but is mandated to discover the intention of the parties. Recognizing the
inability of the parties to anticipate or address all future problems, gaps may be left to be filled in by
reference to the practices of the industry, and the step which is equally a part of the CBA although
not expressed in it. In order to ascertain the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered. The VA may also consider and
rely upon negotiating and contractual history of the parties, evidence of past practices interpreting
ambiguous provisions. The VA has to examine such practices to determine the scope of their
agreement, as where the provision of the CBA has been loosely formulated. Moreover, the CBA must
be construed liberally rather than narrowly and technically and the Court must place a practical and
realistic construction upon it.45

However, just like any other fact, habits, customs, usage or patterns of conduct must be proved.
Thus was the ruling of the Court in Bank of Commerce v. Manalo, et al.: 46

Habit, custom, usage or pattern of conduct must be proved like any other facts. Courts must contend
with the caveat that, before they admit evidence of usage, of habit or pattern of conduct, the offering
party must establish the degree of specificity and frequency of uniform response that ensures more
than a mere tendency to act in a given manner but rather, conduct that is semi-automatic in nature.
The offering party must allege and prove specific, repetitive conduct that might constitute evidence of
habit. The examples offered in evidence to prove habit, or pattern of evidence must be numerous
enough to base on inference of systematic conduct. Mere similarity of contracts does not present the
kind of sufficiently similar circumstances to outweigh the danger of prejudice and confusion.

In determining whether the examples are numerous enough, and sufficiently regular, the key criteria
are adequacy of sampling and uniformity of response. After all, habit means a course of behavior of a
person regularly represented in like circumstances. It is only when examples offered to establish
pattern of conduct or habit are numerous enough to lose an inference of systematic conduct that
examples are admissible. The key criteria are adequacy of sampling and uniformity of response or
ratio of reaction to situations.

We have reviewed the records meticulously and find no evidence to prove that the grant of a wage-
order-mandated increase to all the employees regardless of their salary rates on an agreement
collateral to the CBA had ripened into company practice before the effectivity of Wage Order No. NCR-
08. Respondent Union failed to adduce proof on the salaries of the employees prior to the issuance of
each wage order to establish its allegation that, even if the employees were receiving salaries above
the minimum wage and there was no wage distortion, they were still granted salary increase. Only the
following lists of salaries of respondent Union’s members were presented in evidence: (1) before Wage
Order No. NCR-06 was issued; (2) after Wage Order No. NCR-06 was implemented; (3) after the grant
of the first year increase under the CBA; (4) after Wage Order No. NCR-07 was implemented; and (5)
after the second year increase in the CBA was implemented.

The list of the employees’ salaries before Wage Order No. NCR-06 was implemented belie respondent
Union’s claim that the wage-order-mandated increases were given to employees despite the fact that
they were receiving salaries above the minimum wage. This list proves that some employees were in
fact receiving salaries below the P198.00 minimum wage rate prescribed by the wage order — two
rank-and-file employees in particular. As petitioner explains, a wage distortion occurred as a result of
granting the increase to those employees who were receiving salaries below the prescribed minimum
wage. The wage distortion necessitated the upward adjustment of the salaries of the other employees
and not because it was a matter of company practice or usage. The situation of the employees before
Wage Order No. NCR-08, however, was different. Not one of the members of respondent Union was
then receiving less than P250.00 per day, the minimum wage requirement in said wage order.

The only instance when petitioner admittedly implemented a wage order despite the fact that the
employees were not receiving salaries below the minimum wage was under Wage Order No. NCR-07.
Petitioner, however, explains that it did so because it was agreed upon in the CBA that should a wage
increase be ordered within six months from its signing, petitioner would give the increase to the
employees in addition to the CBA-mandated increases. Respondent’s isolated act could hardly be
classified as a "company practice" or company usage that may be considered an enforceable
obligation.

Moreover, to ripen into a company practice that is demandable as a matter of right, the giving of the
increase should not be by reason of a strict legal or contractual obligation, but by reason of an act of
liberality on the part of the employer. Hence, even if the company continuously grants a wage
increase as mandated by a wage order or pursuant to a CBA, the same would not automatically ripen
into a company practice. In this case, petitioner granted the increase under Wage Order No. NCR-07
on its belief that it was obliged to do so under the CBA.

WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Court of Appeals
in CA-G.R. SP No. 65171 and Resolution dated January 11, 2005 are REVERSED and SET ASIDE.
The Decision of the Voluntary Arbitrator is REINSTATED. No costs.

SO ORDERED.

.R. No. 205453, February 05, 2014

UNITED TOURIST PROMOTIONS (UTP) AND ARIEL D. JERSEY, Petitioners, v. HARLAND B.

KEMPLIN, Respondents.
DECISION

REYES, J.:

United Tourist Promotions (UTP), a sole proprietorship business entity engaged in the printing and
distribution of promotional brochures and maps for tourists, and its registered owner, Ariel D. Jersey
(Jersey), are now before us with a Petition for Review on Certiorari1 filed under Rule 45 of the Rules of
Court to assail the Decision2 rendered by the Court of Appeals (CA) on June 29, 2012 and the
Resolution3 thereafter issued on January 16, 2013 in CA–G.R. SP No. 118971. The assailed decision
and resolution affirmed in toto the rulings of the Sixth Division of the National Labor Relations
Commission (NLRC) and Labor Arbiter Leandro M. Jose (LA Jose) finding that Harland B. Kemplin
(Kemplin) was illegally dismissed as President of UTP.

Antecedents

In 1995, Jersey, with the help of two American expatriates, Kemplin and the late Mike Dunne, formed
UTP.

In 2002, UTP employed Kemplin to be its President for a period of five years, to commence on March
1, 2002 and to end on March 1, 2007, “renewable for the same period, subject to new terms and
conditions”.4

Kemplin continued to render his services to UTP even after his fixed term contract of employment
expired. Records show that on May 12, 2009, Kemplin, signing as President of UTP, entered into
advertisement agreements with Pizza Hut and M. Lhuillier.5

On July 30, 2009,UTP’s legal counsel sent Kemplin a letter, 6 which, in part,
reads:chanRoblesvirtualLawlibrary

We would like to inform you that your Employment Contract had been expired since March 1,
2007 and never been renewed. So[,] it is clear [that] you are no longer [an] employee as President of
[UTP] considering the expiration of your employment contract. However, because of your past services
to our client’s company despite [the fact that] your service is no longer needed by his company[,] as
token[,] he tolerated you to come in the office [and] as such[,] you were given monthly commissions
with allowances.

But because of your inhuman treatment x x x [of] the rank and file employees[,] which caused great
damage and prejudices to the company as evidenced [by] those cases filed against you[,] specifically[:]
(1) x x x for Grave Oral [T]hreat pending for Preliminary Investigation, Pasay City Prosecutor’s
Office x x x[;] (2) x x x for Summary Deportation[,] BID, Pasay City Prosecutor’s Office; and (3) x
x x for Grave Coercion and Grave Threats, we had no other recourse but to give you this notice to
cease and desist from entering the premises of the main office[,] as well as the branch offices of [UTP]
from receipt hereof for the protection and safety of the company[,] as well as to the employees and to
avoid further great damages that you may cause to the company x x x. 7ChanRoblesVirtualawlibrary

On August 10, 2009, Kemplin filed before Regional Arbitration Branch No. 111 of the NLRC a
Complaint8 against UTP and its officers, namely, Jersey, Lorena Lindo 9 and Larry Jersey,10 for: (a)
illegal dismissal; (b) non–payment of salaries, 13th month and separation pay, and retirement
benefits; (c) payment of actual, moral and exemplary damages and monthly commission of
P200,0000.00; and (d) recovery of the company car, which was forcibly taken from him, personal
laptop, office paraphernalia and personal books.

In Kemplin’s Position Paper,11 which he filed before LA Jose, he claimed that even after the expiration
of his employment contract on March 1, 2007, he rendered his services as President and General
Manager of UTP. In December of 2008, he began examining the company’s finances, with the end in
mind of collecting from delinquent accounts of UTP’s distributors. After having noted some
accounting discrepancies, he sent e–mail messages to the other officers but he did not receive direct
replies to his queries. Subsequently, on July 30, 2009, he received a notice from UTP’s counsel
ordering him to cease and desist from entering the premises of UTP offices.

UTP, on its part, argued that the termination letter sent to Kemplin on July 30, 2009 was based on
(a) the expiration of the fixed term employment contract they had entered into, and (b) an employer’s
prerogative to terminate an employee, who commits criminal and illegal acts prejudicial to business.
UTP alleged that Kemplin bad–mouthed, treated his co–workers as third class citizens, and called
them “brown monkeys”. Kemplin’s presence in the premises of UTP was merely tolerated and he was
given allowances due to humanitarian considerations. 12

The LA’s Decision

On June 25, 2010, LA Jose rendered a Decision,13 the dispositive portion of which
reads:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the following findings are made:

1. [Kemplin] is found to be a regular employee;

2. [Kemplin] is adjudged to have been illegally dismissed even as [UTP and Jersey] are held liable
therefor;

3. Consequently, [UTP and Jersey] are ordered to reinstate [Kemplin] to his former position without
loss of seniority rights and other privileges, with backwages initially computed at this time at
[P]219,200.00;

4. The reinstatement aspect of this decision is immediately executory even as [UTP and Jersey] are
enjoined to submit a report of compliance therewith within ten (10) days from receipt hereof;

5. [UTP and Jersey] are further ordered to pay [Kemplin] his salary for July 2009 of [P]20,000.00 and
13th month pay for the year 2009 in the sum of [P]20,000.00;

6. [UTP and Jersey] are assessed 10% attorney’s fee of [P]25,920.00 in favor of [Kemplin].

All other claims are dismissed for lack of merit.

SO ORDERED.14ChanRoblesVirtualawlibrary

LA Jose’s ratiocinations are:chanRoblesvirtualLawlibrary

[Kemplin] was able to show that he was still officially connected with [UTP] as he signed in his
capacity as President of [UTP] an (sic) advertisement agreement[s] with Pizza Hut and M. Lhuillier
Phils. as late as May 12, 2009. This only goes to show that [UTP and Jersey’s] theory of toleration has
no basis in fact.

It would appear now, per record, that [Kemplin] was allowed to continue performing and suffered to
work much beyond the expiration of his contract. Such being the case, [Kemplin’s] fixed term
employment contract was converted to a regular one under Art. 280 of the Labor Code, as amended
(Viernes vs. NLRC, et al., G.R. No. 108405, April 4, 2003).
[Kemplin’s] tenure having now been converted to regular employment, he now enjoys security of
tenure under Art. 279 of the Labor Code, as amended. Simply put, [Kemplin] may only be dismissed
for cause and after affording him the procedural requirement of notice and hearing. Otherwise, his
dismissal will be illegal.

Be that as it may, [UTP and Jersey] proceeded to argue that [Kemplin] was not illegally terminated,
for his termination was according to Art. 282 of the Labor Code, as amended, i.e., loss of trust and
confidence allegedly for various and serious offenses x x x.

However, upon closer scrutiny, in trying to justify [Kemplin’s] dismissal on the ground of loss of trust
and confidence, [UTP and Jersey] failed to observe the procedural requirements of notice and hearing,
or more particularly, the two–notice rule. It would appear that [UTP and Jersey’s] x x x cease and
desist letter compressed the two notices in one. Besides, the various and serious offenses alluded
thereto were not legally established before [Kemplin’s] separation. Ostensibly, [Kemplin] was not
confronted with these offenses and given the opportunity to explain himself.

x x x [R]espondents miserably failed to discharge their onus probandi. Hence, illegal dismissal lies.

xxx

The claim for non–payment of salary for July 2009 appears to be meritorious for failure of [UTP and
Jersey] to prove payment thereof when they have the burden of proof to do so.

The same ruling applies to the claim for 13th month pay.

However, the claims for commissions, company car, laptop, office paraphernalia and personal books
may not be given due course for failure of [Kemplin] to provide the specifics of his claims and/or
sufficient basis thereof when the burden of proof is reposed in him. 15ChanRoblesVirtualawlibrary

The Decision of the NLRC

On January 21, 2011, the NLRC affirmed LA Jose’s Decision. 16 However, Lorena Lindo and Larry
Jersey were expressly excluded from assuming liability for lack of proof of their involvement in
Kemplin’s dismissal. The NLRC declared:chanRoblesvirtualLawlibrary

[A]fter the expiration of [Kemplin’s] fixed term employment, his employment from March 2, 2007 until
his separation therefrom on July 30, 2009 is classified as regular pursuant to the provisions of
Article 280 of the Labor Code, to wit:chanRoblesvirtualLawlibrary

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 service to be
performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph:

Provided, That any employee who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with respect to the activity in which he
is employed and his employment shall continue while such activity exists.

The aforesaid Article 280 of the Labor Code, as amended, classifies employees into three (3)
categories, namely: (1) regular employees or those whose work is necessary or desirable to the usual
business of the employer; (2) project employees or those whose 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 [are] seasonal
in nature and the employment is for the duration of the season; and (3) casual employees or those
who are neither regular nor project employees. Regular employees are further classified into: (1)
regular employees by nature of work; and (2) regular employees by years of service. The former refers
to those employees who perform a particular activity which is necessary or desirable in the usual
business or trade of the employer, regardless of their length of service; while the latter refers to those
employees who have been performing the job, regardless of the nature thereof, for at least a year.
(Rowell Industrial Corporation vs. Court of Appeals, G.R. No. 167714, March 7, 2007)

Considering that he continued working as President for UTP for about one (1) year and five (5)
months and since [his] employment is not covered by another fixed term employment contract,
[Kemplin’s] employment after the expiration of his fixed term employment is already regular.
Therefore, he is guaranteed security of tenure and can only be removed from service for cause and
after compliance with due process. This is notwithstanding [UTP and Jersey’s] insistence that they
merely tolerated [Kemplin’s] “consultancy” for humanitarian reasons.

In termination cases, the employer bears the burden of proving that the dismissal of the employee is
for a just or an authorized cause. Failure to dispose of the burden would imply that the dismissal is
not lawful, and that the employee is entitled to reinstatement, back wages and accruing benefits.
Moreover, dismissed employees are not required to prove their innocence of the employer’s
accusations against them. (San Miguel Corporation vs. National Labor Relations Commission and
William L. Friend, Jr., G.R. No. 153983, May 26, 2009).

In this case, [UTP and Jersey] failed to prove the existence of just cause for his termination. Their
allegation of loss of trust and confidence was raised only in their position paper and was never posed
before [Kemplin] in order that he may be able to answer to the charge. In fact, he was merely told to
cease and desist from entering the premises. He was never afforded due process as he was not
notified of the charges against him and given the opportunity to be heard. Thus, there was never any
proven just cause for [Kemplin’s] termination, which makes it, therefore, illegal. x x x. 17 (Underscoring
supplied)chanroblesvirtualawlibrary

The CA’s Decision

On June 29, 2012, the CA rendered the herein assailed Decision 18 affirming the disquisitions of the
LA and NLRC. The CA stated that:chanRoblesvirtualLawlibrary

[Kemplin’s] presence for humanitarian reasons is purely self–serving and belied by the evidence on
record. In fact, [UTP and Jersey’s] alleged document denominated as Revocation of Power of
Attorney (executed on November 24, 2008 or MORE THAN one year from the expiration of [Kemplin’s]
employment contract) will only confirm that [Kemplin] continued rendering work x x x beyond March
1, 2007. x x x.

xxx

Moreover, if indeed [Kemplin’s] relationship with UTP after the expiration of the former’s employment
contract was based on [UTP and Jersey’s] mere tolerance, why then did [they] have to “dismiss”
[Kemplin] based on alleged loss of trust and confidence? Clearly, [UTP’s and Jersey’s] allegation in
their Position Paper (before LA Jose) that [Kemplin] was “formally given notice of his termination as
in [sic] indicated on the Notice of Termination Letter dated July 20, 2009,” is already an indication, if
not an admission, that [Kemplin] was, indeed, still in the employ of UTP albeit without a new or
renewed contract of employment.
xxx

The validity of an employer’s dismissal from service hinges on the satisfaction of the two substantive
requirements for a lawful termination. x x x [T]he procedural aspect. And x x x the substantive
aspect.

Records are bereft of any evidence that [Kemplin] was notified of the alleged causes for his possible
dismissal. Neither was there any notice sent to him to afford him an opportunity to air his side and
defenses. The alleged Notice of Termination Letter sent by [UTP and Jersey] miserably failed to comply
with the twin–notice requirement under the law. x x x

xxx

We likewise sustain the finding of the [NLRC] that [UTP and Jersey] failed to prove the existence of
just cause for [Kemplin’s] termination. [UTP and Jersey’s] allegation of loss of trust and confidence
was raised only in their Position Paper and was never posed before [Kemplin] in order that he may be
able to answer to the charge. It is a basic principle that in illegal dismissal cases, the burden of proof
rests upon the employer to show that the dismissal of the employee is for a just cause and failure to
do so would necessarily mean that the dismissal is not justified. 19 (Citations
omitted)chanroblesvirtualawlibrary

On January 16, 2013, the CA issued the herein assailed Resolution 20 denying UTP and Jersey’s
Motion for Reconsideration.21

Hence, the instant petition anchored on the following issues:

Whether or not the CA erred when it:

(a) ruled that the termination of [Kemplin] was invalid or unjust;

(b) invalidated the termination of [Kemplin] for [UTP and Jersey’s] failure to afford him due process of
law;

(c) stated that the issue [of] “loss of trust and confidence” cannot be raised for the first time on
appeal; and

(d) failed to apply the doctrine of strained relations in lieu of reinstatement.22

UTP and Jersey’s Allegations

In support of the instant petition, UTP and Jersey reiterate their averments in the proceedings below.
They likewise emphasize that Kemplin is a fugitive from justice since warrants of arrest for grave oral
defamation and grave coercion23 had been issued against him by the Metropolitan Trial Court (MTC)
of Pasay City, and for qualified theft by the Regional Trial Court (RTC) of Angeles City. Kemplin’s co–
workers likewise complained about his alleged improprieties, lack of proper decorum, immorality and
grave misconduct. Kemplin also blocked UTP’s website and diverted all links towards his own site.
Consequently, UTP lost both its customers and revenues. UTP, then, as an employer, has the right to
exercise its management prerogative of terminating Kemplin, who has been committing acts inimical
to business.24

Further, citing Wenphil Corporation v. National Labor Relations Commission,25 UTP and Jersey argue
that even if it were to be assumed that procedural due process was not observed in terminating
Kemplin, still, the dismissal due to just cause should not be invalidated. Instead, a fine should just
be imposed as indemnity.26

UTP and Jersey also challenge the CA’s holding that the court need not resolve the issue of loss of
trust and confidence since it was only belatedly raised in the Position Paper filed before the LA. It is
argued that the issue was timely raised before the proper forum and Kemplin had all the opportunity
to contradict the charges against him, but he chose not to do so.27

UTP and Jersey likewise posit that a strained relationship between them and Kemplin had arisen due
to the several criminal and civil cases they had filed and which are now pending against the latter.
Hence, even if the CA were correct in holding that there was illegal dismissal, Kemplin’s
reinstatement is not advisable, practical and viable. A separation pay should just be paid instead. 28

Kemplin’s Comment

In Kemplin’s Comment,29 he sought the dismissal of the instant petition.

He insists that both procedural and substantive due process were absent when he was dismissed
from service. Kemplin alleges that Jersey merely want to wrest the business away after the former
initiated new checking and collection procedures relative to UTP’s finances. Kemplin also laments
that Jersey caused him to answer for baseless criminal offenses, for which no bail can be posted.
Specifically, the indictment for qualified theft before the RTC of Angeles City involves a car registered
in UTP’s name, but which was actually purchased using Kemplin’s money. 30

Kemplin further emphasizes that “the doctrine of strained relations should not be applied
indiscriminately,”31 especially where “the differences of the employer with the employee are neither
personal nor physical[,] much less serious in nature[.]”32

This Court’s Ruling

The instant petition is partially meritorious.

The first two issues raised are factual in nature, hence, beyond the ambit of a petition filed
under Rule 45 of the Rules of Court.

It is settled that Rule 45 limits us merely to the review of questions of law raised against the assailed
CA decision.33 The Court is generally bound by the CA’s factual findings, except only in some
instances, among which is, when the said findings are contrary to those of the trial court or
administrative body exercising quasi–judicial functions from which the action originated.34

In the case before us now, the LA, NLRC and CA uniformly ruled that Kemplin was
dismissed sans substantive and procedural due process. While we need not belabor the first two
factual issues presented herein, it bears stressing that we find the rulings of the appellate court and
the labor tribunals as amply supported by substantial evidence.

Specifically, we note the advertisement agreements35 with Pizza Hut and M. Lhuillier entered into by
Kemplin, who signed the documents as President of UTP on May 12, 2009, or more than two years
after the supposed expiration of his employment contract. They validate Kemplin’s claim that he,
indeed, continued to render his services as President of UTP well beyond March 2, 2007.

Moreover, in the letter36 dated July 30, 2009,Kemplin was ordered to cease and desist from entering
the premises of UTP.
In Unilever Philippines, Inc. v. Maria Ruby M. Rivera,37 the Court laid down in detail the steps on how
to comply with procedural due process in terminating an employee, viz:chanRoblesvirtualLawlibrary

(1) The first written notice to be served on the employees should contain the specific causes or
grounds for termination against them, and a directive that the employees are given the opportunity to
submit their written explanation within a reasonable period. “Reasonable opportunity” under the
Omnibus Rules means every kind of assistance that management must accord to the employees to
enable them to prepare adequately for their defense. This should be construed as a period of at least
five (5) calendar days from receipt of the notice to give the employees an opportunity to study the
accusation against them, consult a union official or lawyer, gather data and evidence, and decide on
the defenses they will raise against the complaint. Moreover, in order to enable the employees to
intelligently prepare their explanation and defenses, the notice should contain a detailed narration of
the facts and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being charged
against the employees.

(2) After serving the first notice, the employers should schedule and conduct
a hearing or conference wherein the employees will be given the opportunity to: (1) explain and
clarify their defenses to the charge against them; (2) present evidence in support of their defenses;
and (3) rebut the evidence presented against them by the management. During the hearing or
conference, the employees are given the chance to defend themselves personally, with the assistance
of a representative or counsel of their choice. Moreover, this conference or hearing could be used by
the parties as an opportunity to come to an amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve the
employees a written notice of termination indicating that: (1) all circumstances involving the
charge against the employees have been considered; and (2) grounds have been established to justify
the severance of their employment. (Underlining ours) 38ChanRoblesVirtualawlibrary

Prescinding from the above, UTP’s letter sent to Kemplin on July 30, 2009 is a lame attempt to
comply with the twin notice requirement provided for in Section 2, Rule XXIII, Book V of the Rules
Implementing the Labor Code.39

The charges against Kemplin were not clearly specified. While the letter stated that Kemplin’s
employment contract had expired, it likewise made general references to alleged criminal suits filed
against him.40 One who reads the letter is inevitably bound to ask if Kemplin is being terminated due
to the expiration of his contract, or by reason of the pendency of suits filed against him. Anent the
pendency of criminal suits, the statement is substantially bare. Besides, an employee’s guilt or
innocence in a criminal case is not determinative of the existence of a just or authorized cause for his
dismissal.41 The pendency of a criminal suit against an employee, does not, by itself, sufficiently
establish a ground for an employer to terminate the former.

It also bears stressing that the letter failed to categorically indicate which of the policies of UTP did
Kemplin violate to warrant his dismissal from service. Further, Kemplin was never given the chance
to refute the charges against him as no hearing and investigation were conducted. Corollarily, in the
absence of a hearing and investigation, the existence of just cause to terminate Kemplin could not
have been sufficiently established.

Kemplin should have been promptly apprised of the issue of loss of trust and confidence in
him before and not after he was already dismissed.

UTP and Jersey challenge the CA’s disquisition that it need not resolve the issue of loss of trust and
confidence considering that the same was only raised in the Position Paper which they filed before LA
Jose.

UTP and Jersey’s stance is untenable.

In Lawrence v. National Labor Relations Commission,42 the Court is emphatic

that:chanRoblesvirtualLawlibrary

Considering that Lawrence has already been fired, the belated act of LEP in attempting to show a just
cause in lieu of a nebulous one cannot be given a semblance of legality. The legal requirements of
notice and hearing cannot be supplanted by the notice and hearing in labor proceedings. The due
process requirement in the dismissal process is different from the due process requirement in labor
proceedings and both requirements must be separately observed x x x. Thus, LEP’s method of “Fire
the employee and let him explain later” is obviously not in accord with the mandates of law. x x
x.43ChanRoblesVirtualawlibrary

Clearly then, UTP was not exempted from notifying Kemplin of the charges against him. The fact that
Kemplin was apprised of his supposed offenses, through the Position Paper filed by UTP and Jersey
before LA Jose, did not cure the defects attending his dismissal from employment.

While we agree with the LA, NLRC and CA’s findings that Kemplin was illegally dismissed,
grounds exist compelling us to modify the order of reinstatement and payment of 13 th month
benefit.

UTP and Jersey lament that the CA failed to apply the doctrine of strained relations to justify the
award of separation pay in lieu of reinstatement.

APO Chemical Manufacturing Corporation v. Bides 44 is instructive anent the instances when
separation pay and not reinstatement shall be ordered. Thus:chanRoblesvirtualLawlibrary

The Court is well aware that reinstatement is the rule and, for the exception of “strained relations” to
apply, it should be proved that it is likely that, if reinstated, an atmosphere of antipathy and
antagonism would be generated as to adversely affect the efficiency and productivity of the employee
concerned.

Under the doctrine of strained relations, the payment of separation pay is considered an acceptable
alternative to reinstatement when the latter option is no longer desirable or viable. On one hand,
such payment liberates the employee from what could be a highly oppressive work environment. On
the other hand, it releases the employer from the grossly unpalatable obligation of maintaining in its
employ a worker it could no longer trust. Moreover, the doctrine of strained relations has been made
applicable to cases where the employee decides not to be reinstated and demands for separation
pay.45 (Citations omitted)chanroblesvirtualawlibrary

Considering that Kemplin’s dismissal occurred in 2009, there is much room to doubt the viability,
desirability and practicability of his reinstatement as UTP’s President. Besides, as a consequence of
the unsavory accusations hurled by the contending parties against each other, Kemplin’s
reinstatement is not likely to create an efficient and productive work environment, hence, prejudicial
to business and all the persons concerned.

We likewise find the award of 13th month benefit to Kemplin as improper.

In Torres v. Rural Bank of San Juan, Inc.,46 we stated that:chanRoblesvirtualLawlibrary

Being a managerial employee, the petitioner is not entitled to 13th month pay. Pursuant to
Memorandum Order No. 28, as implemented by the Revised Guidelines on the Implementation of the
13th Month Pay Law dated November 16, 1987, managerial employees are exempt from receiving such
benefit without prejudice to the granting of other bonuses, in lieu of the 13th month pay, to
managerial employees upon the employer’s discretion. 47 (Citation omitted)chanroblesvirtualawlibrary

Hence, Kemplin, who had rendered his services as UTP’s President, a managerial position, is clearly
not entitled to be paid the 13th month benefit.

WHEREFORE, the instant petition is PARTIALLY GRANTED. The Decision on June 29, 2012 and
the Resolution thereafter issued on January 16, 2013 rendered by the Court of Appeals in CA–G.R.
SP No. 118971 finding that Harland B. Kemplin was illegally dismissed are AFFIRMED with
MODIFICATIONS. The award to Harland B. Kemplin of a 13th month benefit is hereby DELETED.
In lieu of his reinstatement, he is AWARDED SEPARATION PAY to be computed at the rate of one (1)
month pay for every year of service, with a fraction of at least six (6) months considered as one whole
year to be reckoned from the time of his employment on March 1, 2002 until the finality of this
Decision.48United Tourist Promotions and Ariel D. Jersey are further ORDERED TO PAY Harland
B. Kemplin legal interest of six percent (6%) per annum of the total monetary awards computed from
the finality of this Decision until full satisfaction thereof. 49

The Labor Arbiter is hereby DIRECTED to re–compute the awards according to the above.

SO ORDERED.

G.R. No. 195466, July 02, 2014

ARIEL L. DAVID, DOING BUSINESS UNDER THE NAME AND STYLE “YIELS HOG DEALER,”
PETITIONER, VS. JOHN G. MACASIO, Respondent.

DECISION

BRION, J.:

We resolve in this petition for review on certiorari1 the challenge to the November 22, 2010
decision2 and the January 31, 2011 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No.
116003. The CA decision annulled and set aside the May 26, 2010 decision4 of the National Labor
Relations Commission (NLRC)5 which, in turn, affirmed the April 30, 2009 decision 6 of the Labor
Arbiter (LA). The LA’s decision dismissed respondent John G. Macasio’s monetary claims.

The Factual Antecedents

In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L. David, doing
business under the name and style “Yiels Hog Dealer,” for non-payment of overtime pay, holiday
pay and 13th month pay. He also claimed payment for moral and exemplary
damages and attorney’s fees. Macasio also claimed payment for service incentive leave (SIL).8

Macasio alleged9 before the LA that he had been working as a butcher for David since January 6,
1995. Macasio claimed that David exercised effective control and supervision over his work, pointing
out that David: (1) set the work day, reporting time and hogs to be chopped, as well as the manner by
which he was to perform his work; (2) daily paid his salary of P700.00, which was increased from
P600.00 in 2007, P500.00 in 2006 and P400.00 in 2005; and (3) approved and disapproved his
leaves. Macasio added that David owned the hogs delivered for chopping, as well as the work tools
and implements; the latter also rented the workplace. Macasio further claimed that David employs
about twenty-five (25) butchers and delivery drivers.
In his defense,10 David claimed that he started his hog dealer business in 2005 and that he only has
ten employees. He alleged that he hired Macasio as a butcher or chopper on “pakyaw” or task basis
who is, therefore, not entitled to overtime pay, holiday pay and 13 th month pay pursuant to the
provisions of the Implementing Rules and Regulations (IRR) of the Labor Code. David pointed out
that Macasio: (1) usually starts his work at 10:00 p.m. and ends at 2:00 a.m. of the following day or
earlier, depending on the volume of the delivered hogs; (2) received the fixed amount of P700.00 per
engagement, regardless of the actual number of hours that he spent chopping the delivered hogs; and
(3) was not engaged to report for work and, accordingly, did not receive any fee when no hogs were
delivered.

Macasio disputed David’s allegations.11 He argued that, first, David did not start his business only in
2005. He pointed to the Certificate of Employment12 that David issued in his favor which placed the
date of his employment, albeit erroneously, in January 2000. Second, he reported for work every day
which the payroll or time record could have easily proved had David submitted them in evidence.

Refuting Macasio’s submissions,13 David claims that Macasio was not his employee as he hired the
latter on “pakyaw” or task basis. He also claimed that he issued the Certificate of Employment, upon
Macasio’s request, only for overseas employment purposes. He pointed to the “Pinagsamang
Sinumpaang Salaysay,”14 executed by Presbitero Solano and Christopher (Antonio Macasio’s co-
butchers), to corroborate his claims.

In the April 30, 2009 decision,15 the LA dismissed Macasio’s complaint for lack of merit. The LA gave
credence to David’s claim that he engaged Macasio on “pakyaw” or task basis. The LA noted the
following facts to support this finding: (1) Macasio received the fixed amount of P700.00 for every
work done, regardless of the number of hours that he spent in completing the task and of the volume
or number of hogs that he had to chop per engagement; (2) Macasio usually worked for only four
hours, beginning from 10:00 p.m. up to 2:00 a.m. of the following day; and (3) the P700.00 fixed wage
far exceeds the then prevailing daily minimum wage of P382.00. The LA added that the nature of
David’s business as hog dealer supports this “pakyaw” or task basis arrangement.

The LA concluded that as Macasio was engaged on “pakyaw” or task basis, he is not entitled to
overtime, holiday, SIL and 13th month pay.

The NLRC’s Ruling

In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling. 17 The NLRC observed that David did
not require Macasio to observe an eight-hour work schedule to earn the fixed P700.00 wage; and that
Macasio had been performing a non-time work, pointing out that Macasio was paid a fixed amount
for the completion of the assigned task, irrespective of the time consumed in its performance. Since
Macasio was paid by result and not in terms of the time that he spent in the workplace, Macasio is
not covered by the Labor Standards laws on overtime, SIL and holiday pay, and 13 th month pay
under the Rules and Regulations Implementing the 13th month pay law. 18

Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11, 2010
resolution,20 prompting Macasio to elevate his case to the CA via a petition for certiorari.21

The CA’s Ruling

In its November 22, 2010 decision, 22 the CA partly granted Macasio’s certiorari petition and reversed
the NLRC’s ruling for having been rendered with grave abuse of discretion.

While the CA agreed with the LA and the NLRC that Macasio was a task basis employee, it
nevertheless found Macasio entitled to his monetary claims following the doctrine laid down
in Serrano v. Severino Santos Transit. 23 The CA explained that as a task basis employee, Macasio is
excluded from the coverage of holiday, SIL and 13th month pay only if he is likewise a “field
personnel.” As defined by the Labor Code, a “field personnel” is one who performs the work away from
the office or place of work and whose regular work hours cannot be determined with reasonable
certainty. In Macasio’s case, the elements that characterize a “field personnel” are evidently lacking
as he had been working as a butcher at David’s “Yiels Hog Dealer” business in Sta. Mesa, Manila
under David’s supervision and control, and for a fixed working schedule that starts at 10:00 p.m.

Accordingly, the CA awarded Macasio’s claim for holiday, SIL and 13 th month pay for three years,
with 10% attorney’s fees on the total monetary award. The CA, however, denied Macasio’s claim for
moral and exemplary damages for lack of basis.

David filed the present petition after the CA denied his motion for reconsideration 24 in the CA’s
January 31, 2011 resolution.25

The Petition

In this petition,26 David maintains that Macasio’s engagement was on a “pakyaw” or task
basis. Hence, the latter is excluded from the coverage of holiday, SIL and 13 th month pay.

David reiterates his submissions before the lower tribunals 27 and adds that he never had any control
over the manner by which Macasio performed his work and he simply looked on to the “end-
result.” He also contends that he never compelled Macasio to report for work and that under their
arrangement, Macasio was at liberty to choose whether to report for work or not as other butchers
could carry out his tasks. He points out that Solano and Antonio had, in fact, attested to their (David
and Macasio’s) established “pakyawan” arrangement that rendered a written contract unnecessary.
In as much as Macasio is a task basis employee – who is paid the fixed amount of P700.00 per
engagement regardless of the time consumed in the performance – David argues that Macasio is not
entitled to the benefits he claims. Also, he posits that because he engaged Macasio on “pakyaw” or
task basis then no employer-employee relationship exists between them.

Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality
especially when, as in this case, they are supported by substantial evidence. Hence, David posits
that the CA erred in reversing the labor tribunals’ findings and granting the prayed monetary claims.

The Case for the Respondent

Macasio counters that he was not a task basis employee or a “field personnel” as David would have
this Court believe.28 He reiterates his arguments before the lower tribunals and adds that, contrary to
David’s position, the P700.00 fee that he was paid for each day that he reported for work does not
indicate a “pakyaw” or task basis employment as this amount was paid daily, regardless of the
number or pieces of hogs that he had to chop. Rather, it indicates a daily-wage method of payment
and affirms his regular employment status. He points out that David did not allege or present any
evidence as regards the quota or number of hogs that he had to chop as basis for the “pakyaw” or
task basis payment; neither did David present the time record or payroll to prove that he worked for
less than eight hours each day. Moreover, David did not present any contract to prove that his
employment was on task basis. As David failed to prove the alleged task basis or “pakyawan”
agreement, Macasio concludes that he was David’s employee.

Procedurally, Macasio points out that David’s submissions in the present petition raise purely factual
issues that are not proper for a petition for review on certiorari. These issues – whether he (Macasio)
was paid by result or on “pakyaw” basis; whether he was a “field personnel”; whether an employer-
employee relationship existed between him and David; and whether David exercised control and
supervision over his work – are all factual in nature and are, therefore, proscribed in a Rule 45
petition. He argues that the CA’s factual findings bind this Court, absent a showing that such
findings are not supported by the evidence or the CA’s judgment was based on a misapprehension of
facts. He adds that the issue of whether an employer-employee relationship existed between him and
David had already been settled by the LA29 and the NLRC30 (as well as by the CA per Macasio’s
manifestation before this Court dated November 15, 2012), 31 in his favor, in the separate illegal case
that he filed against David.

The Issue

The issue revolves around the proper application and interpretation of the labor law provisions on
holiday, SIL and 13th month pay to a worker engaged on “pakyaw” or task basis. In the context of
the Rule 65 petition before the CA, the issue is whether the CA correctly found the NLRC in grave
abuse of discretion in ruling that Macasio is entitled to these labor standards benefits.

The Court’s Ruling

We partially grant the petition.

Preliminary considerations: the

Montoya ruling and the factual-
issue-bar rule

In this Rule 45 petition for review on certiorari of the CA’s decision rendered under a Rule 65
proceeding, this Court’s power of review is limited to resolving matters pertaining to any perceived
legal errors that the CA may have committed in issuing the assailed decision. This is in contrast with
the review for jurisdictional errors, which we undertake in an original certiorari action. In reviewing
the legal correctness of the CA decision, we examine the CA decision based on how it determined the
presence or absence of grave abuse of discretion in the NLRC decision before it and not on the basis
of whether the NLRC decision on the merits of the case was correct. 32 In other words, we have to be
keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it.33

Moreover, the Court’s power in a Rule 45 petition limits us to a review of questions of law raised
against the assailed CA decision. 34

In this petition, David essentially asks the question – whether Macasio is entitled to holiday, SIL and
13th month pay. This one is a question of law. The determination of this question of law however is
intertwined with the largely factual issue of whether Macasio falls within the rule on entitlement to
these claims or within the exception. In either case, the resolution of this factual issue presupposes
another factual matter, that is, the presence of an employer-employee relationship between David and
Macasio.

In insisting before this Court that Macasio was not his employee, David argues that he engaged the
latter on “pakyaw” or task basis. Very noticeably, David confuses engagement on “pakyaw” or task
basis with the lack of employment relationship. Impliedly, David asserts that their “pakyawan” or
task basis arrangement negates the existence of employment relationship.

At the outset, we reject this assertion of the petitioner. Engagement on “pakyaw” or task basis does
not characterize the relationship that may exist between the parties, i.e., whether one of employment
or independent contractorship. Article 97(6) of the Labor Code defines wages as “xxx
the remuneration or earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for services rendered or
to be rendered[.]”35 In relation to Article 97(6), Article 10136 of the Labor Code speaks of workers paid
by results or those whose pay is calculated in terms of the quantity or quality of their work output
which includes “pakyaw” work and other non-time work.

More importantly, by implicitly arguing that his engagement of Macasio on “pakyaw” or task basis
negates employer-employee relationship, David would want the Court to engage on a factual appellate
review of the entire case to determine the presence or existence of that relationship. This approach
however is not authorized under a Rule 45 petition for review of the CA decision rendered under a
Rule 65 proceeding.

First, the LA and the NLRC denied Macasio’s claim not because of the absence of an employer-
employee but because of its finding that since Macasio is paid on pakyaw or task basis, then he is
not entitled to SIL, holiday and 13th month pay. Second, we consider it crucial, that in the separate
illegal dismissal case Macasio filed with the LA, the LA, the NLRC and the CA uniformly found the
existence of an employer-employee relationship.37

In other words, aside from being factual in nature, the existence of an employer-employee
relationship is in fact a non-issue in this case. To reiterate, in deciding a Rule 45 petition for review of
a labor decision rendered by the CA under 65, the narrow scope of inquiry is whether the CA
correctly determined the presence or absence of grave abuse of discretion on the part of the NLRC. In
concrete question form, “did the NLRC gravely abuse its discretion in denying Macasio’s claims
simply because he is paid on a non-time basis?”

At any rate, even if we indulge the petitioner, we find his claim that no employer-employee
relationship exists baseless. Employing the control test, 38 we find that such a relationship exist in the
present case.

Even a factual review shows that

Macasio is David’s employee

To determine the existence of an employer-employee relationship, four elements generally need to be

considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the power to control the employee’s conduct. These elements or
indicators comprise the so-called “four-fold” test of employment relationship. Macasio’s relationship
with David satisfies this test.

First, David engaged the services of Macasio, thus satisfying the element of “selection and
engagement of the employee.” David categorically confirmed this fact when, in his “Sinumpaang
Salaysay,” he stated that “nag apply po siya sa akin at kinuha ko siya na chopper[.]”39 Also, Solano
and Antonio stated in their “Pinagsamang Sinumpaang Salaysay”40 that “[k]ami po ay nagtratrabaho
sa Yiels xxx na pag-aari ni Ariel David bilang butcher” and “kilala namin si xxx Macasio na isa ring
butcher xxx ni xxx David at kasama namin siya sa aming trabaho.”

Second, David paid Macasio’s wages. Both David and Macasio categorically stated in their respective
pleadings before the lower tribunals and even before this Court that the former had been paying the
latter P700.00 each day after the latter had finished the day’s task. Solano and Antonio also
confirmed this fact of wage payment in their “Pinagsamang Sinumpaang Salaysay.”41 This satisfies
the element of “payment of wages.”
Third, David had been setting the day and time when Macasio should report for work. This power to
determine the work schedule obviously implies power of control. By having the power to control
Macasio’s work schedule, David could regulate Macasio’s work and could even refuse to give him any
assignment, thereby effectively dismissing him.

And fourth, David had the right and power to control and supervise Macasio’s work as to the means
and methods of performing it. In addition to setting the day and time when Macasio should report for
work, the established facts show that David rents the place where Macasio had been performing his
tasks. Moreover, Macasio would leave the workplace only after he had finished chopping all of the hog
meats given to him for the day’s task. Also, David would still engage Macasio’s services and have him
report for work even during the days when only few hogs were delivered for butchering.

Under this overall setup, all those working for David, including Macasio, could naturally be expected
to observe certain rules and requirements and David would necessarily exercise some degree of
control as the chopping of the hog meats would be subject to his specifications. Also, since Macasio
performed his tasks at David’s workplace, David could easily exercise control and supervision over
the former. Accordingly, whether or not David actually exercised this right or power to control is
beside the point as the law simply requires the existence of this power to control 4243 or, as in this
case, the existence of the right and opportunity to control and supervise Macasio.44

In sum, the totality of the surrounding circumstances of the present case sufficiently points to an
employer-employee relationship existing between David and Macasio.

Macasio is engaged on “pakyaw” or task basis

At this point, we note that all three tribunals – the LA, the NLRC and the CA – found that Macasio
was engaged or paid on “pakyaw” or task basis. This factual finding binds the Court under the rule
that factual findings of labor tribunals when supported by the established facts and in accord with
the laws, especially when affirmed by the CA, is binding on this Court.

A distinguishing characteristic of “pakyaw” or task basis engagement, as opposed to straight-hour

wage payment, is the non-consideration of the time spent in working. In a task-basis work, the
emphasis is on the task itself, in the sense that payment is reckoned in terms of completion of the
work, not in terms of the number of time spent in the completion of work. 45 Once the work or task is
completed, the worker receives a fixed amount as wage, without regard to the standard
measurements of time generally used in pay computation.

In Macasio’s case, the established facts show that he would usually start his work at 10:00
p.m. Thereafter, regardless of the total hours that he spent at the workplace or of the total number of
the hogs assigned to him for chopping, Macasio would receive the fixed amount of P700.00 once he
had completed his task. Clearly, these circumstances show a “pakyaw” or task basis engagement
that all three tribunals uniformly found.

In sum, the existence of employment relationship between the parties is determined by applying the
“four-fold” test; engagement on “pakyaw” or task basis does not determine the parties’ relationship as
it is simply a method of pay computation. Accordingly, Macasio is David’s employee, albeit engaged
on “pakyaw” or task basis.

As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether
Macasio is entitled to holiday, 13th month, and SIL pay.

On the issue of Macasio’s

entitlement to holiday, SIL
and 13th month pay

The LA dismissed Macasio’s claims pursuant to Article 94 of the Labor Code in relation to Section 1,
Rule IV of the IRR of the Labor Code, and Article 95 of the Labor Code, as well as Presidential Decree
(PD) No. 851. The NLRC, on the other hand, relied on Article 82 of the Labor Code and the Rules and
Regulations Implementing PD No. 851. Uniformly, these provisions exempt workers paid on
“pakyaw” or task basis from the coverage of holiday, SIL and 13th month pay.

In reversing the labor tribunals’ rulings, the CA similarly relied on these provisions, as well as on
Section 1, Rule V of the IRR of the Labor Code and the Court’s ruling in Serrano v. Severino Santos
Transit.46 These labor law provisions, when read together with the Serrano ruling, exempt those
engaged on “pakyaw” or task basis only if they qualify as “field personnel.”

In other words, what we have before us is largely a question of law regarding the correct
interpretation of these labor code provisions and the implementing rules; although, to conclude that
the worker is exempted or covered depends on the facts and in this sense, is a question of fact: first,
whether Macasio is a “field personnel”; and second, whether those engaged on “pakyaw” or task
basis, but who are not “field personnel,” are exempted from the coverage of holiday, SIL and 13th
month pay.

To put our discussion within the perspective of a Rule 45 petition for review of a CA decision rendered
under Rule 65 and framed in question form, the legal question is whether the CA correctly ruled that
it was grave abuse of discretion on the part of the NLRC to deny Macasio’s monetary claims simply
because he is paid on a non-time basis without determining whether he is a field personnel or not.

To resolve these issues, we need to re-visit the provisions involved.

Provisions governing SIL and holiday pay

Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the Labor
Code - provisions governing working conditions and rest periods.

Art. 82. Coverage. — The provisions of [Title I] 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.

xxxx

“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. [emphases and underscores ours]

Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor Code)
and SIL pay (under Article 95 of the Labor Code). Under Article 82, “field personnel” on one hand and
“workers who are paid by results” on the other hand, are not covered by the Title I provisions. The
wordings of Article 82 of the Labor Code additionally categorize workers “paid by results” and “field
personnel” as separate and distinct types of employees who are exempted from the Title I provisions
of the Labor Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the
IRR47 reads:chanroblesvirtuallawlibrary

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 (10) workers[.]
[emphasis ours]

xxxx

SECTION 1. Coverage. – This Rule shall apply to all employees except:

xxxx

(e) Field personnel and other employees whose time and performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely commission basis,
or those who are paid a fixed amount for performing work irrespective of the time consumed in the
performance thereof. [emphases ours]

On the other hand, Article 95 of the Labor Code and its corresponding provision in the
IRR48 pertinently provides:chanroblesvirtuallawlibrary

Art. 95. Right to service incentive. (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.

(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those
enjoying vacation leave with pay of at least five days and those employed in establishments regularly
employing less than ten employees or in establishments exempted from granting this benefit by the
Secretary of Labor and Employment after considering the viability or financial condition of such
establishment. [emphases ours]

xxxx

Section 1. Coverage. – This rule shall apply to all employees except:

xxxx

(e) 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 a fixed amount for performing work irrespective of the time consumed in the
performance thereof. [emphasis ours]

Under these provisions, the general rule is that holiday and SIL pay provisions cover all employees.
To be excluded from their coverage, an employee must be one of those that these provisions expressly
exempt, strictly in accordance with the exemption.

Under the IRR, exemption from the coverage of holiday and SIL pay refer to “field personnel and other
employees whose time and performance is unsupervised by the employer including those who are
engaged on task or contract basis[.]” Note that unlike Article 82 of the Labor Code, the IRR on
holiday and SIL pay do not exclude employees “engaged on task basis” as a separate and distinct
category from employees classified as “field personnel.” Rather, these employees are altogether
merged into one classification of exempted employees.
Because of this difference, it may be argued that the Labor Code may be interpreted to mean that
those who are engaged on task basis, per se, are excluded from the SIL and holiday payment since
this is what the Labor Code provisions, in contrast with the IRR, strongly suggest. The arguable
interpretation of this rule may be conceded to be within the discretion granted to the LA and NLRC as
the quasi-judicial bodies with expertise on labor matters.

However, as early as 1987 in the case of Cebu Institute of Technology v. Ople 49 the phrase “those who
are engaged on task or contract basis” in the rule has already been interpreted to mean as
follows:chanroblesvirtuallawlibrary

[the phrase] should however, 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 xxx Clearly, petitioner's teaching personnel cannot be deemed field personnel which refers "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. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's
claim that private respondents are not entitled to the service incentive leave benefit cannot therefore
be sustained.

In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one
from the coverage of SIL and holiday pay. They are exempted from the coverage of Title I (including
the holiday and SIL pay) only if they qualify as “field personnel.” The IRR therefore validly qualifies
and limits the general exclusion of “workers paid by results” found in Article 82 from the coverage of
holiday and SIL pay. This is the only reasonable interpretation since the determination of excluded
workers who are paid by results from the coverage of Title I is “determined by the Secretary of Labor
in appropriate regulations.”

The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc., v.
Bautista:chanroblesvirtuallawlibrary

A careful perusal 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.

The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in support of
granting Macasio’s petition.

In Serrano, the Court, applying the rule on ejusdem generis50 declared that “employees engaged on
task or contract basis xxx are not automatically exempted from the grant of service incentive
leave, unless, they fall under the classification of field personnel.”51 The Court explained that
the phrase “including those who are engaged on task or contract basis, purely commission basis” found
in Section 1(d), Rule V of Book III of the IRR should not be understood as a separate classification of
employees to which SIL shall not be granted. Rather, as with its preceding phrase - “other
employees whose performance is unsupervised by the employer” - the phrase “including those who are
engaged on task or contract basis” serves to amplify the interpretation of the Labor Code definition of
“field personnel” as those “whose actual hours of work in the field cannot be determined with
reasonable certainty.”

In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted the
Labor Code provisions and the IRR as exempting an employee from the coverage of Title I of the Labor
Code based simply and solely on the mode of payment of an employee. The NLRC’s utter disregard
of this consistent jurisprudential ruling is a clear act of grave abuse of discretion.52 In other
words, by dismissing Macasio’s complaint without considering whether Macasio was a “field
personnel” or not, the NLRC proceeded based on a significantly incomplete consideration of the
case. This action clearly smacks of grave abuse of discretion.

Entitlement to holiday pay

Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only taken
counsel from Serrano and earlier cases, they would have correctly reached a similar conclusion
regarding the payment of holiday pay since the rule exempting “field personnel” from the grant of
holiday pay is identically worded with the rule exempting “field personnel” from the grant of SIL pay.
To be clear, the phrase “employees engaged on task or contract basis” found in the IRR on both SIL
pay and holiday pay should be read together with the exemption of “field personnel.”

In short, in determining whether workers engaged on “pakyaw” or task basis” is entitled to holiday
and SIL pay, the presence (or absence) of employer supervision as regards the worker’s time and
performance is the key: if the worker is simply engaged on pakyaw or task basis, then the general
rule is that he is entitled to a holiday pay and SIL pay unless exempted from the exceptions
specifically provided under Article 94 (holiday pay) and Article 95 (SIL pay) of the Labor Code.
However, if the worker engaged on pakyaw or task basis also falls within the meaning of “field
personnel” under the law, then he is not entitled to these monetary benefits.

Macasio does not fall under the

classification of “field personnel”

Based on the definition of field personnel under Article 82, we agree with the CA that Macasio does
not fall under the definition of “field personnel.” The CA’s finding in this regard is supported by the
established facts of this case: first, Macasio regularly performed his duties at David’s principal place
of business; second, his actual hours of work could be determined with reasonable certainty;
and, third, David supervised his time and performance of duties. Since Macasio cannot be considered
a “field personnel,” then he is not exempted from the grant of holiday, SIL pay even as he was
engaged on “pakyaw” or task basis.

Not being a “field personnel,” we find the CA to be legally correct when it reversed the NLRC’s ruling
dismissing Macasio’s complaint for holiday and SIL pay for having been rendered with grave abuse of
discretion.

Entitlement to 13th month pay

With respect to the payment of 13th month pay however, we find that the CA legally erred in finding
that the NLRC gravely abused its discretion in denying this benefit to Macasio.
The governing law on 13th month pay is PD No. 851.53 As with holiday and SIL pay, 13th month pay
benefits generally cover all employees; an employee must be one of those expressly enumerated to be
exempted. Section 3 of the Rules and Regulations Implementing P.D. No. 851 54 enumerates the
exemptions from the coverage of 13th month pay benefits. Under Section 3(e), “employers of those
who are paid on xxx task basis, and those who are paid a fixed amount for performing a specific
work, irrespective of the time consumed in the performance thereof”55 are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and
Regulations Implementing PD No. 851 exempts employees “paid on task basis” without any reference
to “field personnel.” This could only mean that insofar as payment of the 13th month pay is
concerned, the law did not intend to qualify the exemption from its coverage with the requirement
that the task worker be a “field personnel” at the same time.

WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar as
the payment of 13th month pay to respondent is concerned. In all other aspects, we AFFIRM the
decision dated November 22, 2010 and the resolution dated January 31, 2011 of the Court of Appeals
in CA-G.R. SP No. 116003.

SO ORDERED.

GERARDO C. ROXAS, PETITIONER, VS. BALIWAG TRANSIT, INC. AND/OR JOSELITO S.

TENGCO (OWNER), RESPONDENTS.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated November 23, 2016 and the
Resolution3 dated April 17, 2017 of the Court of Appeals (CA) in CA-G.R. SP No. 145623, which
affirmed with modification the Resolutions dated January 8, 20164 and February 29, 20165 of the
National Labor Relations Commission (NLRC) in NLRC LAC No. 01-000013-16, declaring petitioner
Gerardo C. Roxas (Roxas) not to have been illegally dismissed, but ordered respondent Baliwag
Transit, Inc. (BTI) to pay Roxas nominal damages in the amount of P30,000.00.

The Facts

Roxas was employed as bus driver by BTI since March 24, 1998 and paid on commission basis. In
2012, the bus to which Roxas was assigned was phased out pursuant to Land Transportation
Franchising and Regulatory Board (LTFRB) Resolution No. 2013-01.6 For this reason, he became a
reliever for BTI's other remaining buses and his work assignment was reduced from his regular three
(3) weeks work duty to only two (2) weeks per month.7

Feeling aggrieved by the change in his work duty assignment, Roxas, on June 5, 2014, filed a
complaint8 (first complaint) for constructive dismissal, non-payment of holiday pay, holiday
premium, service incentive leave (SIL), and 13th month pay, illegal suspension, moral and exemplary
damages, and attorney's fees against BTI and its owner Joselito S. Tengco (respondents), before the
NLRC National Capital Region (NLRC-NCR), docketed as NLRC RAB NCR Case No. NCR-06-06790-14.

At the scheduled hearing9 on July 2, 2014, Roxas received a call from one of BTI's conductors
informing him of a duty assignment on even date. This prompted him to proceed to BTI's terminal to
inform the terminal master, Edwin Ortega, and dispatcher Elmer Cao, of the said hearing and his
inability to assume work on said day. However, Roxas was warned of abandonment if he did not ply
his route. For this reason, Roxas received on July 15, 2014 a notice10 to explain his absence, which,
in his response letter11 dated July 21, 2014, pointed out that he did not intend to abandon his work
as respondents were well aware of the scheduled hearing at the NLRC. He likewise explained that
while he admittedly failed to check the duty assignments and schedule of trips for July 2, 2014, he
nonetheless did not also expect to be given an assignment considering that he had just rendered his
two (2) weeks duty and there were three (3) other reliever drivers still on reserve and waiting for their
assignment.

Meanwhile, upon follow-up of his first complaint, Roxas learned that the same was dismissed on
October 15, 2014 due to improper venue.12 Thus, on February 16, 2015, Roxas, together with a co-
worker, filed anew their complaint13 (second complaint) against respondents for illegal constructive
dismissal, including non-payment of, among others, 13th month pay and medical benefits, as well as
attorney's fees, this time before the Regional Arbitration Board (RAB) III in San Fernando, Pampanga,
dock ted as NLRC CASE NO. RAB III-02-22498-15. The second complaint was subsequently amended
by Roxas claiming constructive dismissal on June 4, 2014.14

Roxas claimed that after the second complaint was filed, he received a notice15 from respondents
charging him for indiscreet filing of labor cases against the company without basis ("pagsasampa ng
kaso laban sa kompanya sa Labor ng walang dahilan"). Notwithstanding his clarification that the
second complaint was the same as the first complaint that had been dismissed and that he merely re-
filed the same before the appropriate venue at the RAB III,16 respondents no longer gave him any
work assignment.17 Thus, Roxas averred that the foregoing circumstances showed that he was
constructively dismissed.

On the other hand, respondents alleged that Roxas was a disgruntled employee and that his baseless
complaints tarnished the reputation and good will of the company. They denied that Roxas was
dismissed on June 4, 2014, pointing out that he was still given work assignment after the filing pf the
first complaint as evidenced by his Assignment Card18 and that he remained in the roster or list of
employees. They argued that Roxas's refusal to submit an explanation for his unfounded complaints,
and further calling their investigating officer a liar amounted not only to insubordination bu also
tantamount to serious misconduct, as well as abandonment.19 Further, they denied the claim for
13th month pay, pointing out that Roxas was paid purely on commission basis, while his other
money claims were without factual and legal bases.20

In reply, Roxas countered that while he was given a work assignment, the same was reduced to only
two (2) weeks each month contrary to the existing Collective Bargaining Agreement (CBA)21 that
prescribed a three (3)-week work duty for the employees. Roxas added that respondents treated him
with disdain as evidenced by the following events, namely: (a) he was given a trip duty on the day his
first complaint was set for hearing on July 2, 2014; (b ) he was suspended from work beginning July
3, 2014 up to August 1, 2014 before the notice to explain his absence was issued to him; and (c) he
was charged for insubordination22 due to his refusal to submit additional explanation for his alleged
indiscriminate filing of labor case against BTI.23 He likewise denied having abandoned his work,
claiming that his repeated absences were due to respondents' oppressive treatment and that he was
in fact no longer given any trip duty after filing the second complaint.24 Lastly, Roxas pointed out
that the two-week duty per month violated the provisions of BTI's own "Alituntunin at Patakaran,"
particularly, Section 33, Atticle XII thereof, that required employees to work for not less than 200
days in a span of one year,25 since the reduced work schedule translated only to 1168 to 182 days of
work a year.26

For their part, respondents argued, among others, that the scheduled hearing at the NLRC did not
require Roxas's presence,27 and that the reduction in work assignment was in compliance with a
government imposed regulation and that the same applied to all drivers and conductors.28

On July 21, 2015, Roxas was issued a notice of termination29 from employment effective the same
date grounded on violation of the company's policies, rules and regulations amounting to gross
misconduct/gross neglect of duties, as well as indiscriminate filing of cases, insubordination, and
absence without official leave (AWOL).
The LA Ruling

In a Decision30 dated October 30, 2015, the Labor Arbiter (LA) dismissed the complaint with
prejudice.31 The LA ruled that Roxas was not dismissed on June 4, 2014 given his admission that he
still received a work assignment even up to the time he filed the second complaint. In the same vein,
the LA did not also give merit to Roxas's claim of constructive dismissal, holding that there was no
proof to show that he was the only one given the two (2)-week work assignment scheme, and that the
limitation in the duration of assignment was dictated by a government imposed regulation that
effectively superseded the CBA. On the other hand, the LA found sufficient justification to impose the
penalty of dismissal against Roxas in view of his repeated and unjustified failure to submit his
explanation and report for work. With respect to his money claims, the LA ruled that Roxas was not
entitled to 13th month pay since he was paid on commission basis, while the other money claims
were denied for lack of factual and legal bases.32

Aggrieved, Roxas filed an appeal33 to the NLRC.

The NLRC Ruling

In a Resolution34 dated January 8, 2016, the NLRC affirmed in toto35 the LA's decision, finding
Roxas not to have been constructively dismissed and that his subsequent dismissal was justified. It
held that Roxas was not discriminated against since the reduced work scheme undisputedly applied
to all drivers and conductors of BTI, and that the same did not violate the CBA as it was due to a
phase out of buses imposed by the government thus, superseding the provisions of the CBA. In the
same vein, it held that Roxas's eventual dismissal was justified for his failure to heed the
management's directives, which constituted insubordination, and his refusal to work or
abandonment, all of which are just causes for termination under Article 297 (formerly Article 282) of
the Labor Code.36

Roxas's motion for reconsideration37 was denied in a Resolution38 dated February 29, 2016,
prompting him to file a petition for certiorari39 before the CA, docketed as CA-G.R. SP No. 145623.

The CA Ruling

In a Decision40 dated November 23, 2016, the CA denied the petition and found no grave abuse of
discretion on the part of the NLRC in holding that there was no constructive dismissal. It ruled that
BTI's decision to reduce the work week was a reasonable and valid exercise of management
prerogative having been done in compliance with a government issued regulation that applied to all
its affected drivers and conductors. It explicated that the CBA provisions relied upon by Roxas mainly
referred to rest periods of drivers and conductors, and held that since there was a government
imposed restriction on the usage of old buses, it was understandable for BTI to not comply with the
existing practice of providing all its drivers and conductors a three (3)-week work assignment. With
respect to Roxas's eventual termination on July 21, 2015, the CA ruled that the same was justified,
holding that his refusal to submit an explanation despite BTI's repeated directives and calling the
legal staff/investigator a liar constitute disobedience and disrespect to his superior. However, while it
found substantial ground for dismissal, it observed that the notices issued to Roxas were insufficient
as they gave the latter only two (2) days to explain the charges levelled against him with no detailed
narration of the facts and circumstances that brought about the charges as well as the specific
company rules that were violated, and that no hearings were scheduled to clarify his defenses. For
these reasons, the CA awarded Roxas nominal damages in the amount of P30,000.00.41

Both parties moved for reconsideration42 which the CA denied in a Resolution43 dated April 17,
2017; hence, the instant petition.

The Issue Before the Court

The core issue for the Court's resolution is whether or not the CA erred in sustaining the finding that
there was no constructive dismissal committed by respondents and that Roxas's subsequent
termination from work was valid.

The Court's Ruling

The petition is impressed with merit.

At the outset, Roxas claims that the CA gravely abused its discretion when it affirmed the finding of
the labor tribunals that he was not constructively dismissed due to his reduced work assignment
Which consequently affected his pay and other benefits. Case law defines "constructive dismissal" as
follows:

[C]onstructive dismissal is defined as quitting or cessation of work because continued employment is

rendered impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution of
pay and other benefits. It exists if an act of clear discrimination, insensibility, or disdain by an
employer becomes so unbearable on the part of the employee that it could foreclose any choice by
him except to forego his continued employment. There is involuntary resignation due to the harsh,
hostile, and unfavorable conditions set by the employer. The test of constructive dismissal is whether
a reasonable person in the employee's position would have felt compelled to give up his
employment/position under the circumstances.44 (Emphases and underscoring supplied)

In this case, while Roxas's reduced work assignment did effectively result in the diminution of his pay
and other benefits, the same did not amount to a clear act of discrimination, insensibility or disdain
on the part of BTI so as to force him out of employment. This is because the reason for the said work
reduction was due to the phase out of BTI's old buses as imposed by a government regulation,
leading BTI to, in the exercise of its management prerogative, adjust the previous work assignments
of its employees assigned to the affected buses. As pointed out by the CA, "[t]he reduced [work week]
which BTI implemented in 2012 was in relation to the government's directive to remove from the
roads, public utility vehicles which are 15 years old and above, for the safety of the riding public. The
decision to phase out BTI's old buses was [therefore] not done out of the company's whims and
caprices only x x x [but instead,] a means on the part of BTI to cope with the downsizing of their
business operation as a consequence of the strict implementation of LTFRB Resolution No. 2013-
01."45 As such, this exercise of BTI's management prerogative appears to have been done in good
faith, and hence, should be upheld. In Moya v. First Solid Rubber Industries, Inc.:46

[The Court has] recognized the right of the 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 workers. It is a general principle of labor law to discourage interference with an employer's
judgment in the conduct of his business. As already noted, even as the law is solicitous of the welfare
of the employees, it also recognizes employer's exercise of management prerogatives. As long as the
company's exercise of judgment is in good faith to advance its interest and not for the purpose of
defeating or circumventing the rights of employees under the laws or valid agreements, such exercise
will be upheld.47 (Emphasis supplied)

In this relation, it must be pointed out that the records fail to show that Roxas was the only employee
affected by the reduced work assignment scheme. In fact, as the LA observed, "[t]he assignment was
made to apply to all other employees."48

Thus, in view of the foregoing, the Court holds that the CA did not gravely abuse its discretion in
upholding the labor tribunals' findings that Roxas was not constructively dismissed.

This notwithstanding, records show that during the pendency of the proceedings, Roxas was
eventually terminated by respondents premised on the alleged just causes49 as will be discussed
below. This constitutes a separate incident of dismissal, the legality of which the Court is further
tasked to resolve.

Article 294 of the Labor Code, as renumbered,50 provides that an employer may terminate the
services of an employee only upon just or authorized causes. The burden of proving that the
dismissal was for a just or authorized cause lies with the employer. If the employer fails to meet this
burden, the conclusion would be that the dismissal was unjustified, and, therefore, illegal. In order to
discharge this burden, the employer must present substantial evidence, which is defined as that
amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion, and not based on mere surmises and conjectures.51

In this regard, Article 297 of the Labor Code enumerates the just causes for which an employer may
terminate an employment, to wit:

ART. 297. 282 Termination by Employer. - An employer may terminate an employment for any of the
following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;

(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representatives; and

(e) Other causes analogous to the foregoing.

In this case, records reveal that Roxas was terminated by respondents for (a) indiscriminate filing of
complaints against the company tantamount to gross misconduct, (b) insubordination for his failure
to comply with the company's directive to submit additional explanation why he filed the complaints,
and (c) absence without leave or abandonment.52 Thus, it was incumbent upon respondents to prove
by substantial evidence the validity of the foregoing grounds for dismissal, which they failed to
discharge.

Misconduct involves the transgression of some established and definite rule or action, a forbidden
act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in
judgment. For misconduct to be serious and therefore a valid ground for dismissal, it must be (a) of
grave and aggravated character and not merely trivial or unimportant, (b) connected with the work of
the employee such that the latter has become unfit to continue working for the employer, and (c)
performed with wrongful intent.53

Here, respondents failed to show that Roxas's filing of the complaints for constructive dismissal
against the company was impelled by arty ill-motive amounting to gross misconduct. As the Court
sees it, Roxas had ample reason to file the complaints for illegal dismissal because the reduced work
week scheme resulted in him receiving lesser pay and diminished company benefits. In this relation,
it must be noted that the two (2)-week work duty per month, or a total of 168 days per year,
apparently contravenes BTI's own "Alituntunin at Patakaran" that required a minimum work duty of
200 days for its employees. Worse, the failure to meet such requirement constitutes a possible
ground for termination under Sections 33 and 34 of Article XII thereof, which read:

Sek. 33. Ang mga kawani ay kailangang pumasok ng hindi bababa a dalawandaang (200) araw sa
loob ng isang taon. Ang kawaning lalabag sa takdang bilang ng araw ng pagpasok na binabanggit
dito ay aalisan ng benepisyo gaya ng Maxicare o katulad na benepisyong pang-kalusugan,
emergency/assistance loan, grocery at rice loans at iba pang benepisyo.
Sek. 34. Ang kawaning lumabag sa patakarang binabanggit sa unahan nito ay maaari ring itiwalag
sa tungkulin kung ang kanyang paglabag ay inulit ng dalawang taong (2x) magkasunod o kaya'y
tatlong beses (3x) sa panahon ng kanyang panunungkulan.54 (Emphasis supplied)

Neither can the Court subscribe to respondents' assertion that there was insubordination on the part
of Roxas when he repeatedly refused to heed the company's directive to submit additional explanation
as to why he filed his complaints. To be sure, "[w]illful disobedience or insubordination, as a just
cause for the dismissal of an employee, necessitates the concurrence of at least two (2) requisites,
namely: (a) the employee's assailed conduct must have been willful, that is, characterized by a
wrongful and perverse attitude; and (b) the order violated must have been reasonable, lawful, made
known to the employee, and must pertain to the duties which he had been engaged to
discharge."55 None of the foregoing requisites were present in the case at bar.

In this case, records show that Roxas had, in fact, initially complied and submitted his letter of
explanation why he filed the first and second complaints against BTI In this accord, Roxas further
explicated t1at he believed that the same was already sufficient to dispel the charge of indiscriminate
filing of baseless complaints. Thus, his refusal to submit additional "proper explanation/s" should
not be taken against him. At most, Roxas's refusal to comply with the subsequent directives to
explain should only be deemed as a waiver of his right to procedural due process in connection with
the subject incident and was not tantamount to Willful disobedience or insubordination.56 Besides,
the subsequent orders to explain given to Roxas were mere reiterations of the charge57 levelled
against him, to which he had already given an initial explanation. Notably, although it appears that
Roxas had called the investigating officer a liar during the time when the latter forced him to sign an
acknowledgment receipt which he refused to heed,58 the same is but a natural reaction to the
investigating officer's unwarranted assertion that he purportedly failed to provide any explanation at
all as to why he filed the complaints against BTI. In any case, the same does not rise to the level of
seriousness so as to warrant his dismissal from service.

Finally, respondents' charge of abandonment cannot likewise stand. Settled is the rule that mere
absence or failure to report for work ts not tantamount to abandonment.59 The absence must be
accompanied by overt acts unerringly pointing to the fact that the employee simply does not want to
work anymore, and the burden of proof to show that there was unjustified refusal to go back to work
rests on the employer,60 which unfortunately, respondents likewise failed to show.

Accordingly, having failed to establish by substantial evidence the just causes for Roxas's
termination, it was error for the CA to not find grave abuse of discretion on the part of the NLRC in
holding that the dismissal was valid.

In this regard, Article 29461 of the Labor Code provides that an employee who is unjustly dismissed
from work is entitled to reinstatement without loss of seniority rights and other privileges, and to his
full backwages, inclusive of allowances, and to other benefits or their monetary equivalent computed
from the time his compensation was withheld from him, which in this case is reckoned from the time
of his illegal dismissal on July 21, 2015, up to the time of his actual reinstatement. However, if
reinstatement is no longer possible, the employer has the option of paying the employee his
separation pay in lieu of reinstatement. Considering the length of time that had passed since the
controversy started and the existing regulation on the use of buses that has affected respondents'
operations, there is a need to remand the case to the NLRC to determine if Roxas's reinstatement, as
consistently prayed for, is still viable under the circumstances.

On the other hand, with respect to Roxas's claim for 13th month pay, the same is not wan-anted
since Section 3 (e) of the Rules and Regulations Implementing Presidential Decree No. 851 expressly
exempted from payment of 13th month pay "[e]mployers of those who are paid on purely commission,
boundary, or task basis, and those who are paid a fixed amount for performing a specific work,
irrespective of the time consumed in the performance thereof, except where the workers are paid on
piece-rate basis in which case the employer shall be covered by this issuance insofar as such workers
are concerned."

Likewise, the Court finds no basis to award Roxas's claim for illegal deductions as the same was not
substantiated. The same holds true for the claim of moral and exemplary damages. It is worthy to
point out that floral damages are recoverable where the dismissal of the employee was attended by
bad faith or fraud or constituted an act oppressive to labor, or was done in a manner contrary to
morals, good customs, or public policy; while exemplary damages may be awarded if the dismissal
was effected in a wanton, oppressive or malevolent manner.62 The person claiming damages must
prove the existence of bad faith by clear and convincing evidence, for the law always presumes good
faith. Here, Roxas failed to establish that respondents were motivated by ill will or that his dismissal
was done in a wanton, oppressive or malevolent manner.

Nevertheless, since Roxas was compelled to litigate to enforce his rights and protect his interests, he
is entitled to attorney's fees equivalent to ten percent (10%) of the total monetary award due him in
accordance with Article 111 of the Labor Code and Article 2208 of the Civil Code.63

WHEREFORE, the petition is GRANTED. The Decision dated November 23, 2016 and the Resolution
dated April 17, 2017 of the Court of Appeals in CA-G.R. SP No. 145623 are
hereby REVERSED and SET ASIDE. A new one is rendered declaring petitioner Gerardo C. Roxas
(petitioner) to have been illegally dismissed. Accordingly, respondents Baliwag Transit, Inc. and/or
Joselito S. Tengco (respondents) are ORDERED to either reinstate petitioner to his former position
and to pay his full backwages, inclusive of allowances, and his other benefits in accordance with
Article 294 of the Labor Code, as renumbered, or to pay separation pay. In addition, respondents
should pay ten percent (10%) of the monetary awards as attorney's fees.

The case is REMANDED to the Labor Arbiter to determine if reinstatement of petitioner is still viable
or separation pay should paid instead, and to make a detailed computation of the exact amount of
monetary benefits due him. The denial of his other money claims is sustained for lack of basis.

SO ORDERED.

311 Phil. 407

FELICIANO, J.:

On 11 November 1993, this Court, through its Third Division, rendered a decision dismissing the
Petition for Certiorari filed by petitioner Philippine Duplicators, Inc. (Duplicators) in G.R. No. 110068.
The Court upheld the decision of public respondent National Labor Relations Commission (NLRC),
which affirmed the order of Labor Arbiter Felipe T. Garduque II directing petitioner to pay 13th month
pay to private respondent employees computed on the basis of their fixed wages plus sales
commissions. The Third Division also denied with finality on 15 December 1993 the Motion for
Reconsideration filed (on 12 December 1993) by petitioner.

On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to Admit Second Motion for
Reconsideration and (b) a Second Motion for Reconsideration. This time, petitioner invoked the
decision handed down by this Court, through its Second Division, on 10 December 1993 in the two
(2) consolidated cases of Boie-Takeda Chemicals, Inc. vs. Hon. Dionisio de la Serna and Philippine Fuji
Xerox Corp. vs. Hon. Cresenciano B. Trajano, in G.R. Nos. 92174 and 102552, respectively. In its
decision, the Second Division inter alia declared null and void the second paragraph of Section
5(a) [1] of the Revised Guidelines issued by then Secretary of Labor Drilon. Petitioner submits that the
decision in the Duplicators case should now be considered as having been abandoned or reversed by
the Boie-Takeda decision, considering that the latter went "directly opposite and contrary to" the
conclusion reached in the former. Petitioner prays that the decision rendered in Duplicators be set
aside and another be entered directing the dismissal of the money claims of private respondent
Philippine Duplicators' Employees' Union.

In view of the nature of the issues raised, the Third Division of this Court referred the petitioner's
Second Motion for Reconsideration, and its Motion for Leave to Admit the Second Motion for
Reconsideration, to the Court en banc en consulta. The Court en banc, after preliminary deliberation,
and in order to settle the condition of the relevant case law, accepted G.R. No. 110068 as a banc
case.

Deliberating upon the arguments contained in petitioner's Second Motion for Reconsideration, as well
as its Motion for Leave to Admit the Second Motion for Reconsideration, and after review of the
doctrines embodied, respectively, in Duplicators and Boie-Takeda, we consider that these Motions
must fail.

The decision rendered in Boie-Takeda cannot serve as a precedent under the doctrine of stare decisis.
The Boie-Takeda decision was promulgated a month after this Court, (through its Third Division), had
rendered the decision in the instant case. Also, the petitioner's (first) Motion for Reconsideration of
the decision dated 10 November 1993 had already been denied, with finality, on 15 December 1993,
i.e.; before the Boie-Takeda decision became final on 5 January 1994.

Preliminarily, we note that petitioner Duplicators did not put in issue the validity of the Revised
Guidelines on the Implementation of the 13th Month Pay Law, issued on November 16, 1987, by then
Labor Secretary Franklin M. Drilon, either in its Petition for Certiorari or in its (First) Motion for
Reconsideration. In fact, petitioner's counsel relied upon these Guidelines and asserted their validity
in opposing the decision rendered by public respondent NLRC. Any attempted change in petitioner's
theory, at this late stage of the proceedings, cannot be allowed.

More importantly, we do not agree with petitioner that the decision in Boie-Takeda is "directly
opposite or contrary to" the decision in the present (Philippine Duplicators). To the contrary, the
doctrines enunciated in these two (2) cases in fact co-exist one with the other. The two (2) cases
present quite different factual situations (although the same word "commissions" was used or
invoked) the legal characterizations of which must accordingly differ.

The Third Division in Duplicators found that:

"In the instant case, there is no question that the sales commission earned by the salesmen who
make or close a sale of duplicating machines distributed by petitioner corporation, constitute part of
the compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the
'wage' or salary of petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small
fixed or guaranteed wage; the greater part of the salesmen's wages or salaries being composed of the
sales or incentive commissions earned on actual sales closed by them. No doubt this particular salary
structure was intended for the benefit of the petitioner corporation, on the apparent assumption that
thereby its salesmen would be moved to greater enterprise and diligence and close more sales in the
expectation of increasing their sales commissions. This, however, does not detract from the character
of such commissions as part of the salary or wage paid to each of its salesmen for rendering services
to petitioner corporation."
In other words, the sales commissions received for every duplicating machine sold constituted part of
the basic compensation or remuneration of the salesmen of Philippine Duplicators for doing their job.
The portion of the salary structure representing commissions simply comprised an automatic
increment to the monetary value initially assigned to each unit of work rendered by a salesman.
Especially significant here also is the fact that the fixed or guaranteed portion of the wages paid to
the Philippine Duplicators' salesmen represented only 15%-30% of an employee's total earnings in a
year. We note the following facts on record:

Salesmen's Total Earnings and 13th Month Pay For the Year 1986 [2]

Name of Total Amount Paid Monthly Fixed

Salesman Earnings as 13th Month Pay Wages x 12 [3]

Baylon,
P76,610.30 P 1,350.00 P16,200.00
Benedicto

Bautista,
90,780.85 1,182.00 14,184.00
Salvador

Brito,
64,382.75 1,238.00 14,856.00
Tomas

Bunagan,
89,287,75 1,266.00 15,192.00
Jorge

Canilan,
74,678.17 1,350.00 16,200.00
Rogelio

Dasig,
54,625.16 1,378.00 16,536.00
Jeordan

Centeno,
51,854.15 1,266.00 15,192.00
Melecio, Jr.

De los Santos,
73,551.30 1,322.00 15,864.00
Ricardo

Del Mundo,
108,230.35 1,406.00 16,872.00
Wilfredo

Garcia,
93,753.75 1,294.00 15,528.00
Delfin

Navarro,
98,618.71 1,266.00 15,192.00
Ma. Teresa

Ochosa,
66,275.65 1,406.00 16,872.00
Rolano

Quisumbing,
101,065.75 1,406.00 16,872.00
Teofilo
Rubina,
42,209.73 1,266.00 15,192.00
Emma

Salazar,
64,643.65 1,238.00 14,856.00
Celso

Sopelario,
52,622.27 1,350.00 16,200.00
Ludivico

Tan,
30,127.50 1,238.00 14,856.00
Leynard

Talampas,
146,510.25 1,434.00 17,208.00
Pedro

Villarin,
41,888.10 1,434.00 17,208.00
Constancio

Carrasco,
50,201.20 403.75*
Cicero

Punzalan,
24,351.89 1,266.00 15,192.00
Reynaldo

Poblador,
25,516.75 323.00*
Alberto

Cruz,
32,950.45 323.00*
Danilo

Baltazar,
15,681.35 323.00*
Carlito

Considering the above circumstances, the Third Division held, correctly, that the sales commissions
were an integral part of the basic salary structure of Philippine Duplicators' employees-salesmen.
These commissions are not overtime payments, nor profit-sharing payments nor any other fringe
benefit. Thus, the salesmen's commissions, comprising a pre-determined percent of the selling price
of the goods sold by each salesman, were properly included in the term "basic salary" for purposes of
computing their 13[th] month pay.

In Boie-Takeda, the so-called commissions "paid to or received by medical representatives of Boie

Takeda Chemicals or by the rank and file employees of Philippine Fuji Xerox Co.," were excluded from
the term "basic salary" because these were paid to the medical representatives and rank-and-file
employees as "productivity bonuses." [4] The Second Division characterized these payments as
additional monetary benefits not properly included in the term "basic salary" in computing their 13th
month pay. We note that productivity bonuses are generally tied to the productivity, or capacity for
revenue production, of a corporation; such bonuses closely resemble profit-sharing payments and
have no clear direct or necessary relation to the amount of work actually done by each individual
employee. More generally, a bonus is an amount granted and paid ex gratia to the employee; its
payment constitutes an act of enlightened generosity and self-interest on the part of the employer,
rather than as a demandable or enforceable obligation. In Philippine Education Co., Inc. (PECO) v.
Court of Industrial Relations, [5] the Court explained the nature of a bonus in the following general
terms:
"As a rule, a bonus is an amount granted and paid to an employee for his industry and loyalty which
contributed to the success of the employer's business and made possible the realization of profits. It is
an act of generosity of the employer for which the employee ought to be thankful and grateful. It is also
granted by an enlightened employer to spur the employee to greater efforts for the success of the
business and realization of bigger profits. x x x. From the legal point of view, a bonus is not a
demandable and enforceable obligation. It is so when it is made part of the wage or salary or
compensation. In such a case the latter would be a fixed amount and the former would be a
contingent one dependent upon the realization of profits. x x x." [6] (Underscoring supplied)

In Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual Benefit Association, [7] the Court
amplified:

"x x x. Whether or not [a] bonus forms part of wages depends upon the circumstances or conditions for
its payment. If it is an additional compensation which the employer promised and agreed to give
without any conditions imposed for its payment, such as success of business or greater production or
output, then it is part of the wage. But if it is paid only if profits are realized or a certain amount of
productivity achieved, it cannot be considered part of wages. x x x. It is also paid on the basis of
actual or actual work accomplished. If the desired goal of production is not obtained, or the amount
of actual work accomplished, the bonus does not accrue. x x x." [8] (Underscoring supplied)

More recently, the non-demandable character of a bonus was stressed by the Court in Traders Royal
Bank v. National Labor Relations Commission: [9]

"A bonus is a 'gratuity or act of liberality of the giver which the recipient has no right to demand as a
matter of right' (Aragon v. Cebu Portland Cement Co., 61 O.G. 4567). 'It is something given in
addition to what is ordinarily received by or strictly due the recipient.' The granting of a bonus is
basically a management prerogative which cannot be forced upon the employer 'who may not be
obliged to assume the onerous burden of granting bonuses or other benefits aside from the
employee's basic salaries or wages x x x' (Kamaya Point Hotel v. NLRC, 177 SCRA 160
[1989])." [10] (Underscoring supplied)

If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow
that such productivity bonus, when given, should not be deemed to fall within the "basic salary" of
employees when the time comes to compute their 13 th month pay.

It is also important to note that the purported "commissions" paid by the Boie-Takeda Company to its
medical representatives could not have been "sales commissions" in the same sense that Philippine
Duplicators paid its salesmen sales commissions. Medical representatives are not salesmen; they do
not effect any sale of any article at all. In common commercial practice, in the Philippines and
elsewhere, of which we take judicial notice, medical representatives are employees engaged in the
promotion of pharmaceutical products or medical devices manufactured by their employer. They
promote such products by visiting identified physicians and inform such physicians, orally and with
the aid of printed brochures, of the existence and chemical composition and virtues of particular
products of their company. They commonly leave medical samples with each physician visited; but
those samples are not "sold" to the physician and the physician is, as a matter of professional ethics,
prohibited from selling such samples to their patients. Thus, the additional payments made to Boie-
Takeda's medical representatives were not in fact sales commissions but rather partook of the nature
of profit-sharing bonuses.
The doctrine set out in the decision of the Second Division is, accordingly, that additional payments
made to employees, to the extent they partake of the nature of profit-sharing payments, are properly
excluded from the ambit of the term "basic salary" for purposes of computing the 13th month pay due
to employees. Such additional payments are not "commissions" within the meaning of the second
paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th Month Pay.

The Supplementary Rules and Regulations Implementing P.D. No. 851 subsequently issued by former
Labor Minister Ople sought to clarify the scope of items excluded in the computation of the 13th
month pay; viz.

"Sec. 4. Overtime pay, earnings and other remunerations which are not part of the basic salary shall
not be included in the computation of the 13th month pay."

We observe that the third item excluded from the term "basic salary" is cast in open ended and
apparently circular terms: "other remunerations which are not part of the basic salary." However,
what particular types of earnings and remuneration are or are not properly included or integrated in
the basic salary are questions to be resolved on a case to case basis, in the light of the specific and
detailed facts of each case. In principle, where these earnings and remuneration are closely akin to
fringe benefits, overtime pay or profit-sharing payments, they are properly excluded in computing the
13th month pay. However, sales commissions which are effectively an integral portion of the basic
salary structure of an employee, shall be included in determining his 13th month pay.

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

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

ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for Reconsideration and the (b)
aforesaid Second Reconsideration are DENIED for lack of merit. No further pleadings will be
entertained.
G.R. No. 92174 December 10, 1993

BOIE-TAKEDA CHEMICALS, INC., petitioner,

vs.

HON. DIONISIO DE LA SERNA, Acting Secretary of the Department of Labor and Employment,
respondent.

G.R. No. L-102552 December 10, 1993

PHILIPPINE FUJI XEROX CORP., petitioner,

vs.

CRESENCIANO B. TRAJANO, Undersecretary of the Department of Labor and Employment, and

PHILIPPINE FUJI XEROX EMPLOYEES UNION, respondents.

Herrera, Laurel, De los Reyes, Roxas & Teehankee for Boie-Takeda Chemicals, Inc. and Phil Xerox
Corp.

The Solicitor General for public respondents.

NARVASA, C.J.:

What items or items of employee remuneration should go into the computation of thirteenth month
pay is the basic issue presented in these consolidated petitions. Otherwise stated, the question is
whether or not the respondent labor officials in computing said benefit, committed "grave abuse of
discretion amounting to lack of jurisdiction," by giving effect to Section 5 of the Revised Guidelines on
the implementation of the Thirteenth Month Pay (Presidential Decree No. 851) promulgated by then
Secretary of Labor and Employment, Hon. Franklin Drilon, and overruling petitioner's contention that
said provision constituted a usurpation of legislative power because not justified by or within the
authority of the law sought to be implemented besides being violative of the equal protection of the
law clause of the Constitution.

Resolution of the issue entails, first, a review of the pertinent provisions of the laws and implementing
regulations.

Sections 1 and 2 of Presidential Decree No. 851, the Thirteenth Month Pay Law, read as follows:

Sec 1. All employees are hereby required to pay all their employees receiving basic salary of not more
than P1,000.00 a month, regardless of the nature of the employment, a 13th month pay not later
than December 24 of every year.

Sec. 2. Employers already paying their employees a 13th month pay or its equivalent are not covered
by this Decree.

The Rules and Regulations Implementing P.D. 851 promulgated by then Labor Minister Blas Ople on
December 22, 1975 contained the following relevant provisions relative to the concept of "thirteenth
month pay" and the employers exempted from giving it, to wit:

Sec. 2. Definition of certain terms. — . . .

a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic salary of an employee within a
calendar year;

b) "Basic Salary" shall include all remunerations or earnings paid by an employer to an employee for
services rendered but may not include cost of living allowances granted pursuant to Presidential
Decree No. 525 or Letter of Instructions No. 174, profit sharing payments, and all allowances and
monetary benefits which are not considered or integrated as part of the regular or basic salary of the
employee at the time of the promulgation of the Decree on December 16, 1975.

Sec. 3. Employers covered. — . . . (The law applies) to all employers except to:

xxx xxx xxx

c) Employers already paying their employers a 13-month pay or more in calendar year or is
equivalent at the time of this issuance;

xxx xxx xxx

e) Employers of those who are paid on purely commission, boundary, or task basis, and those who
are paid a fixed amount for performing a specific work, irrespective of the time consumed in the
performance thereof, except where the workers are paid on piece-rate basis in which case the
employer shall be covered by this issuance insofar as such workers are concerned.

xxx xxx xxx

The term "its equivalent" as used in paragraph (c) shall include Christmas bonus, mid-year bonus,
profit-sharing payments and other cash bonuses amounting to not less than 1/12th of the basic
salary but shall not include cash and stock dividends, cost of living allowances and all other
allowances regularly enjoyed by the employee, as well as non-monetary benefits. Where an employer
pays less than 1/12th of the employee's basic salary, the employer shall pay the difference.

Supplementary Rules and Regulations implementing P.D. 851 were subsequently issued by Minister
Ople which inter alia set out items of compensation not included in the computation of the 13th
month pay, viz.:

Sec. 4. Overtime pay, earnings and other remunerations which are not part of the basic salary shall
not be included in the computation of the 13th month pay.

On August 13, 1986, President Corazon C. Aquino promulgated Memorandum Order No. 28, which
contained a single provision modifying Presidential Decree No. 851 by removing the salary ceiling of
P1,000.00 a month set by the latter, as follows:

Section 1 of Presidential Decree No. 851 is hereby modified to the extent that all employers are hereby
required to pay all their rank-and-file employees a 13th month pay not later than December 24, of
every year.

Slightly more than a year later, on November 16, 1987, Revised Guidelines on the Implementation of
the 13th Month Pay Law were promulgated by then Labor Secretary Franklin Drilon which, among
other things, defined with particularity what remunerative items were and were not embraced in the
concept of 13th month pay, and specifically dealt with employees who are paid a fixed or guaranteed
wage plus commission. The relevant provisions read:

4. Amount and payment of 13th Month Pay.

xxx xxx xxx

The basic salary of an employee for the purpose of computing the 13th month pay shall include all
remunerations or earnings paid by the employer for services rendered but does not include
allowances and monetary benefits which are not considered or integrated as part of the regular or
basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime,
premium, night differential and holiday pay, and cost-of-living allowances. However, these salary-
related benefits should be included as part of the basic salary in the computation of the 13th month
pay if by individual or collective agreement, company practice or policy, the same are treated as part
of the basic salary of the employees.
xxx xxx xxx

5. 13th Month Pay for Certain Types of Employees.

(a) Employees Paid by Results. — Employees who are paid on piece work basis are by law entitled to
the 13th month pay.

Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the
mandated 13th month pay based on their total earnings during the calendar year, i.e., on both their
fixed or guaranteed wage and commission.

This was the state of the law when the controversies at bar arose out of the following antecedents:

(RE G.R. No. 92174) A routine inspection was conducted on May 2, 1989 in the premises of petitioner
Boie-Takeda Chemicals, Inc. by Labor
and Development Officer Reynaldo B. Ramos under Inspection Authority
No. 4-209-89. Finding that Boie-Takeda had not been including the commissions earned by its
medical representatives in the computation of their 13th month pay, Ramos served a Notice of
Inspection Results 1 on Boie-Takeda through its president, Mr. Benito Araneta, requiring Boie-Takeda
within ten (10) calendar days from notice to effect restitution or correction of "the underpayment of
13th month pay for the year(s) 1986, 1987 and 1988 of Med Rep (Revised Guidelines on the
Implementation of 13th month pay # 5) in the total amount of P558,810.89."

Boie-Takeda wrote the Labor Department contesting the Notice of Inspection Results, and expressing
the view "that the commission paid to our medical representatives are not to be included in the
computation of the 13th month pay . . . (since the) law and its implementing rules speak of REGULAR
or BASIC salary and therefore exclude all other remunerations which are not part of the REGULAR
salary." It pointed out that, "if no sales is (sic) made under the effort of a particular representative,
there is no commission during the period when no sale was transacted, so that commissions are not
and cannot be legally defined as regular in nature. 2

Regional Director Luna C. Piezas directed Boie-Takeda to appear before his Office on June 9 and 16,
1989. On the appointed dates, however, and despite due notice, no one appeared for Boie-Takeda,
and the matter had perforce to be resolved on the basis of the evidence at hand. On July 24, 1989,
Director Piezas issued an Order 3 directing Boie-Takeda:

. . . to pay . . . (its) medical representatives and its managers the total amount of FIVE HUNDRED
SIXTY FIVE THOUSAND SEVEN HUNDRED FORTY SIX AND FORTY SEVEN CENTAVOS
(P565,746.47) representing underpayment of thirteenth (13th) month pay for the years 1986, 1987,
1988, inclusive, pursuant to the . . . revised guidelines within ten (10) days from receipt of this Order.

A motion for reconsideration 4 was seasonably filed by Boie-Takeda under date of August 3, 1989.
Treated as an appeal, it was resolved on
January 17, 1990 by then Acting Labor Secretary Dionisio de la Serna, who affirmed the July 24,
1989 Order with modification that the sales commissions earned by Boie-Takeda's medical
representatives before August 13, 1989, the effectivity date of Memorandum Order No. 28 and its
Implementing Guidelines, shall be excluded in the computation of their 13th month pay. 5

Hence the petition docketed as G.R. No. 92174.

(RE G.R. No. 102552) A similar Routine Inspection was conducted in the premises of Philippine Fuji
Xerox Corp. on September 7, 1989 pursuant to Routine Inspection Authority No. NCR-LSED-RI-494-
89. In his Notice of Inspection Results, 6 addressed to the Manager, Mr. Nicolas O. Katigbak, Senior
Labor and Employment Officer Nicanor M. Torres noted the following violation committed by
Philippine Fuji Xerox Corp., to wit:
Underpayment of 13th month pay of 62 employees, more or less — pursuant to Revised Guidelines
on the Implementation of the 13th month pay law for the period covering 1986, 1987 and 1988.

Philippine Fuji Xerox was requested to effect rectification and/or restitution of the noted violation
within five (5) working days from notice.

No action having been taken thereon by Philippine Fuji Xerox,

Mr. Eduardo G. Gonzales, President of the Philxerox Employee Union, wrote then Labor Secretary
Franklin Drilon requesting a follow-up of the inspection findings. Messrs. Nicolas and Gonzales were
summoned to appear before Labor Employment and Development Officer Mario F. Santos, NCR
Office, Department of Labor for a conciliation conference. When no amicable settlement was reached,
the parties were required to file their position papers.

Subsequently, Regional Director Luna C. Piezas issued an Order dated August 23, 1990, 7 disposing
as follows:

WHEREFORE, premises considered, Respondent PHILIPPINE FUJI XEROX is hereby ordered to

restitute to its salesmen the portion of the 13th month pay which arose out of the non-
implementation of the said revised guidelines, ten (10) days from receipt hereof, otherwise,
MR. NICANOR TORRES, the SR. LABOR EMPLOYMENT OFFICER is hereby Ordered to proceed to the
premises of the Respondent for the purpose of computing the said deficiency (sic) should respondent
fail to heed his Order.

Philippine Fuji Xerox appealed the aforequoted Order to the Office of the Secretary of Labor. In an
Order dated October 120, 1991, Undersecretary Cresenciano B. Trajano denied the appeal for lack of
merit. Hence, the petition in G.R. No. 102552, which was ordered consolidated with G.R. No. 92174
as involving the same issue.

In their almost identically-worded petitioner, petitioners, through common counsel, attribute grave
abuse of discretion to respondent labor officials
Hon. Dionisio dela Serna and Undersecretary Cresenciano B. Trajano in issuing the questioned
Orders of January 17, 1990 and October 10, 1991, respectively. They maintain that under P.D. 851,
the 13th month pay is based solely on basic salary. As defined by the law itself and clarified by the
implementing and Supplementary Rules as well as by the Supreme Court in a long line of decisions,
remunerations which do not form part of the basic or regular salary of an employee, such as
commissions, should not be considered in the computation of the 13th month pay. This being the
case, the Revised Guidelines on the Implementation of the 13th Month Pay Law issued by then
Secretary Drilon providing for the inclusion of commissions in the 13th month pay, were issued in
excess of the statutory authority conferred by P.D. 851. According to petitioners, this conclusion
becomes even more evident when considered in light of the opinion rendered by Labor Secretary
Drilon himself in "In Re: Labor Dispute at the Philippine Long Distance Telephone Company" which
affirmed the contemporaneous interpretation by then Secretary Ople that commissions are excluded
from the basic salary. Petitioners further contend that assuming that Secretary Drilon did not exceed
the statutory authority conferred by P.D. 851, still the Revised Guidelines are null and void as they
violate the equal protection of the law clause.

Respondents through the Office of the Solicitor General question the propriety of petitioners' attack
on the constitutionality of the Revised Guidelines in a petition for certiorari which, they contend,
should be confined purely to the correction of errors and/or defects of jurisdiction, including matters
of grave abuse of discretion amounting to lack or excess of jurisdiction and not extend to a collateral
attack on the validity and/or constitutionality of a law or statute. They aver that the petitions do not
advance any cogent reason or state any valid ground to sustain the allegation of grave abuse of
discretion, and that at any rate, P.D. No. 851, otherwise known as the 13th Month Pay Law has
already been amended by Memorandum Order No. 28 issued by President Corazon C. Aquino on
August 13, 1986 so that commissions are now imputed into the computation of the 13th Month Pay.
They add that the Revised Guidelines issued by then Labor Secretary Drilon merely clarified a gray
area occasioned by the silence of the law as to the nature of commissions; and worked no violation of
the equal protection clause of the Constitution, said Guidelines being based on reasonable
classification. Respondents point to the case of Songco vs. National Labor Relations Commission, 183
SCRA 610, wherein the Court declared that Article 97(f) of the Labor Code is explicit that commission
is included in the definition of the term "wage".

We rule for the petitioners.

Contrary to respondents' contention, Memorandum Order No. 28 did not repeal, supersede or
abrogate P.D. 851. As may be gleaned from the language of the Memorandum Order No. 28, it merely
"modified" Section 1 of the decree by removing the P1,000.00 salary ceiling. The concept of 13th
Month Pay as envisioned, defined and implemented under P.D. 851 remained unaltered, and while
entitlement to said benefit was no longer limited to employees receiving a monthly basic salary of not
more than P1,000.00, said benefit was, and still is, to be computed on the basic salary of the
employee-recipient as provided under P.D. 851. Thus, the interpretation given to the term "basic
salary" as defined in P.D. 851 applies equally to "basic salary" under Memorandum Order No. 28.

In the case of San Miguel Corp. vs. Inciong, 103 SCRA 139, this Court delineated the coverage of the
term "basic salary" as used in P.D. 851. We said at some length:

Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as
the basis in the determination of his 13th month pay. Any compensations or remunerations which
are deemed not part of the basic pay is excluded as basis in the computation of the mandatory
bonus.

Under the Rules and Regulations implementing Presidential Decree 851, the following compensations
are deemed not part of the basic salary:

a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instructions
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 December 16, 1975.

Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851
Presidential Decree 851 issued by 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 exclusion of the cost-of-living allowances under Presidential Decree 525 and Letter of
Instructions No. 174, and profit-sharing payments indicate the intention to strip basic salary of other
payments which are properly considered as "fringe" benefits. Likewise, the catch-all exclusionary
phrase "all allowances and monetary benefits which are not considered or integrated as part of the
basic salary" shows also the intention to strip basic salary of any and all additions which may be in
the form of allowances or "fringe" benefits.

Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even
more emphatic in declaring that earnings and other remunerations which are not part of the basic
salary shall not be included in the computation of the 13th-month pay.

While doubt may have been created by the prior Rules and Regulations Implementing Presidential
Decree 851 which defines basic salary to include all remunerations or earnings paid by an employer
to an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and
Regulations which categorically exclude from the definitions of basic salary earnings and other
remunerations paid by an employer to an employee. A cursory perusal of the two sets of Rules
indicates that what has hitherto been the subject of a broad inclusion is now a subject of broad
exclusion. The Supplementary Rules and Regulations cure the seeming tendency of the former rules
to include all remunerations and earnings within the definition of basic salary.

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, pays 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 13th-month pay. If they were not excluded, it is hard to find any "earnings and other
remunerations" expressly excluded in the computation of the 13th month pay. Then the exclusionary
provision would prove to be idle and with no purpose.

This conclusion finds strong support under the Labor Code of the Philippines. To cite a few
provisions:

Art. 87. Overtime Work. Work may be performed beyond eight (8) hours a day provided that the
employee is paid for the overtime work, additional compensation equivalent to his regular wage plus
at least twenty-five (25%) percent thereof.

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 Presidential Decree 851.

In Article 93 of the same Code, paragraph

c) work performed on any special holiday shall be paid an additional compensation of at least thirty
percent (30%) of the regular wage of the employee.

It is likewise clear the premiums for special holiday which is at least 30% of the regular wage is
an additional pay other than and added to the regular wage or basic salary. For similar reason, it
shall not be considered in the computation of the 13th month pay.

Quite obvious from the foregoing is that the term "basic salary" is to be understood in its common,
generally-accepted meaning, i.e., as a rate of pay for a standard work period exclusive of such
additional payments as bonuses and overtime. 8 This is how the term was also understood in the case
of Pless v. Franks, 308 S.W. 2nd. 402, 403, 202 Tenn. 630, which held that in statutes providing that
pension should not less than 50 percent of "basic salary" at the time of retirement, the quoted words
meant the salary that an employee (e.g., a policeman) was receiving at the time he retired without
taking into consideration any extra compensation to which he might be entitled for extra work. 9

In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed or
guaranteed wage is patently the "basic salary" for this is what the employee receives for a standard
work period. Commissions are given for extra efforts exerted in consummating sales or other related
transactions. They are, as such, additional pay, which this Court has made clear do not form part of
the "basic salary."

Respondents would do well to distinguish this case from Songco vs. National Labor Relations
Commission, supra, upon which they rely so heavily. What was involved therein was the term "salary"
without the restrictive adjective "basic". Thus, in said case, we construed the term in its generic sense
to refer to all types of "direct remunerations for services rendered," including commissions. In the
same case, we also took judicial notice of the fact "that some salesmen do not receive any basic salary
but depend on commissions and allowances or commissions alone, although an employer-employee
relationship exists," which statement is quite significant in that it speaks of a "basic salary" apart and
distinct from "commissions" and "allowances". Instead of supporting respondents' stand, it would
appear that Songco itself recognizes that commissions are not part of "basic salary."
In including commissions in the computation of the 13th month pay, the second paragraph of Section
5(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law unduly expanded
the concept of "basic salary" as defined in P.D. 851. It is a fundamental rule that implementing rules
cannot add to or detract from the provisions of the law it is designed to implement. Administrative
regulations adopted under legislative authority by a particular department must be in harmony with
the provisions of the law they are intended to carry into effect. They cannot widen its scope. An
administrative agency cannot amend an act of Congress. 10

Having reached this conclusion, we deem it unnecessary to discuss the other issues raised in these
petitions.

WHEREFORE, the consolidated petitions are hereby GRANTED. The second paragraph of Section 5
(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law issued on November
126, 1987 by then Labor Secretary Franklin M. Drilon is declared null and void as being violative of
the law said Guidelines were issued to implement, hence issued with grave abuse of discretion
correctible by the writ of prohibition and certiorari. The assailed Orders of January 17, 1990 and
October 10, 1991 based thereon are SET ASIDE.

SO ORDERED.

JPL MARKETING PROMOTIONS, Petitioner,

vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, NOEL GONZALES, RAMON
ABESA III and FAUSTINO ANINIPOT, Respondents.

DECISION

Tinga, J.:

This is a petition for review of the Decision1 of the Court of Appeals in CA-G.R. SP No. 62631 dated 03
October 2001 and its Resolution2 dated 25 January 2002 denying petitioner’s Motion for
Reconsideration, affirming the Resolution of the National Labor Relations Commission (NLRC), Second
Division, dated 27 July 2000, awarding separation pay, service incentive leave pay, and 13th month
pay to private respondents.

JPL Marketing and Promotions (hereinafter referred to as "JPL") is a domestic corporation engaged in
the business of recruitment and placement of workers. On the other hand, private respondents Noel
Gonzales, Ramon Abesa III and Faustino Aninipot were employed by JPL as merchandisers on
separate dates and assigned at different establishments in Naga City and Daet, Camarines Norte as
attendants to the display of California Marketing Corporation (CMC), one of petitioner’s clients.

On 13 August 1996, JPL notified private respondents that CMC would stop its direct merchandising
activity in the Bicol Region, Isabela, and Cagayan Valley effective 15 August 1996. 3 They were advised
to wait for further notice as they would be transferred to other clients. However, on 17 October
1996,4 private respondents Abesa and Gonzales filed before the National Labor Relations Commission
Regional Arbitration Branch (NLRC) Sub V complaints for illegal dismissal, praying for separation
pay, 13th month pay, service incentive leave pay and payment for moral damages.5 Aninipot filed a
similar case thereafter.

After the submission of pertinent pleadings by all of the parties and after some clarificatory hearings,
the complaints were consolidated and submitted for resolution. Executive Labor Arbiter Gelacio L.
Rivera, Jr. dismissed the complaints for lack of merit. 6 The Labor Arbiter found that Gonzales and
Abesa applied with and were employed by the store where they were originally assigned by JPL even
before the lapse of the six (6)-month period given by law to JPL to provide private respondents a new
assignment. Thus, they may be considered to have unilaterally severed their relation with JPL, and
cannot charge JPL with illegal dismissal.7 The Labor Arbiter held that it was incumbent upon private
respondents to wait until they were reassigned by JPL, and if after six months they were not
reassigned, they can file an action for separation pay but not for illegal dismissal. 8 The claims for
13th month pay and service incentive leave pay was also denied since private respondents were paid
way above the applicable minimum wage during their employment. 9

Private respondents appealed to the NLRC. In its Resolution,10 the Second Division of the NLRC
agreed with the Labor Arbiter’s finding that when private respondents filed their complaints, the six-
month period had not yet expired, and that CMC’s decision to stop its operations in the areas was
beyond the control of JPL, thus, they were not illegally dismissed. However, it found that despite
JPL’s effort to look for clients to which private respondents may be reassigned it was unable to do so,
and hence they are entitled to separation pay. 11 Setting aside the Labor Arbiter’s decision, the NLRC
ordered the payment of:

1. Separation pay, based on their last salary rate and counted from the first day of their employment
with the respondent JPL up to the finality of this judgment;

2. Service Incentive Leave pay, and 13th month pay, computed as in No.1 hereof. 12

Aggrieved, JPL filed a petition for certiorari under Rule 65 of the Rules of Court with the Court of
Appeals, imputing grave abuse of discretion on the part of the NLRC. It claimed that private
respondents are not by law entitled to separation pay, service incentive leave pay and 13th month
pay.

The Court of Appeals dismissed the petition and affirmed in toto the NLRC resolution. While
conceding that there was no illegal dismissal, it justified the award of separation pay on the grounds
of equity and social justice.13 The Court of Appeals rejected JPL’s argument that the difference in the
amounts of private respondents’ salaries and the minimum wage in the region should be considered
as payment for their service incentive leave and 13th month pay. 14 Notwithstanding the absence of a
contractual agreement on the grant of 13th month pay, compliance with the same is mandatory
under the law. Moreover, JPL failed to show that it was exempt from paying service incentive leave
pay. JPL filed a motion for reconsideration of the said resolution, but the same was denied on 25
January 2002.15

In the instant petition for review, JPL claims that the Court of Appeals committed reversible error in
rendering the assailed Decision and Resolution.16 The instant case does not fall under any of the
instances where separation pay is due, to wit: installation of labor-saving devices, redundancy,
retrenchment or closing or cessation of business operation, 17 or disease of an employee whose
continued employment is prejudicial to him or co-employees,18 or illegal dismissal of an employee but
reinstatement is no longer feasible.19 Meanwhile, an employee who voluntarily resigns is not entitled
to separation unless stipulated in the employment contract, or the collective bargaining agreement, or
is sanctioned by established practice or policy of the employer.20 It argues that private respondents’
good record and length of service, as well as the social justice precept, are not enough to warrant the
award of separation pay. Gonzales and Aninipot were employed by JPL for more than four (4) years,
while Abesa rendered his services for more than two (2) years, hence, JPL claims that such short
period could not have shown their worth to JPL so as to reward them with payment of separation
pay.21

In addition, even assuming arguendo that private respondents are entitled to the benefits awarded,
the computation thereof should only be from their first day of employment with JPL up to 15 August
1996, the date of termination of CMC’s contract, and not up to the finality of the 27 July 2000
resolution of the NLRC.22 To compute separation pay, 13th month pay, and service incentive leave
pay up to 27 July 2000 would negate the findings of both the Court of Appeals and the NLRC that
private respondents were not unlawfully terminated.23 Additionally, it would be erroneous to compute
service incentive leave pay from the first day of their employment up to the finality of the NLRC
resolution since an employee has to render at least one (1) year of service before he is entitled to the
same. Thus, service incentive leave pay should be counted from the second year of service. 24

On the other hand, private respondents maintain that they are entitled to the benefits being claimed
as per the ruling of this Court in Serrano v. NLRC, et al.25 They claim that their dismissal, while not
illegal, was tainted with bad faith.26 They allege that they were deprived of due process because the
notice of termination was sent to them only two (2) days before the actual termination. 27 Likewise, the
most that JPL offered to them by way of settlement was the payment of separation pay of seven (7)
days for every year of service.28

Replying to private respondents’ allegations, JPL disagrees that the notice it sent to them was a notice
of actual termination. The said memo merely notified them of the end of merchandising for CMC, and
that they will be transferred to other clients.29 Moreover, JPL is not bound to observe the thirty (30)-
day notice rule as there was no dismissal to speak of. JPL counters that it was private respondents
who acted in bad faith when they sought employment with another establishment, without even the
courtesy of informing JPL that they were leaving for good, much less tender their resignation. 30 In
addition, the offer of seven (7) days per year of service as separation pay was merely an act of
magnanimity on its part, even if private respondents are not entitled to a single centavo of separation
pay.31

The case thus presents two major issues, to wit: whether or not private respondents are entitled to
separation pay, 13th month pay and service incentive leave pay, and granting that they are so
entitled, what should be the reckoning point for computing said awards.

Under Arts. 283 and 284 of the Labor Code, separation pay is authorized only in cases of dismissals
due to any of these reasons: (a) installation of labor saving devices; (b) redundancy; (c) retrenchment;
(d) cessation of the employer's business; and (e) when the employee is suffering from a disease and
his continued employment is prohibited by law or is prejudicial to his health and to the health of his
co-employees. However, separation pay shall be allowed as a measure of social justice in those cases
where the employee is validly dismissed for causes other than serious misconduct or those reflecting
on his moral character, but only when he was illegally dismissed. 32 In addition, Sec. 4(b), Rule I, Book
VI of the Implementing Rules to Implement the Labor Code provides for the payment of separation
pay to an employee entitled to reinstatement but the establishment where he is to be reinstated has
closed or has ceased operations or his present position no longer exists at the time of reinstatement
for reasons not attributable to the employer.

The common denominator of the instances where payment of separation pay is warranted is that the
employee was dismissed by the employer. 33 In the instant case, there was no dismissal to speak of.
Private respondents were simply not dismissed at all, whether legally or illegally. What they received
from JPL was not a notice of termination of employment, but a memo informing them of the
termination of CMC’s contract with JPL. More importantly, they were advised that they were to be
reassigned. At that time, there was no severance of employment to speak of.

Furthermore, Art. 286 of the Labor Code allows the bona fide suspension of the operation of a
business or undertaking for a period not exceeding six (6) months, wherein an employee/employees
are placed on the so-called "floating status." When that "floating status" of an employee lasts for more
than six months, he may be considered to have been illegally dismissed from the service. Thus, he is
entitled to the corresponding benefits for his separation, and this would apply to suspension either of
the entire business or of a specific component thereof.34

As clearly borne out by the records of this case, private respondents sought employment from other
establishments even before the expiration of the six (6)-month period provided by law. As they
admitted in their comment, all three of them applied for and were employed by another establishment
after they received the notice from JPL. 35 JPL did not terminate their employment; they themselves
severed their relations with JPL. Thus, they are not entitled to separation pay.

The Court is not inclined in this case to award separation pay even on the ground of compassionate
justice. The Court of Appeals relied on the cases36 wherein the Court awarded separation pay to
legally dismissed employees on the grounds of equity and social consideration. Said cases involved
employees who were actually dismissed by their employers, whether for cause or not. Clearly, the
principle applies only when the employee is dismissed by the employer, which is not the case in this
instance. In seeking and obtaining employment elsewhere, private respondents effectively terminated
their employment with JPL.

In addition, the doctrine enunciated in the case of Serrano37 cited by private respondents has already
been abandoned by our ruling in Agabon v. National Labor Relations Commission. 38 There we ruled
that an employer is liable to pay indemnity in the form of nominal damages to a dismissed employee
if, in effecting such dismissal, the employer failed to comply with the requirements of due process.
However, private respondents are not entitled to the payment of damages considering that there was
no violation of due process in this case. JPL’s memo dated 13 August 1996 to private respondents is
not a notice of termination, but a mere note informing private respondents of the termination of
CMC’s contract and their re-assignment to other clients. The thirty (30)-day notice rule does not
apply.

Nonetheless, JPL cannot escape the payment of 13th month pay and service incentive leave pay to
private respondents. Said benefits are mandated by law and should be given to employees as a matter
of right.

Presidential Decree No. 851, as amended, requires an employer to pay its rank and file employees a
13th month pay not later than 24 December of every year. However, employers not paying their
employees a 13th month pay or its equivalent are not covered by said law. 39 The term "its equivalent"
was defined by the law’s implementing guidelines as including Christmas bonus, mid-year bonus,
cash bonuses and other payment amounting to not less than 1/12 of the basic salary but shall not
include cash and stock dividends, cost-of-living-allowances and all other allowances regularly enjoyed
by the employee, as well as non-monetary benefits.40

On the other hand, service incentive leave, as provided in Art. 95 of the Labor Code, is a yearly leave
benefit of five (5) days with pay, enjoyed by an employee who has rendered at least one year of
service. Unless specifically excepted, all establishments are required to grant service incentive leave
to their employees. The term "at least one year of service" shall mean service within twelve (12)
months, whether continuous or broken reckoned from the date the employee started working. 41 The
Court has held in several instances that "service incentive leave is clearly demandable after one year
of service."42

Admittedly, private respondents were not given their 13th month pay and service incentive leave pay
while they were under the employ of JPL. Instead, JPL provided salaries which were over and above
the minimum wage. The Court rules that the difference between the minimum wage and the actual
salary received by private respondents cannot be deemed as their 13th month pay and service
incentive leave pay as such difference is not equivalent to or of the same import as the said benefits
contemplated by law. Thus, as properly held by the Court of Appeals and by the NLRC, private
respondents are entitled to the 13th month pay and service incentive leave pay.

However, the Court disagrees with the Court of Appeals’ ruling that the 13th month pay and service
incentive leave pay should be computed from the start of employment up to the finality of the NLRC
resolution. While computation for the 13th month pay should properly begin from the first day of
employment, the service incentive leave pay should start a year after commencement of service, for it
is only then that the employee is entitled to said benefit. On the other hand, the computation for both
benefits should only be up to 15 August 1996, or the last day that private respondents worked for
JPL. To extend the period to the date of finality of the NLRC resolution would negate the absence of
illegal dismissal, or to be more precise, the want of dismissal in this case. Besides, it would be unfair
to require JPL to pay private respondents the said benefits beyond 15 August 1996 when they did not
render any service to JPL beyond that date. These benefits are given by law on the basis of the service
actually rendered by the employee, and in the particular case of the service incentive leave, is granted
as a motivation for the employee to stay longer with the employer. There is no cause for granting said
incentive to one who has already terminated his relationship with the employer.

The law in protecting the rights of the employees authorizes neither oppression nor self-destruction of
the employer. It should be made clear that when the law tilts the scale of justice in favor of labor, it is
but recognition of the inherent economic inequality between labor and management. The intent is to
balance the scale of justice; to put the two parties on relatively equal positions. There may be cases
where the circumstances warrant favoring labor over the interests of management but never should
the scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice
is to be denied to none).43

WHEREFORE, the petition is GRANTED IN PART. The Decision and Resolution of the Court of Appeals
in CA-G.R. SP No. 62631 are hereby MODIFIED. The award of separation pay is deleted. Petitioner is
ordered to pay private respondents their 13th month pay commencing from the date of employment
up to 15 August 1996, as well as service incentive leave pay from the second year of employment up
to 15 August 1996. No pronouncement as to costs.

SO ORDERED.

G.R. No. 145561 June 15, 2005

HONDA PHILS., INC., petitioner,

vs.
SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA, respondent.

DECISION

YNARES-SANTIAGO, J.:

This petition for review under Rule 45 seeks the reversal of the Court of Appeals’ decision 1 dated
September 14, 20002 and its resolution3 dated October 18, 2000, in CA-G.R. SP No. 59052. The
appellate court affirmed the decision dated May 2, 2000 rendered by the Voluntary Arbitrator who
ruled that petitioner Honda Philippines, Inc.’s (Honda) pro-rated payment of the 13th and 14th
month pay and financial assistance to its employees was invalid.

As found by the Court of Appeals, the case stems from the Collective Bargaining Agreement (CBA)
forged between petitioner Honda and respondent union Samahan ng Malayang Manggagawa sa
Honda (respondent union) which contained the following provisions:

Section 3. 13th Month Pay

The COMPANY shall maintain the present practice in the implementation [of] the 13th month pay.

Section 6. 14th Month Pay

The COMPANY shall grant a 14th Month Pay, computed on the same basis as computation of 13th
Month Pay.
Section 7. The COMPANY agrees to continue the practice of granting, in its discretion, financial
assistance to covered employees in December of each year, of not less than 100% of basic pay.

This CBA is effective until year 2000. In the latter part of 1998, the parties started re-negotiations for
the fourth and fifth years of their CBA. When the talks between the parties bogged down, respondent
union filed a Notice of Strike on the ground of bargaining deadlock. Thereafter, Honda filed a Notice of
Lockout. On March 31, 1999, then Department of Labor and Employment (DOLE) Secretary
Laguesma assumed jurisdiction over the labor dispute and ordered the parties to cease and desist
from committing acts that would aggravate the situation. Both parties complied accordingly.

On May 11, 1999, however, respondent union filed a second Notice of Strike on the ground of unfair
labor practice alleging that Honda illegally contracted out work to the detriment of the workers.
Respondent union went on strike and picketed the premises of Honda on May 19, 1999. On June 16,
1999, DOLE Acting Secretary Felicisimo Joson, Jr. assumed jurisdiction over the case and certified
the same to the National Labor Relations Commission (NLRC) for compulsory arbitration. The striking
employees were ordered to return to work and the management accepted them back under the same
terms prior to the strike staged.

On November 22, 1999, the management of Honda issued a memorandum4 announcing its new
computation of the 13th and 14th month pay to be granted to all its employees whereby the thirty-
one (31)-day long strike shall be considered unworked days for purposes of computing said benefits.
As per the company’s new formula, the amount equivalent to 1/12 of the employees’ basic salary
shall be deducted from these bonuses, with a commitment however that in the event that the strike is
declared legal, Honda shall pay the amount deducted.

Respondent union opposed the pro-rated computation of the bonuses in a letter dated November 25,
1999. Honda sought the opinion of the Bureau of Working Conditions (BWC) on the issue. In a letter
dated January 4, 2000,5 the BWC agreed with the pro-rata payment of the 13th month pay as
proposed by Honda.

The matter was brought before the Grievance Machinery in accordance with the parties’ existing CBA
but when the issue remained unresolved, it was submitted for voluntary arbitration. In his
decision6 dated May 2, 2000, Voluntary Arbitrator Herminigildo C. Javen invalidated Honda’s
computation, to wit:

WHEREFORE, in view of all foregoing premises being duly considered and evaluated, it is hereby
ruled that the Company’s implementation of pro-rated 13th Month pay, 14th Month pay and
Financial Assistance [is] invalid. The Company is thus ordered to compute each provision in full
month basic pay and pay the amounts in question within ten (10) days after this Decision shall have
become final and executory.

The three (3) days Suspension of the twenty one (21) employees is hereby affirmed.

SO ORDERED.7

Honda’s Motion for Partial Reconsideration was denied in a resolution dated May 22, 2000. Thus, a
petition was filed with the Court of Appeals, however, the petition was dismissed for lack of merit.

Hence, the instant petition for review on the sole issue of whether the pro-rated computation of the
13th month pay and the other bonuses in question is valid and lawful.

The petition lacks merit.

A collective bargaining agreement refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and conditions of
employment in a bargaining unit.8 As in all contracts, the parties in a CBA may establish such
stipulations, clauses, terms and conditions as they may deem convenient provided these are not
contrary to law, morals, good customs, public order or public policy. 9 Thus, where the CBA is clear
and unambiguous, it becomes the law between the parties and compliance therewith is mandated by
the express policy of the law.10

In some instances, however, the provisions of a CBA may become contentious, as in this case. Honda
wanted to implement a pro-rated computation of the benefits based on the "no work, no pay" rule.
According to the company, the phrase "present practice" as mentioned in the CBA refers to the
manner and requisites with respect to the payment of the bonuses, i.e., 50% to be given in May and
the other 50% in December of each year. Respondent union, however, insists that the CBA provisions
relating to the implementation of the 13th month pay necessarily relate to the computation of the
same.

We agree with the findings of the arbitrator that the assailed CBA provisions are far from being
unequivocal. A cursory reading of the provisions will show that they did not state categorically
whether the computation of the 13th month pay, 14th month pay and the financial assistance would
be based on one full month’s basic salary of the employees, or pro-rated based on the compensation
actually received. The arbitrator thus properly resolved the ambiguity in favor of labor as mandated
by Article 1702 of the Civil Code.11 The Court of Appeals affirmed the arbitrator’s finding and added
that the computation of the 13th month pay should be based on the length of service and not on the
actual wage earned by the worker.

We uphold the rulings of the arbitrator and the Court of Appeals. Factual findings of labor officials,
who are deemed to have acquired expertise in matters within their respective jurisdiction, are
generally accorded not only respect but even finality, and bind us when supported by substantial
evidence. It is not our function to assess and evaluate the evidence all over again, particularly where
the findings of both the arbiter and the Court of Appeals coincide.12

Presidential Decree No. 851, otherwise known as the 13th Month Pay Law, which required all
employers to pay their employees a 13 th month pay, was issued to protect the level of real wages from
the ravages of worldwide inflation. It was enacted on December 16, 1975 after it was noted that there
had been no increase in the minimum wage since 1970 and the Christmas season was an opportune
time for society to show its concern for the plight of the working masses so that they may properly
celebrate Christmas and New Year.13

Under the Revised Guidelines on the Implementation of the 13th month pay issued on November 16,
1987, the salary ceiling of P1,000.00 under P.D. No. 851 was removed. It further provided that the
minimum 13th month pay required by law shall not be less than one-twelfth (1/12) of the total basic
salary earned by an employee within a calendar year. The guidelines pertinently provides:

The "basic salary" of an employee for the purpose of computing the 13 th month pay shall include
all remunerations or earnings paid by his employer for services rendered but does not include
allowances and monetary benefits which are not considered or integrated as part of the regular or
basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime
premium, night differential and holiday pay, and cost-of-living allowances.14 (Emphasis supplied)

For employees receiving regular wage, we have interpreted "basic salary" to mean, not the
amount actually received by an employee, but 1/12 of their standard monthly wage multiplied by
their length of service within a given calendar year. Thus, we exclude from the computation of "basic
salary" payments for sick, vacation and maternity leaves, night differentials, regular holiday pay and
premiums for work done on rest days and special holidays. 15 In Hagonoy Rural Bank v. NLRC,16 St.
Michael Academy v. NLRC,17 Consolidated Food Corporation v. NLRC,18 and similar cases, the
13th month pay due an employee was computed based on the employee’s basic monthly wage
multiplied by the number of months worked in a calendar year prior to separation from employment.

The revised guidelines also provided for a pro-ration of this benefit only in cases of resignation or
separation from work. As the rules state, under these circumstances, an employee is entitled to a pay
in proportion to the length of time he worked during the year, reckoned from the time he started
working during the calendar year.19 The Court of Appeals thus held that:

Considering the foregoing, the computation of the 13th month pay should be based on the length of
service and not on the actual wage earned by the worker. In the present case, there being no gap in
the service of the workers during the calendar year in question, the computation of the 13th month pay
should not be pro-rated but should be given in full.20 (Emphasis supplied)

More importantly, it has not been refuted that Honda has not implemented any pro-rating of the
13th month pay before the instant case. Honda did not adduce evidence to show that the 13 th month,
14th month and financial assistance benefits were previously subject to deductions or pro-rating or
that these were dependent upon the company’s financial standing. As held by the Voluntary
Arbitrator:

The Company (Honda) explicitly accepted that it was the strike held that prompt[ed] them to adopt a
pro-rata computation, aside [from] being in [a] state of rehabilitation due to 227M substantial losses
in 1997, 114M in 1998 and 215M lost of sales in 1999 due to strike. This is 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.21

The memorandum dated November 22, 1999 which Honda issued shows that it was the first time a
pro-rating scheme was to be implemented in the company. It was a convenient coincidence for the
company that the work stoppage held by the employees lasted for thirty-one (31) days or exactly one
month. This enabled them to devise a formula using 11/12 of the total annual salary as base amount
for computation instead of the entire amount for a 12-month period.

That a full month payment of the 13th month pay is the established practice at Honda is further
bolstered by the affidavits executed by Feliteo Bautista and Edgardo Cruzada. Both attested that
when they were absent from work due to motorcycle accidents, and after they have exhausted all
their leave credits and were no longer receiving their monthly salary from Honda, they still received
the full amount of their 13th month, 14th month and financial assistance pay. 22

The case of Davao Fruits Corporation v. Associated Labor Unions, et al. 23 presented an example of a
voluntary act of the employer that has ripened into a company practice. In that case, the employer,
from 1975 to 1981, freely and continuously included in the computation of the 13 th month pay those
items that were expressly excluded by the law. We have held that this act, which was favorable to the
employees though not conforming to law, has ripened into a practice and therefore can no longer be
withdrawn, reduced, diminished, discontinued or eliminated. Furthermore, in Sevilla Trading
Company v. Semana,24 we stated:

With regard to the length of time the company practice should have been exercised to constitute
voluntary employer practice which cannot be unilaterally withdrawn by the employer, we hold that
jurisprudence has not laid down any rule requiring a specific minimum number of years. In the above
quoted case of Davao Fruits Corporation vs. Associated Labor Unions, the company practice lasted for
six (6) years. In another case, Davao Integrated Port Stevedoring Services vs. Abarquez, the employer,
for three (3) years and nine (9) months, approved the commutation to cash of the unenjoyed portion
of the sick leave with pay benefits of its intermittent workers. While in Tiangco vs. Leogardo, Jr. the
employer carried on the practice of giving a fixed monthly emergency allowance from November 1976
to February 1980, or three (3) years and four (4) months. In all these cases, this Court held that
the grant of these benefits has ripened into company practice or policy which cannot be
peremptorily withdrawn. In the case at bar, petitioner Sevilla Trading kept the practice of including
non-basic benefits such as paid leaves for unused sick leave and vacation leave in the computation of
their 13th-month pay for at least two (2) years. This, we rule likewise constitutes voluntary
employer practice which cannot be unilaterally withdrawn by the employer without violating
Art. 100 of the Labor Code.25 (Emphasis supplied)
Lastly, the foregoing interpretation of law and jurisprudence is more in keeping with the underlying
principle for the grant of this benefit. It is primarily given to alleviate the plight of workers and to help
them cope with the exorbitant increases in the cost of living. To allow the pro-ration of the 13th month
pay in this case is to undermine the wisdom behind the law and the mandate that the workingman’s
welfare should be the primordial and paramount consideration.26 What is more, the factual milieu of
this case is such that to rule otherwise inevitably results to dissuasion, if not a deterrent, for workers
from the free exercise of their constitutional rights to self-organization and to strike in accordance
with law.27

WHEREFORE, the instant petition is DENIED. The decision and the resolution of the Court of
Appeals dated September 14, 2000 and October 18, 2000, respectively, in CA-G.R. SP No. 59052,
affirming the decision rendered by the Voluntary Arbitrator on May 2, 2000, are hereby AFFIRMED in
toto.

SO ORDERED.

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND/OR ERNANI TUMIMBANG,

PETITIONERS, VS. HENRY ESTRANERO, RESPONDENT.

DECISION

REYES, J.:

This appeal by petition for review[1] seeks to annul and set aside the Decision[2] dated February 15,
2010 and Resolution[3] dated May 25, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 108297,
which affirmed the Decision[4] dated August 29, 2008 of the National Labor Relations Commission
(NLRC) in NLRC-NCR Case No. 00-10-08679-05, and its Resolution[5] dated January 30, 2009
denying Philippine Long Distance Telephone Company's (PLDT) Motion for Reconsideration. The
NLRC Decision affirmed the Decision[6] dated December 8, 2006 of the Labor Arbiter (LA) ordering
PLDT to pay Henry Estranero (respondent) his separation pay.

The Facts

Petitioner PLDT is a public utility corporation engaged in the business of providing

telecommunication services to the general public. On July 1, 1995, PLDT employed the respondent as
an Auto-Mechanic/Electrician Helper, Job Grade 3 with a monthly salary of P15,000.00 at the time of
his separation from the service in 2003.

In the year 1995, PLDT adopted a company-wide Manpower Reduction Program (MRP), aimed at
reducing its work force. To commence with its program, PLDT offered the affected employees an
attractive redundancy pay consisting of 100% of their basic monthly salary for every year of service,
in addition to their retirement benefits, if entitled. For those who were not qualified to the retirement
benefits, they were offered separation or redundancy package of 200% of their basic monthly salary
for every year of service.

By virtue of the MRP, a number of positions were declared redundant. Among those gravely affected
by the MRP was the Fleet Management Division where the respondent was assigned, on account of
the significant decrease of company vehicles, machineries, and equipment that required mechanical
servicing and repair. Consequently, the respondent's position was included in those declared as
redundant.

Attracted by the separation pay offered by the company, the respondent expressed his conformity to
his inclusion in the MRP. In the inter-office Memorandum dated April 21, 2003, the respondent
declared that he has no objection to being included in the redundancy program of PLDT. After having
signified his intention and after approval thereof by his superior officers, the respondent's name was
included in the list of redundant employees for that period and a Notice of Separation Due to
Redundancy was submitted to the Department of Labor and Employment on April 25, 2003. He was
then made to sign a deed denominated as a Receipt, Release and Quitclaim for his severance from
employment, thus availed of the offered personnel reduction program. Thereafter, PLDT proceeded to
compute the respondent's redundancy/separation benefits.

Since his length of service was seven (7) years, eleven (11) months and fifteen (15) days, which was
rounded to 8 years, the respondent was not qualified for retirement pay which required an employee
to have worked for at least 15 years. The respondent was nonetheless entitled to 200% of his basic
monthly salary for every year of service by way of redundancy pay or equivalent to P240,000.00. In
addition, he was also entitled to other benefits he has earned for the years prior to, and during the
year of his actual separation, i.e., 2002 and 2003 sick leave benefits, 2002 and 2003 vacation leave
and vacation leave premium benefits, longevity pay, mid-year bonus, 13th month pay and Christmas
bonus, all in the sum of P27,028.37. Thus, his aggregate redundancy pay plus other earned benefits
amounted to P267,028.37.

However, the respondent had outstanding liabilities arising from various loans he obtained from
different entities, namely: the Home Development Mutual Fund (HDMF), PLDT Employees Credit
Cooperative, Inc., PLDT Service Cooperative, Inc., [7] Social Security System (SSS), and the
Manggagawa ng Komunikasyon sa Pilipinas, which summed to P267,028.37. [8] Thus, PLDT deducted
the said amount from the payment that the respondent was supposed to receive as his redundancy
pay.

As a result, when the respondent was made to sign the Receipt, Release and Quitclaim, it showed
that his take home pay was in the amount of "zero pesos." This prompted the respondent to retract
his availment of the separation pay package offered to him through a letter addressed to the company
dated May 8, 2003. Despite said retraction, however, the respondent was no longer allowed to report
for work.

Subsequently, the respondent filed a complaint for illegal dismissal with reinstatement, as well as
moral and exemplary damages plus attorney's fees, docketed as NLRC-NCR Case No. 04-02820-97,
against PLDT and Ernani Tumimbang (petitioners), the Division Head of the Fleet Management
Division where the respondent was assigned.

In due course, the LA rendered a Decision dated December 8, 2006 in favor of the respondent,
disposing as follows:

WHEREFORE, foregoing premises considered, respondent Philippine Long Distance Telephone

Company is hereby ordered to pay complainant Henry T. Estra[n]ero his separation pay in the
amount of P267,038.37 [sic].

The "set-off of complainant's outstanding loans in the amount of P267,038.37 [sic] against his
separation pay invoked by respondents is hereby dismissed for lack of jurisdiction.

All other claims are hereby ordered dismissed for lack of merit.
SO ORDERED.[9]

The LA sustained the validity of PLDT's redundancy program as an authorized cause to terminate the
employment of the respondent, and his entitlement to the redundancy/separation pay pursuant to
the MRP, being more advantageous than the benefits allowed under the law. The LA, however, ruled
that the office lacks jurisdiction to pass upon the issue of PLDT's act in deducting the total
outstanding loans which the respondent obtained from different entities since the same does not
involve an employer-employee relationship, and may only be enforced by PLDT through a separate
civil action in the regular courts.

On appeal, the NLRC affirmed the LA decision. The NLRC ruled that the respondent should be paid
his separation pay on account of redundancy. As to the setting-off of the respondent's outstanding
loans, it agreed with the LA that the same is not a labor dispute but one arising from a debtor-
creditor relation where PLDT stands as a collecting agent over which the labor tribunals has no
jurisdiction.

The petitioners filed a motion for reconsideration but it was denied; hence, they filed a petition
for certiorari with the CA.

On February 15, 2010, the appellate court promulgated its Decision affirming the assailed NLRC
decision. The CA held that there is no more question as to the legality of the respondent's dismissal
from employment as the respondent had accepted the validity of his dismissal from service. The
controversy arose when the petitioners deducted from the respondent's redundancy pay the latter's
outstanding liabilities arising from various loans he obtained from different entities such that his take
home pay became zero.

In sustaining the respondent's claim for redundancy pay, the appellate court ratiocinated:

The deductions subject of this case pertain to loans which x x x respondent availed from various
entities. Hence, as above stated, there must be proof that there is a personal written authorization
from x x x respondent authorizing petitioners to deduct from his terminal pay his outstanding loans
from said entities. Petitioners failed to present convincing evidence that, indeed, x x x respondent,
has knowledge and consented to these deductions. On the contrary, x x x respondent maintains that
petitioners unilaterally made the application of deductions without his knowledge, much less
consent. Thus, it is the burden of petitioners to present proof of the validity of the deductions.
However, aside from their bare allegations, they did not offer any concrete and tangible evidence
proving their authority to deduct the outstanding loans of x x x respondents from his redundancy
pay. They did not submit any written Authority to Deduct to evince the validity of the deductions.
While they submitted two written Authority to Deduct signed by x x x respondent pertaining to his
loans in the PLDT Multi-Purpose [Cooperative], Inc. (Telescoop), this Court cannot, on face value,
conclude from said documents that x x x respondent has given his consent to deduct his loans from
his redundancy pay. At most, said Authority to Deduct pertain[s] only to his loan obtained from
Telescoop, but even so, the amount stated therein does not even match the amount deducted from
his redundancy pay.[10] (Citation omitted)

The CA further stated that the petitioners are not without any recourse to recover from the
respondent the unauthorized payment they have made in his behalf. It has a right to recover from the
respondent the sum so paid out, at least to the extent in which the payment may have been beneficial
to the respondent.
Aggrieved by the foregoing disquisition, the petitioners moved for reconsideration but it was denied by
the appellate court; hence, the present petition for review on certiorari.

The Issue

As presented, the issue for resolution hinges on whether or not the petitioners can validly deduct the
respondent's outstanding loan obligation from his redundancy pay.

Ruling of the Court

The petition is bereft of merit.

At the outset, the issues in this case are factual. "Under Rule 45 of the Rules of Court, only questions
of law may be raised in this Court; such factual issues may be considered and resolved only when the
findings of facts and the conclusions of the [LA] are inconsistent with those of the NLRC and the
CA."[11] It is apparent from the arguments of the petitioners that they are calling for the Court to re-
evaluate the evidence presented by the parties. "Once the issue invites a review of the evidence, the
question posed is one of fact."[12] The petitioners are, therefore, raising questions of facts beyond the
ambit of the Court's review.

Nevertheless, this Court has thoroughly reviewed the records in this case and found that the NLRC
did not commit any grave abuse of its discretion amounting to lack or excess of jurisdiction in
rendering its decision in favor of the respondent. The CA acted in accord with the evidence on record
and case law when it dismissed the petition and affirmed the assailed decision and resolution of the
NLRC.

In the main, this Court is in consonance with the CA that the instant case is not about jurisdiction to
determine the validity of the set-off but more of the petitioner's authority to deduct from the
redundancy pay of the respondent his outstanding loans obtained from different entities. It is
whether the deductions done by the petitioners are authorized under existing laws or subject to a
written authorization from the respondent. [13]

The antecedent facts that gave rise to the respondent's dismissal from employment are not disputed
in this case. There is no question about the validity of the MRP implemented by PLDT in 1995, since
redundancy is one of the authorized causes for termination of employment. [14] The respondent,
however, argued that the deduction of the outstanding loans that he obtained from different entities
from his redundancy pay was contrary to law. On the other hand, the petitioners insisted that they
can validly deduct the said loans from the respondent's redundancy pay since the respondent was
able to obtain said loans because of his employment with PLDT.

It is clear in Article 113[15] of the Labor Code that no employer, in his own behalf or in behalf of any
person, shall make any deduction from the wages of his employees, except in cases where the
employer is authorized by law or regulations issued by the Secretary of Labor and Employment,
among others. The Omnibus Rules Implementing the Labor Code, meanwhile, provides that
deductions from the wages of the employees may be made by the employer when such deductions are
authorized by law, or when the deductions are with the written authorization of the employees for
payment to a third person.[16] Thus, 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 well as the Omnibus Rules implementing it. Further, Article 116 [17] of the Labor Code
clearly provides that it is unlawful for any person, directly or indirectly, to withhold any amount from
the wages of a worker without the worker's consent.

In this case, the deductions made to the respondent's redundancy pay do not fall under any of the
circumstances provided under Article 113, nor was it established with certainty that the respondent
has consented to the said deductions or that the petitioners had authority to make such deductions.

As aptly stated by the CA, the matter would have been different if the deductions refer to the
respondent's contributions for his being a member of SSS, HDMF, or withholding taxes on income,
because if such was the case, the contributions are deductions already sanctioned by existing laws.
Here, it is evidently emphasized that the subject deductions pertain to the respondent's outstanding
loans from various entities.

Furthermore, the petitioners may not offset the outstanding loans of the respondent against the
latter's monetary benefits. The records expressly revealed that the respondent has obtained various
loans from different entities and not with PLDT. Accordingly, set-off or legal compensation cannot
take place between PLDT and the respondent because they are not mutually creditor and debtor of
each other. Thus, there can be no valid set-off because the respondent's creditor is not PLDT. [18]

The Court further agrees with the labor tribunals that the petitioners cannot offset the outstanding
balance of the respondent's loan obligation with his redundancy pay because the balance on the loan
does not come within the scope of jurisdiction of the LA. The demand for payment of the said loans is
not a labor, but a civil dispute. It involves debtor-creditor relations, rather than employee-employer
relations. Evidently, the respondent's unpaid balance on his loans cannot be offset against the
redundancy pay due to him.

In fine, the Court rules that PLDT has no legal right to withhold the respondent's redundancy pay
and other benefits to recompense for his outstanding loan obligations to different entities. The
respondent's entitlement to his redundancy pay is mandated by law which the petitioners cannot
unjustly deny.

WHEREFORE, the Decision dated February 15, 2010 and Resolution dated May 25, 2010 of the
Court of Appeals in CA-G.R. SP No. 108297 are AFFIRMED.

SO ORDERED.

G.R. No. 207286, July 29, 2015

DELA ROSA LINER, INC. AND/OR ROSAURO DELA ROSA, SR. AND NORA DELA
ROSA, Petitioners, v. CALIXTO B. BORELA AND ESTELO A. AMARILLE, Respondents.

DECISION

BRION, J.:

Before us is Dela Rosa Liner, et al.'s petition for review on certiorari1 which seeks to annul the March
8, 2013 decision2 and May 21, 2013 resolution3 of the Court of Appeals in CA-G.R. SP No. 128188.

The Antecedents
The facts as set out in the CA decision are summarized below.

On September 23, 2011, respondents Calixto Borela, bus driver, and Estelo Amarille, conductor,
filed separate complaints4 (later consolidated) against petitioners Dela Rosa Liner, Inc., a public
transport company, Rosauro Dela Rosa, Sr., and Nora Dela Rosa, for underpayment/non-payment of
salaries, holiday pay, overtime pay, service incentive leave pay, 13 th month pay, sick leave and
vacation leave, night shift differential, illegal deductions, and violation of Wage Order Nos. 13, 14, 15
and 16.

In a motion dated October 26, 2011, the petitioners asked the labor arbiter to dismiss the case for
forum shopping. They alleged that on September 28, 2011, the CA 13th Division disposed of a similar
case between the parties (CA-G.R. SP No. 118038) after they entered into a compromise
agreement5 which covered all claims and causes of action they had against each other in relation to
the respondents' employment.

The respondents opposed the motion, contending that the causes of action in the present case
are different from the causes of action settled in the case the petitioners cited.

The Rulings on Compulsory Arbitration

Labor Arbiter (LA) Danna A. Castillon, in an order6 dated November 24, 2011, upheld the petitioners'
position and dismissed the complaint on grounds of forum shopping. Respondents appealed the LA's
ruling. On July 31, 2012, the National Labor Relations Commission (NLRC) 1st Division granted the
appeal,7 reversed LA Castillon's dismissal order, and reinstated the complaint.

The NLRC held that the respondents could not have committed forum shopping as there was no
identity of causes of action between the two cases. The first complaint, the NLRC pointed out,
charged the petitioners with illegal dismissal and unfair labor practice; while the second
complaint was based on the petitioners' alleged nonpayment/underpayment of their salaries and
monetary benefits, and violation of several wage orders.

The petitioners moved for reconsideration, but the NLRC denied their motion, prompting them to file
with the CA a petition for certiorari, for alleged grave abuse of discretion by the NLRC in: (1) holding
that the respondents did not commit forum shopping when they filed the second complaint; and (2)
disregarding respondents' quitclaim in relation to the compromise agreement in the first complaint.

The CA Decision

In its decision under review, the CA 15th Division denied the petition; it found no grave abuse of
discretion in the NLRC ruling that the respondents did not commit forum shopping when they filed
their second complaint. The NLRC likewise held that neither was the case barred by res
judicata arising from the CA judgment in the first case.

The appeals court explained that the first case involved the issues of whether respondents had been
illegally dismissed and whether petitioners should be liable for unfair labor practice. The labor
arbiter8 dismissed the first complaint for lack of merit in his decision of November 6, 2008.

On the respondents' appeal against the LA ruling in this first case, the NLRC 6th Division rendered a
decision on March 25, 2010, reversing the dismissal of the complaint. It awarded respondents back
wages (P442,550.00 for Borela and P215,775.00 for Amarille), damages (P10,000.00 each in moral
and exemplary damages for Borela), and moral and exemplary damages (P25,000.00 each for
Amarille), plus 10% attorney's fees for each of them. 9chanrobleslaw

On the petitioners' motion for reconsideration of the NLRC ruling in the first complaint, however, the
NLRC vacated its decision, and in its resolution of September 30, 2010, issued a new ruling that
followed the LA's ruling, with modification. It awarded the respondents financial assistance of
P10,000.00 each, in consideration of their long years of service to the company.

The respondents sought relief from the CA through a petition for certiorari (CA-G.R. SP No. 118038).
Thereafter, the parties settled the case (involving the first complaint) amicably through the
compromise agreement10 adverted to earlier. Under the terms of this agreement, "(t)he parties
has (sic) agreed to terminate the case now pending before the Court of Appeals and that both parties
further agree that no further action based on the same grounds be brought against each other, and this
Agreement applies to all claims and damages or losses either party may have against each other
whether those damages or losses are known or unknown, foreseen or unforeseen."

Based on this agreement, Borela and Amarille received from respondents P350,000.00 and
P150,000.00, respectively, and executed a quitclaim. Consequently, the CA 13th Division rendered
judgment in accordance with the compromise agreement and ordered an entry of judgment which
was issued on September 28, 2011. In this manner, the parties resolved the first case.

To go back to the present case CA-G.R. SP No. 128188, which arose from the second complaint the
respondents subsequently filed), the CA 15th Division upheld the NLRC's (1st Division) decision and
ruled out the presence of forum shopping and res judicata as bars to the respondents' subsequent
money claims against the petitioners. The petitioners moved for reconsideration, but the CA denied
the motion in its resolution of May 21, 2013.

The Petition

The petitioners now ask the Court to nullify the CA judgment in CA-G.R. SP No. 128188 (arising from
the second complaint), contending that the appellate court erred in upholding the NLRC ruling that
there was no forum shopping nor res judicata that would bar the second complaint. They submit that
private respondents should be penalized and be dealt with more severely, knowing fully well that the
same action had been settled and they both received a considerable amount for the
settlement.11chanrobleslaw

The Respondents' Position

In their Comment12 filed on September 4, 2013, the respondents pray for the denial of the petition for
having been filed out of time and for lack of merit.

They argue that the petition should not prosper as it was belatedly filed. They claim that according to
the petitioners' counsel herself, her law firm received a copy of the CA resolution of May 21, 2013,
denying their motion for reconsideration on May 28, 2013, and giving them until June 12, 2013, to
file the petition. The petition, they point out, was notarized only on June 13, 2013, which means that
it was filed only on that day, or beyond the 15-day filing period.

On the substantive aspect of the case, respondents contend that their second complaint involved two
causes of action: (1) their claim for sick leave, vacation leave, and 13th-month pay under the
collective bargaining agreement of the company; and (2) the petitioners' noncompliance with wage
orders since the year 2000 until the present.

They quote the NLRC's (1st Division) decision of July 31, 2012, 13 almost in its entirety, to support
their position that they did not commit forum shopping in the filing of the second complaint and that
they should be heard on their money claims against the petitioners.

The Court's Ruling

The procedural issue

We find the petition for review on certiorari timely filed pursuant to Rule 45, Section 2 of the Rules of
Court.14chanrobleslaw

The last day for filing of the petition, as respondents claim, fell on June 12, 2013, Independence Day,
a legal holiday. In Reiner Pacific International Shipping, et al., v. Captain Francisco B. Guevarra, et
al.,15 the Court explained that under Section 1, Rule 22 of the Rules of Court, as clarified by A.M. 00-
2-14 SC (in relation to the filing of pleadings in courts), when the last day on which a pleading is due
falls on a Saturday, Sunday, or a legal holiday, the filing of the pleading on the next working day is
deemed on time. The filing of the petition therefore on June 13, 2013, a working day, fully complied
with the rules.

The merits of the case

The CA 15th Division committed no reversible error when it affirmed the NLRC ruling that the second
complaint is not barred by the rule on forum shopping nor by the principle of res judicata. In other
words, no grave abuse of discretion could be attributed to the NLRC when it reinstated the second
complaint.

Contrary to the petitioners' submission, respondents' second complaint (CA-G.R. SP No. 128188), a
money claim, is not a "similar case" to the first complaint (CA-G.R. SP No. 118038). Thus, the filing
of the second complaint did not constitute forum shopping and the judgment in the first case is not
a res judicata ruling that bars the second complaint.

As the CA aptly cited, the elements of forum shopping are: (1) identity of parties; (2) identity of rights
asserted and relief prayed for, the relief being founded on the same facts; and (3) identity of the two
preceding particulars such that any judgment rendered in the other action will, regardless of which
party is successful, amount to res judicata in the action under consideration.16chanrobleslaw

We concur with the C A that forum shopping and res judicata are not applicable in the present case.
There is no identity of rights asserted and reliefs prayed for, and the judgment rendered in the
previous action will not amount to res judicata in the action now under consideration.

There is also no identity of causes of action in the first complaint and in the second complaint. In Yap
v. Chua,17 we held that the test to determine whether causes of action are identical is to ascertain
whether the same evidence would support both actions, or whether there is an identity in the facts
essential to the maintenance of the two actions. If the same facts or evidence would support both
actions, then they are considered the same; a judgment in the first case would be a bar to the
subsequent action.

Under the circumstances of the case before us, sufficient basis exists for the NLRC's and CA's
conclusions that there is no identity of causes of action between the respondents' two complaints
against the petitioners. The first complaint involved illegal dismissal/suspension, unfair labor
practice with prayer for damages and attorney's fees; while the second complaint (the subject of the
present appeal) involves claims for labor standards benefits — the petitioners' alleged violation of
Wage Orders Nos. 13, 14, 15 and 16; nonpayment of respondents' sick and vacation leave pays, 13th-
month pay, service incentive leave benefit, overtime pay, and night shift differential.
As the CA correctly held, the same facts or evidence would not support both actions. To put it simply,
the facts or the evidence that would determine whether respondents were illegally dismissed, illegally
suspended, or had been the subject of an unfair labor practice act by the petitioners are not the same
facts or evidence that would support the charge of non-compliance with labor standards benefits and
several wage orders. We thus cannot find a basis for petitioners' claim that "the same action had
been settled x x x."18chanrobleslaw

Neither are we persuaded by petitioners' argument that "The Compromise Agreement covered all
claims and causes of action that the parties may have against each other in relation to the private
respondents' employment."19 The compromise agreement had been concluded to terminate the illegal
dismissal and unfair labor case then pending before the CA. While the parties agreed that no further
action shall be brought by the parties against each other, they pointedly stated that they referred to
actions on the same grounds. The phrase same grounds can only refer to the grounds raised in the
first complaint and not to any other grounds.

We likewise cannot accept the compromise agreement's application "to all claims and damages or
losses either party may have against each other whether those damages or losses are known or
unknown, foreseen or unforeseen."20chanrobleslaw

This coverage is too sweeping and effectively excludes any claims by the respondents against the
petitioners, including those that by law and jurisprudence cannot be waived without appropriate
consideration such as nonpayment or underpayment of overtime pay and wages.

In Pampanga Sugar Development, Co., Inc., v. Court of Industrial Relations, et al.,21 the Court reminded
the parties that while rights may be waived, the waiver must not be contrary to law, public policy,
morals, or good customs; or prejudicial to a third person with a right recognized by law. 22 In labor
law, respondents' claim for 13th-month pay, overtime pay, and statutory wages (under Wages Orders
13, 14, 15 and 16), among others, cannot simply be generally waived as they are granted for workers'
protection and welfare; it takes more than a general waiver to give up workers' rights to these legal
entitlements.

Lastly, the petitioners' insinuation, that the respondents are not and should not be entitled to
anything more, because they had already "received a considerable amount for the
settlement"23 (P350,000.00 for Borela and P150,000.00 for Amarille), should be placed and
understood in its proper context.

We note that in the illegal dismissal case where the compromise agreement took place, the NLRC 6th
Division (acting on the appeal from the LA's ruling) awarded Borela P442,550.00 in backwages;
P20,000.00 in moral and exemplary damages, plus 10% attorney's fees; and to Amarille P215,775.00
in back wages and P50,000.00 in moral and exemplary damages, plus 10% attorney's
fees.24chanrobleslaw

Although the NLRC reconsidered these awards and eventually granted financial assistance of
P10,000.00 each to Borela and Amarille, 25 it is reasonable to regard the amounts they received as a
fair compromise in the settlement of the first complaint in relation with the initial NLRC award,
indicated above, before its reconsideration. To be sure, the parties, especially the respondents,
could not have considered the P10,000.00 financial assistance or their labor standards claims,
particularly the alleged violation of the wage orders, as a factor in their effort to settle the case
amicably. The compromise agreement, it should be emphasized, was executed on September 8,
2011,26 while the labor standards complaint was filed only on September 23, 2011. 27chanrobleslaw

For the reasons discussed above, we find the petition without merit.
WHEREFORE, premises considered, the petition for review on certiorari is DISMISSED for lack of
merit. The assailed decision and resolution of the Court of Appeals are AFFIRMED.

SO ORDERED.

G.R. No. 183934

ERNESTO GALANG and MA. OLGA JASMIN CHAN, Petitioners,

vs
BOIE TAKEDA CHEMICALS, INC. and/or KAZUHIKO NOMURA, Respondents.

DECISION

JARDELEZA, J.:

This is a petition for review on certiorari1under Rule 45 of the Revised Rules of Court filed by Ernesto
M. Galang and Ma. Olga Jasmin Chan (petitioners) from the Court of Appeals' (CA) Decision 2 dated
February 26, 2008 (CA Decision) and the Resolution3 dated July 28, 2008 (collectively, Assailed
Decision) in CA-G.R. SP No. 96861. In the Assailed Decision, the CA affirmed the National Labor
Relations Commission (NLRC) Decision4 dated March 7, 2006 reversing the Labor Arbiter's ruling that
petitioners were illegally dismissed, viz:

WHEREFORE, premises considered, the instant Petition is hereby DENIED. Accordingly, the assailed
March 7, 2006 Decision of the NLRC as well as the October 25, 2006 Resolution denying Petitioners'
Motion for Reconsideration are AFFIRMED.

SO ORDERED.5(Emphases in the original.)

Statement of Facts

Respondent pharmaceutical company Boie Takeda Chemicals, Inc. (BTCI) hired petitioners Ernesto
Galang and Ma. Olga Jasmin Chan in August 28, 1975 and July 20, 1983, respectively. 6 Through the
years, petitioners rose from the ranks and were promoted to Regional Sales Managers in 2000.
Petitioners held these positions until their separation from BTCI on May 1, 2004. 7

As Regional Sales Managers, they belong to the sales department of BTCI. They primarily managed
regional sales budget and target, and were responsible for market share and company growth within
their respective regions. Within the organizational hierarchy, they reported to the National Sales
Director.8 In 2002, when the National Sales Director position became vacant (after the retirement of
Melchor Barretto), petitioners assumed and shared (with the general manager) the functions and
responsibilities of this higher position, and reported directly to the General Manager. 9

In February 2003, the new General Manager, Kazuhiko Nomura (Nomura), asked petitioners to apply
for the position of National Sales Director. 10 Simultaneously, Nomura also asked Edwin Villanueva
(Villanueva) and Mimi Escarte, both Group Product Managers in the marketing depatiment, to apply
for the position of Marketing Director. All four employees submitted themselves to interviews with the
management. In the end, Nomura hired an outsider from Novartis Company as Marketing Director,
while the position of National Sales Director remained vacant. 11

Later, however, petitioners were informed that BTCI promoted Villanueva as National Sales Director
effective May 1,2004.12 BTCI explained that the appointment was pursuant to its management
prerogative, and that it arrived at such decision only "after careful assessment of the situation, the
needs of the position and the qualifications of the respective candidates." 13 The promotion of
Villanueva as the National Sales Director caused ill-feelings on petitioners' part.14 They believed that
Villanueva did not apply for the position; has only three years of experience in sales; and was
reportedly responsible for losses in the marketing depmiment. 15 Petitioners further resented
Villanueva's appointment because they heard that the appointment was made only because he
threatened to leave the office along with the company's top cardio-medical doctors.16

After Villanueva's promotion, petitioners claimed that Nomura threatened to dismiss them from office
if they failed to perform well under the newly appointed National Sales Director. 17 This prompted
petitioners to inquire if they could avail of early retirement package due to health reasons.
Specifically, they requested Nomura if they could avail of the early retirement package of 150% plus
120% of monthly salary for every year of service tax free, and full ownership of service vehicle tax
free.18 They claimed that this is the same retirement package given to previous retirees namely,
former Regional Sales Director Jose Sarmiento, Jr. (Sarmiento), and former National Sales Director
Melchor Barretto.19 Nomura, however, insisted that such retirement package does not exist 20 and
Sarmiento's case was exceptional since he was just a few years shy from the normal retirement age.21

On April 28, 2004, petitioners intimated their intention to retire in a joint written letter of
resignation22 dated April 28, 2002 (sic) to Nomura, effective on April 30, 2004. Thereafter, petitioners
received their retirement package and other monetary pay from BTCI. Chan received two checks 23 in
the total amount of P2, 187,236.6424 computed as follows:

1) Retirement pay (P70,000.00 x 120% x 21years) = P1,764,000.00

2) Salaries from May to December 2004 (P70,000.00

P560,000.00
x 8 mos.) =

3) Allowances (from May to December 2004) = P69,328.00

4) Rice Subsidy (April-December) = P6,000.00

5) Conversion of Leave Credits (138 days) = P461,833.00

6) 13th month pay (pro-rata) = P35,000.00

[Gross Amount] P2,896,161.00

Less: Accountabilities P595,952.76

Taxes P110,971.00

[Net Amount] P2, 187,236.6425

Galang received checks26 in the total amount of P3,754,306.5627 computed as follows:

1) Retirement Pay (P70,000 x 160% x 29 years)= P3,248,000.00

2) Salaries ffrom] May [to] Dec. 2004 = P560,000.00

 3) Allowances (May to December 2004) = P69,328.00

4) Rice Subsidy (April to December)= P6,000.00

5) Conversion of Leave Credits (35 days) = P117,131.00

6) 13th month pay (pro-rata) = P35,000.00

Gross Amount P4,035,459.00

Less: Accountabilities P275.553.63

Taxes P5,598.81

[Net Amount] P3, 754,306.5628

Upon petitioners' retirement, the positions of Regional Sales Manager were abolished, and a new
position of Operations Manager was created. 29

On October 20, 2004, petitioners filed the complaint for constructive dismissal and money claims
before the NLRC Regional Arbitration Branch. 30

In a Decision dated May 16, 2005 (LA Decision),31 the Labor Arbiter ruled that petitioners were
constructively dismissed.32 The Labor Arbiter explained that petitioners were forced to retire because
Villanueva's appointment constituted an abuse of exercise of management prerogative; and that
subsequent events, such as the abolition of the positions of Regional Sales Managers and the creation
of the position of the Operations Manager show that petitioners' easing out from service were
orchestrated. It also found that petitioners were discriminated as to their retirement package. The
dispositive pmiion of the decision stated, thus:

WHEREFORE, premises considered, judgment is hereby rendered, declaring complainants' dismissal

from their employment to be illegal.1âwphi1 Accordingly, respondents are jointly and severally liable:

1) To pay complainants the amounts opposite their respective names:

Backwagcs Separation Pay/ Salary

Differential Pay Differentials

E. Galang P398,854.16 189,000.00 830,000.00

3045,000.00 680,000.00

Ma. OJ Chan 398,954.16 189,000.00 830,000.00

2,205,000.00 680,000.00

2) To pay complainants, the amount P227, 164.10 for Olga Chan and the sum of P27,374.85 for
Ernesto Galang, representing the refund of the deducted car loan;
3) To pay complainants the amount of P500,000.00 each, representing moral damages, and the
amount of P500.000.00 each, as for exemplary damages;

4) To pay complainant the amount equivalent to ten (10%) percent of the total judgment award, as
and for attorney's fees.

SO ORDERED.33

On June 30, 2005, BTCI appealed the LA Decision with the NLRC. 34

Petitioners allegedly received a Notice of Decision 35 dated March l0, 2006 from the NLRC. The notice
informed petitioners that a decision was promulgated by the NLRC on February 7, 2006. The
attached decision in the notice, however, was dated March 7, 2006. The decision dated March 7,
200636 (March Decision) reversed and set aside the LA Decision, and dismissed the complaint. In
said decision, the NLRC ruled that petitioners failed to prove that they were constructively dismissed.

Petitioners filed a motion to declare the March Decision null and void by way of motion for
reconsideration37 dated March 22, 2006. Petitioners alleged that prior to the Notice of Decision, they
personally received a decision allegedly promulgated on February 7, 200638 (February Decision)
which affirmed the LA Decision, but with modification as to the amount of moral and exemplary
damages. Petitioners pointed out that the March Decision: (1) lacked one signature in page 19; (2)
contained two different specimens signature for Commissioner Gacutan; (3) had pages which do not
contain the initials of the one preparing it; (4) was printed in higher quality paper; (4) merely lifted the
arguments of BTCI in contrast to the NLRC's February Decision which directly reviewed the findings
of the Labor Arbiter; and (5) was attached to a notice signed by merely a Labor Arbiter Associate, and
not by the Executive Clerk of the Division.39 Petitioners also reiterated that BTCI dismissed them
under the guise of management prerogative, and that Villanueva's appointment as National Sales
Director was an abuse of exercise of such prerogative. They also claimed that their departure from the
office was not voluntary but was prompted by the circumstances after the BTCI preferred Villanueva's
application over theirs.40

On October 25, 2006, the NLRC issued a Resolution 41 which denied petitioners' motion for
reconsideration, and therefore upheld the NLRC's March Decision. The NLRC clarified that the official
decision is the March Decision, and that the February Decision cannot be considered as the official
decision because it was merely a draft decision.

Petitioners filed a petition for certiorari42under Rule 65 of the Revised Rules of Court with the CA,
which denied the petition in the Assailed Decision. The CA said that the "NLRC having thus chosen to
uphold its Decision dated March 7, 2006 as the authentic one, this Court must therefore, consider
the same as the version herein submitted for review." 43 The CA also found that the March Decision
was more in tune with law and jurisprudence. 44 It reviewed and reassessed the facts and evidence on
record and made a finding that the NLRC did not commit grave abuse of discretion.

Thus, petitioners filed before this Court a petition for review on certiorari under Rule 45 of the Revised
Rules of Court. They allege that the CA erred in sustaining the decision of the NLRC.

The Arguments

Petitioners argue that they were constructively dismissed because of the acts of BTCI 's General
Manager Nomura. They claim that they were forced into resigning because instead of promoting them
to the position of National Sales Directors, BTCI hired Villanueva who only had three years of service
in the company, who has no background or experience in sales to speak of and who was allegedly
responsible for almost the bankruptcy of the company. They allege that Nomura threatened to
dismiss them if they do not perform well under the newly-appointed National Sales Director.

Petitioners also argue that the retirement package given to them is lower compared to others who
were holding the similar position at the time of their retirement. By way of example, petitioners cite
the case of one Sarmiento, who was promoted with them to the same position, and who opted for
early retirement in 2001. Sarmiento allegedly received a more generous package of 150% of his
monthly salary for every year of service on top of the 120% retirement package for his 22 years of
service. Petitioners contend that this was the same retirement package given to other employees such
as Anita Ducay, Marcielo Rafael, Rolando Arada, Sarmiento, and Melchor Barretto. 45

For its part, BCTI claims that the complaint is only an attempt to extort additional benefits from the
company.

BTCI denies having constructively dismissed petitioners. It argues that no constructive dismissal can
occur because there was no movement or transfer of position or diminution of salaries or benefits.
Neither was there any circumstance that would make petitioners' continued employment
unreasonable or impossible.46 The appointment of Villanueva was within the sphere of management's
prerogatives, and was arrived at after careful consideration. It did not have any adverse effect on
petitioners' positions as Regional Sales Managers. According to BTCI, petitioner's decision to retire
was voluntary and of their own volition. 47

As to the payment of retirement benefits, BTCI insists that petitioners have been paid according to
the Collective Bargaining Agreement (CBA) between BTCI and BTCI Supervisory Union. Although
petitioners are managers (and are not covered by the CBA), BTCI by practice grants the same
retirement benefits to managers. BTCI admits that it gave Sarmiento additional financial assistance
because of serious health problems, and because he was merely three years away from normal
retirement. Other employees cited by petitioners all received retirement benefits computed on the
CBA provisions.48

Issues

Thus, the issues before this Court are the following:

I. Whether petitioners were constructively dismissed from service; and

II. Whether petitioners are entitled to a higher retirement package.

Our Ruling

We deny the petition.

In its Resolution dated October 25, 2006, the NLRC denied petitioners' motion for reconsideration,
and declared the March Decision as the official decision. It ruled that the February Decision (in
petitioners' possession) is merely a draft decision.49 This Court recognizes that it is common practice
that more than one decision may be drafted because more often, members of a collegiate body change
their positions during deliberations.50 This finding of the NLRC, coupled by the fact that the March
Decision is complete in form and substance pursuant to Section 4(c) and Section 13 of Rule VII of the
2005 NLRC Rules of Procedure, cannot be characterized as an exercise of grave abuse of discretion
amounting to lack or excess of jurisdiction. The issue of which between the two decisions is the
correct one delves into the substantive arguments of the case, which the CA has already decided after
review and reassessment of the facts and evidence of the entire records.

I. Petitioners voluntarily
retired from the service, thus
were not constructively
dismissed.

Constructive dismissal has often been defined as a "dismissal in disguise" or "an act amounting to
dismissal but made to appear as if it were not." 51 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 some cases, while no demotion in rank or diminution in
pay may be attendant, constructive dismissal may still exist when continued employment has become
so unbearable because of acts of clear discrimination, insensibility or disdain by the employer, that
the employee has no choice but to resign. 52 Under these two definitions, what is essentially lacking is
the voluntariness in the employee's separation from employment.

In this case, petitioners were neither demoted nor did they receive a diminution in pay and benefits.
Petitioners also failed to show that employment is rendered impossible, unreasonable or unlikely.

Petitioners admitted that they have previously intended to retire and were actually the ones who
requested to avail of an early retirement. 53 More, the circumstances which petitioners claim to have
forced them into early retirement are not of such character that rendered their continued employment
with BTCI as impossible.

Petitioners allege that Nomura appointed Villanueva in order to ease them out from the company.
Petitioners claim that Villanueva was unqualified for the position compared to their experiences; that
Villanueva did not apply for the position of National Sales Director; and that he lacked the experience
for the job. Such arguments only affirm the NLRC and CA's finding that petitioners' resignation was
prompted by their general disagreement with the appointment of Villanueva, and not by the acts of
discrimination by the management.

Our labor laws respect the employer's inherent right to control and manage effectively its enterprise
and do not normally allow interference with the employer's judgment in the conduct of his
business.54 Management has exclusive prerogatives to determine the qualifications and fitness of
workers for hiring and firing, promotion or reassignment.55 It is only in instances of unlawful
discrimination, limitations imposed by law and collective bargaining agreement can this prerogative of
management be reviewed.56

The reluctance to interfere with management's prerogative in determining who to promote all the
more applies when we consider that the position of National Sales Director is a managerial position.
Managerial positions are offices which can only be held by persons who have the trust of the
corporation and its officers.57 The promotion of employees to managerial or executive positions rests
upon the discretion of management. 58 Thus, we have repeatedly reminded that the Labor Arbiters, the
different Divisions of the NLRC, and even courts, are not vested with managerial authority. 59 The
employer's exercise of management prerogatives, with or without reason, does not per se constitute
unjust discrimination, unless there is a showing of grave abuse of discretion.60 In this case, there is
none.

Petitioners did not present any evidence showing BTCI's adopted rules and policies laying out the
standards of promotion of an employee to National Sales Director. They did not present the
qualification standards (which BTCl did not allegedly follow) needed for the position. Petitioners
merely assumed that one of them was better for the job compared to Villanueva. Mere allegations
without proof cannot sustain petitioners' claim. In any case, a perusal of Villanueva's resume shows
that he has combined experiences in both sales and marketing. 61 The NLRC also found that an
independent consulting agency, K Search Asia Consulting, was engaged by BTCI to determine who to
appoint as National Sales Director.62 The consulting agency recommended Villanueva to the
position.63 In the absence of any qualification standards that BTCI allegedly gravely abused to refuse
to follow, we cannot substitute our own judgment on the qualifications of Villanueva.

Petitioners' allegation that Villanueva was appointed only because of the threats the latter made to
management militates against their claim. If BTCI management was merely forced to appoint
Villanueva, petitioners cannot claim that BTCI intentionally and maliciously orchestrated their
easement from the company.

Petitioners cannot also argue that BTCI's caution to dismiss them if they do not perform well under
the newly-appointed National Sales Director constituted a threat to their employment. This is merely
a warning for them to cooperate with the new National Sales Director. Such warning is expected of
management as part of its supervision and disciplining power over petitioners given their
unwelcoming reactions to Villanueva's appointment.

The other acts of discrimination complained of by petitioners refer to post-employment matters, or

those that transpired after their retirement. These include payment of alleged "lesser" retirement
package, and the abolition of the positions of Regional Sales Manager. These events transpired only
after they voluntary availed of the early retirement. We stress, however, that the circumstances
contemplated in constructive dismissal cases are clear acts of discrimination, insensibility or disdain
which necessarily precedes the apparent "voluntary" separation from work. If they happened after the
fact of separation, it could not be said to have contributed to employee's decision to involuntary
resign, or in this case, retire.

It is true that in constructive dismissal cases, the employer is charged with the burden of proving
that its conduct and action or the transfer of an employee are for valid and legitimate grounds such
as genuine business necessity.64 However, it is likewise true that in constructive dismissal cases, the
employee has the burden to prove first the fact of dismissal by substantial evidence.65 Only then
when the dismissal is established that the burden shifts to the employer to prove that the dismissal
was for just and/or authorized causc.66 The logic is simple-if there is no dismissal, there can be no
question as to its legality or illegality. 67

In Portuguez v. GSIS Family Bank (Comsavings Bank), 68 we were confronted with the same facts where
an employee who opted for voluntary retirement claimed that he was constructively dismissed. In that
case, we ruled that it is the employee who has the onus to prove his allegation that his availment of
the early voluntary retirement program was, in fact, done involuntarily:

Again, we are not persuaded. We are not unaware of the statutory rule that in illegal dismissal cases,
the employer has the onus prohandi to show that the employee's separation from employment is not
motivated by discrimination, made in bad faith, or cffocled as a form of punishment or demotion
without sufficient cause. It bears stressing, however, that this legal principle presupposes that there
is indeed an involuntary separation from employment and the facts attendant to such forced
separation was clearly established.

This legal principle has no application in the instant controversy for as we have succinctly pointed
above, petitioner failed to establish that indeed he was discriminated against and on account of such
discrimination, he was forced to sever his employment from the respondent bank. What is
undisputed is the fact that petitioner availed himself of respondent bank's early voluntary retirement
program and accordingly received his retirement pay in the amount of P1.324 Million under such
program. Consequently, the burden of proof will not vest on respondent bank to prove the legality of
petitioner's separation from employment but aptly remains with the petitioner to prove his allegation
that his availment of the early voluntary retirement program was, in fact, done involuntarily.

As we have explicitly ruled in Machica v. Roosevelt Service Center, Inc.:

"The rule is that one who alleges a fact has the burden of proving it; thus, petitioners were
burdened to prove their allegation that respondents dismissed them from their employment. It must
be stressed that the evidence to prove this fact must be clear, positive and convincing. The rule
that the employer bears the burden of proof in illegal dismissal cases finds no application here
because the respondents deny having dismissed the petitioners."

Verily, petitioner did not present any clear, positive or convincing evidence in the present case to
support his claims. Indeed, he never presented any evidence at all other than his own self-serving
declarations. We must bear in mind the legal dictum that, "he who asserts, not he who denies,
must prove."69 (Citations omitted, emphases in the original.)
Here, records show that petitioners failed to establish the fact of their dismissal when they failed to
prove that their decision to retire is involuntary. Consequently, no constructive dismissal can be
found.

II. Petitioners were not

discriminated against in
terms of their retirement
package.

The entitlement of employees to retirement benefits must specifically be granted under existing laws,
a collective bargaining agreement or employment contract, or an established employer policy. 70 Based
on both parties' evidence, petitioners arc not covered by any agreement. There is also no dispute that
petitioners received more than what is mandated by Article 287 71 of the Labor Code. Petitioners,
however, claim that they should have received a larger pay because BTCI has given more than what
they received to previous retirees. In essence, they claim that they were discriminated against
because BTCI did not give them the package of 150% of monthly salary for every year of service on
top of the normal retirement package.

In Vergara v. Coca-Cola Bottlers Philippines, Inc., 72we explained that the burden of proof that the
benefit has ripened into company practice, i.e., giving of the benefit is done over a long period of time,
and that it has been made consistently and deliberately, rests with the employee:

To he considered as a regular company practice the employee must prove by substantial evidence
that the giving of the benefit is done over a long period of time, and that it has been made
consistently and deliberately. Jurisprudence has not laid down any hard-and-fast rule as to the
length of time that company practice should have been exercised in order to constitute voluntary
employer practice. The common denominator in previously decided cases appears to be the regularity
and deliberateness of the grant of benefits over a significant period of time. It requires an
indubitable showing that the employer agreed to continue giving the benefit knowing fully well
that the employees are not covered by any provision of the law or agreement requiring
payment thereof. In sum, the benefit must be characterized by regularity, voluntary and deliberate
intent of the employer to grant the benefit over a considerable period of time. 73 (Citations omitted,
emphases supplied.)

We agree with the CA when it ruled that "[t]his concession given to such an employee was not
proved (sic) to be company practice or policy such that petitioners can demand of it over and above
what has been specified in the collective bargaining agreement." 74

To prove that their claim on the additional grant of 150% of salary, petitioners presented evidence
showing that Anita Ducay,75 Rolando Arada,76 Marcielo Rafael,77 and Sarmiento,78 received
significantly larger retirement benefits. However, the cases of Ducay, Arada, and Rafael cannot be
used as precedents to prove this specific company practice because these employees were not shown
to be similarly situated in terms of rank, nor are the applicable retirement packages corresponding to
their ranks alike. Also, these employees, including Sarmiento, all retired in the same year of 2001, or
only within a one-year period. Definitely, a year cannot be considered long enough to constitute the
grant of retirement benefits to these employees as company practice.

In fact, the affidavit79 of Anita Ducay affirms BTCI's position that in practice, the CBA provisions
govern the employees' retirement pay. And while it may also support petitioners' allegation that in
some cases, a more generous package is given to retiring employees higher than that provided in the
CBA, the affidavit candidly states that the retirement package given to Sarmiento, Melchor Barreto,
Marcielo Rafael, and Rolando Arada was not in accordance with standard of merit or company
practice.

It cannot therefore be disputed that petitioners already received the benefits as specified in the CBA
between BTCI and BTCI Supervisory Union. 80 Petitioner Chan, for her 21 years of service, received a
total of Pl,764,000.00 as retirement benefits following the formula of P70,000.00 x 120% x 21 years.
Petitioner Galang, for his 29 years of service, received a total of P3,248,000.00 as retirement benefits
following the formula of P70,000.00 x 160% x 29 years.

In sum, we hold that petitioners voluntarily retired from service and received their complete
retirement package and other monetary claims from BTCI.

WHEREFORE, the petition for review on certiorari is DENIED. No costs.

SO ORDERED.

G.R. No. 230481, July 26, 2017

HOEGH FLEET SERVICES PHILS., INC., AND/OR HOEGH FLEET SERVICES

AS, Petitioners, v. BERNARDO M. TURALLO, Respondent.

G.R. No. 230500

BERNARDO M. TURALLO, Petitioner, v. HOEGH FLEET SERVICES PHILS., INC., AND/OR HOEGH
FLEET SERVICES AS, Respondents.

RESOLUTION

VELASCO, JR., J.:

These are consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of Court, which
seek to reverse and set aside the Decision1 dated November 8, 2016 of the Court of Appeals (CA) and
its Resolution2 dated March 8, 2017 in CA-G.R. SP No. 142979. There, Hoegh Fleet Services Phils.,
Inc. and/or Hoegh Fleet Services AS (hereinafter referred to as Hoegh Fleet) was ordered to pay
Turallo US$90,000.00, US$3,084.54 and US$1,000.00 as disability compensation, sickness
allowance and attorney's fees, respectively.3

The facts, as found by the CA, are as follows:

On 9 November 2012, petitioners hired Turallo as a Messman on board vessel "Hoegh Tokyo" for nine
(9) months. The employment contract was signed on 27 December 2012, which was also covered by a
Collective Bargaining Agreement between the Associated Marine Officers' and Seaman's Union of the
Philippines and Hoegh Fleet Services AS, represented by Hoegh Fleet Services Phils., Inc.

Turallo was found "fit for sea duty" in the Pre-Employment Medical Examination (PEME).

On 2 January 2013, Turallo boarded the vessel.

Sometime in September 2013 while on board the vessel, Turallo felt pain on the upper back of his
body and chest pain, which was reported to his superiors on 23 September 2013, as evidenced by the
"Incident/Accidents Personnel" signed by Turallo's department head and the master of the vessel. On
24 September 2013, Turallo was referred to a doctor by the ship's captain. Said referral also
mentioned that Turallo was discharged from the ship on 23 September 2013.

Upon arrival in Manila, Turallo was referred to the company-designated physician, who in turn
referred him to an orthopedic surgeon and cardiologist. He underwent medical and laboratory tests
and was advised to return on 27 September 2013 for re-evaluation.
On 27 September 2013, Turallo underwent MRI of the cervical spine and left shoulder and EMG-NCV
on 30 September 2013.

On 4 October 2013, after the said tests, the company-designated physician diagnosed Turallo with
"Acromioclavicular Joint Arthritis; Bicep Tear and Cuff Tear, Left Shoulder; Cervical Spondylosis
Secondary to C4-C5, C5-C6; Disc Protrusion; Rule Out Ischemic Heart Disease" and recommended
that he undergo the following procedures: "Dobutamine Stress Echocardiogram Arthroscopic Surgery,
Acromioclavicular Joint Debridgment, Subacrominal Decompression Cuff Repair using Double Row
3-4 anchors, Biceps Tenodesis using 1-2 anchors".

In a "private and confidential" correspondence dated 23 December 2013 to Capt. Desabille, head of
the crew operations, the company-designated physician reported that Turallo had undergone a C4-
C5, C5-C6 Discectomy Fusion with PEEK Prevail on 19 December 2013, and that the specialist
opined that the estimated length of treatment after surgery is three (3) months of rehabilitation for
strengthening and mobilization exercise. The letter further stated that based on Turallo's condition at
that time, if the latter is entitled to disability, the closest interim assessments are Grade 8 (shoulder)-
ankylosis of one shoulder and Grade 10 (neck)-moderate stiffness or 2/3 loss of motion in neck.

In another correspondence of same date addressed to Capt. Desabille, the company-designated

physician noted Turallo's condition and stated the treatment and processes that the latter has
undergone and further noted that Turallo was in stable condition, he was advised to continue
physical therapy on out-patient basis and was prescribed seven (7) different take home medications.

On 10 January 2014, the company-designated physician certified that Turallo was undergoing
medical/surgical treatment from 25 September 2013 up to the said date.

Despite Turallo's continuous rehabilitation treatment, pain in his left shoulder persisted, hence, he
followed up his pending surgery therefor several times to no avail. This prompted Turallo to seek a
second opinion.

On 13 May 2014, Turallo consulted with Dr. Manuel Fidel Magtira, a government physician of the
Vizcarra Diagnostic Center who, after x-ray of his left wrist and shoulder joints, found him to be
"partially and permanently disabled with separate impediments for the different affected parts of (his)
body of Grade 8, Grade 10 and Grade 11, based on the POEA contract" but declared him as
"permanently unfit in any capacity for further sea duties".

On 23 May and 2 June 2014, grievance proceedings were held between the parties at the AMOSUP,
where the petitioners offered the amount of Thirty Thousand Two Hundred Thirty One US Dollars
(US$30,231.00) corresponding to .a Grade 8 disability compensation based on the maximum amount
of Ninety Thousand US Dollars (US$90,000.00). Turallo, however proposed the settlement amount of
Sixty Thousand US Dollars (US$60,000.00). The parties failed to reach an agreement.

Turallo then filed a Notice to Arbitrate with the National Conciliation and Mediation Board. At this
point, petitioners increased their offer from Thirty Thousand Two Hundred Thirty One US Dollars
(US$30,231.00) to Fifty Thousand US Dollars (US$50,000.00) plus allowances for further medical
treatments and expenses. Turallo, however still refused to accept such amount.

Despite efforts to arrive at an agreement, the parties failed to settle their differences, hence, they were
directed to submit their pleadings and evidence for the resolution of the issues before the panel of
arbitrators.

On 27 May 2015, the Panel rendered its assailed Decision, disposing,

thus:chanRoblesvirtualLawlibrary
"WHEREFORE, judgment is hereby rendered ordering [petitioners], jointly and severally, to pay
complainant the following amounts:

1. Disability compensation in the amount of US$90,000.00, to be paid in the equivalent peso amount
at the rate prevailing at the time of payment.

2. Sickness Allowance in the amount of US$3,084.54 to be paid in its peso equivalent as in number
1; and

3. Attorney's fees equivalent to ten percent (10%) of the total monetary award.

Finally, legal interests shall be imposed on the monetary awards herein granted at the rate of 6% per
annum from finality of this judgment until fully paid.

SO ORDERED."

In its 16 September 2015 Resolution, the Panel denied petitioners' motion for reconsideration,
thus:chanRoblesvirtualLawlibrary

"WHEREFORE, the Decision and Award dated 27 May 2015 stays.

SO ORDERED."4

The Ruling of the CA

In assailing the Panel of Arbitrator's decision, Hoegh Fleet argued that the Panel erred in ruling that
Turallo is entitled to total and permanent disability benefits, finding that he was not issued a final
disability grade. It averred that the final assessment of Grade 8 disability was given by the company-
designated physician but was not attached to their Position Paper before the Panel, hence, it was not
considered. It also questioned the award of attorney's fees for being unwarranted as there was no
showing of an unjustified act or evident bad faith on its part for denying Turallo's claim.

The CA found no cogent reason to reverse the findings of the Panel. It explained that the employment
of seafarers and its incidents, including claims for death benefits, are governed by the contracts they
sign every time they are hired or rehired. Also, while the seafarers and their employees are governed
by their mutual agreements, the Philippine Overseas Employment Agency (POEA) rules and
regulatioi1s require the POEA-Standard Employment Contract (SEC), which contains the standard
terms and conditions of the seafarer's employment in ocean-going vessels, be integrated in every
seafarer's contract. Entitlement, thus, to disability benefits by seamen is a matter governed not only
by medical findings but by law and contract.

In saying that the Panel correctly considered Turallo as totally and permanently disabled, it referred
to Section 32 of the POEA-SEC which states that a seafarer shall be deemed totally and permanently
disabled if the company-designated physician fails to arrive at a definite assessment of the seafarer's
fitness to work or permanent disability within the period of 120 to 240 days. The CA was not
persuaded with Hoegh Fleet's allegation that its company-designated physician actually issued a final
assessment, invoking the document signed by its orthopedic and spinal surgery specialist dated 29
January 2014 as Turallo is still undergoing surgery during this period.

Even assuming that the company-designated physician's disability rating was actually given and
considered definitive, the CA ruled that Turallo would still have a cause of action for total and
permanent disability compensation as he remained incapacitated to perform his usual sea duties
after the lapse of 120 or 240 days, such being the period for the company-designated physician to
issue a declaration of his fitness to engage in sea duty.

Finally, with regard to the award of attorney's fees, while the CA did not dispute Turallo's entitlement
to the same, it ruled that reducing the amount from ten percent (10%) of the total monetary award to
just One Thousand US Dollars (US$1,000.00) would be reasonable.The dispositive portion of the
assailed Decision reads:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the assailed Decision dated 27 May 2015 and Resolution dated
16 September 2015 of the Panel of Voluntary Arbitrators composed of AVA Orlalyn Suarez-Fetesio,
AVA Generoso Mamaril and AVA Jaime Montealegre in Case No. AC-949-RCMB-NCR-MVA-075-06-
08-2014 are hereby AFFIRMED with MODIFICATION only as to the award of attorney's fees, herein
reduced to One Thousand Dollars (US$1,000.00).

SO ORDERED.5

The Motion for Reconsideration was denied in a Resolution 6 dated March 8, 2017. From the CA
ruling, Hoegh Fleet and Turallo filed separate petitions for review on certiorari, which were
consolidated by the Court through its April 24, 2016 Resolution. 7

The Issue

In G.R. No. 230481, Hoegh Fleet questioned Turallo's claim for total and permanent disability
benefits. It raised that its company-designated physician issued a final disability assessment of Grade
8 well within the 240-day period. Thus, Turallo's compensation should only be confined to the
amount corresponding to the Grade 8 assessment, a partial disability.8

Meanwhile in G.R. No. 230500, Turallo questioned the award of US$1,000.00 attorney's fees for being
wanting in any factual and legal justification. He furthered that the judgment of the Panel of
Voluntary Arbitrators awarding him 10% of the total monetary award should be reinstated as it is in
accord with prevailing jurisprudence.9

The Ruling of the Court

The petitions are unmeritorious.

The POEA-SEC governs. Under Section 32 thereof, Turallo is entitled to a total and permanent
disability compensation

In Kestrel Shipping Co., Inc. v. Munar,10 the Court reads Section 32 of POEA-SEC in harmony with the
Labor Code and explained, viz:chanRoblesvirtualLawlibrary

Indeed, under Section 32 of the POEA-SEC, only those injuries or disabilities that are classified as
Grade 1 may be considered as total and permanent. However, if those injuries or disabilities with a
disability grading from 2 to 14, hence, partial and permanent, would incapacitate a seafarer from
performing his usual sea duties for a period of more than 120 or 240 days, depending on the need for
further medical treatment, then he is, under legal contemplation, totally and permanently disabled.
In other words, an impediment should be characterized as partial and permanent not only under the
Schedule of Disabilities found in Section 32 of the POEA-SEC but should be so under the relevant
provisions of the Labor Code and the Amended Rules on Employee Compensation (AREC)
implementing Title II, Book IV of the Labor Code. That while the seafarer is partially injured or
disabled, he is not precluded from earning doing the same work he had before his injury or disability
or that he is accustomed or trained to do. Otherwise, if his illness or injury prevents him from
engaging in gainful employment for more than 120 or 240 days, as the case may be, he shall be
deemed totally and permanently disabled.

Moreover, the company-designated physician is expected to arrive at a definite assessment of

the seafarer's fitness to work or permanent disability within the period of 120 or 240 days.
That should he fail to do so and the seafarer's medical condition remains unresolved, the
seafarer shall be deemed totally and permanently disabled.11 (emphasis ours)

It cannot be any clearer that the company-designated physician's failure to arrive at a definite
assessment of the seafarer's fitness to work or permanent disability within the prescribed periods
would hold the seafarer's disability total and permanent.

The Court does not wish to disturb the factual findings of the Panel and the CA that indeed the
company-designated physician failed to issue a final assessment of Turallo's disability grading as this
Court is not a trier of facts.12 Hence, under the contemplation of the law abovementioned, Turallo is
considered as totally and permanently disabled. The Panel, as affirmed by the CA, is correct in
concluding that the Grade 8 disability grading given, as reflected in the 23 December 2013
correspondence, cannot be considered as a final assessment as the said letter expressly states that it
was merely an "interim" assessment. In Fil-Star Maritime Corporation v. Rosete 13 and Tamin v.
Magsaysay Maritime Corporation,14 We concluded that the company-designated doctor's certification
issued within the prescribed periods must be a final and definite assessment of the seafarer's fitness
to work or disability, not merely interim, as in this case. Thus, the award of US$90,000, as the
maximum disability compensation stipulated in their Collective Bargaining Agreement (CBA) 15 is
warranted.

Article 111 of the Labor Code fixes the limit on the amount of attorney's fees a party may
recover

The Court agrees with the CA that attorney's fees should be reduced, not to US$1,000.00, however,
but to five percent (5%) of the total monetary award.

Article 111 of the Labor Code indeed provides that the culpable party may be assessed attorney's fees
equivalent to 10 percent of the amount of wages recovered. It also provides that it shall be unlawful
for any person to demand or accept, in any judicial or administrative proceedings for the recovery of
wages, attorney's fees which exceed 10 percent of the amount of wages recovered. Section 8, Rule
VIII, Book III of the Implementing Rules of the Labor Code sustains the same and states that
attorney's fees shall not exceed 10 percent of the amount awarded. 16 A closer reading of these
provisions, however, would lead us to the conclusion that the 10 percent only serves as the maximum
of the award that may be granted.17 Relevantly, We have ruled in the case of Taganas v. National
Labor Relations Commission18 that Article 111 does not even prevent the NLRC from fixing an amount
lower than the ten percent ceiling prescribed by the article when the circumstances warrant it. With
that, the Court is not tied to award 10 percent attorney's fees to the winning party, as what Turallo
wishes to imply.

Despite this, We deem it more reasonable to grant five percent (5%) of the total monetary award as
attorney's fees to Turallo, instead of the US$1,000.00 awarded by the CA.

In PCL Shipping Philippines, Inc. v. National Labor Relations Commission,19 the Court discussed that
there are two commonly accepted concepts of attorney's fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation paid to a
lawyer by his client for the legal services he has rendered to the latter. The basis of this compensation
is the fact of his employment by and his agreement with the client. In its extraordinary concept,
attorney's fees are deemed indemnity for damages ordered by the court to be paid by the losing party
in a litigation. The instances where these may be awarded are those enumerated in Article 2208 of
the Civil Code, specifically par. 7 thereof which pertains to actions for recovery of wages, and is
payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to
the lawyer as additional compensation or as part thereof. The extraordinary concept of attorney's fees
is the one contemplated in Article 111 of the Labor Code. This is awarded by the court to the
successful party to be paid by the losing party as indemnity for damages sustained by the former in
prosecuting, through counsel, his cause in court.20

Clearly, Turallo incurred legal expenses after he was forced to file an action to recover his disability
benefits. Considering that he was constrained to litigate with counsel in all the stages of this
proceeding, and keeping in mind the liberal and compassionate spirit of the Labor Code, where the
employees' welfare is the paramount consideration,21 this Court considers five percent (5o/o) of the
total monetary award as more appropriate and commensurate under the circumstances of this
petition.

WHEREFORE, the instant petitions are hereby DENIED. The November 8, 2016 Decision and March
8, 2017 Resolution issued by the Court of Appeals are hereby AFFIRMED WITH
MODIFICATION that the attorney's fees to be awarded to Turallo is increased to five (5) percent of the
total monetary award to him.

SO ORDERED.

JOSELITO A. ALVA, PETITIONER, V. HIGH CAPACITY SECURITY FORCE, INC. AND ARMANDO M.
VILLANUEVA, RESPONDENTS.

DECISION

REYES, JR., J:

The laborer's availment of the free legal services offered by the Public Attorney's Office (PAO) does not
prevent the award of attorney's fees upon the successful conclusion of the litigation.

This treats of the Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court seeking the
reversal of the Decision[2] dated February 24, 2012 and Resolution[3] dated August 30, 2012, rendered
by the Court of Appeals (CA) in CA-G.R. SP No. 114442 and CA-G.R. SP No. 114520, which deleted
the award of attorney's fees in favor of petitioner Joselito A. Alva (Alva).

The Antecedents

On November 1, 2003, Alva was hired as a security guard by respondent High Capacity Security
Force, Inc., (High Capacity), a duly organized security agency. Alva was initially detailed as a security
guard at the Basa Land Power Plant in Rosario, Cavite, earning a daily wage of Three Hundred Thirty
Pesos (Php 330.00).

On April 16, 2004, Alva was promoted as Assistant Security Officer. After sometime, he was again
promoted as Security Officer, with a daily salary of Four Hundred Thirty Pesos (Php 430.00).

Meanwhile, on June 5, 2007, Alva was assigned as an Assistant Officer-in-Charge of HRD-PTE, Ltd.
Inc. (HRD PTE). While assigned thereat, one of the security guards under his supervision allowed the
entry of a garbage collection truck without securing the prior permission and approval of the
company's Administrative and Personnel Manager. Bearing the crudgels of such mishap, Alva was
suspended for one month beginning October 21, 2007.
During Alva's suspension, HRD-PTE requested for Alva's relief from post. HRD-PTE complained that
Alva was found sleeping while on duty and exercised favoritism in the assignment of shifts of security
guards.

Thereafter, Alva was placed on floating status. On November 23, 2007, while Alva was still on floating
status, High Capacity informed him of the lack of available posts where he could be assigned as
Security Officer or Assistant Security Officer. Instead, Alva was given an option to temporarily render
duty as an ordinary guard while waiting for an available officer's post. [4] However, Alva was no longer
given any post. Alva begged for an assignment, but his pleas were all unheeded. [5]

This prompted Alva to file a Complaint for Illegal Dismissal, Underpayment of Wages, Non-Payment of
13th Month Pay, Service Incentive Leave, Holiday Premium, ECOLA, Payment for Rest Day, Night Shift
Differential Pay, Separation Pay, moral and exemplary damages and attorney's fees against High
Capacity and its General Manager, Armando Villanueva.[6] Alva was assisted by the PAO in the
proceedings before the Labor Arbiter (LA). [7]

Ruling of the LA

On October 28, 2008, the LA rendered a Decision[8] finding High Capacity guilty of illegal dismissal.
The LA observed that Alva was placed on floating status from October 21, 2007 to April 22, 2008, and
was not given any assignment or duty after the lapse of six months. The failure of High Capacity to
reinstate Alva after the lapse of his off-detail status on April 22, 2008, rendered it liable for illegal
dismissal.[9]

Accordingly, the LA ordered Alva's reinstatement with the payment of backwages, computed six
months after he was first placed on floating status up to the promulgation of its decision. Likewise,
the LA awarded separation pay in lieu of reinstatement, equivalent to one month salary for every year
of service. In addition, the LA awarded attorney's fees equivalent to ten percent (10%) of the total
monetary award, finding that Alva was constrained to hire the services of counsel to protect his rights
and interests.

Aggrieved, High Capacity filed an appeal before the National Labor Relations Commission (NLRC). [10]

Ruling of the NLRC

On December 8, 2009, the NLRC modified the earlier ruling of the Labor Arbiter. [11]The NLRC found
that Alva was dismissed for just cause, as he was caught sleeping while on duty. However, the NLRC
noted that High Capacity failed to observe procedural due process in effecting Alva's dismissal from
employment. Accordingly, the NLRC deleted the award of backwages and separation pay, and instead
ordered the payment of nominal damages in addition to Alva's monetary claims. The NLRC
maintained the award of attorney's fees. The dispositive portion of the NLRC decision reads:

WHEREFORE, premises considered, the Decision is MODIFIED. Respondents are ordered: (1) to pay
Complainant the amount of P30,000.00 by way of nominal damages; (2) to pay the Complainant the
aggregate amount of P52,890.00 representing his holiday pay, service incentive leave pay and
13th month pay; (3) to pay Complainant an amount equivalent to ten (10%) percent of the judgment
award, as and for attorney's fees.

SO ORDERED.[12]

Dissatisfied with the ruling of the NLRC, both parties filed their respective Motions for
Reconsideration.

In his Motion for Reconsideration,[13] Alva claimed that the NLRC gravely abused its discretion in
modifying the decision of the LA by deleting the awards of backwages and separation pay. Alva
maintained that he was entitled to backwages as a recompense for the earnings he lost due to his
illegal dismissal.
On the other hand, High Capacity averred that the NLRC's award of nominal damages amounting to
Thirty Thousand Pesos (Php 30,000.00), effectively forbid the imposition of any other damages. In this
regard, High Capacity argued that the award of Fifty Two Thousand Eight Hundred Ninety Pesos (Php
52,890.00), which represented Alva's holiday pay, service incentive leave pay and 13 th month pay,
partook the nature of actual damages that may no longer be imposed. In addition, High Capacity
prayed for the deletion of attorney's fees, there being no justification for its award. High Capacity
stressed that the award of attorney's fees is an exception, rather than the general rule. [14]

On March 30, 2010, the NLRC issued a Resolution[15] partially granting High Capacity's Motion for
Reconsideration by deleting the award of attorney's fees in favor of Alva. The NLRC found no basis to
award attorney's fees considering that Alva's dismissal from employment was justified. As such, the
NLRC opined that no bad faith may be imputed against High Capacity. [16]

Dissatisfied with the ruling, both parties filed separate Petitions for Certiorari before the CA.[17] The
two petitions were consolidated. One of the issues raised before the CA was the propriety of the
deletion of the award of attorney's fees. [18]

Ruling of the CA

On February 24, 2012, the CA rendered the assailed Decision. [19] The CA held that Alva was
constructively dismissed, when he was placed on floating status for more than six months. The
unreasonable length of time that Alva was not given a new assignment inevitably resulted in his
constructive dismissal.[20] Additionally, the CA observed that High Capacity failed to comply with
procedural due process requirements in effecting Alva's dismissal.[21]

Accordingly, the CA ordered the payment of backwages, computed from the time Alva's compensation
was withheld up to the finality of the Court's decision. Acceding to Alva's request not to be reinstated,
the CA awarded separation pay in lieu of reinstatement.[22] Likewise, the CA granted Alva's claims for
holiday pay, service incentive leave pay and 13 th month pay. However, the CA deleted the award of
attorney's fees noting that Alva was represented by the PAO. [23]

The dispositive portion of the assailed decision reads:

WHEREFORE, premises considered, the assailed Decision dated December 8, 2009 rendered by the
[NLRC] in NLRC LAC No. 12-004020-08 and its Resolution dated March 30, 2010 issued in the same
case are hereby VACATED and SET ASIDE and another judgment entered as follows:

1. Declaring the dismissal of Joselito A. Alva to be illegal and consequently, HCSFI and Armando
Villanueva are directed to pay Mr. Alva his separation pay, backwages and monetary claims
constituting holiday pay, service incentive leave pay and 13th month pay;

2. Dismissing the claim of Joselito A. Alva for attorney's fees; and

3. The [LA] of origin is DIRECTED to compute the following with dispatch:

1. Joselito A. Alva's backwages from the time his salary was withheld on April 22, 2008, up to the
date of finality of this Decision;

2. Joselito A. Alva's separation pay from the date he was employed on November 1, 2003 up to
the date of finality of this Decision; and

3. Joselito A. Alva's monetary claims comprising of holiday pay, service incentive leave pay and
13th month pay with due consideration to the corresponding changes in the daily salary rate
received by him within the period of three years, that is, from 2005 until the year he filed the
case for illegal dismissal on April 22, 2008.

The total monetary award shall earn legal interest from the date of the finality of this Decision until
fully paid.[24]
Both parties filed their respective Motions for Reconsideration, [25] which were denied by the CA in its
Resolution[26] dated August 30, 2012.

The Issue

Undeterred, Alva filed the instant Petition, praying for the modification of the assailed decision, on
the following lone ground, to wit:

THE CA GRAVELY ERRED IN DELETING THE AWARD OF ATTORNEY'S FEES. [27]

Alva asserts that High Capacity should be ordered to pay attorney's fees pursuant to Article 2208
paragraphs (2) and (7) of the Civil Code.[28] Alva asserts that he is entitled to attorney's fees as he was
compelled to litigate to protect his interest by reason of the unjustified and unlawful termination of
his employment.[29] The fact that he is represented by the PAO does not militate against his right to
receive attorney's fees. Alva points out that Section 6 of Republic Act (R.A.) No. 9406 [30] actually
sanctions the award of attorney's fees in favor of the PAO in successfully litigated cases. [31]

On the other hand, High Capacity counters that the CA was correct in deleting the award of
attorney's fees. High Capacity avers that the award of attorney's fees is warranted only in cases where
the plaintiff was compelled to litigate or incur expenses to protect his interest due to the act or
omission of the defendant. Alva, who was represented by the PAO, did not incur any expenses to
protect his interest, as the former merely availed of the latter's free legal services. High Capacity relies
on the Court's pronouncement in Lambo v. NLRC,[32] which disallowed the award of attorney's fees to
litigants who were represented by the PAO. [33] Similarly, High Capacity points out that the award of
attorney's fees in favor of Alva was bereft of any factual, legal and equitable justification. [34] Finally,
High Capacity asserts that the award of attorney's fees under Article 2208 of the Civil Code is
discretionary on the courts. This being so, the CA's refusal to award attorney's fees must thus be
respected.

Ruling of the Court

The petition is impressed with merit.

It must be noted at the outset that the only issue submitted for the Court's resolution is the propriety
of the deletion of the award of attorney's fees. There remains no issue regarding the finding of illegal
dismissal, thereby rendering all pronouncements on the matter of illegal dismissal final.

The Concept of Attorney's Fees in Labor Cases

Essentially, there are two commonly accepted concepts of attorney's fees - the ordinary and
extraordinary. On the one hand, in its ordinary concept, an attorney's fee is the reasonable
compensation paid by the client to his lawyer in exchange for the legal services rendered by the latter.
The compensation is paid for the cost and/or results of the legal services, as agreed upon by the
parties or as may be assessed by the courts. On the other hand, as an extraordinary concept, an
attorney's fee is deemed an indemnity for damages ordered by the court to be paid by the losing party
to the winning party. In labor cases, attorney's fees partake of the nature of an extraordinary award
granted to the victorious party as an indemnity for damages. As a general rule, it is payable to the
client, not to his counsel, unless the former agreed to give the amount to the latter as an addition to,
or part of the counsel's compensation.[35]

Notably, Article 111 of the Labor Code sanctions the award of attorney's fees in cases of the unlawful
withholding of wages, wherein the culpable party may be assessed attorney's fees equivalent to ten
percent (10%) of the amount of wages recovered.[36] The amount of attorney's fees shall not exceed ten
percent (10%) of the total monetary award, and the fees may be deducted from the amount due the
winning party.[37]
In addition, Article 2208 of the Civil Code allows the award of attorney's fees in the following
instances, to wit:

ART. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial
costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs
plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen's compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney's fees and
expenses of litigation should be recovered.

In all cases, the attorney's fees and expenses of litigation must be reasonable. (Emphasis Ours)

To recapitulate, both the Labor Code and the Civil Code provide that attorney's fees may be recovered
in the following instances, namely, (i) in cases involving the unlawful withholding of wages; [38] (ii)
where the defendant's act or omission has compelled the plaintiff to litigate with third persons or the
plaintiff incurred expenses to protect his interest;[39] (iii) in actions for the recovery of wages of
household helpers, laborers and skilled workers; [40] (iv) in actions for indemnity under workmen's
compensation and employer's liability laws; [41] and (v) in cases where the court deems it just and
equitable that attorney's fees and expenses of litigation should be recovered. [42]

In a catena of cases, the Court awarded attorney's fees in favor of illegally dismissed employees who
were compelled to file an action for the recovery of their lawful wages, which were withheld by the
employer without any valid and legal basis. [43] A plain showing that the lawful wages were not paid
without justification was sufficient to warrant an award of attorney's fees. [44]

Moreover, "Article 111 is an exception to the declared policy of strict construction in the award of
attorney's fees."[45] In fact, the general rule that attorney's fees may only be awarded upon proof of
bad faith takes a different turn when it comes to labor cases. The established rule in labor law is that
the withholding of wages need not be coupled with malice or bad faith to warrant the grant of
attorney's fees under Article 111 of the Labor Code.[46] All that is required is that the lawful wages
were not paid without justification, thereby compelling the employee to litigate. [47]

Thus, based on the foregoing laws and jurisprudence, it becomes all too apparent that Alva, whose
wages and monetary benefits were unlawfully withheld, is indeed entitled to an award of attorney's
fees.

The Availment of Free Legal Services Does Not

Foreclose an Award of Attorney's Fees

In the case at bar, the CA deleted the award of attorney's fees on the simple pretext that Alva was
represented by the PAO.

The CA was mistaken.

Needless to say, in addition to the fact that attorney's fees partake of an indemnity for damages
awarded to the employee, there is nothing that prevents Alva and the PAO from entering into an
agreement assigning attorney's fees in favor of the latter. It must be noted that in 2007, Congress
passed R.A. No. 9406 inserting new sections in Chapter 5, Title III, Book IV of Executive Order No.
292 (E.O. 292), or the Administrative Code of 1987. R.A. No. 9406 sanctions the receipt by the PAO of
attorney's fees, and provides that such fees shall constitute a trust fund to be used for the special
allowances of their officials and lawyers, viz.:

SEC. 6. New sections are hereby inserted in Chapter 5, Title III, Book IV of Executive Order No. 292,
to read as follows:

xxxx

SEC. 16-D. Exemption from Fees and Costs of the Suit. - The clients of the PAO shall [sic] exempt from
payment of docket and other fees incidental to instituting an action in court and other quasi-judicial
bodies, as an original proceeding or on appeal.

The costs of the suit, attorney's fees and contingent fees imposed upon the adversary of the
PAO clients after a successful litigation shall be deposited in the National Treasury as trust
fund and shall be disbursed for special allowances of authorized officials and lawyers of the
PAO.[48] (Emphasis Ours)

In fact, the matter of entitlement to attorney's fees by a claimant who was represented by the PAO
has already been settled in Our Haus Realty Development Corporation v. Alexander Parian, et al. [49] The
Court, speaking through Associate Justice Arturo D. Brion ruled that the employees are entitled to
attorney's fees, notwithstanding their availment of the free legal services offered by the PAO. The
Court ruled that the amount of attorney's fees shall be awarded to the PAO as a token recompense to
them for their provision of free legal services to litigants who have no means of hiring a private
lawyer, to wit:

It is settled that in actions for recovery of wages or where an employee was forced to litigate
and, thus, incur expenses to protect his rights and interest, the award of attorney's fees is
legally and morally justifiable. Moreover, under the PAO Law or Republic Act No. 9406, the costs of
the suit, attorney's fees and contingent fees imposed upon the adversary of the PAO clients after a
successful litigation shall be deposited in the National Treasury as trust fund and shall be
disbursed for special allowances of authorized officials and lawyers of the PAO.

Thus, the respondents are still entitled to attorney's fees. The attorney's fees awarded to them
shall be paid to the PAO. It serves as a token recompense to the PAO for its provision of free
legal services to litigants who have no means of hiring a private lawyer.[50] (Citations omitted and
emphasis Ours)

Thus, Alva's availment of free legal services from the PAO does not disqualify him from an award of
attorney's fees. Simply put, Alva should be awarded attorney's fees notwithstanding the fact that he
was represented by the PAO.

The Respondent's Reliance on the Case of

Lambo v. NLRC is Misplaced

In Lambo,[51] the Court disallowed the payment of attorney's fees on the ground that therein
petitioners were represented by the PAO.

It must be noted that the Lambo[52] case was decided on October 26, 1999, when the law that
governed the PAO was still E.O. 292. Nothing in the provisions of E.O. 292 granted the PAO the right
to an award of attorney's fees. In contrast, the later law R.A. No. 9406 allows the award of attorney's
fees and clearly instructs that such attorney's fees shall constitute a special allowance for the PAO's
officers and lawyers.

In fine, the award of attorney's fees is sanctioned in the case at bar, where there was an unlawful and
unjustified withholding of wages, and as a result thereof, the employee was compelled to litigate to
protect and defend his interests. This award is not prevented by the fact that the employee was
represented by the PAO. After all, attorney's fees are awarded as a recompense against the employer
who unjustifiably deprived the employee of a source of income he industriously worked for.

WHEREFORE, premises considered, the petition is GRANTED. The Decision dated February 24,
2012 of the Court of Appeals in CA-G.R. SP No. 114442 and CA-G.R. SP No. 114520 is MODIFIED in
order to INTEGRATE the award of attorney's fees equivalent to ten percent (10%) of the total
monetary award.

SO ORDERED.

HOME CREDIT MUTUAL BUILDING AND LOAN ASSOCIATION AND/OR RONNIE B. ALCANTARA,
PETITIONERS, VS. MA. ROLLETTE G. PRUDENTE, RESPONDENT. D E C I S I O N

LOPEZ, J.:

There is no greater crime than desire.

There is no greater disaster than discontent.

There is no greater misfortune than greed.

Therefore:

To have enough of enough is always enough

- Tao Te Ching, Chapter 46

Whether an employer violated the rule on non-diminution of benefits when it adopted a cost sharing
scheme in its car plan for employees is the core issue in this Petition for Review on Certiorari under
Rule 45 of the Rules of Court assailing the Court of Appeal's (CA) Decision [1] dated August 31, 2011 in
CA-G.R. SP No. 117332, which reversed the findings of the National Labor Relations Commission
(NLRC).

ANTECEDENTS

In 1997, Home Credit Mutual Building and Loan Association gave its employee Rollette Prudente her
first service vehicle. Later, Rollete purchased the vehicle from Home Credit at its depreciated value. In
2003, Home Credit granted Rollete's request for a second service vehicle. However, Home Credit
required Rollete to pay for additional equity in excess of the maximum limit of P660,000.00. In 2008,
Rollete again purchased the vehicle at its depreciated value.

In 2009, Rollette applied for a third service vehicle. This time, Home Credit informed Rollette that she
must pay the equity more than P550,000.00. Home Credit likewise adopted a cost sharing scheme
where Rollette must shoulder 40% of the acquisition price. Aggrieved, Rollette filed a complaint
against Home Credit for violation of Article 100 of the Labor Code on non-diminution of benefits
before the Labor Arbiter (LA).
On October 30, 2009, the LA dismissed Rollette's complaint and held that Home Credit's new 60%-
40% cost sharing scheme on the acquisition of service vehicle did not constitute diminution of
benefit.[2] The LA explained that what ripened into a company practice is the employer's act of
granting transportation facility to its employees. However, as to the specific details of the grant, i.e.,
the covered employees, period of depreciation, car model, company share or participation, may vary
as these call for the exercise of management prerogative. [3] In its Decision dated August 5, 2010, the
NLRC affirmed the LA's findings, thus:

WHEREFORE, absent grave abuse of discretion or serious error in the resolution of the issues raised
in this case. We SUSTAIN the disposition a quo.

SO ORDERED.[4]

Dissatisfied, Rollette elevated the case to the CA through a petition for certiorari. On August 31, 2011,
the CA reversed the labor tribunals' findings. It held that the car plan at full company cost or on a
non-participation basis has evolved into a company practice. The employer cannot unilaterally
withdraw or reduce the benefit. Also, the service vehicle given to Rollette is not akin to a bonus or an
act of gratuity which can be withdrawn at will. The car plan was part of Rollette's hiring package.
Lastly, there was no competent evidence showing that the car provision was contingent on the
realization of company profits.[5] In sum, the new scheme diminished Rollette's benefits as she will be
forced to shell out part of the vehicle's cost,[6] to wit:

WHEREFORE, the petition is GRANTED. The Decision dated August 5, 2010 and Resolution dated
October 6, 2010 of the Fifth Division of the National Labor Relations Commission are REVERSED and
SET ASIDE and a new one entered:

(1) Ordering Home Credit Mutual Building and Loan Association to provide the full car benefit of the
petitioner without diminution consisting of a car service of the same worth or value as that of Honda
Civic LXi on a non-participatory basis (full company cost) with transfer of ownership after five (5)
years.

(2) Ordering Elome Credit Mutual Building and Loan Association to pay Ma. Rolette Prudentc moral
damages in the amount of Fifty Thousand
Pesos (P50,000.00), Philippine Currency, exemplary damages in the amount of Fifty Thousand
Pesos (P50,000.00), Philippine Currency and attorney's fees in the amount often percent (10%) of the
total award.

SO ORDERED.[7] (Emphasis in the original.)

Home Credit sought reconsideration but was denied.[8] Hence, this recourse.[9]

RULING

The petition is meritorious.

There is no dispute that Rollette received service vehicles from Home Credit in 1997 and in 2003. The
LA and the NLRC both held that the car plan has ripened into a company practice but the specific
manner by which it is given may vary and is subject to management prerogative. On the other hand,
the CA ruled that Rollette is entitled to a service vehicle at full company cost as this benefit was part
of her hiring package. Also, Home Credit may not diminish this benefit which it had practiced for a
long period of time. The question now is whether the CA committed reversible error in finding that
Home Credit violated the rule against diminution of benefits.

Generally, employees have a vested right over existing benefits that the employer voluntarily granted
them.[10] These benefits cannot be reduced, diminished, discontinued or eliminated[11] consistent with
the constitutional mandate to protect the rights of workers and promote their welfare. [12] Apropos is
Article 100 of the Labor Code, viz.:

ART. 100. Prohibition against Elimination or Diminution of Benefits. - Nothing in this Book shall be
construed to eliminate or in any way diminish supplements, or other employee benefits being
enjoyed at the time of promulgation of this Code. (Emphasis Supplied.)

In Arco Metal Products, Co., Inc. v. Samahan ng mga Manggagawa sa Arco Metal-NAFLU (SAMARM-
NAFLU, et al.),[13] we stressed that the principle of non-diminution of benefits is founded on the
constitutional mandate to "protect the rights of workers and promote their welfare" and "to afford labor
full protection." In his separate concurring opinion, Justice Arturo Brion clarified that the basis for
non-diminution rule is not Article 100 which refers solely to "benefits enjoyed at the time of the
promulgation of the Labor Code" thus:

x x x Article 100 refers solely to the non-diminution of benefits enjoyed at the time of the
promulgation of the Labor Code. Employer-employee relationship is contractual and is based on
the express terms of the employment contract as well as on its implied terms, among them,
those not expressly agreed upon but which the employer has freely, voluntarily and
consistently extended to its employees. Under the principle of mutuality of contracts embodied in
Article 1308 of the Civil Code, the terms of a contract - both express and implied - cannot be
withdrawn except by mutual consent or agreement of the contracting parties, x x x [14] (Emphasis
supplied.)

Clearly, the non-diminution rule applies only if the benefit is based on an express policy, a written
contract, or has ripened into a practice. [15] In this case, Rollette's claim that the car plan was part of
her hiring package was unsubstantiated. Admittedly, Home Credit has no existing car plan at the
time Rollette was hired. Rollette's employment contract does not even contain any express provision
on her entitlement to a service vehicle at full company cost. [16] Therefore, it is incongruous for the CA
to conclude that the grant of a service vehicle was part of Rollette's hiring package.

Similarly, we find that the car plan has not ripened into a company practice. As a rule, "practice" or
"custom" is not a source of a legally demandable or enforceable right. In labor cases, however, benefits
which were voluntarily given by the employer, and which have ripened into company practice, are
considered as rights and are subject to the non-diminution rule.[17] To be considered a company
practice, the benefit must be consistently and deliberately granted by the employer over a long period
of time. It requires an indubitable showing that the employer agreed to continue giving the benefit
knowing fully well that the employee is not covered by any provision of law or agreement for its
payment.[18] The burden to establish that the benefit has ripened into a company practice rests with
the employee.[19]

Here, the labor tribunals correctly held that Home Credit's act of giving service vehicles to Rollette
has been a company practice - but not as to the non-participation aspect. There was no substantial
evidence to prove that the car plan at full company cost had ripened into company practice. Notably,
the only time Rollette was given a service vehicle fully paid for by the company was for her first car.
For the second vehicle, the company already imposed a maximum limit of P660,000.00 but Rollette
never questioned this. She willingly paid for the equity in excess of said limit. Thus, the elements of
consistency and deliberateness are not present.

At this point, we emphasize that any employee benefit enjoyed cannot be reduced and discontinued.
Otherwise, the constitutional mandate to afford full protection to labor is offended. [20] But, even as the
law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise
what are clearly management prerogatives, like the adoption of a new car plan at a new cost sharing
scheme, with a reduced maximum limit. The free will of management to conduct its own business
affairs to achieve its purpose cannot be denied, [21] especially in this case wherein Home Credit is
willing to give one hand by giving a service vehicle to Rollette but she wanted to grab the entire arm.

FOR THESE REASONS, the petition is GRANTED. The Court of Appeals' Decision dated August 31,
2011 in CA-G.R. SP No. 117332 is REVERSED and SET ASIDE. The National Labor Relations
Commission's Decision dated August 5, 2010, which affirmed the labor arbiter's dismissal of the
complaint is REINSTATED.

SO ORDERED.