MODULE 2: WAGES

A. Concept and Definition

 TAN V LAGRAMA
August 15, 2002 | Ponente | Wages
DIGEST MADE BY: Aleix (copied)
CLUE: PAINTER; ADS AND BILLBOARDS
PETITIONER: Rolando Y. Tan
RESPONDENTS: Leovigildo Lagrama
DOCTRINE:
Wages are defined as “remunerations or earning, 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.
Payment by result is a method of compensation, not a basis for
determining the existence or absence of an Employer-Employee
Relationship .
RECIT- READY SUMMARY:
Tan is the president and general manager of 2 theaters while Lagrama
is a painter, making ad billboards and murals for the motion pictures
shown at the 2 theaters for more than 10 years. In 1998, Lagrama was
summoned by Tan and upbraided “You again urinated inside your work
area”. When Lagrama tried to explain, Tan told him to get out and he
would not be drawing anymore for the theaters. Lagrama filed a
complaint with NLRC alleging he had been illegally dismissed. Tan denied
Lagrama was his employee and asserted that Lagrama was an
independent contractor as Tan was only interested in the result.
LA ruled that Lagrama was illegally dismissed while NLRC reversed and
held that Lagrama is an independent contractor. CA ruled that Tan
exercised control over Lagrama’s work, as such, there was EER.
The issues in this case are (1) W/N EER existed and (2) WoN Lagrama
was illegally dismissed.
SC ruled YES for both. SC applied four-fold test and found that all
elements are present in this case. The evidence shows that Lagrama
performed his work under the supervision and control of Tan. An
independent contractor is one who carries on a distinct and independent
business and undertakes to perform the job, work, or service on its own
manner and method, free from the control and direction of the principal
in all matters connected with the performance of the work except as to
the results while an employee is subject to the employer’s power to
control the means and methods by which the employee’s work is to be
performed and accomplished. Tan has the power to dismiss or fire
Lagrama as evidenced by his position paper before NLRC. Lastly,
Payment of wages is one of the four factors to be considered in
determining the existence of EER. Payment by result is a method of
compensation and is not a basis for determining the existence or absence
of an EER. Therefore, Lagrama is an employee of Tan and not merely an
independent contractor. For the second issue, the employer has the
burden of proving the lawfulness of his employee’s dismissal. By Tan’s
refusal to give Lagrama work to do and ordering Lagrama to get out of
his sight as the latter tried to explain his side, Tan made it plain that
Lagrama was dismissed. Urinating in a workplace other than the one
designated for the purpose by the employer constitutes violation of
regulations to promote a healthy environment. But, the same must be
shown by evidence, which Tan failed to do.
FACTS:
1. Tan is the president of Supreme Theater Corporation and the
general manager of Crown and Empire Theaters in Butuan City
(“2 theaters”) 

2. Respondent Lagrama is a painter, making ad billboards and
murals for the motion pictures shown at the 2 theaters for more
than 10 years (1988-1998) 

3. October 1998 – Lagrama was summoned by Tan and upbraided:
“You again urinated inside your work area.” When Lagrama
asked, Tan told him to not say anything further, no more
drawing, and to get out. 

4. Lagrama denied the charges & claimed that he was not the only
one who entered the area. Even if true, it was a minor infraction.
He had no other choice but to leave as Tan kept shouting “get
out” 

5. Lagrama filed a complaint with NLRC Butuan City and alleged
that he had been illegally dismissed 

 6. Tan denied that Lagrama was his employee. He asserted that has control of distinct & independent business &
Lagrama was an independent contractor who did his work the employee undertakes to perform the work, or
according to his methods as Tan was only interested in the result. with respect service on its own manner &

a. Before LA, Lagrama admitted that he was paid on a fixed to the means method, free from control &
piece-work basis and “no mural/billboard drawn, no pay” 
b. and methods direction in all matters connected
Denied dismissing Lagrama and alleged that it was Lagrama who by which w/ the performance of the work
refused to paint after he was scolded. 
 work is to be except as to the results. 

7. LA: Ruled that Lagrama’s dismissal was illegal. On appeal by accomplished. • An employee is subject to the
Tan, NLRC reversed LA ruling and held that Lagrama is an Most employer’s power to control the
independent contractor. 
 important means and methods by which the
8. CA: Ruled that Tan exercised control over Lagrama’s work by element. employee’s work is to be performed
dictating the time when Lagrama should submit his billboards and accomplished.
and mural and setting rules on the use of work area and • The evidence shows that Lagrama
restroom. Even though Lagrama worked for other cinema performed his work as painter
owners, such was merely a sideline. 
 under the supervision and control of
Tan. Only worked in a designated
ISSUE: area; has rules, such as the
observance of cleanliness 

1. WoN employer-employee relationship existed between Tan and • Lagrama claimed he worked daily
Lagrama? YES, EER existed. 
 but Tan disputed this saying that he
paid Lagrama P1.4k per week for
2. WoN Tan is guilty of illegally dismissing Lagrama? YES. 

the murals. 


RULING: WHEREFORE, based on the foregoing, the petition is DENIED

for lack of showing that the Court of Appeals committed any reversible SC: The fact that Lagrama worked for at
error. least 3 to 4 days a week proves regularity
in his employment.
RATIO:
3. Whether he • Tan had the right to hire and fire
1. YES. has the him as admitted in his position
• In determining whether there is an Employer-Employee power to paper before the NLRC. Paper: “He
Relationship, SC applied the four-fold test: dismiss 
 was urinating at his work area... As
such, Tan had every right, nay all
1. Whether • This is undisputed. It was Tan who the compelling reason to fire him ...
employer has engaged the services of Lagrama Nonetheless, though scolded, he
the power of without the intervention of a third was not fired, it was Lagrama who
selection and party. stopped to paint”
engagement
2. Whether he • Independent contractor - carries a
 relationship w/ Tan.

• Lagrama had been employed by petitioner since 1988. Under the
4. Whether the • Payment of wages is one of the four law, he is deemed a regular employee and is thus entitled to
employee factors to be considered in security of tenure. His services shall not be terminated except
was paid 
determining the existence of EER. for a just or authorized cause. If the employee has been
wages. 
 performing the job for at least 1 year, even if not continuously
• Wages are defined as but intermittently, the repeated and continuing need for its
“remunerations or earning, performance is sufficient evidence of the necessity of that
however 
designated, capable of activity.
being expressed in terms of money, • No evidence to show that Lagrama abandoned his work. Mere
whether fixed or ascertained on a absence is not sufficient. The burden is on the employer to show
time, task, piece, or commission a deliberate and unjustified refusal on the part of the employee
basis, or other method of to resume his employment w/o any intention of returning.
calculating the same, which is • Abandonment requires two elements:
payable by an employer to an 1. Failure to report for work or absence w/o valid or
employee under a written or justifiable reason 

unwritten contract of employment 2. And a clear intention to sever the employer-employee
for work done or to be done, or for 
relationship. 

services rendered or to be
rendered. 2 YES
• That Lagrama worked on a fixed • The employer has the burden of proving the lawfulness of his
piece-work basis is immaterial. employee’s dismissal. The validity of the charge must be clearly

Payment by result is a method of est ablished in a manner consistent with due process.
compensation and is not a 
basis for • IRR of Labor Code provides that no worker shall be dismissed
determining the existence or except for a just or authorized caused provided by law and after
absence of an EER. 
 due process. This provision has two aspects:
• IRR of Labor Code requires every 1. Legality of the ACT of dismissal
employee to pay his employees by 2. Legality in the MANNER of dismissal.

means of payroll. Tan did not • Illegality of the act of dismissal constitutes discharge without just
present the payroll to support his cause, while illegality in the manner of dismissal is dismissal

claim that Lagrama was not his without due process.
employee. • By Tan’s refusal to give Lagrama work to do and ordering
Lagrama to get out of his sight as the latter tried to explain his
side, Tan made it plain that Lagrama was dismissed.
• Urinating in a place other than the one designated by the
• The fact that Lagrama was not reported as employee to SSS is employer constitutes violation of reasonable regulations to
not conclusive on whether he is an employee or not. Neither does promote a healthy environment. But, it must be shown by
the fact that Lagrama painted for others affect his employment evidence, which Tan failed to do.
• Instead of ordering his reinstatement, the relationship has been
so strained that reinstatement would no longer serve any
purpose. As such, the grant of separation pay is appropriate, in
addition to the payment of backwages.
• The Bureau of Working Conditions classifies workers paid by
results into 2:
1. Those whose time and performance is supervised by the
employer
a. Involves an element of control and supervision over
the manner the work is to be performed
b. There is EER here. BUT, not entitled to service
incentive leave pay as he is paid a fixed amount for
work done, regardless of the time he spent in
accomplishing work.
2. Those whose time and performance is unsupervised.
 PHIL. SPRING WATER v. MAHILUM
June 11, 2014 | J. Mendoza | Wages: Concept & Definition
DIGEST MADE BY: Jules
PETITIONER: Philippine Spring Water Resources, Inc./Danilo Y. Lua
RESPONDENTS: Court of Appeals and Juvenstein B. Mahilum
DOCTRINE:
Article 279 of the Labor Code provides that an employee who is
unjustly dismissed from work shall be entitled to reinstatement without
loss of seniority rights and other privileges, to full backwages, inclusive
of allowances, and to other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to
the time of his actual reinstatement. Due to the strained relations of
the parties, however, the payment of separation pay has been
considered an acceptable alternative, when reinstatement is no longer
desirable or viable.
RECIT- READY SUMMARY:
Phil. Spring hired Mahilum as VP for Sales and Marketing for the Bulacan-
South Luzon Area, for a monthly salary of P15,000.00 plus 0.25%
commission on every cash on delivery and another 0.25% on new
accounts from July to August, 2004. The inauguration of Phil.
Spring’s Bulacan Plant was to be celebrated at the same time as the
company’s Christmas Party. Mahilum was designated as the over-all
chairman of the affair. As preparation for such event, Evangelista (VP for
Administration and Finance) took charge of the meetings on the program
of activities for the inauguration and party in Mahilum’s absence (he
attended a prior appointment with major clients). On the inaugural day,
Mahilum was not around to supervise and that he delegated the task to
Evangelista. Mahilum’s attention was called when Lua (the President and
CEO) was not recognized during the program, he was likewise not
mentioned in the opening remarks or called to deliver his inaugural
speech.
As a result, Mahilum was required to explain why Lua was not recognized
and placed under preventive suspension for 30 days. After the lapse of
the suspension, Mahilum reported for work but was prevented from
entering the workplace. He later on received a copy of the Memorandum
terminating his services. A clearance certificate was issued to him where
he received the amount of around 44k and was made to execute a
Release, Waiver and Quitclaim.
Mahilum then filed a complaint for illegal dismissal with prayer for
reinstatement, payment of back wages and damages. LA dismissed the
complaint holding that the quitclaim barred his right to question the
dismissal. NLRC reversed and held that the quitclaim did not bar the right
to question. CA reversed the NLRC and upheld the validity of the
quitclaim. On MR however, CA reconsidered and held that Mahilum had
been illegally dismissed and the quitclaim was void for having no
consideration.
ISSUE: WON Mahilum was illegally dismissed and is thus entitled to
monetary claims? – YES (but the 0.25% commission is excluded)
The SC noted that Mahilum was a regular employee (and NOT
probationary) because Phil Spring allowed him to work past the lapse of
the probationary period (6 months). Mahilum’s designation as the
chairman of the whole affair did not form part of his duty as a supervisor.
Mahilum was engaged to supervise the sales and marketing aspects of
Phil. Spring Bulacan Plant. Thus, charge of loss of trust and confidence
had no basis, as the act complained of was not work-related. There is no
just cause in his dismissal.
Mahilum is entitled to separation pay and backwages, computed from
the time of his dismissal up to the finality of the decision, as
reinstatement is no longer viable. SC resolved to delete the inclusion
of 0.25% commission on cash and delivery sales as part of
Mahilum's backwages. Back wages are granted on grounds of equity
to workers for earnings lost due to their illegal dismissal from work. They
are a reparation for the illegal dismissal of an employee based on
earnings which the employee would have obtained, either by virtue of a
lawful decree or order, as in the case of a wage increase under a wage
order, or by rightful expectation, as in the case of one's salary or wage.
The outstanding feature of backwages is thus the degree of
assuredness to an employee that he would have had them as
earnings had he not been illegally terminated from his
employment.
Mahilum's 0.25% commission based on the monthly sales and 0.25%
commission for cash payments must be taken to come in the nature of
overriding commission, not sales commission. The latter is not
properly includable in the basic salary as it must be earned by actual
market transactions attributable to the claimant. Not being a salesman
who directly effected any sale of a product, the commission
embodied in the agreement partook of the nature of profit-
sharing business based on quota. In fine, the alleged commissions
were profit-sharing payments and had no clear, direct or necessary
relation to the amount of work he actually performed. Mahilum's
backwages must be pegged at his basic salary, excluding the
commissions mentioned by the NLRC, to be computed from the time
of his dismissal up to the finality of this decision.
FACTS:
1. Philippine Spring Water Resources, Inc. (Phil. Spring), engaged
in the business of manufacturing, selling and distributing bottled
mineral water, hired Mahilum as Vice-President for Sales and
Marketing for the Bulacan- South Luzon Area, for a monthly
salary of P15,000.00 plus 0.25% commission on every
cash on delivery and another 0.25% on new accounts from
July to August, 2004.
2. Nov 2004: The inauguration of Phil. Spring’s Bulacan plant would
be celebrated at the same time with the company's Christmas
party. Mahilum was designated as over-all chairman of the affair.
3. A few days after his designation, Mahilum called all committee
chairpersons to a meeting for the program of action and budget
plan. The meeting, however, was reset to the following day as
some visitors arrived without prior appointment.
4. The next day, Mahilum requested Vicky Evangelista
(Evangelista), VP for Administration and Finance, to take charge
of the meeting for the inauguration should he fail to come back
on time. He attended a prior appointment with major clients in
Makati City.
5. Later, Mahilum learned that Evangelista postponed the meetings
because she accompanied the daughter of petitioner Danilo Lua
(Lua), President and CEO, to Bulacan.
6. Thereafter, meetings on the program of activities for the
inauguration and Christmas party were conducted without
Mahilum's presence. Evangelista took charge and assumed the
lead role until the day of the affair.
7. On the inaugural day, Mahilum was not seen around to supervise
the program proper as he entertained some visitors of the
company.
a. According to him, he delegated the task to Evangelista.
8. Mahilum's attention was, however, called when Lua got furious
because he was not recognized during the program. He was not
mentioned in the opening remarks or called to deliver his
inaugural speech.
a. Upon inquiry from the emcees of the program, Mahilum
learned that they were not apprised of Lua's decision to
deliver the speech considering that he previously
declined to have a part in the program as he would be
very busy during the affair.
b. Thus, Lua's speech appeared to be "optional" in the
printed program during the affair.
9. The next day, Mahilum was required to explain why Lua was not
recognized and made to deliver his speech. At the same time, he
was placed under preventive suspension for thirty (30) days.
a. Mahilum submitted his written explanation.
Subsequently, an investigation was conducted.
10. After the lapse of the suspension, Mahilum reported for work but
was prevented from entering the workplace.
11. Sometime in the first week of March 2005, he received a copy of
the Memorandum, dated January 31, 2005, terminating his
services effective the next day or on February 1, 2005.
12. On February 9, 2005, a clearance certificate was issued to
Mahilum.
a. He received the amount of P43,998.56 and was
made to execute the Release, Waiver and Quitclaim
in favor of the company and Lua.
13. Mahilum filed a complaint for illegal dismissal with prayer for
reinstatement, payment of back wages and damages.
a. Mahilum alleged that he was illegally suspended and
dismissed constructively and was forced to sign the
waiver.
14. LABOR ARBITER: Dismissed the complaint for lack of merit and
that the quitclaim barred his right to question his dismissal under
the principle of estoppel given that Mahilum was a person of
sufficient aptitude and intellect and could not have been forced.
15. NLRC: Reversed the LA and ruled in favor of Mahilum. It also
held that the quitclaim did not bar the institution of the case for
illegal dismissal.
a. The NLRC noted that although Mahilum voluntary signed
the quitclaim, it may be possible that he assented to such
due to the fact that he had not received any salary for
more than 1 month due to the preventive suspension.
b. NLRC also held that Mahilum was illegally dismissed.
16. CA: Reversed the NLRC. It held that Mahilum’s conduct during
the inauguration did not constitute willful disobedience or breach
of trust, rendering his termination as illegal and without cause.
a. It however upheld the validity of the executed quitclaim
given the Mahilum, as a top executive of the company,
could not have been a gullible person who misunderstood
the import of the document. That there was no showing
that it was tained with deceit or coercion.
17. Mahilum filed a MR. CA reconsidered and amended it decision.
a. CA found that Mahilum had been illegally dismissed from
employment and is entitled to full backwages and
separation pay in lieu of reinstatement.
b. With respect to the quitclaim, CA held that it was void
for having no consideration.
18. The CA also noted that all that Mahilum received by virtue of the
said document amounted to what he was legally entitled like
salaries and wages, 13th month pay and commissions. These
could not be considered as reasonable and credible consideration
for a quitclaim.
a. By receiving only what he was lawfully entitled to, there
was, in effect, no consideration at all for the quitclaim,
rendering it void and ineffective to bar an action for
illegal dismissal.
ISSUE/S:
1. WON Mahilum was illegally dismissed? — YES
2. WON Mahilum was entitled to monetary claims —YES (but the
0.25% commission is excluded)
RULING:
WHEREFORE, the petition is PARTIALLY GRANTED . The July 23, 2010
Amended Decision and the October 31, 2012 Resolution of the Twentieth
Division of the Court of Appeals in CA G.R. SP No. 02636 are AFFIRMED
with MODIFICATION.
RATIO:
1. YES
● The SC noted that Mahilum was a regular employee contrary to
the argument of Phil. Spring that Mahilum was not a regular
employee at the time of his dismissal due to his probationary
status.
● Mahilum was hired in June 2004 and was dismissed on February
5, 2005 (thus he served the company for 8 months). Pursuant
to CALS Poultry v. Roco, the computation of the 6-month
probationary period was reckoned from the date of appointment
up to the same calendar date of the 6th month following.
● Having been allowed to work after the lapse of the probationary
period, Mahilum became a regular employee and thus enjoys
security of tenure.
● According to the Phil Spring, Mahilum's behavior during the
inauguration/party was allegedly tantamount to: 1] serious
misconduct, as displayed by a drinking binge with his own
visitors causing the shame and humiliation of Lua; and 2] willful
disobedience, as shown by his refusal to carry out legitimate
orders.
● Well-entrenched rule, especially in labor cases, is that findings
of fact of quasi-judicial bodies, like the NLRC, are accorded with
respect, even finality, if supported by substantial evidence.
Although this doctrine is not without exceptions, the Court finds
that none is applicable to the present case.
o Here, the CA affirmed the ruling of the NLRC and adopted
as its own the latter's factual findings as to Mahilum's
illegal dismissal. SC found no reason to depart from such
rulings.
● Mahilum’s designation as the chairman of the whole affair did not
form part of his duty as a supervisor. Mahilum was engaged to
supervise the sales and marketing aspects of Phil. Spring
Bulacan Plant. Thus, charge of loss of trust and confidence had
no basis, as the act complained of was not work-related. (NO
JUST CAUSE)
2. YES
● Article 279 of the Labor Code provides that an employee who
is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other
privileges, to full backwages, inclusive of allowances, and
to other benefits or their monetary equivalent computed
from the time his compensation was withheld from him up
to the time of his actual reinstatement. Due to the
strained relations of the parties, however, the payment of
separation pay has been considered an acceptable
alternative, when reinstatement is no longer desirable or
viable.
o On the one hand, such payment liberates the employee
from what could be a highly oppressive work
environment. On the other, the payment releases the
employer from the grossly unpalatable obligation of
maintaining in its employ a worker it could no longer
trust.
● Thus, as an illegally or constructively dismissed employee, the
respondent is entitled to: (1) either reinstatement, if viable, or
separation pay, if reinstatement is no longer viable; and (2)
backwages. These two reliefs are separate and distinct from each
other and are awarded conjunctively.
● Mahilum, as a regular employee at the time of his illegal
dismissal, is entitled to separation pay and backwages,
computed from the time of his dismissal up to the finality
of the decision. Likewise, reinstatement is no longer viable
considering the circumstances of animosity between Mahilum
and Lua.
● SC resolved to delete the inclusion of 0.25% commission
on cash and delivery sales as part of Mahilum's
backwages.
● Back wages are granted on grounds of equity to workers for
earnings lost due to their illegal dismissal from work. They are a
reparation for the illegal dismissal of an employee based on
earnings which the employee would have obtained, either by
virtue of a lawful decree or order, as in the case of a wage
increase under a wage order, or by rightful expectation, as in the
case of one's salary or wage. The outstanding feature of
backwages is thus the degree of assuredness to an
employee that he would have had them as earnings had
he not been illegally terminated from his employment.
● It is well-established in jurisprudence that the determination of
whether or not a commission forms part of the basic salary
depends upon the circumstances or conditions for its payment.
SC cited jurisprudence as well.
● Phil Duplicators, Inc. v. NLRC: Court held that commissions
earned by salesmen form part of their basic salary. The
salesmen's commissions, comprising a pre-determined
percentage of the selling price of the goods sold by each
salesman, were properly included in the term basic salary for
purposes of computing the 13th month pay. The salesmen's
commissions are not overtime payments, nor profit-sharing
payments nor any other fringe benefit, but a portion of the salary
structure which represents an automatic increment to the
monetary value initially assigned to each unit of work rendered
by a salesman
● Boie-Takeda Chemicals v. De la Serna: The so-called
commissions paid to or received by medical representatives were
 excluded from the term basic salary because these were paid to
the medical representatives and rank-and-file employees as
productivity bonuses, which were generally tied to the
productivity, or capacity for revenue production, of a corporation
and such bonuses closely resemble profit-sharing payments and
had no clear direct or necessary relation to the amount of work
actually done by each individual employee.
● In the case at bar, Phil. Duplicator cannot be automatically
applied without considering his position as VP for sales and
marketing of the Phil Spring’s Bulacan-South Luzon Area.
● This factor constrains the Court to hold that Mahilum's 0.25%
commission based on the monthly sales and 0.25% commission
for cash payments must be taken to come in the nature of
overriding commission, not sales commission. The latter is
not properly includable in the basic salary as it must be earned
by actual market transactions attributable to the claimant.
● Curiously, Mahilum did not comment on the petitioners' objection
to the award. Not being a salesman who directly effected
any sale of a product, the commission embodied in the
agreement partook of the nature of profit-sharing
business based on quota. In fine, the alleged commissions
were profit-sharing payments and had no clear, direct or
necessary relation to the amount of work he actually performed.
● Mahilum's backwages must be pegged at his basic salary,
excluding the commissions mentioned by the NLRC, to be
computed from the time of his dismissal up to the finality of this
decision. Nonetheless, the award of backwages shall earn legal
interest at the rate of six percent (6%) per annum in accordance
with prevailing jurisprudence.
 NORMA MABEZA v. NATIONAL LABOR RELATIONS should not report to work and, instead, continue with her unofficial
leave of absence. Thus, petitioner filed a complaint for illegal dismissal
COMMISSION
and also alleged underpayment of wages, non-payment of holiday pay,
April 18, 1997 | J. Kapunan | Payment of Wages
service incentive leave pay, 13th month pay, night differential and other
DIGEST MADE BY: Aly & Melo
benefits.

PETITIONER: Norma Mabeza

Respondent Ng, argued that petitioner "surreptitiously left (her job)
RESPONDENTS: NLRC, Peter Ng/Hotel Supreme
without notice to the management" and that she abandoned her work,
DOCTRINE:
and, as regards petitioner’s money claims, that there was no basis for
the money claims for underpayment and other benefits as these were
Facilities can be deducted only if the employer complies with certain
paid in the form of facilities to petitioner and the hotel's other
legal requirements such as:
employees. In a supplemental answer submitted 11 months after the
original complaint for illegal dismissal was filed, respondent Ng raised
(1) proof must be shown that such facilities are customarily furnished
the new ground of loss of confidence supported by a criminal complaint
by the trade,
for Qualified Theft he filed before the prosecutor's office.
(2) the provision of deductible facilities must be voluntarily accepted
The LA dismissed the petitioner's complaint on the ground of loss of
in writing by the employee, and
confidence. The LA found that from the evidence of respondent Ng,
(3) facilities must be charged at fair and reasonable value.
complainant Mabeza indeed stole or carted away 1 blanket, 1 piece
bedsheet, 1 piece thermos, 2 pieces towel. In fact, this was the reason
Supplement is a benefit or privilege granted to an employee for the
why respondent Peter Ng filed a criminal complaint for qualified theft
convenience of the employer. The criterion in making a distinction
and perjury. The NLRC affirmed this decision.
between the facilities and supplements lies NOT in the kind (food,
lodging) but in the purpose.
The issue in this case is WON the dismissal by the private respondent
of petitioner constitutes an unfair labor practice.
All money claims arising out of employer-employee relationship to 3
years from the time the cause of action arises
The Court held yes because it is settled that in termination cases the
employer bears the burden of proof to show that the dismissal is for
RECIT- READY SUMMARY:
just cause, failure of which would mean that the dismissal is not
Petitioner Mabeza contends that she and her co-employees were asked
justified. Respondent Ng claims (1) that petitioner abandoned her job
by the Hotel Supreme’s management to sign an instrument attesting to
when she failed to return to work on May 8, 1991, and (2) that
the latter's compliance with minimum wage and other labor standard
petitioner was dismissed based on the just cause of loss of confidence.
provisions of law. Petitioner signed the affidavit but refused to go to the
The Court held otherwise.
City Prosecutor's Office to swear to the veracity and contents of the
affidavit. After petitioner refused to proceed to the City Prosecutor's
As to the 1st cause of action (abandonment), the petitioner did NOT
Office petitioner avers that she was ordered by the hotel management
abandon her work because the two requirements for abandonment to
to turn over the keys to her living quarters and to remove her
be present—(1) lack of intention to work and (2) presence of overt acts
belongings from the hotel premises. She then filed a leave of absence
signifying the employee's intention not to work—were not met. In this
which was denied by management and when she attempted to return
case, respondent Ng does not dispute the fact that petitioner tried to
to work on May 10, 1991, the hotel's cashier informed her that she
file a leave of absence when she learned that the hotel management
was displeased with her refusal to attest to the affidavit. Thus, the fact
that petitioner made this attempt clearly indicates not an intention to
abandon but an intention to return to work after the period of her leave
of absence has expired. Additionally, while absence from work for a
prolonged period may suggest abandonment, mere absence of 1 or 2
days would not be enough to sustain such claim because the overt act
(absence) ought to unerringly point to the fact that the employee has
no intention to return to work, as in the present case. Petitioner, several
days after she had been advised to take an informal leave, she tried to
resume working with the hotel and it was only after she had been
repeatedly rebuffed that she filed a case for illegal dismissal.
As to the 2nd cause of action (loss of confidence), The Court held that
loss of confidence should ideally apply only to cases involving (1)
employees occupying positions of trust and confidence, or (2) to those
situations where the employee is routinely charged with the care and
custody of the employer's money or property. Evidently, an ordinary
chambermaid who has to sign out for linen and other hotel property
would NOT fall under any of these two classes of employees for which
loss of confidence, would normally apply.
As for petitioner’s monetary claims, the Court held that the LA accepted
hook, line and sinker the respondent Ng's bare claim that the reason
the monetary benefits received by petitioner between 1981 to 1987
were less than minimum wage was because petitioner did not factor in
the meals, lodging, electric consumption and water she received during
the period in her computations. Granting that meals and lodging were
provided and constituted facilities, such facilities could not be deducted
without the employer complying first with certain legal requirements—
(1) proof must be shown that such facilities are customarily furnished
by the trade, (2) the provision of deductible facilities must be voluntarily
accepted in writing by the employee, and (3) facilities must be charged
at fair and reasonable value. In this case, respondent Ng did NOT get
to proof these 3 elements since he (1) "failed to present any company
policy or guideline to show that the meal and lodging (are) part of the
salary, (2) did not provide proof of the employee's written
authorization, and (3) failed to show how he arrived at the valuations.
In addition, the food and lodging, or the electricity and water consumed
by the petitioner were not facilities, but supplements which is a benefit
or privilege granted to an employee for the convenience of the
employer. Considering 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 respondent Ng's.
Therefore, the Court awarded petitioner:
(1) deficiency in her wages equivalent to the full wage applicable from
May 13, 1988 up to the date of her illegal dismissal,
(2) service incentive leave pay, emergency cost of living allowance,
night differential pay, and 13th month pay from May 13, 1988 up to the
date of her illegal dismissal,
(3) separation pay equivalent to one month's salary for every year of
continuous service,
(4) Full backwages without qualification or deduction, from the date of
petitioner's illegal dismissal up to the date of promulgation of this
decision, and
(5) P1,000 since petitioner was not granted her right to due process.
FACTS:
1. Petitioner Norma Mabeza contends that around the first week
of May, 1991, she and her co-employees at the Hotel Supreme
in Baguio City were asked by the hotel's management to sign
an instrument attesting to the latter's compliance with
minimum wage and other labor standard provisions of law.
2. Petitioner signed the affidavit but refused to go to the City
Prosecutor's Office to swear to the veracity and contents of the
affidavit.
3. The affidavit was nevertheless submitted on the same day to
the Regional Office of the Department of Labor and Employment
in Baguio City.
4. The affidavit was drawn by management for the sole purpose
of refuting findings of the Labor Inspector of DOLE adverse to
the private respondent.
5. After petitioner refused to proceed to the City Prosecutor's
Office petitioner avers that she was ordered by the hotel
management to turn over the keys to her living quarters and to
remove her belongings from the hotel premises. According to
her, respondent Ng strongly chided her for refusing to proceed
to the City Prosecutor's Office to attest to the affidavit.
6. Afterwards, she filed a leave of absence from her job which was
denied by management. When she attempted to return to work
on May 10, 1991, the hotel's cashier informed her that she
should not report to work and, instead, continue with her
unofficial leave of absence.
7. On May 13, 1991, three days after her attempt to return to
work, petitioner filed a complaint for illegal dismissal before the
Arbitration Branch of the National Labor Relations Commission
In addition to her complaint for illegal dismissal, she alleged
underpayment of wages, non-payment of holiday pay, service
incentive leave pay, 13th month pay, night differential and
other benefits.
8. Respondent Peter Ng alleged before Labor Arbiter that:
(a) petitioner "surreptitiously left (her job) without notice
to the management" and that she abandoned her work,
(b) there was no basis for the money claims for
underpayment and other benefits as these were paid
in the form of facilities to petitioner and the hotel's
other employees,
(c) his employees have no problems with management.
9. In a supplemental answer submitted 11 months after the
original complaint for illegal dismissal was filed, respondent Ng
raised the new ground of loss of confidence which was
supported by a criminal complaint for Qualified Theft he filed
before the prosecutor's office of the City of Baguio against
petitioner.
10. Labor Arbiter Pati rendered a decision dismissing petitioner's
complaint on the ground of loss of confidence. The LA found
that from the evidence of respondent Ng, complainant Mabeza
indeed stole or carted away 1 blanket, 1 piece bedsheet, 1 piece
thermos, 2 pieces towel. In fact, this was the reason why
respondent Peter Ng filed a criminal complaint for qualified theft
and perjury. The fiscal's office finding a prima facie evidence
that complainant committed the crime of qualified theft, as a
consequence, complainant was charged in court for the said
crime.
11. Thus, the LA concluded that complainant Mabeza committed
serious misconduct against her employer which is one of the
just and valid grounds for an employer to terminate an
employee (Article 282 of the Labor Code as amended).
12. The NLRC affirmed the Labor Arbiter's decision.
13. Petitioner instituted a petition for certiorari under Rule 65.
ISSUE/S:
1. WON the dismissal by the private respondent of petitioner
constitutes an unfair labor practice - YES
RULING:
WHEREFORE, premises considered, the RESOLUTION of the National
Labor Relations Commission dated April 24, 1994 is REVERSED and
SET ASIDE, with costs. For clarity, the economic benefits due the
petitioner are hereby summarized as follows:
(1) Deficiency wages and the applicable ECOLA from May 13,
1988 up to the date of petitioner's illegal dismissal;
(2) Service incentive leave pay; night differential pay and
13th month pay for the same period;
(3) Separation pay equal to one month's salary for every
year of petitioner's continuous service with the private
respondent starting with her job at the Belfront Hotel;
(4) Full backwages, without qualification or deduction, from the
date of petitioner's illegal dismissal up to the date of
promulgation of this decision pursuant to our ruling in
Bustamante vs. NLRC. 34
(5) P1,000.00.
RATIO:
1. YES
Petitioner did not abandon her work (first cause of action)
● It is settled that in termination cases the employer bears the
burden of proof to show that the dismissal is for just cause,
failure of which would mean that the dismissal is not justified
and the employee is entitled to reinstatement.
● In this case, the respondent Ng initially claimed that petitioner
abandoned her job when she failed to return to work on May 8,
1991, and to strengthen his contention, respondent Ng
belatedly included a complaint for loss of confidence, supporting
this with charges that petitioner had stolen a blanket, a
bedsheet and two towels from the hotel.
● The Court held that from the evidence on record, it is clear that
the circumstances upon which respondent Ng anchored his
claim that petitioner "abandoned" her job were not enough to
constitute just cause because for abandonment to arise, there
must be concurrence of two things:
(1) lack of intention to work; and
(2) the presence of overt acts signifying the employee's
intention not to work.
● The Court held that the respondent Ng does not dispute the fact
that petitioner tried to file a leave of absence when she
learned that the hotel management was displeased with her
refusal to attest to the affidavit. The fact that petitioner made
this attempt clearly indicates not an intention to abandon
but an intention to return to work after the period of her
leave of absence has expired.
● Furthermore, while absence from work for a prolonged period
may suggest abandonment, mere absence of 1 or 2 days would
not be enough to sustain such claim because the overt act
(absence) ought to unerringly point to the fact that the
employee has no intention to return to work, as in the present
case. Petitioner, several days after she had been advised to
take an informal leave, she tried to resume working with the
hotel. It was only after she had been repeatedly rebuffed that
she filed a case for illegal dismissal.
● Thus, the court held that petitioner’s acts militate against the
respondent Ng's claim that she abandoned her job.
No loss of confidence (second cause of action)
● Loss of confidence as a just cause for dismissal was never
intended to provide employers with a blank check for
terminating their employees. Such a vague, all-encompassing
pretext as loss of confidence could reduce to barren form the
words of the constitutional guarantee of security of tenure.
● So, loss of confidence should ideally apply only to cases
involving:
(a) employees occupying positions of trust and confidence,
or
(b) to those situations where the employee is routinely
charged with the care and custody of the employer's
money or property.
● To the first class belong managerial employees who are those
vested with the powers or prerogatives to lay down
management policies and/or to hire, transfer, suspend, lay-off,
recall, discharge, assign or discipline employees or effectively
recommend such managerial actions; and to the second class
belong cashiers, auditors, property custodians, etc., or those
who, in the normal and routine exercise of their functions,
regularly handle significant amounts of money or property.
● Evidently, an ordinary chambermaid who has to sign out for
linen and other hotel property would not fall under any of
these two classes of employees for which loss of confidence,
would normally apply.
● In the case of Marina Port Services, Inc. v. NLRC, the Court
explained that the security guard must be considered as
enjoying the trust and confidence of his employer, whose
property he is safeguarding. Like the janitor, he has access to
this property. He too, is charged with its care and protection.
However, he is entrusted only with the physical task of
protecting that property. The employer's trust and confidence
in him is limited to that ministerial function. He is not
entrusted 'with the duties of safekeeping and safeguarding
company policies, management instructions, and company
secrets such as operation devices.' He is not privy to these
confidential matters, which are shared only in the higher
 echelons of management. It is the persons on such levels
who, because they discharge these sensitive duties, may
be considered holding positions of trust and confidence.
The security guard does not belong in such category.
● In this case, the suspicious delay in respondent Ng 's filing of
qualified theft charges against petitioner long after she exposed
the hotel's scheme (to avoid its obligations as employer under
the Labor Code) by her act of filing illegal dismissal charges
against respondent would hardly warrant serious consideration
of loss of confidence as a valid ground for dismissal.
● The Court agreed with the statement of the SolGen “if petitioner
had really committed the acts charged against her by private
respondents (stealing supplies of respondent hotel), private
respondents should have confronted her before dismissing her
on that ground. Private respondents did not do so. In fact,
respondent Ng did not raise the matter when petitioner went to
see him and handed him her application for leave. It took
respondents 52 days before finally deciding to file a
criminal complaint against petitioner, in an obvious
attempt to build a case against her.
● The pivotal question in any case where unfair labor practice is
alleged is whether or not the employer has exerted pressure, in
the form of restraint, interference or coercion, against his
employee's right to institute concerted action for better terms
and conditions of employment. The Court said that without a
doubt, the act of compelling employees to sign an instrument
indicating that the employer observed labor standards
provisions of law when he might have not, together with the act
of terminating or coercing those who refuse to cooperate with
the employer's scheme constitutes unfair labor practice since
the first act preempts the right of the hotel's workers to seek
better terms and conditions of employment through concerted
action.
● We agree with the SolGen’s observation that "this actuation is
analogous to the situation envisaged in paragraph (f) of Article
248 of the Labor Code" which distinctly makes it an unfair labor
practice "to dismiss, discharge or otherwise prejudice or
discriminate against an employee for having given or being
about to give testimony" under the Labor Code.
● Thus, for refusing to cooperate with the respondent Ng's
scheme, petitioner was held up as an example to all of the
hotel's employees, that they could only cause trouble to
management at great inconvenience. Implicit in the act of
petitioner's termination and the subsequent filing of charges
against her was the warning that they would not only be
deprived of their means of livelihood, but also their personal
liberty.
Monetary claims issue (syllabus topic)
● The Court held that the labor arbiter's evaluation of the money
claims ignores existing law and jurisprudence on the matter. Its
blatant one-sidedness raises the suspicion that something more
than the facts, the law and jurisprudence may have influenced
the decision at the level of the Arbiter.
● The LA accepted hook, line and sinker the respondent's bare
claim that the reason the monetary benefits received by
petitioner between 1981 to 1987 were less than minimum wage
was because petitioner did not factor in the meals, lodging,
electric consumption and water she received during the period
in her computations. Granting that meals and lodging were
provided and constituted facilities, such facilities could not
be deducted without the employer complying first with
certain legal requirements.
(1) proof must be shown that such facilities are customarily
furnished by the trade,
(2) the provision of deductible facilities must be voluntarily
accepted in writing by the employee, and
(3) facilities must be charged at fair and reasonable value.
● But, these requirements were not met in the case because:
(1) respondent Ng "failed to present any company
policy or guideline to show that the meal and
lodging (are) part of the salary;"
(2) he failed to provide proof of the employee's
written authorization; and
 (3) he failed to show how he arrived at the valuations.
● The only valuations relied upon by the LA were figures furnished
by the respondent Ng's own accountant, without corroborative
evidence. On the pretext that records prior to the July 16, 1990
earthquake were lost or destroyed, respondent Ng failed to
produce payroll records, receipts and other relevant
documents, where he could have, "secured certified copies
thereof from the nearest regional office of the Department of
Labor, the SSS or the BIR."
● In addition, the food and lodging, or the electricity and water
consumed by the petitioner were not facilities, but supplements
which is a benefit or privilege granted to an employee for the
convenience of the employer. The criterion in making a
distinction between the two lies NOT in the kind (food, lodging)
but in the purpose.
● Considering that hotel workers are required to work different
shifts and are expected to be available at various odd hours,
their ready availability is a necessary matter in the operations
of a small hotel, such as the respondent Ng's.
● Therefore, the Court held that it is evident that petitioner is
entitled to the payment of the deficiency in her wages
equivalent to the full wage applicable from May 13, 1988
up to the date of her illegal dismissal.
● Additionally, petitioner is entitled to payment of service
incentive leave pay, emergency cost of living allowance,
night differential pay, and 13th month pay for the periods
alleged by the petitioner as the private respondent Ng was not
able to adduce proof that petitioner was paid the such benefits.
● However, the claims covering the period of October 1987
up to the time of filing the case on May 13, 1988 are
barred by prescription as P.D. 442 (as amended) and its
implementing rules limit all money claims arising out of
employer-employee relationship to 3 years from the time the
cause of action arises.
● The Court also awarded separation pay equivalent to one
month's salary for every year of continuous service
instead of reinstatement given the strained relation between
petitioner and respondent Ng which may only subject her to
possible harassment and future embarrassment.
● In addition to separation pay, backwages from the time of her
illegal dismissal up to the date of promulgation of this decision
without qualification or deduction, are in order.
● Finally, in dismissal cases, the law requires that the employer
must furnish the employee sought to be terminated from
employment with 2 written notices—(1) written notice
containing a statement of the cause(s) for dismissal, and (2)
notice informing the employee of the employer's decision to
terminate him stating the basis of the dismissal—before the
same may be legally effected. During the process leading to the
2nd notice, the employer must give the employee ample
opportunity to be heard and defend himself, with the assistance
of counsel if he so desires.
● Given the seriousness of the 2nd cause of action (qualified theft)
of the petitioner's dismissal, it is noteworthy that the
respondent Ng never even bothered to inform petitioner
of the charges against her. Neither was petitioner given
the opportunity to explain the loss of the articles. It was
only almost 2 months after petitioner filed a complaint for illegal
dismissal that the loss was reported to the police and added as
a supplemental answer to petitioner's complaint. Clearly, the
dismissal of petitioner without the benefit of notice and hearing
prior to her termination violated her constitutional right to
due process. Thus, under the circumstances, the Court
awarded an additional P1,000.00 on top of payment of the
deficiency in wages and benefits.
 OUR HAUS V. PARIAN
6 August 2014 | Brion, J. | 2A: Wages - Concept & Definition
DIGEST MADE BY: Cham
CLUE: meals and lodging
PETITIONER: OUR HAUS REALTY DEVELOPMENT CORPORATION
RESPONDENTS: ALEXANDER PARIAN, JAY C. ERINCO, ALEXANDER
CANLAS, BERNARD TENEDERO AND JERRY SABULAO
DOCTRINE:
These requirements {for deductibility},
as summarized in Mabeza, are the following:
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.
RECIT- READY SUMMARY:
Respondents were all laborers working for Our Haus Realty
Development Corporation. During a financial distress, Our Haus
suspended some of its construction projects and asked the affected
workers, including respondents to take vacation leaves. Respondents
eventually filed a complaint for underpayment of their daily wages
(refer to the table provided in facts for the amounts).
According to Our Haus they are compliant with the minimum wage
requirement of the law, emphasizing that it has been subsidizing meals
and lodging near the construction projects. The total amount of
respondent’s daily wage should include these benefits. LA ruled in favor
of Our Haus. NLRC reversed. CA affirmed.
W/N the subsidies can be considered as part of the respondents’ wages
– NO
Our Haus failed to comply with the requirements for deductibility.
1. Customarily furnished by trade – NO
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.
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. Section 16 of DOLE Department Order (DO) No. 13,
series of 1998, employers engaged in the construction business are
required to provide suitable living accommodations.
If a benefit is customarily provided by the trade, it must still pass the
purpose test set by jurisprudence. 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. Accordingly, their values cannot be considered in
computing the total amount of the respondents' wages.
2. Voluntary Acceptance in writing – NO
Our Haus only offered the kasunduans supposedly executed by the
respondents 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.
3. Charged at fair and reasonable value – NO
Our Haus never explained how it came up with the values it assigned
for the benefits it provided. Without any corroborative evidence, it
cannot be said that Our Haus complied with this third requisite.
FACTS: 2010).
5. The respondents also alleged that Our Haus failed to pay them
1. Respondents Alexander Parian, Jay Erinco, Alexander Canlas, their holiday, service incentive leave (SIL), 13th month and
Jerry Sabulao and Bernardo Tenedero were all laborers working overtime pays.
for petitioner Our Haus Realty Development Corporation (Our 6. Before the LA, Our Haus primarily argued that the respondents'
Haus), a company engaged in the construction business. 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
Name Date Yrs of Yr & Place of Daily Rate
them free lodging near the construction project they were
Hired Service Assignment
assigned to. In determining the total amount of the
respondents' daily wages, the value of these benefits should be
Parian Oct 1999 10 07-10 - QC P353.50
considered, in line with Article 97 (f) of the Labor Code.
Erinco Jan 2000 10 08 - QC; 09 - P342.00 7. The LA ruled in favor of Our Haus
Antipolo; 10 - QC 8. NLRC reversed, noting that the respondents did not authorize
Our Haus in writing to charge the values of their board and
Canlas 2005 5 07-10 - QC P312.00 lodging to their wages. Thus, the same cannot be credited.
9. CA affirmed NLRC.
Sabulao Aug 1999 10 08 - QC; 09 - P342.00
Antipolo; 10 - QC
ISSUE/S:
Tenedero 1994 16 07-10 - QC P383.50
1. W/N the subsidies can be considered as part of respondents’
wages - NO
2. Sometime in May 2010, Our Haus experienced financial
distress. To alleviate its condition, Our Haus suspended some
RULING:
of its construction projects and asked the affected workers,
including the respondents, to take vacation leaves.
WHEREFORE, in light of these considerations, we conclude that the
3. Eventually, the respondents were asked to report back to work
Court of Appeals correctly found that the National Labor Relations
but instead of doing so, they filed with the LA a complaint for
Commission did not abuse its discretion in its decision of July 20, 2011
underpayment of their daily wages.
and Resolution of December 2, 2011. Consequently we DENY the
4. They claimed that except for respondent Bernardo N. Tenedero,
petition and AFFIRM the Court of Appeals' decision dated May 7, 2012
their wages were below the minimum rates prescribed in the
and resolution dated November 27, 2012 in CA-G.R. SP No. 123273.
following wage orders from 2007 to 2010:
No costs.
a. 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); and
b. 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,
RATIO:
1. NO
● No substantial distinction between deducting and
charging a facility's value from the employee's wage; the
legal requirements for creditability apply to both
● 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' 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.
● These requirements, as summarized in Mabeza, are the
following:
o a. proof must be shown that such facilities are
customarily furnished by the trade;
o b. the provision of deductible facilities must be
voluntarily accepted in writing by the employee;
and
o c. The facilities must be charged at fair and
reasonable value.
● Customarily furnished by the trade
● 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.
o 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.
o We agree with the NLRC's finding that the sinumpaang
salaysay statements submitted by Our Haus are self-
serving
o 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.
● 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.
o Peculiar to the construction business are the
occupational safety and health (OSH) services which
the law itself mandates employers to provide to their
workers.
o Under Section 16 of DOLE Department Order (DO) No.
13, series of 1998, employers engaged in the
construction business are required to provide the
following welfare amenities:
o 16.3 Suitable living accommodation for workers,
and as may be applicable, for their families
o 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
o 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.
● 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
● Under the law, 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.
● In the present case, the board and lodging provided by Our
Haus cannot be categorized as facilities but as supplements.
● 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.
● 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.
● 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.
● The provision of deductible facilities must be voluntarily
accepted in writing by the employee
● In Mayon Hotel (case), we reiterated that a facility may only be
deducted from the wage if the employer was authorized in
writing by the concerned employee. As it diminishes the take-
home pay of an employee, the deduction must be with his
express consent.
● Oddly, Our Haus only offered these kasunduans 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.
● The facility must be charged at a fair and reasonable
value
● The valuation of a facility must be supported by relevant
documents such as receipts and company records for it to
be considered as fair and reasonable
● In the present case, Our Haus never explained how it came
up with the 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.
● 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.
 DAVID V MACASIO
July 2, 2014 | J. Brion.| Wages
DIGEST MADE BY: Xander
PETITIONER: ARIES L. DAVID, doing business under the name and
style “YIELS HOG DEALER”
RESPONDENTS: JOHN G. MACASIO
DOCTRINE:
Labor Code defines wages as “the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether
fixed or ascertained on a time, task, piece, or commission basis, or
other method of calculating the same, which is payable by an employer
to an employee under a written or unwritten contract of employment
for work done or to be done, or for services rendered or to be
rendered.
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."
RECIT- READY SUMMARY:
Macasio filed a complaint for non-payment of SIL, holiday pay, and
13th month pay against the petitioner, doing business under the name
and style “Yiels Hog Dealer” before the LA. Macasio argues that he is an
employee as he was working under the supervision and control of the
petitioner. On the other hand, petitioner argues that Macasio was not
an employee as he was hired on”pakyaw” or task basis. David argues
that he issued the Certificate of Employment, upon Macasio’s request,
only for overseas employment purposes. LA dismissed the complaint
and NLRC Affirmed. The CA however, partially granted the petition and
reversed the decision of the NLRC, ruling that Macasio is entitled to
SIL, holiday, and 13th month pay. Hence this petition filed by David.
ISSUE: (the other issue is in the body - YES Macasio is an
employee for fulfilling or satisfying the four-fold test)
(syllabus topic) W/N Macasio is entitled to holiday, 13th month, and
SIL pay? YES, except the 13th month pay.
Labor Code defines wages as “the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether
fixed or ascertained on a time, task, piece, or commission basis, or
other method of calculating the same, which is payable by an employer
to an employee under a written or unwritten contract of employment
for work done or to be done, or for services rendered or to be
rendered.” 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. 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. 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."
FACTS:
1. Macasio alleged that he had been working as a butcher for
David since January 6, 1995.
2. According to Macasio (respondent), David exercised effective
control over his work, pointing out that David:
a. set the work day, reporting time and hogs to be
 chopped, as well as the manner by which he was to
perform his work;
b. daily paid his salary of P700 which was increased from
P600 in 2007, P500 in 2006 and P400 in 2005;
c. approved and disapproved his leaves
d. David owned the hogs delivered for chopping, as well
as the work tools and implements; and
e. David rented the workplace
f. David employs about 25 butchers and delivery drivers.
3. In January 2009, Macasio filed a complaint against the
petitioner, doing business under the name and style “Yiels Hog
Dealer”, before the LA.
a. The complaint was for non-payment of overtime pay,
holiday pay and 13th month pay. He also claimed
payment for moral and exemplary damages and
attorneys fees as well as payment for service incentive
leave (SIL).
4. Petitioner argues that he started his business only in 2005 with
only 10 butchers and 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 13th month pay
pursuant to the provisions of the IRR of the Labor Code.
5. Petitioner pointed out that:
a. Macasio starts his work at 10 pm and ends at 2 am, or
earlier, depending on the volume of the delivered hogs;
b. received the fixed amount of P700 per engagement,
regardless of the actual number of hours that he spent
chopping the delivered hogs; and
c. Macasio was not engaged to report for work and,
accordingly, did not receive any fee when no hogs were
delivered.
6. David argues that Macasio was not an employee as he was
hired on”pakyaw” or task basis. David argues that he issued
the Certificate of Employment, upon Macasio’s request, only for
overseas employment purposes.
a. He used the “Pinagsamang Sinumpaang Salaysay”
executed by Macasio’s co-butchers to corroborate his
claims.
7. LA dismissed the complaint for lack of merit and concluded that
as Macasio was engaged n “pakyaw” or task basis, he is not
entitled to overtime, holiday, SIL and 13th month pay. On
appeal, the NLRC affirmed the LA ruling.
a. NLRC ratio: David did not require Macasio to observe
an 8-hour work schedule to earn the fixed P700 wage
and Macasio had been performing a non-time work.
b. 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 13th month pay under the IRR
implementing the 13th month pay law.
8. CA partly granted Macasio’s certiorari petition and reversed the
NLRC’s ruling for having been rendered with grave abuse of
discretion.
a. 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”
b. 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.
c. 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 business under David’s
supervision and control, and for a fixed working
schedule that starts at 10 pm.
9. Hence this petition.
ISSUE/S:
1. W/N Macasio is an employee? YES
2. (syllabus topic) W/N Macasio is entitled to holiday, 13th
month, and SIL pay? YES, except the 13th month pay.
RULING:
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 CAG. R. SP No. 116003.
RATIO:
1. YES
● David argues that Macasio was not his employee as he engaged
the latter on “pakyaw” or task basis.
● The court held that David confuses engagement on “pakyaw” or
task basis with the lack of employment relationship.
● This argument is untenable.
● Engagement on “pakyaw” or task basis does not characterize
the relationship that may exist between the parties.
● Article 97 (6) of the Labor Code defines wages as “the
remuneration or earnings, however designated, capable of
being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis, or
other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract
of employment for work done or to be done, or for services
rendered or to be rendered.”
● In relation to Article 97 (6), Article 101 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.
● 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.
o 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[.]" Also, Solano and Antonio stated in their
"Pinagsamang Sinumpaang Salaysay” that "[k]ami po
ay nagtratrabaho sa Yiels . . . na pag-aari ni Ariel David
bilang butcher" and "kilala namin si . . . Macasio na isa
ring butcher . . . ni . . . David at kasama namin siya sa
aming trabaho."
o 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." This satisfies the element of "payment of
wages."
o 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.
o 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.
● 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.
● 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.
2. YES, except the 13th month 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.
● 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 IRR reads:
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.
SECTION 1. Coverage. — This Rule shall apply to
all employees except:
(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.
● On the other hand, Article 95 of the Labor Code and its
corresponding provision in the IRR pertinently provides:
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 ● In Serrano , the Court, applying the rule on ejusdem
regularly employing less than ten employees or in generis declared that "employees engaged on task or
establishments exempted from granting this contract basis . . . are not automatically exempted from
benefit by the Secretary of Labor and Employment the grant of service incentive leave, unless, they fall
after considering the viability or financial condition under the classification of field personnel."
of such establishment.
● The Court explained that the phrase "including those
who are engaged on task or contract basis, purely
● Under these provisions, the general rule is that holiday
commission basis" found in Section 1 (d), Rule V of
and SIL pay provisions cover all employees. To be
Book III of the IRR should not be understood as a
excluded from their coverage, an employee must be
separate classification of employees to which SIL shall
one of those that these provisions expressly exempt,
not be granted.
strictly in accordance with the exemption.
● Rather, as with its preceding phrase — "other
● Under the IRR, exemption from the coverage of holiday
employees whose performance is unsupervised by the
and SIL pay refer to "field personnel and other
employer" — the phrase "including those who are
employees whose time and performance is
engaged on task or contract basis" serves to amplify
unsupervised by the employer including those who are
the interpretation of the Labor Code definition of "field
engaged on task or contract basis"
personnel" as those "whose actual hours of work in the
○ Note that unlike Article 82 of the Labor Code ,
field cannot be determined with reasonable certainty."
the IRR on holiday and SIL pay do not exclude
● The phrase "employees engaged on task or contract
employees "engaged on task basis" as a
basis" found in the IRR on both SIL pay and holiday pay
separate and distinct category from employees
should be read together with the exemption of "field
classified as "field personnel." Rather, these
personnel."
employees are altogether merged into one
● In short, in determining whether workers engaged on
classification of exempted employees.
"pakyaw" or task basis" is entitled to holiday and SIL
● In short, the payment of an employee on task or
pay, the presence (or absence) of employer supervision
pakyaw basis alone is insufficient to exclude one from
as regards the worker's time and performance is the
the coverage of SIL and holiday pay.
key: if the worker is simply engaged on pakyaw or task
● They are exempted from the coverage of Title I
basis, then the general rule is that he is entitled to a
(including the holiday and SIL pay) only if they qualify
holiday pay and SIL pay unless exempted from the
as "field personnel." The IRR therefore validly qualifies
exceptions specifically provided under Article 94
and limits the general exclusion of "workers paid by
(holiday pay) and Article 95 (SIL pay) of the Labor
results" found in Article 82 from the coverage of holiday
Code. However, if the worker engaged on pakyaw or
and SIL pay. This is the only reasonable interpretation
task basis also falls within the meaning of "field
since the determination of excluded workers who are
personnel" under the law, then he is not entitled to
paid by results from the coverage of Title I is
these monetary benefits.
"determined by the Secretary of Labor in appropriate
● Based on the definition of field personnel under Article
regulations."
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.
● The governing law on 13th month pay is PD No. 851.
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 enumerates the exemptions from the
coverage of 13th month pay benefits.
● Under Section 3 (e), "employers of those who are paid
on . . . task basis, and those who are paid a fixed
amount for performing a specific work, irrespective of
the time consumed in the performance thereof" are
exempted.
● Unlike the IRR of the Labor Code on holiday and SIL
pay, IRR of PD 851 exempts employees “paid on task
basis” without any reference to field personnel.
○ This means 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.
B. Wage-Fixing
 NASIPIT LUMBER COMPANY INC. v. NSWPC
April 27, 1998 | J. Panganiban| Concept & Definition
DIGEST MADE BY: Bimb
PETITIONER: NASIPIT LUMBER COMPANY, INC., and PHILIPPINE
WALLBOARD CORPORATION
R E S P O N D E N T S : N AT I O N A L W A G E S A N D P R O D U C T I V I T Y
COMMISSION, WESTERN AGUSAN WORKERS UNION (WAWU-ULGWP
LOCAL 101), TUNGAO LUMBER WORKERS UNION (TULWU-ULGWP
LOCAL 102) and UNITED WORKERS UNION (UWU-ULGWP LOCAL 103)
DOCTRINE:
If a discrepancy occurs "between the basic law and an implementing
rule or regulation, it is the former that prevails." This is so because the
law cannot be broadened by a mere administrative issuance. It is
axiomatic that "[a]n administrative agency cannot amend an act of
Congress." Article 122 (e) of the Labor Code cannot be construed to
enable the RTWPB to decide applications for exemption on the basis of
its own guidelines which were not reviewed an approved by the NWPC,
for the simple reason that a statutory grant of "powers should not be
extended by implication beyond what may be necessary for their just
and reasonable execution. Official powers cannot be merely assumed
by administrative officers, nor can they be created by the courts in the
exercise of their judicial functions."
RECIT- READY SUMMARY:
The Region X [Tripartite Wages and Productivity] Board issued Wage
Order No. RX-01 which provides the increase in minimum wage rates
applicable to workers and employees in the private sector in Northern
Mindanao.Nasipit Lumber Company, Inc. (NALCO), Philippine Wallboard
Corporation (PWC), and Anakan Lumber Company (ALCO), claiming to
be separate and distinct from each other but for expediency and
practical purposes, jointly filed an application for exemption from the
Wage Orders as distressed establishments and based the exemption on
Guidelines No. 3 issued by the herein Board, specifically Sec. 3(2)
thereof which, among others, provides: Establishment belonging to
distressed industry - an establishment that is engaged in an industry
that is distressed due to conditions beyond its control as may be
determined by the Board in consultation with DTI and NWPC.
Petitioners aver that they are engaged in logging and integrated wood
processing industry but are distressed due to conditions beyond their
control, to wit: 1) Depressed economic conditions due to worldwide
recession; 2) Peace and order and other emergency-related problems
causing disruption and suspension of normal logging operations; 3)
Imposition of environmental fee for timber production in addition to
regular forest charges; 4) Logging moratorium in Bukidnon; 5) A
reduction in the annual allowable volume of cut logs of NALCO& ALCO
by 59%; 6) Highly insufficient raw material supply; 7) Extraordinary
increases in the cost of fuel, oil, spare parts, and maintenance; 8)
Excessive labor cost/production ratio that is more or less 47%; and 9)
Lumber export ban. Private respondent unions jointly opposed the
application for exemption on the ground that said companies are not
distressed establishments since their capitalization has not been
impaired by 25%. RTWPB approved the applicants’ joint application for
exemption citing liquidity problems and business decline in the wood-
processing industry. Private respondents lodged an appeal with the
NWPC, which reversed the applications of herein petitioners. Guidelines
No. 3 could not be used as valid basis for granting their application for
exemption since it did not pass the approval of the NWPC.
WON a guideline issued by an RTWPB without the approval of or,
worse, contrary to the guidelines promulgated by the NWPC is valid?
NO
Article 121 of the Labor Code lists the powers and functions of the
NWPC. Which includes that the Commission has the power to (c) To
prescribe rules and guidelines for the determination of appropriate
minimum wage and productivity measures at the regional, provincial or
industry levels; (d) To review regional wage levels set by the Regional
Tripartite Wages and Productivity Boards to determine if these are in
accordance with prescribed guidelines and national development plans;
 plans; among others. Article 122 of the Labor Code, on the other hand,
prescribes the powers of the RTWPB, one of which is (b) to determine
and fix minimum wage rates applicable in their region, provinces or
industries therein and to issue the corresponding wage orders, subject
to guidelines issued by the Commission. The foregoing clearly grants
the NWPC, not the RTWPB, the power to "prescribe the rules and
guidelines" for the determination of minimum wage and productivity
measures. While the RTWPB has the power to issue wage orders under
Article 122 (b) of the Labor Code, such orders are subject to the
guidelines prescribed by the NWPC. Significantly, the NWPC authorized
the RTWPB to issue exemptions from wage orders, but subject to its
review and approval. Since the NWPC never assented to Guideline No.
3 of the RTWPB, the said guideline is inoperative and cannot be used by
the latter in deciding or acting on petitioners' application for exemption.
To allow RTWPB Guideline No. 3 to take effect without the approval of
the NWPC is to arrogate unto RTWPB a power vested in the NWPC by
Article 121 of the Labor Code, as amended by RA 6727. If a
discrepancy occurs "between the basic law and an implementing rule or
regulation, it is the former that prevails." This is so because the law
cannot be broadened by a mere administrative issuance. It is axiomatic
that "[a]n administrative agency cannot amend an act of Congress."
Article 122 (e) of the Labor Code cannot be construed to enable the
RTWPB to decide applications for exemption on the basis of its own
guidelines which were not reviewed and approved by the NWPC, for the
simple reason that a statutory grant of "powers should not be extended
by implication beyond what may be necessary for their just and
reasonable execution. Official powers cannot be merely assumed by
administrative officers, nor can they be created by the courts in the
exercise of their judicial functions."
FACTS:
1. Region X (Tripartite Wages and Productivity) Board issued Wage
Order No. RX-01 which the following:
a. Sec. 1. Upon the effectivity of this Wage Order, the
increase in minimum wage rates applicable to workers
and employees in the private sector in Northern
Mindanao (Region X) shall be as follows:
i. The provinces of Agusan del Norte, Bukidnon,
Misamis Oriental, and the Cities of Butuan,
Gingoog, and Cagayan de Oro P13.00/day
ii. The provinces of Agusan del Sur, Surigao del
Norte and Misamis Occidental, and the Cities of
Surigao Oroquieta, Ozamis and Tangub
P11.00/day.
iii. The province of Camiguin P9.00/day.
2. Subsequently, a supplementary Wage Order No. RX-01-A was
issued by the Board on November 6, 1990 which provides as
follows:
a. Sec. 1. Upon the effectivity of the original Wage Order
RX-01, all workers and employees in the private sector
in Region X already receiving wages above the
statutory minimum wage rates up to one hundred and
twenty pesos (P120.00) per day shall also receive an
increase of P13, P11, P9 per day, as provided for under
Wage Order No. RX-01;
3. Applicants/appellees Nasipit Lumber Company, Inc. (NALCO),
Philippine Wallboard Corporation (PWC), and Anakan Lumber
Company (ALCO), claiming to be separate and distinct from
each other but for expediency and practical purposes, jointly
filed an application for exemption from the above-mentioned
Wage Orders as distressed establishments under Guidelines No.
3, issued by the herein Board on November 26, 1990,
specifically Sec. 3(2) thereof which, among others, provides:
a. For purposes of this Guidelines the following criteria to
determine whether the applicant-firm is actually
distressed shall be used.
b. Establishment belonging to distressed industry - an
establishment that is engaged in an industry that
is distressed due to conditions beyond its control as
may be determined by the Board in consultation with
DTI and NWPC.
4. Applicants/appellees aver that they are engaged in logging and
integrated wood processing industry but are distressed due to
conditions beyond their control, to wit: 1) Depressed economic
 conditions due to worldwide recession; 2) Peace and order and
other emergency-related problems causing disruption and
suspension of normal logging operations; 3) Imposition of
environmental fee for timber production in addition to regular
forest charges; 4) Logging moratorium in Bukidnon; 5) A
reduction in the annual allowable volume of cut logs of NALCO
& ALCO by 59%; 6) Highly insufficient raw material supply; 7)
Extraordinary increases in the cost of fuel, oil, spare parts, and
maintenance; 8) Excessive labor cost/production ratio that is
more or less 47%; and 9) Lumber export ban.
5. On the other hand, oppositor/appellant Unions jointly opposed
the application for exemption on the ground that said
companies are not distressed establishments since their
capitalization has not been impaired by 25%.
6. Citing liquidity problems and business decline in the wood-
processing industry, the RTWPB approved the applicants' joint
application for exemption in this wise:
a. The Board considered the arguments presented by
petitioners and the oppositors. The Board likewise took
note of the financial condition of petitioner firms. One
of the affiliates, Anakan Lumber Company, is confirmed
to be suffering from capital impairment by: 14:80% in
1988, 71.35% in 1989 and 100% in 1990. On the other
hand, NALCO had a capital impairment of 6.41%.
13.53% and 17.04% in 1988, 1989 and 1990,
respectively, while PWC had no capital impairment from
1988 to 1990. However, the Board also took note of the
fact that petitioners are claiming for exemption, not on
the strength of capital impairment, but on the basis of
belonging to a distressed industry - an establishment
that is engaged in an industry that is distressed due to
conditions beyond its control as may be determined by
the Board in consultation with DTI and NWPC.
b. Inquiries made by the Board from the BOI and the DTI
confirm that all petitioner-firms are encountering
liquidity problems and extreme difficulty servicing their
loan obligations.
c. A perusal of the Provincial Trade and Industry
Development Plan for Agusan del Norte and Butuan City
where petitioners are operating their business, confirms
the existence of a slump in the wood-processing
industry due to the growing scarcity of [a] large volume
of raw materials to feed the various plywood and
lumber mills in the area. A lot of firms have closed and
shifted to other ventures, the report continued,
although the competitive ones are still in operation.
d. The Board took note of the fact that most of the
circumstances responsible for the financial straits of
petitioners are largely external, over which petitioners
have very little control. The Board feels that as an
alternative to closing up their business[es] which could
bring untold detriment and dislocation to [their] 4,000
workers and their families, petitioners should be
extended assistance and encouragement to continue
operating - so that jobs could thereby be preserved
during these difficult times. One such way is for the
Board to grant them a temporary reprieve from
compliance with the mandated wage increase
specifically W.O. RX-01 and RX-01-A only.
7. Private respondents appealed with the NWPC, which affirmed
ALCO's application but reversed the applications of herein
petitioners, NALCO and PWC. The NWPC reasoned:
a. The Guidelines No. 3 dated November 26, 1990, issued
by the herein Board cannot be used as valid basis for
granting applicants/appellees application for exemption
since it did not pass the approval of this Commission.
b. Under the Rules of Procedure on Minimum Wage Fixing
dated June 4, 1990, issued by this Commission
pursuant to Republic Act 6727, particularly Section 1 of
Rule VIII thereof provides that:
i. Sec. 1. Application For Exemption. Whenever a
wage order provides for exemption,
applications thereto shall be filed with the
appropriate Board which shall process the
same, subject to guidelines issued by the
Commission.
 8. Clearly, it is the Commission that is empowered to set [the]
criteria on exemption from compliance with wage orders. While
the Boards may issue supplementary guidelines on exemption,
the same should first pass the Commission for the purpose of
determining its conformity to the latter's general policies and
guidelines relative thereto. In fact, under the "Guidelines on
Exemption from Compliance with the Prescribed Wage/Cost of
Living Allowance Increases Granted by the Regional Tripartite
Wages and Productivity Boards" dated February 25, 1991,
issued by the Commission, there is a provision that "(T)he
Board may issue supplementary guidelines for exemption . . .
subject to review/approval by the Commission". (Section 11).
In the case at bar, after the Commission Secretariat made
some comments on said Guidelines No. 3, the same was never
submitted again for [the] Commission's approval either
justifying its original provisions or incorporating the comments
made thereon. Until and unless said Guidelines No. 3 is
approved by the Commission, it has no operative force and
effect.
9. The applicable guidelines on exemption therefore is that one
issued by the Commission dated February 25, 1991, the
pertinent portion of which reads:
a. Sec. 3. CRITERIA FOR EXEMPTION — Distressed
Employers/Establishment: In the case of a stock
corporation, partnership, single proprietorship or non-
stock, non-profit organization engaged in business
activity or charging fees for its services.
When accumulated losses at end of the period under
review have impaired by at least 25 percent the:
i. Paid-up-capital at the end of the last full
accounting period preceding the application, in
the case of corporations;
ii. Total invested capital at the beginning of the
last full accounting period preceding the
application, in the case of partnership and
single proprietorships
10. A perusal of the financial documents on record shows that for
the year 1990, which is the last full accounting period
preceding the applications for exemption, appellees NALCO,
ALCO, and PWC incurred a capital impairment of 1.89%,
28.72%, and 5.03%, respectively. Accordingly, based on the
criteria set forth above in the NWPC Guidelines on Exemption,
only the application for exemption of ALCO should be approved
in view of its capital impairment of 28.72%.
11. We are not unmindful of the fact that during the Board hearing
conducted, both labor and management manifested their desire
for a uniform decision to apply to all three (3) firms. However,
we cannot grant the same for want of legal basis considering
that we are required by the rules to decide on the basis of the
merit of application by an establishment having a legal
personality of its own.
12. Public respondent explained:The fact that applicant companies
relied in good faith upon Guidelines No. 3 issued by the Board a
quo, the same is not sufficient reason that they should be
assessed based on the criteria of said Guidelines considering
that it does not conform to the policies and guidelines relative
to wage exemption issued by this Commission pursuant to
Republic Act 6727. Consequently, it has no force and effect. As
such, said Guidelines No. 3 cannot therefore be a source of a
right no matter if one has relied on it in good faith. In like
manner that the workers, who are similarly affected, cannot be
bound thereof.
13. Moreover, even assuming that Guidelines No. 3 conforms to the
procedural requirement, still, the same cannot be given effect
insofar as it grants exemption by industry considering that the
s u b j e c t Wa g e O r d e r m e n t i o n e d o n l y d i s t r e s s e d
establishments as one of those to be exempted thereof. It did
not mention exemption by industries. Well-settled is the rule
that an implementing guidelines [sic] cannot expand nor limit
the provision of [the] law it seeks to implement. Otherwise, it
shall be considered ultra vires. And, contrary to applicant
companies' claim, this Commission does not approve rules
implementing the Wage Orders issued by the Regional Tripartite
Wages and Productivity Boards. Perforce, it cannot be said that
this Commission has approved the Rules Implementing Wage
Order No[s]. RX-01 and RX-01 A

ISSUE/S:
1. WON a guideline issued by an RTWPB without the approval of,
or contrary to the guidelines promulgated by the NWPC valid?
NO
RULING:
WHEREFORE, the petition is hereby DISMISSED. The assailed
Decisions are hereby AFFIRMED. Costs against petitioners.
SO ORDERED.
RATIO:
1. NO
● Approval of NWPC is required. The power to prescribe
guidelines is lodged in the NWPC, not in the RTWPB.
● RA 6727 (the Wage Rationalization Act), amending the Labor
Code, created both the NWPC and the RTWPB and defined their
respective powers. Article 121 of the Labor Code lists the
powers and functions of the NWPC, as follows:
o Art. 121. Powers and Functions of the Commission. -
The Commission shall have the following powers and
functions:
▪ (b) To formulate policies and guidelines on
wages, incomes and productivity improvement
at the enterprise, industry and national levels;
▪ (c) To prescribe rules and guidelines for the
determination of appropriate minimum wage
and productivity measures at the regional,
provincial or industry levels;
▪ (d) To review regional wage levels set by the
Regional Tripartite Wages and Productivity
Boards to determine if these are in accordance
with prescribed guidelines and national
development plans;
● Additionally, Art. 122 of the Labor Code provides for the powers
of the RTWPB:
o Art. 122. Creation of Regional Tripartite Wages and
Productivity Boards.
▪ (b) To determine and fix minimum wage rates
applicable in their region, provinces or
industries therein and to issue the
c o rres p o n d i ng wag e o rd ers , s u b j ec t t o
guidelines issued by the Commission;
● The foregoing clearly grants the NWPC, not the RTWPB, the
power to "prescribe the rules and guidelines" for the
determination of minimum wage and productivity measures.
While the RTWPB has the power to issue wage orders under
Article 122 (b) of the Labor Code, such orders are subject to
the guidelines prescribed by the NWPC. One of these guidelines
is the "Rules on Minimum Wage Fixing," which was issued on
June 4, 1990. 15 Rule IV, Section 2 thereof, allows the RTWPB
to issue wage orders exempting enterprises from the coverage
of the prescribed minimum wages. 16 However, the NWPC has
the power not only to prescribe guidelines to govern wage
orders, but also to issue exemptions therefrom, as the said rule
provides that "whenever a wage order provides for exemption,
applications thereto shall be filed with the appropriate Board
which shall process the same, subject to guidelines issued by
the Commission." In short, the NWPC lays down the guidelines
which the RTWPB implements.
● Significantly, the NWPC authorized the RTWPB to issue
exemptions from wage orders, but subject to its review and
approval. Since the NWPC never assented to Guideline No. 3 of
the RTWPB, the said guideline is inoperative and cannot be
used by the latter in deciding or acting on petitioners'
application for exemption. Moreover, Rule VIII, Section 1 of the
NWPC's Rules of Procedure on Minimum Wage Fixing issued on
June 4, 1990 - which was prior to the effectivity of RTWPB
Guideline No. 3 - requires that an application for exemption
from wage orders should be processed by the RTWPB, subject
specifically to the guidelines issued by the NWPC.
 ● To allow RTWPB Guideline No. 3 to take effect without the
approval of the NWPC is to arrogate unto RTWPB a power
vested in the NWPC by Article 121 of the Labor Code, as
amended by RA 6727. The Court will not countenance this
naked usurpation of authority. It is a hornbook doctrine that the
issuance of an administrative rule or regulation must be in
harmony with the enabling law. If a discrepancy occurs
"between the basic law and an implementing rule or regulation,
it is the former that prevails." This is so because the law cannot
be broadened by a mere administrative issuance. It is
axiomatic that "[a]n administrative agency cannot amend an
act of Congress." Article 122 (e) of the Labor Code cannot be
construed to enable the RTWPB to decide applications for
exemption on the basis of its own guidelines which were not
reviewed an approved by the NWPC, for the simple reason that
a statutory grant of "powers should not be extended by
implication beyond what may be necessary for their just and
reasonable execution. Official powers cannot be merely
assumed by administrative officers, nor can they be created by
the courts in the exercise of their judicial functions."
● There is no basis for petitioners' claim that their vested rights
were prejudiced by the NWPC's alleged retroactive application
of its own rules which were issued on February 25, 1991 and
took effect on March 18, 1991. Such claim cannot stand
because Guideline No. 3, as previously discussed and as
correctly concluded by the NWPC, was not valid and, thus,
cannot be a source of a right; much less, a vested one.

 ECOP V. NWPC, RTWPB-NCR AND TUCP
Sept 24, 1991 | Sarmiento | Wage Fixing
DIGEST MADE BY: Gabo (copied from A2021 Digests
PETITIONER: ECOP
RESPONDENTS: NWPC, et al.
DOCTRINE:
"Minimum wages" underlies the effort of the State, as Republic Act
No. 6727 expresses it, "to promote productivity-improvement and
gain-sharing measures to ensure a decent standard of living for the
workers and their families; to guarantee the rights of labor to its just
share in the fruits of production; to enhance employment generation
in the countryside through industry dispersal; and to allow business
and industry reasonable returns on investment, expansion and
growth," and as the Constitution expresses it, to affirm "labor as a
primary social economic force."
RECIT-READY SUMMARY:
Regional Board of the National Capital Region (Board) issued Wage
Order No. NCR-01, increasing the minimum wage by P17.00 daily in the
National Capital Region. Wage Order No. NCR-01 was later amended
which allowed all workers and employees in the private sector in the
National Capital Region already receiving wages above the statutory
minimum wage rates up to one hundred and twenty-five pesos
(P125.00) per day to also receive an increase of seventeen pesos
(P17.00) per day. ECOP appealed to the National Wages and
Productivity Commission which dismissed the appeal for lack of merit
and also denied reconsideration. Solicitor General commented on behalf
of the Government saying the Board, in prescribing an across-the-board
hike did not, in reality, "grant additional or other benefits to workers
and employees, such as the extension of wage increases to employees
and workers already receiving more than minimum wages ..." but
rather, fixed minimum wages according to the "salary-ceiling method."
ISSUE: WON Wage Order No. NCR-01-A of the Regional Tripartite
Wages and Productivity Board, National Capital Region is VALID – YES.
HELD: The Court is not convinced that the Regional Board of the
National Capital Region, in decreeing an across-the-board hike,
performed an unlawful act of legislation. It is true that wage-fixing, like
rate constitutes an act Congress; it is also true, however, that Congress
may delegate the power to fix rates provided that, as in all delegations
cases, Congress leaves sufficient standards. As this Court has indicated,
it is impressed that the standards (Ratio #3) are sufficient, and in the
light of the floor-wage method's failure, the Court believes that the
Commission correctly upheld the Regional Board of the National Capital
Region. Republic Act No. 6727 was intended to rationalize wages, first,
by providing for full-time boards to police wages round-the-clock, and
second, by giving the boards enough powers to achieve this objective.
FACTS:
1. Employers Confederation of the Philippines (ECOP) is
questioning the validity of Wage Order No. NCR-01-A of the
Regional Tripartite Wages and Productivity Board, National
Capital Region, promulgated pursuant to the authority of
Republic Act No. 6727 was approved by the President on June
9, 1989. "Wage Rationalization Act" also provides, among other
things, for various Regional Tripartite Wages and Productivity
Boards in charge of prescribing minimum wage rates for all
workers in the various regions and for a National Wages and
Productivity Commission to review, among other functions,
wage levels determined by the boards.
2. Regional Board of the National Capital Region issued Wage
Order No. NCR-01, increasing the minimum wage by P17.00
daily in the National Capital Region.
3. Board issued Wage Order No. NCR-01-A amending Wage Order
No. NCR-01, as follows:
Section 1. Upon the effectivity of this Wage Order, all workers
and employees in the private sector in the National Capital
Region already receiving wages above the statutory
minimum wage rates up to one hundred and twenty-five
pesos (P125.00) per day shall also receive an increase of
seventeen pesos (P17.00) per day.
 4. ECOP appealed to the National Wages and Productivity
Commission which dismissed the appeal for lack of merit and
also denied reconsideration.
5. ECOP assails the Orders of the Commission, Wage Order No.
NCR-01-A and board's grant of an "across-the-board" wage
increase to workers already being paid more than existing
minimum wage rates as an alleged excess of authority, and
alleges that under the Republic Act No. 6727, the boards may
only prescribe "minimum wages," not determine "salary
ceilings." ECOP likewise claims that Republic Act No. 6727 is
meant to promote collective bargaining as the primary mode of
settling wages, and in its opinion, the boards cannot preempt
collective bargaining agreements by establishing ceilings. ECOP
prays for the nullification of Wage Order No. NCR 01-A and for
the "reinstatement" of Wage Order No. NCR-01.
6. Solicitor General commented on behalf of the Government
saying the Board, in prescribing an across-the-board hike did
not, in reality, "grant additional or other benefits to workers and
employees, such as the extension of wage increases to
employees and workers already receiving more than minimum
wages ..." but rather, fixed minimum wages according to the
"salary-ceiling method."
7. ECOP insists, in its reply, that wage is a legislative function, and
Republic Act No. 6727 delegated to the regional boards no more
"than the power to grant minimum wage adjustments" and "in
the absence of clear statutory authority," the boards may no
more than adjust "floor wages."
8. The Solicitor General, in his rejoinder, argues that Republic Act
No. 6727 is intended to correct "wage distortions" and the
salary-ceiling method to rectify wage distortions.
ISSUE/S:
1. WON Wage Order No. NCR-01-A of the Regional
Tripartite Wages and Productivity Board, National Capital
Region is VALID – YES.
RATIO:
• Legislation involving the adjustment of the minimum
wage made use of two methods.
• The first method involves the fixing of determinate
amount that would be added to the prevailing
statutory minimum wage. The other involves "the
salary-ceiling method" whereby the wage
adjustment is applied to employees receiving a
certain denominated salary ceiling.
• The first method was adopted in the earlier wage
orders, while the latter method was used in R.A. Nos.
6640 and 6727. Prior to this, the salary-ceiling method
was also used in no less than eleven issuances
mandating the grant of cost-of-living allowances.
• The shift from the first method to the second method
was brought about by labor disputes arising from wage
distortions, a consequence of the implementation of the
said wage orders.
• Apparently, the wage order provisions that wage
distortions shall be resolved through the grievance
procedure was perceived by legislators as ineffective in
checking industrial unrest resulting from wage order
implementations. With the establishment of the second
method as a practice in minimum wage fixing, wage
distortion disputes were minimized.
• Republic Act No. 6727 was intended to rationalize
wages, first, by providing for full-time boards to
police wages round-the-clock, and second, by
giving the boards enough powers to achieve this
objective.
• The Court is of the opinion that Congress meant the
boards to be creative in resolving the annual question
of wages without labor and management knocking on
the legislature's door at every turn.
• The Court's opinion is that if Republic No. 6727
intended the boards alone to set floor wages, the Act
would have no need for a board but an accountant to
keep track of the latest consumer price index, or better,
 would have Congress done it as the need arises, as the
legislature, prior to the Act, has done so for years. The
fact of the matter is that the Act sought a "thinking"
group of men and women bound by statutory
standards. We quote:
• ART. 124. Standards / Criteria for Minimum Wage
Fixing. — The regional minimum wages to be
established by the Regional Board shall be as nearly
adequate as is economically feasible to maintain the
minimum standards of living necessary for the health,
efficiency and general well-being of the employees
within the framework of the national economic and
social development program. In the determination of
such regional minimum wages, the Regional Board
shall, among other relevant factors, consider the
following:
1. (a) The demand for living wages;
2. (b) Wage adjustment vis-a-vis the consumer price index;
3. (c) The cost of living and changes or increases therein;
4. (d) The needs of workers and their families;
5. (e) The need to induce industries to invest in the countryside;
6. (f) Improvements in standards of living;
7. (g) The prevailing wage levels;
8. (h) Fair return of the capital invested and capacity to pay of
emphasis on employers;
9. (i) Effects of employment generation and family income; and
10. (j) The equitable distribution of income and wealth along the
imperatives of economic and social development.
• The Court is not convinced that the Regional
Board of the National Capital Region, in decreeing
an across-the-board hike, performed an unlawful
act of legislation.
• It is true that wage-fixing, like rate constitutes an
act Congress; it is also true, however, that
Congress may delegate the power to fix rates
provided that, as in all delegations cases,
Congress leaves sufficient standards.
• As this Court has indicated, it is impressed that
the above-quoted standards are sufficient, and in
the light of the floor-wage method's failure, the
Court believes that the Commission correctly
upheld the Regional Board of the National Capital
Region.
• The Court does not think that the law intended to
deregulate the relation between labor and capital for
several reasons: (
1. 1) The Constitution calls upon the State to
protect the rights of workers and promote their
welfare;
2. (2) the Constitution also makes it a duty of the
State "to intervene when the common goal so
demands" in regulating property and property
relations;
3. (3) the Charter urges Congress to give priority
to the enactment of measures, among other
things, to diffuse the wealth of the nation and
to regulate the use of property;
4. (4) the Charter recognizes the "just share of
labor in the fruits of production;"
5. (5) under the Labor Code, the State shall
regulate the relations between labor and
management;
6. (6) under Republic Act
No. 6727 itself, the State is interested in seeing
that workers receive fair and equitable wages;
and
7. (7) the Constitution is primarily a document of
social justice, and although it has recognized
the importance of the private sector, it has not
embraced fully the concept of laissez faire or
otherwise, relied on pure market forces to
govern the economy;
• It is the Court's thinking that the Act is meant to rationalize concerned, in addition, that wages are not distributed unevenly,
wages, that is, by having permanent boards to decide wages and more important, that social justice is subserved.
rather than leaving wage determination to Congress year after
year and law after law.
• As Justice Cruz observed, "[w]ith the proliferation of
specialized activities and their attendant peculiar
problems, the national legislature has found it more
necessary to entrust to administrative agencies the
power of subordinate legislation' as it is caned."
• The Labor Code defines "wage" as follows:
"Wage" paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under
a written or unwritten contract of employment for work done or
to be done, or for services rendered or to be rendered and
includes the fair and reasonably value, as determined by the
Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. "Fair
and reasonable value" shall not include any profit to the
employer or to any person affiliated with the employer.
• The concept of "minimum wage" is, however, a different thing,
and certainly, it means more than setting a floor wage to
upgrade existing wages, as ECOP takes it to mean.
• "Minimum wages" underlies the effort of the State, as
Republic Act No. 6727 expresses it, "to promote
productivity-improvement and gain-sharing measures to
ensure a decent standard of living for the workers and
their families; to guarantee the rights of labor to its just
share in the fruits of production; to enhance employment
generation in the countryside through industry
dispersal; and to allow business and industry reasonable
returns on investment, expansion and growth," and as
the Constitution expresses it, to affirm "labor as a
primary social economic force."
• As the Court indicated, the statute would have no need for a
board if the question were simply "how much". The State is
 MBTC v. NWPC
February 6, 2007 | Austria-Martinez, J | Wages
DIGEST MADE BY: Ellice
PETITIONER: METROPOLITAN BANK and TRUST COMPANY,
INC.RESPONDENTS: NATIONAL WAGES AND PRODUCTIVITY
COMMISSION and REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY
BOARD — REGION II
DOCTRINE
The "floor-wage" method involves the fixing of a determinate amount
to be added to the prevailing statutory minimum wage rates.
On the other hand, in the "salary-ceiling" method, the wage
adjustment was to be applied to employees receiving a certain
denominated salary ceiling. In other words, workers already being
paid more than the existing minimum wage (up to a certain amount
stated in the Wage Order) are also to be given a wage increase.
RECIT- READY SUMMARY:
The RTWPB issued a wage order that says all employees/ workers in
the private sector throughtout Region 2 are granted an across the board
increase of 15 php, regardless of the status of employment. It also
states that any party aggrieved may file an appela with the NWPC. Now,
BCPM seek exemption from the coverage of the Wage Order since its
memberbanks are already paying more than the prevailing minimum
wage rate in the NCR but NWPC stated that memberbanks are still
included. Also, petitioner sought for interpretation of the applicability of
said Wage Order. NWPC referred this to RTWPB. the RTWPB clarified
that the Wage Order covers all private establishments situated in
Region II, regardless of the voluntary adoption by said establishments
of the wage orders established in Metro Manila and irrespective of the
amounts already paid by the petitioner.
the petitioner then filed a Petition for Certiorari and Prohibition with the
CA seeking nullification of the Wage Order
whether Wage Order No. R02-03 is void and of no legal effect – YES
Pursuant to its wage fixing authority, the RTWPB may issue wage orders
which set the daily minimum wage rates, based on the standards or
criteria set by Article 124 of the Labor Code.
The RTWPB did not set a wage level nor a range to which a wage
adjustment or increase shall be added. Instead, it granted an across-
theboard wage increase of P15.00 to all employees and workers of
Region 2. In doing so, the RTWPB exceeded its authority by extending
the coverage of the Wage Order to wage earners receiving more than
the prevailing minimum wage rate, without a denominated salary
ceiling. As correctly pointed out by the OSG, the Wage Order granted
additional benefits not contemplated by R.A. No. 6727. Thus, the Court
finds that Section 1, Wage Order No. R02-03 is void insofar as it grants
a wage increase to employees earning more than the minimum wage
rate; and pursuant to the separability clause of the Wage Order, Section
1 is declared valid with respect to employees earning the prevailing
minimum wage rate. Also, employees, other than minimum wage
earners, who received the wage increase mandated by the Wage Order
need not refund the wage increase received by them since they received
the wage increase in good faith, in the honest belief that they are
entitled to such wage increase and without any knowledge that there
was no legal basis for the same.
FACTS:
1. Regional Tripartite Wages and Productivity Board, Region II,
Tuguegarao, Cagayan (RTWPB), by virtue of Republic Act No.
6727 (R.A. No. 6727), otherwise known as the Wage
Rationalization Act, issued Wage Order No. R02-03 (Wage
Order), as follows:
Section 1. Upon effectivity of this Wage Order, all
employees/workers in the private sector throughout Region II,
regardless of the status of employment are granted an across-
theboard increase of P15.00 daily.
2. The Wage Order was published in a newspaper of general
circulation on December 2, 1995 4 and took effect on January
1, 1996.
3. Per Section 13 of the Wage Order, any party aggrieved by the
Wage Order may file an appeal with the National Wages and
Productivity Commission (NWPC) through the RTWPB within 10
calendar days from the publication of the Wage Order.
4. In a letter-inquiry to the NWPC, the Bankers' Council for
Personnel Management (BCPM), on behalf of its member-
banks, requested for a ruling on the eligibility of establishments
with head offices outside Region II to seek exemption from the
coverage of the Wage Order since its memberbanks are already
paying more than the prevailing minimum wage rate in the
National Capital Region (NCR), which is their principal place of
business.
5. In a letter-reply, the NWPC stated that the memberbanks of
BCPM are covered by the Wage Order and do not fall under the
exemptible categories listed under the Wage Order.
6. In another letter-inquiry to the NWPC, petitioner sought for
interpretation of the applicability of said Wage Order. The
NWPC referred petitioner's inquiry to the RTWPB.
7. In a letter-reply dated August 12, 1996, the RTWPB clarified
that the Wage Order covers all private establishments situated
in Region II, regardless of the voluntary adoption by said
establishments of the wage orders established in Metro Manila
and irrespective of the amounts already paid by the petitioner.
8. the petitioner then filed a Petition for Certiorari and Prohibition
with the CA seeking nullification of the Wage Order on grounds
that the RTWPB acted without authority when it issued the
questioned Wage Order; that even assuming that the RTWPB
was vested with the authority to prescribe an increase, it
exceeded its authority when it did so without any ceiling or
qualification; that the implementation of the Wage Order will
cause the petitioner, and other similarly situated employers, to
incur huge financial losses and suffer labor unrest.
9. On March 24, 1997, the Office of the Solicitor General (OSG)
filed a Manifestation and Motion in lieu of Comment affirming
the petitioner's claim that the RTWPB acted beyond its authority
in issuing the Wage Order prescribing an across-the-board
increase to all workers and employees in Region II, effectively
granting additional or other benefits not contemplated by R.A.
No. 6727.
10. In view of the OSG's manifestation, the CA directed
respondents NWPC and RTWPB to file their comment.
11. On September 22, 1997, respondents filed their Comment
praying that the petition should be dismissed outright for
petitioner's procedural lapses; that certiorari and prohibition
are unavailing since petitioner failed to avail of the remedy of
appeal prescribed by the Wage Order; that the Wage Order has
long been in effect; and that the issuance of the Wage Order
was performed in the exercise of a purely administrative
function.
12. , the CA rendered its Decision denying the petition.
ISSUE/S:
1. whether Wage Order No. R02-03 is void and of no legal effect -
YES
RULING:
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision of the
Court of Appeals dated July 19, 2000 in CA-G.R. SP No. 42240 is
MODIFIED. Section 1 of Wage Order No. R02-03 issued on October 17,
1995 by the Regional Tripartite Wages and Productivity Board for
Region II, Tuguegarao, Cagayan is declared VALID insofar as the
mandated increase applies to employees earning the prevailing
minimum wage rate at the time of the passage of the Wage Order and
VOID with respect to its application to employees receiving more than
the prevailing minimum wage rate at the time of the passage of the
Wage Order.
RATIO:
1.YES
• petitioner maintains that:
1. the RTWPB, in issuing said Wage Order, exceeded the authority
delegated to it under R.A. No. 6727, which is limited to
determining and fixing the minimum wage rate within their
respective territorial jurisdiction and with respect only to
employees who do not earn the prescribed minimum wage rate;
2. that the RTWPB is not authorized to grant a general across-
the-board wage increase for non-minimum wage earners;
3. that Employers Confederation of the Philippines v. National
Wages and Productivity Commission (hereafter referred to as
"ECOP") is not authority to rule that respondents have been
empowered to fix wages other than the minimum wage since
said case dealt with an across-the-board increase with a salary
ceiling, where the wage adjustment is applied to employees
receiving a certain denominated salary ceiling;
4. that the Wage Order is an unreasonable intrusion into its
property rights; that the Wage Order undermines the essence
of collective bargaining;
5. that the Wage Order fails to take into account the rationale for
a unified wage structure.
• R.A. No. 6727 declared it a policy of the State to rationalize the
fixing of minimum wages and to promote productivity-
improvement and gain-sharing measures to ensure a decent
standard of living for the workers and their families; to
guarantee the rights of labor to its just share in the fruits of
production; to enhance employment generation in the
countryside through industrial dispersal; and to allow business
and industry reasonable returns on investment, expansion and
growth.
• In line with its declared policy, R.A. No. 6727 created the NWPC,
vested with the power to prescribe rules and guidelines for the
determination of appropriate minimum wage and productivity
measures at the regional, provincial or industry levels; and
authorized the RTWPB to determine and fix the minimum wage
rates applicable in their respective regions, provinces, or
industries therein and issue the corresponding wage orders,
subject to the guidelines issued by the NWPC.
• Pursuant to its wage fixing authority, the RTWPB may issue
wage orders which set the daily minimum wage rates, based on
the standards or criteria set by Article 124 of the Labor Code.
• In ECOP, the Court declared that there are two ways of fixing
the minimum wage: the "floor-wage" method and the "salary-
ceiling" method.
• The "floor-wage" method involves the fixing of a determinate
amount to be added to the prevailing statutory minimum wage
rates.
• On the other hand, in the "salary-ceiling" method, the wage
adjustment was to be applied to employees receiving a certain
denominated salary ceiling. In other words, workers already
being paid more than the existing minimum wage (up to a
certain amount stated in the Wage Order) are also to be given
a wage increase.
• To illustrate: under the "floor wage method", it would have
been sufficient if the Wage Order simply set P15.00 as the
amount to be added to the prevailing statutory minimum wage
rates, while in the "salary-ceiling method", it would have been
sufficient if the Wage Order states a specific salary, such as
P250.00, and only those earning below it shall be entitled to the
salary increase.
• In the present case, the RTWPB did not determine or fix the
minimum wage rate by the "floor-wage method" or the "salary-
ceiling method" in issuing the Wage Order.
• The RTWPB did not set a wage level nor a range to which a
wage adjustment or increase shall be added. Instead, it granted
an across-theboard wage increase of P15.00 to all employees
and workers of Region 2.
• In doing so, the RTWPB exceeded its authority by extending
the coverage of the Wage Order to wage earners receiving more
than the prevailing minimum wage rate, without a denominated
salary ceiling. As correctly pointed out by the OSG, the Wage
Order granted additional benefits not contemplated by R.A. No.
6727.
• In no uncertain terms must it be stressed that the function of without any knowledge that there was no legal basis for the
promulgating rules and regulations may be legitimately same.
exercised only for the purpose of carrying out the provisions of
a law.
• It has been said that when the application of an administrative
issuance modifies existing laws or exceeds the intended scope,
as in this case, the issuance becomes void, not only for being
ultra vires, but also for being unreasonable.
• Thus, the Court finds that Section 1, Wage Order No. R02-03 is
void insofar as it grants a wage increase to employees earning
more than the minimum wage rate; and pursuant to the
separability clause of the Wage Order, Section 1 is declared
valid with respect to employees earning the prevailing minimum
wage rate.

• Prior to the passage of the Wage Order, the daily minimum

wage rates in Region II was set at P104.00 for the Province of
Isabela, P103.00 for the Province of Cagayan, P101.00 for the
Province of Nueva Vizcaya, and P100.00 for the Provinces of
Quirino and Batanes. Only employees earning the abovestated
minimum wage rates are entitled to the P15.00 mandated
increase under the Wage Order.
• Although the concomitant effect of the nullity of the Wage Order
to those employees who have received the mandated increase
was not put in issue, this Court shall make a definite
pronouncement thereon to finally put this case to rest.
• In the case of Blaquera v. Alcala, Petitioners here received the
additional allowances and bonuses in good faith under the
honest belief that LWUA Board Resolution No. 313 authorized
such payment. Petitioners had no knowledge that such payment
was without legal basis. Thus, being in good faith, petitioners
need not refund the allowances and bonuses they received but
disallowed by the COA.
• In the case at bar, employees, other than minimum wage
earners, who received the wage increase mandated by the
Wage Order need not refund the wage increase received by
them since they received the wage increase in good faith, in the
honest belief that they are entitled to such wage increase and
(DOCUMENT OVER-ALL FORMAT: Landscape, 2 columns)
NWPC and RTWP v. APL
March 12, 2014 | Bersamin | Wage-fixing
DIGEST MADE BY: de la Torre
CLUE: wage exemptions
PETITIONER: THE NATIONAL WAGES AND PRODUCTIVITY
COMMISSION (NWPC) and THE REGIONAL TRIPARTITE WAGES AND
PRODUCTIVITY BOARD (RTWPB)-NCR
RESPONDENTS: THE ALLIANCE OF PROGRESSIVE LABOR (APL) and
THE TUNAY NA NAGKAKAISANG MGA MANGGAGAWA NG ROYAL (TNMR-
APL)
DOCTRINE:
The requirements in setting exemptions for minimum wage
applications, to wit: (1) in accord with the rationale for the exemption
as provided for in the Rules, (2) reviewed and approved by the NWPC,
and (3) upon review, the RTWPB issuing the wage order must submit a
strong and justifiable reason or reasons for the inclusion of such
category.
RECIT- READY SUMMARY:
The RTWPB-NCR issued Wage Order NCR-007 which increased the
minimum wage in Metro Manila by Php25.50 per day. Also in the said
Wage Order, the RTWPB-NCR excluded and exempted certain categories
of business from the application of the increase in minimum wage. The
APL-TNMR alleges that neither the NWPC and the RTWPB-NCR can
expand the non-coverage and exemptible categories under the wage
orders, and thus such exemptions should be void, thus filing an appeal
with the NWPC. Moreover, it alleged that the NWPC did not review the
exemptions granted by the RTWPB-NCR when it resolved the APL-TNMR’s
appeal.
The Court held that under the Labor Code, RTWPB-NCR has the power
to issue exemptions on minimum wage applications, subject to NWPC
review, as provided for in the Rules that were formulated by the NWPC
in minimum wage setting and exempting. The RTWPB-NCR has met the
requirements in setting exemptions for minimum wage applications, to
wit: (1) in accord with the rationale for the exemption as provided for in
the Rules, (2) reviewed and approved by the NWPC, and (3) upon review,
the RTWPB issuing the wage order must submit a strong and justifiable
reason or reasons for the inclusion of such category.
FACTS:
1. In 1989, RA 6272 was enacted into law. It created the National
Wages and Productivity Commission (NWPC) and the Regional
Tripartite Wages and Productivity Boards (RTWPBs) of the
different regions.
2. Article 121(b) of the Labor Code2, as amended, tasked the
RTWPBs to determine and fix minimum wage rates applicable in
their region, provinces, or industries therein, and to issue
corresponding wage orders, subject to on applications for
exemption from the prescribed wage rates as may be provided
by law or any wage order.
3. In 1999, RTWPB-National Capital Region issued Wage Order
NCR-07 imposing an increase of Php25.50 per day on all wages
in the private sector, thus pegging the minimum wage in NCR at
Php223.50 per day. Section 2 and 3 of Wage Order NCR-07,
however, excluded and exempted certain sectors and industries:
a. EXCLUDED : Those that were granted wage increases in
January 1, 1999 (Agriculture workers, cottage/handicraft
industry, private hospitals with bed capacity of 100 or
less, retail/service establishments)
b. EXCLUDED : Workers in small establishments employing
less than ten (10) workers
c. EXEMPTED, UPON APPLICATION :
i. Distressed establishments
ii. Exporters with at least 50% exports sales and
with forward contracts entered into on or
twelve months before the date of publication
of the Order.
4. The Alliance of Progressive Labor (APL) and the Tunay na
Nagkakaisang Manggagagawa sa Royal (TNMR) filed an appeal
with the NWPC assailing the exemptions. They contend that
(DOCUMENT OVER-ALL FORMAT: Landscape, 2 columns)
neither the NWPC and the RTWPB-NCR had the authority to
expand the non-coverage and exemptible categories under the
wage order, and thus such exemptions should be void.
5. NWPC upheld the validity of the Wage Order. It stated that the
power of the RTWPB to determine exemptible categories was
adjunct to its wage fixing functions under Article 122(e) of the
Labor Code3, and NWPC Guidelines No. 1, Series of 1996. It also
stated that APL and the TNMR did not adduce evidence to show
any arbitrariness on the part of RTWPB-NCR when it exempted
such categories.
6. With regard to the excluded sectors provided for in Section 2(A)
of Wage Order No. NCR-07, the NWPC took cognizance of the
precarious situation in the Philippines in 1997 because of the
Asian economic turmoil that had prompted the RTWPB-NCR to
issue Wage Order No. NCR-06 to prescribe a staggered amount
of wage increases for the agricultural workers,
cottage/handicraft industry, private hospitals with bed capacity
of 100 or less, and retail/service establishments employing 15 or
less workers. It noted that the effects of that economic turmoil
were still felt in the NCR when Wage Order No. NCR-07 was
issued considering that the unemployment rate was 15.4% in
July 1999; that the RTWPB-NCR thought it wise to defer the
implementation of the new wage increase until a future date;
and that the non-inclusion of some sectors from the coverage of
the Wage Order No. NCR-07 was only temporary in character.
7. As regards the exemption granted to the exporting firms , the
NWPC considered the nature of the business wherein the
exporters would normally enter into forwarding contracts with
their principals. It held that the recent adjustment imposed by
Wage Order No. NCR-07 could not have been anticipated by the
parties at the time they agreed on the price of their forward
contract; that the implementation of the wage adjustment would
surely result, therefore, into either financial loss or at the very
least a marked reduction of profits on the part of the exporters ;
and that the exemption given to exporting firms was not
automatic because the RTWPB-NCR had the discretion to
ascertain if the exporter had complied with the requirements,
and the exemption given was only for a period of one year.
8. The CA reversed, hence the review on certiorari.
ISSUE/S:
1. W/N Section 3 of RA 6272 may be construed to authorize the
NWPC and RTWPB to provide additional exemptions in the
minimum wage adjustments. – YES.
2. W/N the approval given by the NWPC complies with the
requirement of NWPC review of RTWPB wage orders. – YES.
RULING:
WHEREFORE, we GRANT the petition for review on certiorari; SET ASIDE
the decision promulgated on June 15, 2001 and resolution promulgated
on September 11, 2001 by the Court of Appeals; REINSTATE the
decisions rendered on February 28, 2000 and July 17, 2000 by the
National Wages and Productivity Commission; and DIRECT the
respondents to pay the costs of suit.
RATIO:
The law provides that NWPC has the power to promulgate rules
and guidelines on minimum wage-fixing; the rules and guidelines
gave the RTWPBs the power to exempt certain categories from
the application of minimum wage orders.
1. Section 2 provides:
a. SECTION 2. CATEGORIES OF EXEMPTIBLE
ESTABLISHMENTS
“Exemption of establishments from compliance with the
wage increases and cost of living allowances prescribed
by the Boards may be granted in order to (1) assist
establishments experiencing temporary difficulties due
to losses maintain the financial viability of their
businesses and continued employment of their workers;
(2) encourage the establishment of new businesses and
the creation of more jobs, particularly in areas outside
the National Capital Region and Export Processing
Zones, in line with the policy on industry dispersal; and
(DOCUMENT OVER-ALL FORMAT: Landscape, 2 columns)
(3) ease the burden of micro establishments, particularly wage order issued by the RTWPBs could appeal. Here, APL and
in the retail and service sector, that have a limited TNMR appealed on October 26, 1999, submitting to the NWPC
capacity to pay. precisely the issue of the validity of the Section 2(A) and Section
b. Pursuant to the above, the following categories of 9(2) of Wage Order No. NCR-07. The NWPC, in arriving at its
establishments may be exempted upon application with decision, weighed the arguments of the parties and ruled that
and as determined by the Board, in accordance with the RTWPB-NCR had substantial and justifiable reasons in
applicable criteria on exemption as provided in this exempting the sectors and establishments enumerated in
Guidelines; provided further that such categories are Section 2(A) and Section 9(2) based on the public hearings and
expressly specified in the Order. consultations, meetings, social-economic data and informations
i. Distressed establishments gathered prior to the issuance of Wage Order No. NCR-07.
ii. New business enterprises (NBEs) 2. The very fact that the validity of the assailed sections of Wage
iii. Retail/Service establishments employing not Order No. NCR-07 had been already passed upon and upheld by
more than ten (10) workers Establishments the NWPC meant that the NWPC had already given the wage
adversely affected by natural calamities order its necessary legal imprimatur. Accordingly, the requisite
c. Exemptible categories outside of the abovementioned approval or review was complied with.
list may be allowed only if they are in accord with the
rationale for exemption reflected in the first paragraph
of this section . The concerned Regional Board shall
submit strong and justifiable reason/s for the inclusion
of such categories which shall be subject to
review/approval by the Commission.
2. In issuing exemptions, the Board may require the submission of
other pertinent documents to support the application for
exemption.
3. On the other hand, if the exemption was outside of the four
exemptible categories, like here, the exemptible category should
be: (1) in accord with the rationale for exemption; (2)
reviewed/approved by the NWPC ; and (3) upon review, the
RTWPB issuing the wage order must submit a strong and
justifiable reason or reasons for the inclusion of such category.
It is the compliance with the second requisite that is at issue
here.

The Court held that the review made by NWPC in the RTWPB-
NCR’s issuance of exemptions to Wage Order NCR-07 was
sufficient
1. The wage orders issued by the RTWPBs could be reviewed by the
NWPC motu proprio or upon appeal. Any party aggrieved by the
Wage Distortion
 Metropolitan Bank & Trust Company Employees by 25 pesos per day. Those already receiving above the minimum wage
rates up to one hundred pesos(P100.00) were also given the
Union-ALU-TUCP v. NLRC
increase of twenty-five pesos (P25.00) per day. Hence, the bank
September 10, 1993 | Vitug, J. | MODULE 2 (B: Wage-Fixing)
granted a P25 increase per day or P750 a month to its probationary
DIGEST MADE BY: Lirene
employees and those that have been promoted to regular before July
1, 1989. The bank did not give the same incentives to its regular
PETITIONER: METROPOLITAN BANK & TRUST COMPANY
employees who were receiving more than P100 a day and recipients of
EMPLOYEES UNION-ALU-TUCP and ANTONIO V. BALINANG
the P900 CBA increase. The Union argues that: the bank's
RESPONDENTS: ATIONAL LABOR RELATIONS COMMISSION
implementation of Republic Act 6727 resulted in a substantially
(2nd Division) and METROPOLITAN BANK & TRUST COMPANY
reduced salary gap. The Union wanted the Bank to correct the alleged
distortion in pay.
DOCTRINE:
The definition of "wage distortion," shows that such distortion can so
The Labor Arbiter held that a P900.00 wage gap intentionally provided
exist when, as a result of an increase in the prescribed wage rate, an
in a collective bargaining agreement as a quantitative difference in
"elimination or severe contraction of intentional quantitative differences
wage between those who WERE regular employees as of January 1,
in wage or salary rates" would occur "between and among employee
1989 and those who WERE NOT as of that date, is definitely a logical
groups in an establishment as to effectively obliterate the distinctions
basis of differentiation that deserves protection from any distorting
embodied in such wage structure based on skills, length of service, or
statutory wage increase. Thus, since the "subjective quantitative
other logical bases of differentiation."
difference" between wage rates had been reduced from P900.00 to
barely P150.00, correction of the wage distortion pursuant to Section
The formula offered and incorporated in Wage Order No. IV-02 issued
4(c) of the Rules Implementing Republic Act 6727 should be made.
on 21 May 1991 by the Regional Tripartite Wages and Productivity
Thus, the LA directed the Bank restore to complainants the P900.00
Commission for correction of pay scale structures in case of wage
CBA wage gap they used to enjoy over non-regular employees by
distortion as in the case at bar is the most equitable and fair under the
granting them P750 monthly increase. NLRC reversed the decision
circumstances. It is:

W/N the implementation by the Bank of RA 6727, created a distortion

Minimum wage/ Actual salary = % x Prescribed increased adjustment
that would require an adjustment under in the wages of the bank’s
= distortion.
other various groups of employees –YES

RECIT- READY SUMMARY:

The SC upheld the decision of the LA. The definition of "wage distortion”
Recit-ready Digest + Doctrine: The bank entered into a collective
shows that distortion can exist when, as a result of an increase in the
bargaining agreement with the Union, granting a monthly P900 wage
prescribed wage rate, an elimination or severe contraction of intentional
increase to regular employees as of January 1 1989, to the exclusion of
quantitative differences in wage or salary rates would occur between
probationary employees. (Note: Because of the CBA, between regular
and among employee groups. In mandating an adjustment, the law
employees and the probationary employees, there existed a salary gap
did not require that there be an elimination or total abrogation
of P900 per month, which is an intentional quantitative difference
of quantitative wage or salary differences; a severe contraction
between the employee groups). On 01 JULY 1989, The Wage
thereof is enough. The contraction between personnel groupings
Rationalization Act (RA 6727) took effect, increasing the statutory
comes close to eighty-three (83%), which is severe. The "intentional
minimum wage rates of all workers and employees in the private sector
quantitative differences" in wage among employees of the bank has
been set by the CBA to about P900 per month as of 01 January 1989.
It is intentional as it has been arrived at through the collective
bargaining process to which the parties are thereby concluded.
However, giving the employees an across-the-board increase of P750
may not be conducive to the policy of encouraging "employers to grant
wage and allowance increases to their employees higher than the
minimum rates of increases prescribed by statute or administrative
regulation," particularly in this case where both Republic Act 6727 and
the CBA allow a credit for voluntary compliance.
The SC finds the formula suggested then by Commissioner Bonto-Perez,
which has also been the standard considered by the regional Tripartite
Wages and Productivity Commission for the correction of pay scale
structures in cases of wage distortion, to well be the appropriate
measure to balance the respective contentions of the parties in this
instance.
FACTS:
1. In May 1989, the bank entered into a collective bargaining
agreement with the Union, granting a monthly P900 wage
increase effective in January 1 1989.
2. The Union had also bargained for the inclusion of probationary
employees in the list of employees who would benefit from the
first P900 increase but the bank refused.
3. Consequently, only regular employees as of 01 January 1989
were given the increase to the exclusion of probationary
employees.
a. (Note: Because of the CBA, between regular employees
and the probationary employees, there existed a
salary gap of P900 per month, which is an intentional
quantitative difference between the employee
groups)
4. On 01 JULY 1989, The Wage Rationalization Act (RA 6727)
took effect, increasing the statutory minimum wage rates of all
workers and employees in the private sector by 25 pesos per
day. Those already receiving above the minimum wage rates
up to one hundred pesos(P100.00) were also given the
increase of twenty-five pesos (P25.00) per day.
5. RA 6727 also states that:
If expressly provided for and agreed upon in the collective
bargaining agreements,all increase in the daily basic wage
rates granted by the employers three (3) months before
the effectivity of this Act shall be credited as compliance
with the increases in the wage rates prescribed herein, provided
that, where such increases are less than the prescribed
increases in the wage rates under this Act, the employer shall
pay the difference. Such increase shall not include anniversary
wage increases, merit wage increase and those resulting from
the regularization or promotion of employees.
6. Pursuant to the above provisions, the bank gave the P25
increase per day, or P750 a month, to its:
a. probationary employees and
b. those who had been promoted to regular or permanent
status before the effectivity of the Act (01 July 1989)
but whose daily rate was P100 and below.
7. The bank refused to give the same increase to its regular
employees who were:
a. receiving more than P100 per day and recipients
of the P900 CBA increase.
8. The Union argues that:
a. the bank's implementation of Republic Act 6727
resulted in the categorization of the employees into:
i. The probationary employees as of 30 June 1989
and regular employees receiving P100 or less a
day who had been promoted to permanent or
regular status before 01 July 1989,
ii. the regular employees as of 01 July 1989,
whose pay was over P100 a day
9. and that, between the two groups, there emerged a
substantially reduced salary gap.
10. The Union wanted the Bank to correct the alleged distortion in
pay. The parties ultimately agreed to refer the issue for
compulsory arbitration to the NLRC.
11. The bank argues that the increase in its implementation of RA
6727 did not constitute a distortion because "only 143
 employees or 6.8% of the bank's population of a total of 2,108
regular employees" benefited.
12. The LA disagreed and ruled that "it is not necessary that a big
number of wage earners within a company be benefited by the
mandatory increase before a wage distortion may be considered
to have taken place," it being enough, he said, that such
increase "result(s) in the severe contraction of an intentional
quantitative difference in wage between employee groups."
a. The labor arbiter concluded that since the "intentional
quantitative difference" in wage or salary rates between
and among groups of employees is not based purely on
skills or length of service but also on "other logical
bases of differentiation, a P900.00 wage gap
intentionally provided in a collective bargaining
agreement as a quantitative difference in wage
between those who WERE regular employees as of
January 1, 1989 and those who WERE NOT as of that
date, is definitely a logical basis of differentiation (that)
deserves protection from any distorting statutory wage
increase."
b. Thus, since the "subjective quantitative difference"
between wage rates had been reduced from P900.00 to
barely P150.00, correction of the wage distortion
pursuant to Section 4(c) of the Rules Implementing
Republic Act 6727 should be made.
c. Thus, the LA directed the Bank restore to complainants
and their members the Nine Hundred (P900.00) Pesos
CBA wage gap they used to enjoy over non-regular
employees as of January 1, 1989 by granting them
P750 monthly increase effective July 1, 1989.
13. The NLRC, reversed the decision of the Labor Arbiter:
. . . a wage distortion can arise only in a situation where the
salary structure is characterized by intentional quantitative
differences among employee groups determined or fixed on the
basis of skills, length of service, or other logical basis of
differentiation and such differences or distinction are
obliterated.
a. As applied in this case, We noted that in the new wage
salary structure, the wage gaps between Level 6 and 7
levels 5 and 6, and levels 6 and 7 (sic) were maintained.
While there is a noticeable decrease in the wage gap
between levels 2 and 3, Levels 3 and 4, and Levels 4
and 5, the reduction in the wage gaps between said
levels is not significant as to obliterate or result in
severe contraction of the intentional quantitative
differences in salary rates between the
employees groups.
b. For this reason, the basis requirement for a wage in this
case. Moreover, there is nothing in the law which would
justify an across-the-board adjustment of P750.00 as
ordered by the labor Arbiter.
14. In her dissent, Presiding Commissioner Edna Bonto-Perez
opined: (not sure if her dissent is impt but she discussed the
formula below jic)
a. There may not be an obliteration nor elimination of said
quantitative distinction/difference aforecited but clearly
there is a contraction. Would such contraction be severe
as to warrant the necessary correction sanctioned by
the law in point, RA 6727? It is may considered view
that the quantitative intended distinction in pay
between the two groups of workers in respondent
company was contracted by more than fifty (50%) per
cent or in particular by more or less eighty-three (83%)
per cent hence, there is no doubt that there is an
evident severe contraction resulting in the complained
of wage distortion.
b. Nonetheless, the award of P750.00 per month to all of
herein individual complainants as ordered by the Labor
Arbiter below, to my mind is not the most equitable
remedy at bar, for the same would be an across the
board increase which is not the intention of RA 6727.
For that matter, herein complainants cannot by right
claim for the whole amount of P750.00 a month or
 P25.00 per day granted to the workers covered by the
said law in the sense that they are not covered by the
said increase mandated by RA 6727. They are only
entitled to the relief granted by said law by way of
correction of the pay scale in case of distortion in wages
by reason thereof.
c. Hence, the formula offered and incorporated in Wage
Order No. IV-02 issued on 21 May 1991 by the Regional
Tripartite Wages and Productivity Commission for
correction of pay scale structures in case of wage
distortion as in the case at bar is the most equitable
and fair under the circumstances. It is:
Minimum wage/ Actual salary = % x Prescribed increased adjustment
= distortion.
ISSUE/S:
1. W/N the implementation by the Bank of RA 6727, mandating
an increase in pay of P25 per day for certain employees in the
private sector, created a distortion that would require an
adjustment under said law in the wages of the latter's other
various groups of employees –YES
RULING:
WHEREFORE, finding merit in the instant petition for certiorari, the
same is GRANTED DUE COURSE, the questioned NLRC decision is
hereby SET ASIDE and the decision of the labor arbiter is REINSTATED
subject to the MODIFICATION that the wage distortion in question be
corrected in accordance with the formula expressed in the dissenting
opinion of Presiding Commissioner Edna Bonto-Perez. This decision is
immediately executory.prcd
RATIO:
1. YES
● The term "wage distortion", under the Rules Implementing
Republic Act 6727, is defined, thus:
o p) Wage Distortion means a situation where an increase
in prescribed wage rates results in the elimination or
severe contradiction of intentional quantitative
differences in wage or salary rates between and among
employee groups in an establishment as to effectively
obliterate the distinctions embodied in such wage
structure based on skills, length of service, or other
logical bases of differentiation.
● The issue of whether or not a wage distortion exists as a
consequence of the grant of a wage increase to certain
employees, we agree, is, by and large, a question of fact the
determination of which is the statutory function of the NLRC.
● ●In this case, the majority of the members of the NLRC, as well
as its dissenting member, agree that there is a wage distortion
arising from the bank's implementation of the P25 wage
increase; they do differ, however, on the extent of the distortion
that can warrant the adoption of corrective measures required
by law.
● The definition of "wage distortion," shows that such distortion
can so exist when, as a result of an increase in the prescribed
wage rate, an "elimination or severe contraction of intentional
quantitative differences in wage or salary rates" would occur
"between and among employee groups in an establishment as
to effectively obliterate the distinctions embodied in such wage
structure based on skills, length of service, or other logical
bases of differentiation."
● In mandating an adjustment, the law did not require that there
be an elimination or total abrogation of quantitative wage or
salary differences; a severe contraction thereof is enough. As
has been aptly observed by Presiding Commissioner Edna
Bonto-Perez in her dissenting opinion, the contraction between
personnel groupings comes close to eighty-three (83%), which
cannot, by any stretch of imagination, be considered less than
severe.
● The "intentional quantitative differences" in wage among
employees of the bank has been set by the CBA to about P900
per month as of 01 January 1989. It is intentional as it has been
arrived at through the collective bargaining process to which
the parties are thereby concluded. The intention of the parties,
whether the benefits under a collective bargaining agreement
 should be equated with those granted by law or not, unless
there are compelling reasons otherwise, must prevail and be
given effect.
● We, however, do not subscribe to the labor arbiter's exacting
prescription in correcting the wage distortion. Giving the
employees an across-the-board increase of P750 may not be
conducive to the policy of encouraging "employers to grant
wage and allowance increases to their employees higher than
the minimum rates of increases prescribed by statute or
administrative regulation," particularly in this case where both
Republic Act 6727 and the CBA allow a credit for voluntary
compliance.
● As the Court pointed out in Apex Mining Company, Inc. v. NLRC
o To compel employers simply to add on legislated
increases in salaries or allowances without regard to
what is already being paid, would be to penalize
employers who grant their workers more than the
statutorily prescribed minimum rates of increases.
Clearly, this would be counter-productive so far as
securing the interests of labor is concerned. . .
● We find the formula suggested then by Commissioner Bonto-
Perez, which has also been the standard considered by the
regional Tripartite Wages and Productivity Commission for the
correction of pay scale structures in cases of wage distortion,
to well be the appropriate measure to balance the respective
contentions of the parties in this instance.
 PRUBANKERS ASSOC. v. PRUDENTIAL BANK & TRUST CO.
January 25, 1999| PANGANIBAN, J.| wage fixing
DIGEST MADE by : Marts
PETITIONER PRUBANKERS ASSOCIATION ,
RESPONDENTS: PRUDENTIALBANK & TRUST COMPANY
DOCTRINE:
Wage distortion presupposes an increase in the compensation of the
lower ranks in an office hierarchy without a corresponding raise for
higher-tiered employees in the same region of the country, resulting in
the elimination or the severe diminution of the distinction between the
two groups. Such distortion does not arise when a wage order gives
employees in one branch of a bank higher compensation than that given
to their counterparts in other regions occupying the same pay scale,
who are not covered by said law. The implementation of wage orders
in one region but not in others does not in itself necessarily result in
wage distortion.
RECIT- READY SUMMARY:
Regional Tripartite Wages and Productivity Board of Region V issued
Wage Order No. RB 05-03 which provided for a Cost of Living Allowance
(COLA) to workers in the private sector who had rendered service for
at least three (3) months before its effectivity; Subsequently, the
Regional Tripartite Wages Board of Region IV issued WAGE ORDER NO.
RB VII-03, directing the integration of the COLA mandated pursuant to
Wage Order No. RO VII-02-A into the basic pay of all worker.
Prubankers Association wrote the petitioner requesting that the Labor
Management Committee be immediately convened to discuss and
resolve the alleged wage distortion created in the salary structure upon
the implementation of the said wage orders; Association then
demanded in the Labor Management Committee meetings that the
petitioner extend the application of the wage orders to its employees
outside Regions V and VII; Compromise failed so the matter was
brought to The Arbitration Committee which held that there was a wage
distortion in the bank nationwide which should be resolved in accord
with Art. 124 of the Labor Code. CA held otherwise & that that the
variance in the salary rates of employees in different regions of the
country was justified by the Wage Rationalization Act (RA No. 6727);
Petitioner argued that a wage distortion exists because the
implementation of the two Wage Orders has resulted in the discrepancy
in the compensation of employees of similar pay classification in
different regions. Hence, petitioner maintained that, as a result of the
two Wage Orders, the employees in the affected regions have higher
compensation than their counterparts of the same level in other
regions.
ISSUE: W/N discrepancy of employees’ wages in different regions
results to wage distortion? - NO
Supreme Court affirmed the decision of the Court of Appeals. A disparity
in wages between employees holding similar positions but in different
regions does not constitute wage distortion as contemplated by law.
Wage distortion presupposes an increase in the compensation of the
lower ranks in an office hierarchy without a corresponding raise for
higher-tiered employees in the same region of the country, resulting in
the elimination or the severe diminution of the distinction between the
two groups. Such distortion does not arise when a wage order gives
employees in one branch of a bank higher compensation than that given
to their counterparts in other regions occupying the same pay scale,
who are not covered by said law. The implementation of wage orders
in one region but not in others does not in itself necessarily result in
wage distortion. The fact that a person is receiving more in one region
does not necessarily mean that he or she is better off than a person
receiving less in another region. We must consider, among others, such
factors as cost of living, fulfillment of national economic goals, and
standard of living. In the present case, it is clear that no wage distortion
resulted when respondent implemented the subject Wage Orders in the
covered branches. In the said branches, there was an increase in the
salary rates of all pay classes. Furthermore, the hierarchy of positions
based on skills, length of service and other logical bases of
differentiation was preserved. The quantitative difference in
compensation between pay classes remained the same in all branches
in the affected region. Hence, it cannot be said that there was a wage
distortion.
FACTS:
1. Regional Tripartite Wages and Productivity Board of Region V
issued Wage Order No. RB 05-03 which provided for a Cost of
Living Allowance (COLA) to workers in the private sector who
had rendered service for at least three (3) months before its
effectivity;
2. and for the same period therereafter, in the following
categories:
(P17.50) in the cities of Naga and Legaspi;
(P15.50) in the municipalities of Tabaco, Daraga, Pili and the
city of Iriga;
(P10.00) for all other areas in the Bicol Region.
3. Subsequently, the Regional Tripartite Wages Board of Region
IV issued WAGE ORDER NO. RB VII-03, directing the integration
of the COLA mandated pursuant to Wage Order No. RO VII-02-
A into the basic pay of all workers. It also established an
increase in the minimum wage rates for all workers and
employees in the private sector as follows: by Ten Pesos
(P10.00) in the cities of Cebu, Mandaue and Lapulapu; Five
Pesos (P5.00) in the municipalities of Compostela, Liloan,
Consolacion, Cordova, Talisay, Minglanilla, Naga and the cities
of Davao, Toledo, Dumaguete, Bais, Canlaon, and Tagbilaran;
4. petitioner then granted a COLA of P17.50 to its employees at
its Naga Branch, the only branch covered by Wage Order No.
RB 5- 03, and integrated the P150.00 per month COLA into the
basic pay of its rank-and-file employees at its Cebu, Mabolo and
P. del Rosario branches, the branches covered by Wage Order
No. RB VII-03;
5. Prubankers Association wrote the petitioner requesting that the
Labor Management Committee be immediately convened to
discuss and resolve the alleged wage distortion 1 created in
the salary structure upon the implementation of the said
wage orders;
1
situation where an increase in prescribed wage results in the elimination or
severe contraction of intentional quantitative differences in wage or salary rates
between and among employee groups in an establishment as to effectively
6. Association then demanded in the Labor Management
Committee meetings that the petitioner extend the application
of the wage orders to its employees outside Regions V and VII,
claiming that the regional implementation of the said orders
created a wage distortion in the wage rates of petitioner's
employees nationwide.
7. They agreed to submit the matter to voluntary arbitration cos
they couldn’t settle; The Arbitration Committee held that there
was a wage distortion in the bank nationwide which should be
resolved in accord with Art. 124 of the Labor Code.
8. CA ruled that there was no wage distortion because it was
justified by RA 6727.
ISSUE:
W/N discrepancy of employees’ wages in different regions results to
wage distortion? - NO
RULING: WHEREFORE, the petition is DENIED and the assailed
Decision is AFFIRMED. Costs against petitioner. cdasia
SO ORDERED.
SO ORDERED.
RATIO:
NO
• Wage distortion presupposes a classification of positions and
ranking of these positions at various levels. One visualizes a
hierarchy of positions with corresponding ranks basically in
terms of wages and other emoluments. Where a significant
change occurs at the lowest level of positions in terms of basic
wage without a corresponding change in the other level in the
hierarchy of positions, negating as a result thereof the
distinction between one level of position from the next higher
obliterate the distinctions embodied in such wage structure based on skills,
length of service, or other logical bases of differentiation
 level, and resulting in a parity between the lowest level and the
next higher level or rank, between new entrants and old hires,
there exists a wage distortion. The concept of wage distortion
assumes an existing grouping or classification of employees
which establishes distinctions among such employees on some
relevant or legitimate basis. This classification is reflected in a
differing wage rate for each of the existing classes of employees.
• WAGE DISTORTION has 4 elements:
• An existing hierarchy of positions with corresponding salary
rates
• A significant change in the salary rate of a lower pay class
without a concomitant increase in the salary rate of a higher
one
• The elimination of the distinction between the two levels
• The existence of the distortion in the same region of the
country;
• In the present case, it is clear that no wage distortion resulted
when respondent implemented the subject Wage Orders in the
covered branches. In the said branches, there was an increase
in the salary rates of all pay classes. Furthermore, the hierarchy
of positions based on skills, length of service and other logical
bases of differentiation was preserved. In other words, the
quantitative difference in compensation between different pay
classes remained the same in all branches in the affected
region. Put differently, the distinction between Pay Class 1 and
Pay Class 2, for example, was not eliminated as a result of the
implementation of the two Wage Orders in the said region.
Hence, it cannot be said that there was a wage distortion;
• A wage parity between employees in different rungs is not at
issue here, but a wage disparity between employees in the
same rung but located in different regions of the country.
• Contrary to petitioner's postulation, a disparity in wages
between employees holding similar positions but in different
regions does not constitute wage distortion as contemplated by
law. As previously enunciated, it is the hierarchy of positions
and the disparity of their corresponding wages and other
emoluments that are sought to be preserved by the concept of
wage distortion. Put differently, a wage distortion arises when
a wage order engenders wage parity between employees in
different rungs of the organizational ladder of the same
establishment. It bears emphasis that wage distortion involves
a parity in the salary rates of different pay classes which, as a
result, eliminates the distinction between the different ranks in
the same region;
• The difference in wages between employees in the same pay
scale in different regions is not the mischief sought to be
banished by the law. In fact, Republic Act No. 6727 (the Wage
Rationalization Act), recognizes "existing regional disparities in
the cost of living." Section 2 of said law provides:
• "SEC. 2. It is hereby declared the policy of the State to
rationalize the fixing of minimum wages and to promote
productivity- improvement and gain-sharing measures to
ensure a decent standard of living for the workers and their
families; to guarantee the rights of labor to its just share in the
fruits of production; to enhance employment generation in the
countryside through industry dispersal; and to allow business
and industry reasonable returns on investment, expansion and
growth.
• "The State shall promote collective bargaining as the primary
mode of settling wages and other terms and conditions of
employment; and whenever necessary, the minimum wage
rates shall be adjusted in a fair and equitable manner,
considering existing regional disparities in the cost of living and
other socio-economic factors and the national economic and
social development plans."
• RA 6727 also amended Article 124 of the Labor Code, thus:
• "Art. 124. Standards/Criteria for Minimum Wage Fixing. — The
regional minimum wages to be established by the Regional
Board shall be as nearly adequate as is economically feasible to
maintain the minimum standards of living necessary for the
health, efficiency and general well-being of the employees
within the frame work of the national economic and social
development program. In the determination of such regional
minimum wages, the Regional Board shall, among other
relevant factors, consider the following:
 o The demand for living wages;
Wage adjustment vis-a-vis the consumer price index;
The cost of living and changes or increases therein; The
needs of workers and their families;
o The need to induce industries to invest in the
countryside;
o Improvements in standards of living;
o The prevailing wage levels;
o Fair return of the capital invested and capacity to pay
of employers;
o Effects on employment generation and family income;
and
o The equitable distribution of income and wealth along
the imperatives of social and economic development."
• From the above-quoted rationale of the law, as well as the
criteria enumerated, a disparity in wages between employees
with similar positions in different regions is necessarily
expected. In insisting that the employees of the same pay class
in different regions should receive the same compensation,
petitioner has apparently misunderstood both the meaning of
wage distortion and the intent of the law to regionalize wage
rates.
• It must be understood that varying in each region of the country
are controlling factors such as the cost of living; supply and
demand of basic goods, services and necessities; and the
purchasing power of the peso. Other considerations underscore
the necessity of the law. Wages in some areas may be increased
in order to prevent migration to the National Capital Region
and, hence, to decongest the metropolis. Therefore, what the
petitioner herein bewails is precisely what the law provides in
order to achieve its purpose;
• RA 6727 recognizes that there are different needs for the
different situations in different regions of the country. The fact
that a person is receiving more in one region does not
necessarily mean that he or she is better off than a person
receiving less in another region. We must consider, among
others, such factors as cost of living, fulfillment of national
economic goals, and standard of living. In any event, this Court,
in its decisions, merely enforces the law. It has no power to
pass upon its wisdom or propriety.
OTHER EMERUTs since madaming tanong si sir :
RE: Equal Pay for Equal Work
Petitioner also avers that the implementation of the Wage Order in
only one region violates the equal-pay-for-equal-work principle.
This is not correct. At the risk of being repetitive, we stress that RA
6727 mandates that wages in every region must be set by the
particular wage board of that region, based on the prevailing
situation therein. Necessarily, the wages in different regions will not
be uniform. Thus, under RA 6727, the minimum wage in Region 1
may be different from that in Region 13, because the socioeconomic
conditions in the two regions are different.
RE: Management Practice
Petitioner also insists that the Bank has adopted a uniform wage
policy, which has attained the status of an established management
practice; thus, it is estopped from implementing a wage order for a
specific region only. We are not persuaded. Said nationwide uniform
wage policy of the Bank had been adopted prior to the enactment
of RA 6727. After the passage of said law, the Bank was mandated
to regionalize its wage structure. Although the Bank implemented
Wage Order Nos. NCR-01 and NCR-02 nationwide instead of
regionally even after the effectivity of RA 6727, the Bank at the
time was still uncertain about how to follow the new law. In any
event, that single instance cannot be constitutive of "management
practice."
 Bankard Employees Union-WATU vs. NLRC
February 17, 2004 | J. Carpio- Morales | Wage Distortion
DIGEST MADE BY: Mico (copied from A2021 Digests)
PETITIONER: Bankard Employees Union – Workers Allliance
trade Unions (BEU-WATU)
RESPONDENTS: National Labor Relations Commission (NLRC)
and Bankard, Inc.
DOCTRINE
The 4 elements of wage distortion are:
(1) An existing hierarchy of positions with corresponding
salary rates
(2) A significant change in the salary rate of a lower pay class
without a
concomitant increase in the salary rate of a higher one
(3) The elimination of the distinction between the two levels
RECIT- READY SUMMARY:
Bankard classifies its employees into 5 levels. Its BOD approved a new
salary scale to make its hiring rate competitive and increased hiring
rates of new employees in the different levels.
BEU-WATU pressed for the increase in the salary of old regular
employees. Bankard claimed that it had no obligation to grant to all its
employees the same increase in an across-the-board manner.
WON the unilateral adoption by an employer of an upgraded
salary scale increasing the hiring rates of new employees
without increasing the salary rates of old employees results in
wage distortion – NO.
The SC ruled that the first element of wage distortion was wanting since
there was no hierarchy of positions between the newly hired and regular
employees of Bankard. Rather, they were classified into levels.

The third element was also absent since the resulting decrease in the
(4) The existence of distortion in the same region of the
wage gap between old and new employees was not significant as to
country
obliterate or result in severe contraction of the intentional quantitative
differences in the salary rates between the employee group.
Art. 124 should be construed and correlated in relation to
Furthermore, BEU-WATU cannot legally obligate Bankard to correct the
minimum wage fixing, the intention of the law being that in the event
alleged wage distortion pursuant to Art. 124 of the Labor Code as the
of an increase in minimum wage, the distinctions embodied in the
increase in the wages and salaries of the newly-hired was not due to a
wage structure based on skills, length of service, or other logical
prescribed law or wage order.
bases of differentiation will be preserved.

Absent any indication that the voluntary increase of salary rates by an

The mere factual existence of wage distortion does not ipso employer was done arbitrarily and illegally for the purpose of
facto result in an obligation to rectify it, absent a law or other source circumventing the laws or was devoid of any legitimate purpose other
of obligation which requires its rectification. than to discriminate against the regular employees, the Court will not
step in to interfere with this management prerogative
Absent any indication that the voluntary increase of salary
rates by an employer was done arbitrarily and illegally for the purpose *Read Ratio in Bold
of circumventing the laws or was devoid of any legitimate purpose
other than to discriminate against the regular employees, the Court
will not step in to interfere with this management prerogative.
FACTS:
1. Bankard classifies its employees into 5 levels. On May 28, 1993,
its Board of Directors approved a "New Salary Scale", made
retroactive to April 1, 1993, to make its hiring rate competitive
in the industry's labor market. It increased the hiring rates of
new employees, as follows: Levels I and V by P1000 and Levels
II-IV by P900. The salaries of employees falling below the new
minimum rates were adjusted to reach such rates under their
levels.
2. BEU-WATU, the duly certified exclusive bargaining agent of
Bankard's regular rank and file employees, pressed for the
increase in the salary of old regular employees.
3. Bankard claimed that it had no obligation to grant to all its
employees the same increase in an across-the-board manner.
4. BEU-WATU then filed a Notice of Strike on the ground of
discrimination and other acts of unfair labor practice (ULP).
However, the NCMB treated the notice as a "preventive
mediation case" since the issues therein were not strikeable.
5. BEU-WATU filed another Notice of Strike on the grounds of
refusal to bargain, discrimination, and union busting. The strike
was averted when the dispute was certified by the Secretary of
Labor and Employment for compulsory arbitration.
6. NLRC 2nd Division dismissed the case, finding that there was no
wage distortion. The CA also denied the same for lack of merit
ISSUE/S:
1. WON the unilateral adoption by an employer of an
upgraded salary scale increasing the hiring rates of new
employees without increasing the salary rates of old
employees results in wage distortion? NO
RULING:
WHEREFORE, the present petition is hereby DENIED.
RATIO:
1. NO
• Wage distortion was defined under the Wage
Rationalization Act (RA 6727), amending, among others,
Art. 124 of the Labor Code, as: a situation where an
increase in prescribed wage rates results in the elimination
or severe contraction of intentional quantitative differences
in wage or salary rates between and among employee
groups in an establishment as to effectively obliterate the
distinctions embodied in such wage structure based on
skills, length of service, or other logical bases of
differentiation.
• The 4 elements of wage distortion are:
o (1) An existing hierarchy of positions with
corresponding salary rates
o (2) A significant change in the salary rate of a lower
pay class without a concomitant increase in the
salary rate of a higher one
o (3) The elimination of the distinction between the
two levels
o (4) The existence of distortion in the same region
of the country
• In a problem dealing with wage distortion, the basic
assumption is that there exists a grouping or
classification of employees that establishes
distinctions among them on some relevant or
legitimate bases.
• Various factors determine the classification, such as the
degrees of responsibility, the skills and knowledge required,
the complexity of the job, or other logical basis of
differentiation. The differing wage rate for each of the
existing classes of employees reflects this classification.
• BEU-WATU: the classification is not one based on levels or
ranks but on 2 groups of employees: the newly hired and
the old, in each and every level, and not between and
among the different levels or ranks in the salary structure.
o NLRC: to determine the existence of wage
distortion, the “historical” classification of the
employees prior to the wage increase must be
established. Likewise, it must be shown that as
between the different classifications of employees,
there exists a “historical” gap or difference. In this
case, the employees of Bankard have been
“historically” classified into levels, i.e. I to V, and
not on the basis of their length of service.
• Since there is no hierarchy of positions between the newly
hired and regular employees of Bankard, the first element
 of wage distortion is absent. While seniority may be a
factor in determining the wages of employees, it cannot be
made the sole basis in cases where the nature of their work
differs.
• For purposes of determining the existence of wage
distortion, employees cannot create their own
independent classification and use it as a basis to
demand an across-the-board increase in salary. The
formulation of a wage structure through the
classification of employees is a matter of management
judgment and discretion, and ultimately, a subject matter
for bargaining negotiations between employer and
employees.
• The third element is also absent. BEU-WATU tried to
show the decrease in the wage gap between newly hired
employees and old regular employees because of the new
salary scale. However, even assuming that there is a
decrease in the wage gap, the gap is not significant as
to obliterate or result in severe contraction of the
intentional quantitative differences in the salary
rates between the employee group. The classification
under the wage structure is based on the rank of an
employee, not on seniority; thus, wage distortion does not
appear to exist.
• Furthermore, BEU-WATU cannot legally obligate
Bankard to correct the alleged wage distortion as the
increase in the wages and salaries of the newly-hired
was not due to a prescribed law or wage order. Art.
1244 of the Labor Code is clear. If it was the intention of
legislators to cover all kinds of wage adjustments, then the
language of the law should have been broad, not restrictive.
• Art. 124 is entitled “Standards/Criteria for Minimum Wage
Fixing." It is found in CHAPTER V on “W AGE STUDIES, W
AGE AGREEMENTS AND W AGE DETERMINATION” which
principally deals with the fixing of minimum wage. It should
thus be construed and correlated in relation to minimum
wage fixing, the intention of the law being that in the event
of an increase in minimum wage, the distinctions embodied
in the wage structure based on skills, length of service, or
other logical bases of differentiation will be preserved.
• If Art. 124 was applied to voluntary and unilateral increases
by the employer in fixing hiring rates, which is inherently
a business judgment prerogative, then the hands of the
employer would be completely tied even in cases where an
increase in wages of a particular group is justified due to a
re-evaluation of the high productivity of a particular group,
or as in the present case, the need to increase the
competitiveness of Bankard’s hiring rate.
• BEU-WATU relied on Metro Transit Org. v. NLRC to
support its claim that the obligation to rectify wage
distortion is not confined to wage distortion resulting from
government decreed law or wage order.
o SC: Such reliance is misplaced, as the obligation
in that case was to rectify the wage distortion not
by virtue of Art. 124, but on account of a then
existing “company practice” that whenever rank-
and-file employees were paid a statutorily
mandated salary increase, supervisory employees
were, as a matter of practice, also paid the same
amount plus an added premium. Unlike in Metro,
no such management practice is herein alleged to
obligate Bankard to provide an across-the-board
increase to all its regular employees.
• The mere factual existence of wage distortion does
not, however, ipso facto result to an obligation to
rectify it, absent a law or other source of obligation
which requires its rectification.
• Bankard’s right to increase its hiring rate, to establish
minimum salaries for specific jobs, and to adjust the rates
of employees affected thereby is embodied under the
parties’ CBA.
• This CBA provision, which is based on legitimate business-
judgment prerogatives of the employer, is a valid and
legally enforceable source of rights between the parties.
• Absent any indication that the voluntary increase of
salary rates by an employer was done arbitrarily
and illegally for the purpose of circumventing the
laws or was devoid of any legitimate purpose other
than to discriminate against the regular employees,
the Court will not step in to interfere with this
management prerogative. Employees are of course not
precluded from negotiating with its employer and lobby for
wage increases through appropriate channels, such as
through a CBA.
• It does not mean that every dispute should be decided in
favor of labor, for employers correspondingly have rights
under the law which need to be respected.
 Philippine Geothermal, Inc. Employees Union v.
Chevron Geothermal Phils. Holdings, Inc
January 24, 2018 | Reyes, Jr., J. | Wage Distortion
DIGEST MADE BY: AJG
CLUE: Chevron
PETITIONERS: Philippine Geothermal, Inc. Employees Union
(PGIEU)
RESPONDENTS: Chevron Geothermal Phils. Holdings, Inc.
DOCTRINE:
The SC said that the apparent increase in Lanao and Cordovales'
salaries as compared to the other company workers who also have
the same salary/pay grade with them should not be interpreted to
mean that they were given a premature increase for November 1,
2008, thus resulting to a wage distortion.
RECIT- READY SUMMARY:
PH. Geothermal Emp. Union and Chevron Geo Phil. formally executed
a Collective Bargaining Agreement (CBA). Petitioners’ president sent
a letter to respondent saying that the CBA is not being implemented
properly and might result in a conflict between them.
Respondent replied that there were no occurrence of salary distortion
among union members and reiterating its remuneration philosophy of
having "similar values for similar jobs", which means that employees
in similarly-valued jobs would have similar salary rates.
Petitioners said that respondent breached the CBA because it granted
salary increase even to probationary employees (to Lanao and
Cordovales) in contravention of the express mandate of that particular
CBA article and implementing guidelines that salary increases were to
be given only to regular employees.
Respondent said that it did not commit any violation and the increases
given to Lanao and Cordovales were granted after they were
regularized.
ISSUE: WON the CBA was violated – NO
The SC said that the apparent increase in Lanao and Cordovales'
salaries as compared to the other company workers who also have the
same salary/pay grade with them should not be interpreted to mean
that they were given a premature increase for November 1, 2008, thus
resulting to a wage distortion.
The alleged increase in their salaries was not a result of the erroneous
application of Article VII and Annex D of the CBA, rather, it was
because when they were hired by respondent in 2009, when the hiring
rates were relatively higher as compared to those of the previous
years.
The setting and implementation of such various engagement rates
were purely an exercise of the respondent's business prerogative in
order to attract or lure the best possible applicants in the market and
which the court will not interfere with, absent any showing that it was
exercised in bad faith.
FACTS:
Petitioner is a legitimate labor organization and the certified bargaining
agent of the rank-and-file employees of respondent Chevron Geothermal
Phils. Holdings, Inc.
On July 31, 2008, the petitioner and respondent formally executed a
Collective Bargaining Agreement (CBA) which was made effective for the
period from November 1, 2007 until October 31, 2012. Under Article VII,
Section 1 of the CBA, there is a stipulation governing salary increases of
the respondent's rank-and-file employees.
The COMPANY will grant the following:
- Effective Nov. 1, 2007, P260,000.00 — lump sum payment for
the 1st year of this agreement (taxable).
- Effective Nov. 1, 2008, across the board increase on the monthly
salary in the amount of P1,500.00.
- Effective Nov. 1, 2009, across the board increase on the monthly
salary in the amount of P1,500.00.
On October 6, 2009, a letter was sent by the petitioner's President to
respondent expressing, on behalf of its members, the concern that the
aforesaid CBA provision and implementing rules were not being
implemented properly pursuant to the guidelines and that, if not
addressed, might result to a salary distortion among union members.
On even date, respondent responded by letter denying any occurrence
of salary distortion among union members and reiterating its
remuneration philosophy of having "similar values for similar jobs,"
which means that employees in similarly-valued jobs would have similar
salary rates. It explained that to attain such objective, it made annual
reviews and necessary adjustments of the employees' salaries and hiring
rates based on the computed values for each job.
Finding the explanation not satisfactory, petitioner, with respondent's
approval, referred the subject dispute to the Voluntary Arbitration of the
National Conciliation and Mediation Board (NCMB). It averred that
respondent breached their CBA provision on worker's wage increase
because it granted salary increase even to probationary employees in
contravention of the express mandate of that particular CBA article and
implementing guidelines that salary increases were to be given only to
regular employees.
To cite an example, petitioner alleged that respondent granted salary
increases of One Thousand Five Hundred Pesos (P1,500.00) each to then
probationary employees Sherwin Lanao (Lanao) and Jonel Cordovales
(Cordovales) at a time when they have not yet attained regular status.
They (Lanao and Cordovales) were regularized only on January 1, 2010
and April 16, 2010, respectively, yet they were given salary increase for
November 1, 2008. As a consequence of their accelerated increases,
wages of said probationary workers equated the wage rates of the
regular employees, thereby obliterating the wage rates distinction based
on merit, skills and length of service. Therefore, the petitioner insisted
that its members' salaries must necessarily be increased so as to
maintain the higher strata of their salaries from those of the probationary
employees who were given the said premature salary increases.
On the other hand, respondent maintained that it did not commit any
violation of that CBA provision and its implementing guidelines; in fact,
it complied therewith. It reasoned that the questioned increases given to
Lanao and Cordovales' salaries were granted, not during their
probationary employment, but after they were already regularized. It
further asseverated that there was actually no salary distortion in this
case since the disparity or difference of salaries between Lanao and
Cordovales with that of the other company employees were merely a
result of their being hired on different dates, regularization at different
occasions, and differences in their hiring rates at the time of their
employment.
The Voluntary Arbitrator (VA) ruled in favor of the respondents saying
that petitioner failed to duly substantiate its allegations that the former
prematurely gave salary increases to its probationary employees and
that there was a resultant distortion in the salary scale of its regular
employees. The CA affirmed the VA’s decision.
ISSUE/S:
1. (MAIN) WON the CBA was violated – NO
2. WON the grant of wage increase to Lanao and Cordovales is a
valid exercise of management prerogatives by respondent – NO
3. WON respondent should also increase the rates of other regular
employees in order to maintain the difference between their
rates and those of the employees who were allegedly granted
premature wage increases – NO
RULING:
WHEREFORE, premises considered, the petition is DENIED. The Decision
dated November 5, 2012 of the Court of Appeals in CA-G.R. SP No.
115796 is hereby AFFIRMED.
RATIO:
1. NO
The petition is devoid of merit.
 Respondent, for its part, claims that the alleged "increase" in the wages
Petitioner and respondent entered into an agreement whereby of these employees was not due to application of the provisions of Article
employees will be granted a wage increase depending on the date of VII and Annex D of the CBA, rather it was brought about by the increase
their regularization, viz.: in the hiring rates at the time these employees were hired. As a matter
of fact, a careful scrutiny of the records reveals that respondent have
Employment Status P260K P1500 P1500 complied with the terms agreed upon in the CBA.
Lump Sum Nov 1, 2008 Nov 1, 2009
Regularized on or before Notably, respondent's reply to the petitioner's letter accusing them of
April 30, 2008 / / / violation of the terms of the CBA and holding them responsible for the
Regularized between x / / alleged wage distortion, clarified the ambiguity with regard to the hiring
May 1, 2008 and rates, viz.:
October 31, 2008
Regularized on or before x / / As for the perceived salary distortion among Union members
April 30, 2009 resulting from the non-implementation of the guidelines on
Regularized between x x / Article VII-Salaries and Allowances, Section 1 — Wage Increase,
May 1, 2009 and Annex D of the CBA 2007-2012, we would like to reiterate our
October 31, 2009 discussion during the recent NLMC meeting of September 16, on
Regularized on or before x x / Chevron's remuneration philosophy of having "similar value for
April 30, 2010 similar jobs" which simply states that employees in similarly
valued jobs will have similar salary rates. Salaries and hiring
rates are reviewed annually and adjusted as necessary based on
Petitioner claims that Lanao and Cordovales having been regularized only the computed values of each job. an employee's tenure or
on January 1, 2010 and April 16, 2010, respectively, are not covered by seniority in his/her current position will not influence the value
the P260,000.00 lump sum and the initial P1500.00 wage increase of the job.
effective on Nov. 1, 2008. It appears, however, that based on the actual
pay slips of union members, Lanao and Cordovales both received wage Clearly then, the increase in the salaries of Lanao and Cordovales was
increase in the amount of P1500.00 effective Nov. 1, 2008 and that such not pursuant to the wage increase agreed upon in CBA 2007-2012 rather
increase was immediately granted to them at the time of their hiring it was the result of the increase in hiring rates at the time they were
which resulted to the increase of their salaries to P36,500.00 per month. hired.

It is further stressed by petitioner that the increase granted by
respondent to Lanao and Cordovales are violative of the terms of the
CBA, specifically Section 1, Article VII and Annex D, for the reason that
these employees have not yet attained "Regular" status at the time they
were granted a wage increase and thus resulting to a salary/wage
distortion.
To illustrate, in its Reply, respondent discussed the difference in the
hiring rates of employees Lanao and Robert Gawat, viz.:
Mr. Robert Gawat was regularized on April 16, 2007 having been
hired on October 16, 2007 while Mr. Lanao as shown in the
Company's position paper was regularized on January 1, 2010,
having been hired only on July 1, 2009. At the time of Mr.
Gawat's hiring, the hiring rate for Pay Grade 12 was
 P31,800.00. On April 16, 2007, Mr. Gawat was given a CBA
salary increase under the 2002-2007 CBA of P1,700.00 per
month which increased his pay to P33,500.00 per month. He
received another CBA salary increase of P1,500.00 under the
2007-2012 CBA on November 1, 2008, thus increasing his pay
to P35,000.00. On November 1, 2009, he received another
salary increase of P1,500.00 under the 2007-2012 CBA which
further increased his pay to P36,500.00 per month until the
present.
On the other hand, when Mr. Lanao was hired on July 9,
2009, the hiring rate at the time for employees falling
under Pay Grade 12 was already P35,000.00, having been
adjusted by the company in accordance with market and industry
practice. On January 1, 2010, Mr. Lanao was regularized and as
dictated by the CBA, he was given a CBA salary increase of
P1,500.00 per month effective January 1, 2010 which increased
his monthly pay at the present to P36,500.00.
As shown above, the respondent never violated the CBA and in fact,
complied with it to the letter. Clearly, the petitioner only used the
respondent's alleged violation of the CBA when its true gripe is related
to the respondent's prerogative of setting the hiring rate of the
employees over which the petitioner neither has the personality nor the
privilege to meddle or interfere with.
2. NO
3. NO
The second and third issue, being interrelated, shall be discussed jointly.
Upon the enactment of Republic Act (R.A.) No. 6727 (Wage
Rationalization Act, amending among others, Article 124 of the Labor
Code) on June 9, 1989, the term "Wage Distortion" was explicitly defined
as "a situation where an increase in prescribed wage rates results in the
elimination or severe contraction of intentional quantitative differences
in wage or salary rate between and among employee groups an
establishment as to effectively obliterate the distinctions embodied in
such wage structure based on skills, length of service or other logical
bases of differentiation."
Contrary to petitioner's claim of alleged "wage distortion," Article 124 of
the Labor Code of the Philippines only cover wage adjustments and
increases due to a prescribed law or wage order, viz.:
Article 124. Standards/Criteria for Minimum Wage Fixing.
xxx xxx xxx
Where the application of any prescribed wage increase by
virtue of a law or Wage Order issued by any Regional
Board results in distortions of the wage structure within an
establishment, the employer and union shall negotiate to correct
the distortions. Any dispute arising from the wage distortions
shall be resolved through the grievance procedure under their
collective bargaining agreement and, if it remains unresolved,
through voluntary arbitration.
Prubankers Association v. Prudential Bank and Trust Company laid down
the four elements of wage distortion, to wit:
1. An existing hierarchy of positions with corresponding salary
rates;
2. A significant change in the salary rate of a lower pay class
without a concomitant increase in the salary rate of a higher one;
3. The elimination of the distinction between the two levels; and
4. The existence of the distortion in the same region of the country.
The apparent increase in Lanao and Cordovales' salaries as compared to
the other company workers who also have the same salary/pay grade
with them should not be interpreted to mean that they were given a
premature increase for November 1, 2008, thus resulting to a wage
distortion. The alleged increase in their salaries was not a result of the
erroneous application of Article VII and Annex D of the CBA, rather, it
was because when they were hired by respondent in 2009, when the
hiring rates were relatively higher as compared to those of the previous
years. Verily, the setting and implementation of such various
engagement rates were purely an exercise of the respondent's business
prerogative in order to attract or lure the best possible applicants in the
market and which We will not interfere with, absent any showing that it
was exercised in bad faith.
Management prerogative gives an employer freedom to regulate
according to their discretion and best judgment, all aspects of
employment including work assignment, working methods, the
processes to be followed, working regulations, transfer of employees,
work supervision, lay-off of workers and the discipline, dismissal and
recall of workers. This right is tempered only by these limitations: that it
must be exercised in good faith and with due regard to the rights of the
employees.
Petitioner claims that the wages of other employees should also be
increased in order to maintain the difference between their salaries and
those of employees granted a "premature" wage increase. Such a
situation may be remedied if it falls under the concept of a wage
distortion as defined by Article 124 of the Labor Code of the Philippines.
However, as already discussed, there is no wage distortion in the case
at bench. Not all increases in salary which obliterate the salary
differences of certain employees should be perceived as wage distortion.
In the case of Bankard Employees Union-Workers Alliance Trade Unions
v. National Labor Relations Commission, the Court discussed the possible
implication of an expanded interpretation of the concept of Wage
Distortion, to wit:
If the compulsory mandate under Article 124 to correct "wage
distortion" is applied to voluntary and unilateral increases by the
employer in fixing hiring rates which is inherently a business
judgment prerogative, then the hands of the employer would be
completely tied even in cases where an increase in wages of a
particular group is justified due to a re-evaluation of the high
productivity of a particular group, or as in the present case, the
need to increase the competitiveness of Bankard's hiring rate.
An employer would be discouraged from adjusting the salary
rates of a particular group of employees for fear that it would
result to a demand by all employees for a similar increase,
especially if the financial conditions the business cannot address
an across-the-board increase.
The Court's ruling in the case of Bankard seek to address and resolve
conflicting opinions regarding the true concept of a wage distortion like
the one presented in this case whereby a legitimate exercise by an
employer of its management prerogative is being taken against it in the
guise of an allegation that it is circumventing labor laws. An employer
should not be held hostage by the whims and caprices of its employees
especially when it has faithfully complied with and executed the terms of
the CBA.
It is the prerogative of management to regulate, according to its
discretion and judgment all aspects of employment. This flows from the
established rule that labor law does not authorize the substitution of the
judgment of the employer in the conduct of its business. Such
management prerogative may be availed of without fear of any liability
so long as it is exercised in good faith for the advancement of the
employer's interest and not for the purpose of defeating or circumventing
the rights of the employees under special laws or agreements and are
not exercised in a malicious, harsh, oppressive, vindictive or wanton
manner or out of malice or spite.
On a final note, the Court has ruled time and again that factual findings
of labor officials, who are deemed to have acquired expertise in matters
within their jurisdiction, are generally accorded not only respect but even
finality by the courts when supported by substantial evidence and
affirmed by the CA, in the exercise of its expanded jurisdiction to review
findings of the National Labor Relations Commission.
C. Payment of Wages
 SPS. PERFORATED MATERIALS V. DIAZ
13 October 2010 | Mendoza, J. | Payment of wages
DIGEST MADE BY: TRF
CLUE: Wages unlawfully withheld kasi di daw sya pumapasok sa iskul,
ay sa work pala hehe
PETITIONER: SHS PERFORATED MATERIALS, INC., WINFRIED
HARTMANNSHENN, and HINRICH JOHANN SCHUMACHER
RESPONDENTS: MANUEL F. DIAZ
DOCTRINE:
Management prerogative refers "to the right of an employer to regulate
all aspects of employment, such as the freedom to prescribe work
assignments, working methods, processes to be followed,
regulation regarding transfer of employees, supervision of their work,
lay-off and discipline, and dismissal and recall of work." Although
management prerogative refers to "the right to regulate all
aspects of employment," it cannot be understood to
include the right to temporarily withhold salary/wages
without the consent of the employee.
Any withholding of an employee's wages by an employer may
only be allowed in the form of wage deductions under the
circumstances provided in Article 113 of the Labor Code. (see full
codal provision below)
RECIT- READY SUMMARY:
Petitioner SHS Perforated Materials, Inc. (SHS) is a start-up
corporation– Hartmannshenn, is its president while Schumacher is its
treasurer and one of the board directors. Schumacher is also the
Executive Vice-President of the European Chamber of Commerce of the
Philippines (ECCP) which is a separate entity from SHS handling the
payroll requirements of SHS. (Taguiang is its Accounting head). Manuel
F. Diaz was hired by SHS as Manager for Business Development on
probationary status with a monthly salary of P100k. Diaz’ duties,
responsibilities, and work hours had an import that the Corporation had
no close supervision of Diaz. Later, Hartmannshenn expressed his
dissatisfaction over Diaz as Diaz failed to fulfill his duties and
responsibilities and so Hartmannshenn instructed Taguiang not to
release Diaz’ salary.
When Diaz called to inquire about his salary, Taguiang informed him that
it was being withheld and that he had to communicate with
Hartmannshenn. Diaz denied having received such directive and served
on SHS a demand letter and a resignation letter. Hartmannshenn and
Schumacher averred that they accepted Diaz’ resignation and informed
him that his salary would be released upon explanation of his failure to
report to work, and proof that he did, in fact, work for the period in
question. On the other hand, Diaz claims that Hartmannshenn insulted
him and rudely demanded that Diaz accept P 25,000 instead of his
accrued wage and stop working for SHS, which demands he refused. Diaz
also appealed for the release of his salary and another demand letter for
his accrued salary for November 16 to November 30, 2005, 13th month
pay, moral and exemplary damages, and attorney’s fees.
Hartmannshenn & Schumacher and Diaz failed to amicably settle
prompting Diaz to file a Complaint against the petitioners for illegal
dismissal; non-payment of salaries/wages and 13th month pay with
prayer for reinstatement and full backwages; exemplary damages, and
attorneys fees, costs of suit, and legal interest.
[MAIN ISSUE] WON the temporary withholding of respondent’s
salary/wages by petitioners was a valid exercise of management
prerogative – NO, management prerogative does not include the right
to temporarily withhold wages without the employee’s consent
SHS, Hartmannshenn & Schumacher claim that withholding Diaz’ salary
from November 16 to November 30, 2005, was justified because Diaz
did not show up for work and that is within management prerogative to
temporarily withhold an employees salary/wages pending determination
of whether or not such employee did indeed work. SC disagrees. *Insert
doctrine* ART. 116 of the Labor Code prohibits withholding of
wages and kickbacks. Any withholding of an employees 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. The
circumstances under Art. 113 are not present in this case. Furthermore
SHS, Hartmannshenn & Schumacher failed to prove that Diaz was absent
from November 16 to November 30, 2005.
FACTS:
1. Petitioner SHS Perforated Materials, Inc. (SHS) is a start-up
corporation organized and existing under the laws of the
Republic of the Philippines. Petitioner Winfried Hartmannshenn
(Hartmannshenn), a German national, is its president. Petitioner
Hinrich Johann Schumacher (Schumacher), also a German
national, is the treasurer and one of the board directors. He is
also the Executive Vice- President of the European Chamber of
Commerce of the Philippines (ECCP) which is a separate entity from
SHS.
2. ECCP handles the payroll requirements of SHS, thus, the wages of
SHS employees are paid out by ECCP, through its Accounting
Services Department headed by Juliet Taguiang (Taguiang).
3. Manuel F. Diaz (respondent) was hired by petitioner SHS as Manager
for Business Development on probationary status from July 18, 2005
to January 18, 2006, with a monthly salary of P100,000.00.
4. Respondent's duties, responsibilities, and work hours were
described in the Contract of Probationary Employment, as
reproduced below:
Normal Working Hours : 8:00 a.m. to 5:00 p.m. subject to requirements of the
job
DAILY/GENERAL DUTIES:
(a) Represent the company in any event organized by PEZA;
(b) Perform sales/marketing functions;
(c) Monitor/follow-up customer's inquiry on EMPLOYER's services;
(d) Monitor on-going job orders/projects;
(e) Submit requirements as needed in application/renewal of necessary
permits;
(f) Liaise closely with the other commercial and technical staff of the
company;
(g) Accomplish PEZA documents/requirements for every sales made; with
legal assistance where necessary at EMPLOYER's expense; and
(h) Perform other related duties and responsibilities.
OTHER RESPONSIBILITIES:
(a) abide by and perform to the best of his abilities all functions, duties
and responsibilities to be assigned by the EMPLOYER in due course;
(b) comply with the orders and instructions given from time to time by the
EMPLOYER, INC. through its authorized representatives;
(c) will not disclose any confidential information in respect of the affairs
of the EMPLOYER to any unauthorized person;
(d) perform any other administrative or non-administrative duties, as assigned
by any of the EMPLOYER's representative from time to time either
through direct written order or by verbal assignment. The EMPLOYER
may take into account EMPLOYEE's training and expertise when assigning
additional tasks.
5. Hartmannshenn was often abroad. Hartmannshenn’s instructions to
Diaz were either sent by email or relayed through telephone or
mobile.
6. In addition to the above-mentioned responsibilities, respondent was
also instructed by Hartmannshenn to report to the SHS office and
plant at least two (2) days every work week to observe technical
processes involved in the manufacturing of perforated materials,
and to learn about the products of the company, which respondent
was hired to market and sell. As to Diaz’ work, there was no close
supervision by him.
7. Hartmannshenn expressed his dissatisfaction over Diaz; Diaz
allegedly failed to make any concrete business proposal or deliver
sales for a sample product. In numerous electronic mail messages,
Diaz acknowledged his poor performance and offered to resign.
8. Diaz, however, denied sending such messages but admitted that he
had reported to the SHS office and plant only 8 times from July 18,
2005 to November 30, 2005.
9. In preparation for his trip to the Philippines, Hartmannshenn tried to
call Diaz on his mobile phone, but the latter did not answer. Even
when Hartmannshenn arrived in the Philippines, Hartmannshenn
failed to successfully contact Diaz.
10. Hartmannshenn then instructed Taguiang not to release
respondents salary. When Diaz called to inquire about his
salary, Taguiang informed him that it was being withheld and
that he had to communicate with Hartmannshenn. Diaz
denied having received such directive.
11. Diaz served on SHS a demand letter and a resignation letter.
Hartmannshenn accepted Diaz’ resignation and informed him that
his salary would be released upon explanation of his failure to report
to work, and proof that he did, in fact, work for the period in
question. He demanded that Diaz surrender all company property
and information in his possession. Diaz agreed to these "exit”
conditions. However, instead of complying with the conditions Diaz
sent another message to Hartmannshenn and Schumacher appealing
for the release of his salary.
12. On the other hand, Diaz claims that Hartmannshenn insulted him and
 rudely demanded that Diaz accept P 25,000 instead of his accrued
wage and stop working for SHS, which demands he refused. Diaz
admitted that he sent Hartmannshenn and Schumacher an electronic
mail message appealing for the release of his salary and another
demand letter for his accrued salary for November 16 to November
30, 2005, 13th month pay, moral and exemplary damages, and
attorney’s fees.
13. Petitioner’s counsel advised Diaz’ counsel by telephone that a check
had been prepared in the amount of P 50,000.00, and was ready for
pick-up on December 5, 2005. On the same date, a copy of the
formal reply letter relating to the prepared payment was sent to the
Diaz’ counsel by facsimile transmission. Despite being informed of
this, Diaz never picked up the check.
14. Diaz countered that his counsel received petitioner’s formal reply
letter only on December 20, 2005, stating that his salary would be
released subsequent to the turn-over of all materials owned by the
company in his possession. Diaz claimed that the only thing in his
possession was a sample panels folder which he already returned
and was duly received by Taguiang.
15. Diaz filed a Complaint against the petitioners for illegal dismissal;
non-payment of salaries/wages and 13th month pay with prayer for
reinstatement and full backwages; exemplary damages, and
attorney’s fees, costs of suit, and legal interest.
16. Labor arbiter ruled in favor of Diaz and ruled that he was
constructively dismissed. NLRC reversed the decision of the LA, CA
reversed the NLRC decision and held that , the CA held that
withholding respondent's salary was not a valid exercise of
management prerogative as there is no such thing as a management
prerogative to withhold wages temporarily.
17. Petitioner’s argument: withholding Diaz’ salary from November 16
to November 30, 2005, was justified because Diaz was absent and
did not show up for work. When there is an issue as to whether an
employee has, in fact, worked and is entitled to his salary, it is within
management prerogative to temporarily withhold an employee’s
salary/wages pending determination of whether or not such
employee did indeed work.
ISSUE/S:
1. WON respondent was constructively dismissed by
petitioners—YES, for unreasonably withholding Diaz’s salary, he
was forced to resign and was constructively dismissed
2. [MAIN ISSUE] WON the temporary withholding of
respondent’s salary/wages by petitioners was a valid
exercise of management prerogative – NO, management
prerogative does not include the right to temporarily withhold wages
without the employee’s consent
RULING:
WHEREFORE, the assailed December 23, 2008 Decision of the Court
of Appeals in CA-G.R. SP No. 100015 is hereby AFFIRMED with
MODIFICATION. The additional amount for 13th month pay is
deleted. Petitioners Winfried Hartmannshenn and Hinrich Johann
Schumacher are not solidarily liable with petitioner SHS Perforated
Materials, Inc.
RATIO:
1. YES
• Petitioner next contends that Diaz resigned hence they could not
have constructively dismissed Diaz as evidenced by the resignation
letter.
• The Court, however, agrees with the LA and the CA that respondent
was forced to resign and was, thus, constructively dismissed.
• Duldulao v. Court of Appeals: There is constructive dismissal if
an act of clear discrimination, insensibility, or disdain by an
employer becomes so unbearable on the part of the employee
that it would foreclose any choice by him except to forego his
continued employment. It exists where there is cessation of work
because continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank
and a diminution in pay.
• What made it impossible, unreasonable or unlikely for
respondent to continue working for SHS was the unlawful
withholding of his salary. For said reason, he was forced to
resign. It would be absurd to require respondent to tolerate the
unlawful withholding of his salary for a longer period before his
 employment can be considered as so impossible, unreasonable or
unlikely as to constitute constructive dismissal.
2. NO
● Management prerogative refers "to the right of an employer to
regulate all aspects of employment, such as the freedom to prescribe
work assignments, working methods, processes to be followed,
regulation regarding transfer of employees, supervision of their
work, lay-off and discipline, and dismissal and recall of work."
Although management prerogative refers to "the right to
regulate all aspects of employment," it cannot be
understood to include the right to temporarily withhold
salary/wages without the consent of the employee. To
sanction such an interpretation would be contrary to Article 116 of
the Labor Code, which provides.
ART. 116. Withholding of wages and kickbacks prohibited. —
It shall be unlawful for any person, directly or indirectly, to
withhold any amount from the wages of a worker or induce him to give
up any part of his wages by force, stealth, intimidation, threat or by any
other means whatsoever without the worker's consent.
● 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.
ART. 113 . Wage Deduction. — No employer, in his own
behalf or in behalf of any person, shall make any deduction from the
wages of his employees, except:
(a) In cases where the worker is insured with his consent by the
employer, and the deduction is to recompense the employer for the
amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union
to check-off has been recognized by the employer or authorized in
writing by the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations
issued by the Secretary of Labor.
• Petitioners argue that Article 116 of the Labor Code only
applies if it is established that an employee is entitled to his
salary/wages and, hence, does not apply in cases where there is
an issue or uncertainty as to whether an employee has worked
and is entitled to his salary/wages.
• The Court finds petitioners' evidence insufficient to prove that
respondent did not work from November 16 to November 30, 2005.
As can be gleaned from respondent's Contract of Probationary
Employment and the exchanges of electronic mail messages 22
between Hartmannshenn and respondent, the latter's duties as
manager for business development entailed cultivating business
ties, connections, and clients in order to make sales. Such
duties called for meetings with prospective clients outside the
office rather than reporting for work on a regular schedule. In
other words, the nature of respondent's job did not allow close
supervision and monitoring by petitioners. Neither was there any
prescribed daily monitoring procedure established by petitioners
to ensure that respondent was doing his job. Therefore, granting
that respondent failed to answer Hartmannshenn's mobile calls and
to reply to two electronic mail messages and given the fact that
he admittedly failed to report to work at the SHS plant twice each
week during the subject period, such cannot be taken to signify that
he did not work from November 16 to November 30, 2005.
• Although it cannot be determined with certainty whether
respondent worked for the entire period from November
16 to November 30, 2005, the consistent rule is that if
doubt exists between the evidence presented by the
employer and that by the employee, the scales of justice must
be tilted in favor of the latter. Therefore, the withholding of
respondent's salary by petitioners is contrary to Article 116 of the
Labor Code and, thus, unlawful.
Minor issues:
RE: DIAZ BEING A PROBATIONARY EMPLOYEE
• Although respondent was a probationary employee, he
was still entitled to security of tenure. Section 3 (2)
Article 13 of the Constitution guarantees the right of all
workers to security of tenure. In using the expression "all
workers," the Constitution puts no distinction between a
probationary and a permanent or regular employee. This means
 that probationary employees cannot be dismissed except for
cause or for failure to qualify as regular employees.
• This Court has held that probationary employees who are
unjustly dismissed during the probationary period are entitled
to reinstatement and payment of full backwages and other benefits
and privileges from the time they were dismissed up to their actual
reinstatement.
• Respondent's reinstatement, however, is no longer feasible as
antagonism has caused a severe strain in their working relationship.
a more equitable disposition would be an award of separation pay
equivalent to at least one month pay, in addition to his full
backwages, allowances and other benefits.

RE: OFFICER’S LIABILITY

• Petitioners withheld respondents salary in the sincere belief that
respondent did not work for the period in question and was,
therefore, not entitled to it. There was no dishonest purpose or ill will
involved as they believed there was a justifiable reason to withhold
his salary. Thus, it cannot be concluded that such was made in bad
faith. Corporate officers, Hartmannshenn and Schumacher cannot be
held personally liable for the corporate obligations of SHS.
 COMMANDO SECURITY AGENCY v. NLRC
July 20, 1992 | Grino-Aquino | Payment of Wages
DIGEST MADE BY: Andrea
PETITIONER: Commando Security Agency
RESPONDENTS: National Labor Relations Commission and Nemesio
Decierdo
DOCTRINE:
The constitutional provisions on social justice in the declaration of
Principles and State Policies, impose upon the courts the duty to be ever
vigilant in protecting the rights of workers who are placed in a
contractually disadvantaged position and who sign waivers or provisions
contrary to law and public policy. Hence, the 25% deduction from the
employee’s salary provided in the employment contract signed by him is
void ab initio being contrary to law and public policy.
RECIT- READY SUMMARY:
Nemesio Decierdo was a security guard of the petitioner since February
1981. In April 1987, Commando Security Agency entered into a contract
to provide guarding services to ALSONS at its Aldevinco Building (Davao)
for a period of one year unless renewed. Decierdo was one of the guards
assigned to the building by petitioner.
Pursuant to the “periodic reshuffling” of guards requested by ALSONS,
petitioner served a recall order on Decierdo. On the same date, a detail
order was issued to Decierdo assigning him to the Pacific Oil Company
but Decierdo refused to accept the assignment. The next day, Decierdo
filed a complaint for illegal dismissal, unfair labor practice, underpayment
of wages, and payment of other benefits.
LA and NLRC dismissed the complaint for illegal dismissal but awarded
payment of the wages and other benefits. Petitioner appealed the
petition because apparently in their employment contract there was a
provision that provides Petitioner Agency is entitled to a 25% of
Decierdo’s monthly salary. Petitioner is arguing that by signing the
contract, Decierdo is estopped from complaining about the 25%
deduction form his salary representing petitioner’s share in procuring job
placement for him.
Issue is WON the 25% deduction from his salary is valid – NO.
SC said the provision of the employment contract was illegal and
iniquitous and so null and void. The Constitutional Provisions on social
justice in the declaration of Principles and State Policies, impose upon
the courts the duty to be ever vigilant in protecting the rights of workers
who are placed in a contractually disadvantaged position and who sign
waivers or provisions contrary to law and public policy.
Court quoted NLRC: “It goes without saying that respondent may not
deduct its so-called share from the salaries of its guards without the
latter’s express consent and if such deductions are not allowed by law.
This is notwithstanding any previous agreement or understanding
between them. Any such agreement or contract is void ab initio for being
contrary to law and public policy.” Sapat na recit ready! Pero MAGIS kaya
pinaste ko na halos buong case
FACTS:
1. Private respondent Nemesio Decierdo was a security guard of the
petitioner since February 1981. In April 1987, petitioner entered
into a contract to provide guarding services to the Alsons
Development and Investment Corporation (ALSONS for brevity)
at its Aldevinco Building on Claro M. Recto Avenue, Davao City,
for a period of one year, i.e., from April 11, 1987 to April 10,
1988, unless renewed under such terms and conditions as may
be mutually acceptance. The number of guards to be assigned
by the petitioner would depend on ALSON's demand, sometimes
two (2) guards on a daily shift, and sometimes four (4) guards.
Decierdo was one of the guards assigned to the Aldevinco
Building by the petitioner.
2. On February 9, 1988, Maria Mila D. Samonte, Properties
Administration Head on ALSONS, requested the petitioner for a
"periodic reshuffling" of guards.
3. Pursuant to that reasonable request of its client, petitioner on
February 10, 1988 served the following recall order on Decierdo
 and on the same date, February 10, 1988, Detail Order 02-016
was issued to Decierdo assigning him to the Pacific Oil Company
in Bunawan, Davao City, with instruction to report to the
manager, but Decierdo refused to accept the assignment
because he was alleged going to rest for a while.
4. On February 11, 1988, which was the effective date of the detail
order, Decierdo filed a complaint for illegal dismissal, unfair labor
practice, underpayment of wages, overtime pay, night premium,
13th month pay, holiday pay, rest day pay and incentive leave
pay.
5. LA and NLRC dismissed the complaint for illegal dismissal but
awarded payment of the wages and other benefits. Petitioner
appealed the petition because apparently in their employment
contract there was a provision that provides Petitioner Agency is
entitled to a 25% of Decierdo’s monthly salary. Petitioner is
arguing that by signing the contract, Decierdo is estopped from
complaining about the 25% deduction form his salary
representing petitioner’s share in procuring job placement for
him.
ISSUE/S:
1. Whether the 25% deduction from his salary is valid – NO
2. Whether there was illegal dismissal - NO
RULING:
WHEREFORE, premises considered, the petition is DISMISSED for lack of
merit
RATIO:
1. NO
• Petitioner's contention that Decierdo is estopped from
complaining about the 25% deduction from his salary
representing petitioner's share in procuring job placement for
him, is not well taken. That provision of the employment contract
was illegal and inequitous, hence, null and void.
• The constitutional provisions on social justice (Sections 9 and 10,
Article II) and protection to labor (Sec. 18, Article II) in the
declaration of Principles and State Policies, impose upon the
courts the duty to be ever vigilant in protecting the rights of
workers who are placed in a contractually disadvantaged position
and who sign waivers or provisions contrary to law and public
policy
• SC affirmed the NLRC's ruling that:
• "It goes without saying that respondent may not deduct its so-
called 'share' from the salaries of its guards without the latter's
express consent and if such deductions are not allowed by law.
This is notwithstanding any previous agreement or
understanding between them. Any such agreement or contract
is void ab initio being contrary to law and public policy”
2. NO
• There was no need for the Executive Labor Arbiter to fix a period
within which to require complainant to report for work
considering that the latter is no longer interested in his job and
had claimed for separation benefits in lieu of reinstatement. Why
respondent had begrudged the Labor Arbiter's 'failure' to fix a
return-to-work period escapes us considering that the Labor
Arbiter practically found complainant to have abandoned his job
and, besides, complainant's claims for separation pay was not
granted. If there was anyone who should have been interested
in being recalled to work, it should have been complainant
himself and not respondent
• As a result, the NLRC dismissed the charge of illegal dismissal
and unfair labor practice against the petitioner and denied
Decierdo's claim for separation pay.
 MILAN v NLRC
February 4, 2015 | Leonen, J. | Payment of Wages
DIGEST MADE BY: Jopers
PETITIONERS: Emer Milan, Randy Masangkay, Wilfredo Javier, Ronaldo
David, Bonifacio Matundan, Nora Mendoza, et. al.
RESPONDENTS: National Labor Relations Commission, Solid Mills, Inc.
and/or Philip Ang
DOCTRINE:
Withholding of payment by the employer does not mean that the
employer may renege on its obligation to pay employees their wages,
termination payments, and due benefits. The employees’ benefits are
also not being reduced. It is only subjected to the condition that
the employees return properties properly belonging to the
employer. This is only consistent with the equitable principle that “no
one shall be unjustly enriched or benefited at the expense of another.
RECIT- READY SUMMARY:
Petitioners Milan, et. al. are Solid Mills, Inc.’s (SMI) employees. As SMI
employees, Milan, et al and their families were allowed to occupy SMI
Village, a property owned by Solid Mills. Milan, et al were informed that
effective October 10, 2003, Solid Mills would cease its operations due to
serious business losses. NAFLU (Milan, et al’s union) recognized SMI’s
closure due to serious business losses in a MOA. The MOA provided for
Solid Mills’ grant of separation pay “less accountabilities, accrued sick
leave benefits, vacation leave benefits, and 13th month pay to the
employees.” SMI sent to Milan, et al individual notices to vacate SMI
Village. Accrued benefits and separation of Milan, et al were withheld
because their possession of Solid Mills property was considered as an
accountability, hence subject to clearance procedures.
ISSUE: Whether or not Sold Mills can withhold the last payments to
Milan, et al – YES.
Article 1706 of the CC provides that “withholding of the wages, except
for a debt due, shall not be made by the employer. “Debt” in this case
refers to any obligation due from the employee to the employer. It
includes any accountability that the employee may have to the employer.
In this case, SMI and NAFLU agreed that the release of petitioners’
benefits shall be “less accountabilities.” “Accountability” in its ordinary
sense, means obligation or debt. As long as the debt or obligation was
incurred by virtue of the employer-employee relationship, generally, it
shall be included in the employee’s accountabilities that are subject to
clearance procedures. It may be true that not all employees enjoyed the
privilege of staying in respondent Solid Mills’ property. However, this
alone does not imply that this privilege when enjoyed was not a result of
the EER relationship. Those who did avail of the privilege were employees
of SMI. Petitioners’ possession should, therefore, be included in the term
“accountability.” Milan, et al were merely allowed to possess and use it
out of Solid Mills’ liberality. The employer may, therefore, demand the
property at will. The return of the property’s possession became an
obligation or liability on the part of the employees when the employer-
employee relationship ceased. Thus, respondent Solid Mills has the right
to withhold petitioners’ wages and benefits because of this existing debt
or liability. The employees’ benefits are also not being reduced. It is only
subjected to the condition that the employees return properties properly
belonging to the employer. The Court thus holds that petitioners are
entitled to interest of their withheld separation benefits. These benefits
were properly withheld by SMI because of their refusal to return/vacate
its property.
FACTS:
1. Petitioners Milan, et. al are Solid Mills, Inc.’s (Solid Mills)
employees. They are represented by the National Federation of
Labor Unions (NAFLU), their collective bargaining agent.
2. As Solid Mills’ employees, Milan, et al and their families were
allowed to occupy SMI Village, a property owned by Solid Mills.
a. According to Solid Mills, this was out of liberality and for the
convenience of its employees and on the condition that the
employees would vacate the premises anytime the Company
deems fit.
3. In September 2003, Milan, et al were informed that effective
October 10, 2003, Solid Mills would cease its operations due to
serious business losses.
4. NAFLU recognized Solid Mills’ closure due to serious business
 losses in the memorandum of agreement dated September 1,
2003.
a. The MOA provided for Solid Mills’ grant of separation pay,
“less accountabilities, accrued sick leave benefits, vacation
leave benefits, and 13th month pay to the employees.”
5. Solid Mills sent to Milan, et al individual notices to vacate SMI
Village.
6. Petitioners were no longer allowed to report for work by October
10, 2003.11 They were required to sign a MOA with release and
quitclaim before their vacation and sick leave benefits, 13th
month pay, and separation pay would be released.
a. Employees who signed the memorandum of agreement were
considered to have agreed to vacate SMI Village, and to the
demolition of the constructed houses inside as condition for
the release of their termination benefits and separation pay.
b. Petitioners refused to sign the documents and demanded to
be paid their benefits and separation pay
7. Milan, et al filed complaints before the Labor Arbiter for alleged
non-payment of separation pay, accrued sick and vacation
leaves, and 13th month pay.
a. They argued that their accrued benefits and separation pay
should not be withheld because their payment is based on
company policy and practice.
b. Moreover, the 13th month pay is based on law, specifically,
Presidential Decree No. 851.
c. Their possession of Solid Mills property is not an
accountability that is subject to clearance procedures.
d. They had already turned over to Solid Mills their uniforms and
equipment when Solid Mills ceased operations.
8. On the other hand, Solid Mills argued that Milan, et al’s complaint
was premature because they had not vacated its property.
9. LA ruled in favor of Milan, et al while NLRC ruled that because of
Milan, et al’s failure to vacate Solid Mills’ property, Solid Mills was
justified in withholding their benefits and separation pay.
10. CA dismissed petitioner’s petition, ruling that Solid Mills’ act of
allowing its employees to make temporary dwellings in its
property was a liberality on its part. It may be revoked any time
at its discretion.
a. As a consequence of Solid Mills’ closure and the resulting
termination of petitioners, the EER relationship between them
ceased to exist. There was no more reason for them to stay
in Solid Mills’ property. Moreover, the MOA between Solid Mills
and the union provided that Solid Mills’ payment of
employees’ benefits should be “less accountabilities.”
ISSUE/S:
Whether or not Sold Mills can withhold the last payments to Milan, et al
– YES.
RULING:
WHEREFORE, the petition is DENIED. The Court of Appeals’ decision is
AFFIRMED.
RATIO:
1. YES
● Requiring clearance before the release of last payments to the
employee is a standard procedure among employers, whether
public or private. Clearance procedures are instituted to ensure
that the properties, real or personal, belonging to the employer
but are in the possession of the separated employee, are
returned to the employer before the employee’s departure.
● As a general rule, employers are prohibited from withholding
wages from employees. The Labor Code provides:
Art. 116. Withholding of wages and kickbacks prohibited. It shall
be unlawful for any person, directly or indirectly, to withhold any amount
from the wages of a worker or induce him to give up any part of his
wages by force, stealth, intimidation, threat or by any other means
whatsoever without the worker’s consent.
● The Labor Code also prohibits the elimination or diminution of
● benefits. Thus:
Art. 100. Prohibition against elimination or diminution of
benefits. Nothing in this Book shall be construed to eliminate or in any
way diminish supplements, or other employee benefits being enjoyed at
the time of promulgation of this Code.
● However, our law supports the employers’ institution of
clearance procedures before the release of wages.
 ● As an exception to the general rule that wages may not be the right to withhold petitioners’ wages and benefits because of
withheld and benefits may not be diminished, the Labor Code this existing debt or liability.
provides in Article 113: ● Withholding of payment by the employer does not mean that the
Art. 113. Wage deduction. No employer, in his own behalf or in behalf employer may renege on its obligation to pay employees their
of any person, shall make any deduction from the wages of his wages, termination payments, and due benefits.
employees, except: ● The employees’ benefits are also not being reduced. It is only
3. In cases where the employer is authorized by law or subjected to the condition that the employees return properties
regulations issued by the Secretary of Labor and Employment. properly belonging to the employer.
● Article 1706 of the Civil Code provides that “withholding of ● For these reasons, we cannot hold that petitioners are entitled
the wages, except for a debt due, shall not be made by the to interest of their withheld separation benefits. These benefits
employer. were properly withheld by respondent Solid Mills because of their
● “Debt” in this case refers to any obligation due from the refusal to return its property.
employee to the employer. It includes any accountability that the
employee may have to the employer. There is no reason to limit
its scope to uniforms and equipment, as petitioners would argue.
● Solid Mills and NAFLU, the union representing petitioners, agreed
that the release of petitioners’ benefits shall be “less
accountabilities.”
o “Accountability” in its ordinary sense, means obligation or
debt.
o As long as the debt or obligation was incurred by virtue of
the employer-employee relationship, generally, it shall be
included in the employee’s accountabilities that are subject
to clearance procedures.
● It may be true that not all employees enjoyed the privilege of
staying in respondent Solid Mills’ property. However, this alone
does not imply that this privilege when enjoyed was not a result
of the employer-employee relationship. Those who did avail of
the privilege were employees of respondent Solid Mills.
Petitioners’ possession should, therefore, be included in the term
“accountability.”
● Milan, et al were merely allowed to possess and use it out of
Solid Mills’ liberality. The employer may, therefore, demand the
property at will.
● The return of the property’s possession became an obligation or
liability on the part of the employees when the employer-
employee relationship ceased. Thus, respondent Solid Mills has
D. Thirteenth-Month Pay
 NATIONAL FEDERATION OF SUGAR WORKERS v. 13th month pay agreeing to abide by the final decision of the Supreme
Court in any case involving the 13th month pay if it clearly held that the
OVEJERA
employer is liable to pay the same separate and distinct from the
May 31, 1982 | Plana, J. | 13th month pay
bonuses already given.
DIGEST MADE BY: Sienna

Meanwhile, the SC dismissed G.R. No. 51254, a Petition for Certiorari

CLUE: strike to claim 13th month pay
and Prohibition filed by Marcopper Mining Corporation which sought to
annul the decision of the Labor Deputy Minister granting the 13th month
PETITIONER: NATIONAL FEDERATION OF SUGAR WORKERS (NFSW)
pay to its employees in addition to mid-year and Christmas bonuses
RESPONDENTS: ETHELWOLDO R. OVEJERA (Labor Arbiter), CENTRAL
under a CBA.
AZUCARERA DE LA CARLOTA (CAC), COL. ROGELIO DEINLA, as
Provincial Commander, 3311st P.C. Command, Negros Occidental
FSW renewed its demand. CAC opposed.

DOCTRINE:
Issue is WON CAC obliged to give its workers a 13th month salary in
addition to Christmas, milling and amelioration bonuses (the aggregate
The intention of the law as revealed by the law itself, was to grant an
of which admittedly exceeds by far the disputed 13th month pay) under
additional income in the form of a 13th month pay to employees not
the 13th month pay law (PD 851)? NO.
receiving the same. Otherwise put, the intention was to grant some relief
— not to all workers — but only to the unfortunate ones not actually paid
The SC ruled that the NFSW cannot insist on its claim that its members
a 13th month salary or what amounts to it, by whatever named called;
are entitled to a 13th month pay in addition to the bonuses already paid
but it was not envisioned that a double burden would be imposed
by CAC. (see doctrine)
on the employer already paying his employees a 13th month pay
or it is equivalent-whether out of pure generosity or the basis of a
FACTS:
binding agreement and, in the latter case, regardless of the conditional
character of the grant (such as making the payment dependent on the
1. NFSW has been the bargaining agent of CAC rank and file
profit), so long as there is actual payment. Otherwise, what was
employees (about 1200 of more than 2000 personnel) and has
conceived to be 13th month salary would in effect become a 14th or
concluded with CAC a collective bargaining agreement effective
possibly 15th month pay.
February 16, 1981 — February 15, 1984. Under Art. VII, Sec. 5
of the said CBA —
RECIT- READY SUMMARY:
"Bonuses — The parties also agree to maintain the present practice on
the grant of Christmas bonus, milling bonus, and amelioration bonus to
Petitioner has been the bargaining agent of respondent Central the extent as the latter is required by law."
Azucarera de la Carlota (CAC) employees. They entered into a collective The Christmas and milling bonuses amount to 1-1/2 months' salary.
bargaining agreement wherein the parties agreed to maintain the 2. NFSW struck allegedly to compel the payment of the 13th month
present practice on the grant of Christmas bonus, milling bonus and pay under PD 851, in addition to the Christmas, milling and
amelioration bonus equivalent to 1 1/2 month's salary. amelioration bonuses being enjoyed by CAC workers.
3. To settle the strike, a compromise agreement was concluded
Petitioner and respondent CAC entered into a compromise agreement between CAC and NFSW:
two days after the petitioner when on a strike to compel payment of the "The parties agree to abide by the final decision of the Supreme Court in
 any case involving the 13th Month Pay Law if it is clearly held that the
employer is liable to pay a 13th month pay separate and distinct from
the bonuses already given."
4. G.R. No. 51254 (Marcopper Mining Corp. vs. Blas Ople) had been
dismissed on June 11, 1981 on the vote of seven Justices. A
motion for reconsideration thereafter filed was denied in a
resolution. The decision of June 11, 1981 having become final
and executory — entry of judgment was made.
5. After the Marcopper decision had become final, NFSW renewed
its demand that CAC give the 13th month pay. CAC refused.
6. NFSW filed with the Ministry of Labor and Employment (MOLE)
Regional Office in Bacolod City a notice to strike based on non-
payment of the 13th month pay. Six days after, NFSW went on
a strike.
7. CAC filed a petition (R.A.B. Case No. 0110-82) with the Regional
Arbitration Branch VI-A, MOLE, at Bacolod City to declare the
strike illegal, principally for being violative of Batas Pambansa
Blg. 130, that is, the strike was declared before the expiration of
the 15-day cooling-off period for unfair labor practice (ULP)
strikes, and the strike was staged before the lapse of seven days
from the submission to MOLE of the result of the strike-vote.
8. After the submission of position papers and hearing, Labor
Arbiter Ovejera declared the NFSW strike illegal. The employees
involved were put on preventive suspension.
9. NFSW — by passing the NLRC — filed the instant Petition for
prohibition alleging that Labor Arbiter Ovejera, CAC and the PC
Provincial Commander of Negros Occidental were threatening to
immediately enforce the February 20, 1982 decision which would
violate fundamental rights of the petitioner, and praying to
Enjoining respondents to refrain from the threatened acts
violative of the rights of strikers and peaceful picketers
ISSUE/S:
1. [MAIN] Whether under Presidential Decree 851 (13th Month Pay
Law), CAC is obliged to give its workers a 13th month salary in
addition to Christmas, milling and amelioration bonuses, the
aggregate of which admittedly exceeds by far the disputed 13th
month pay. — NO
2. Whether the strike declared by NFSW is illegal —YES
RULING:
WHEREFORE, the petition is dismissed for lack of merit. No costs.
SO ORDERED.
RATIO:
1. NO
● The evident intention of the law, as revealed by the law itself,
was to grant an additional income in the form of a 13th month
pay to employees not already receiving the same. Otherwise put,
the intention was to grant some relief — not to all workers — but
only to the unfortunate ones not actually paid a 13th month
salary or what amounts to it, by whatever name called; but it
was not envisioned that a double burden would be imposed on
the employer already paying his employees a 13th month pay or
its equivalent — whether out of pure generosity or on the basis
of a binding agreement and, in the latter case, regardless of the
conditional character of the grant (such as making the payment
dependent on profit), so long as there is actual payment.
Otherwise, what was conceived to be a 13th month salary would
in effect become a 14th or possibly 15th month pay.
● This view is justified by the law itself which makes no distinction
in the grant of exemption: "Employers already paying their
employees a 13th month pay or its equivalent are not
covered by this Decree." (P.D. 851.)
● The Rules Implementing P.D. 851 issued by MOLE immediately
after the adoption of said law reinforce this stand. (Under Section
3(e) thereof —
"The term 'its equivalent' . . . 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." (Italics supplied.)
● Having been issued by the agency charged with the members are entitled to a 13th month pay in addition to the
implementation of PD 851 as its contemporaneous interpretation bonuses already paid by CAC.
of the law, the quoted rule should be accorded great weight.
● Pragmatic considerations also weigh heavily in favor of crediting 2. YES
both voluntary and contractual bonuses for the purpose of
determining liability for the 13th month pay. ● NFSW strike is illegal. — The NFSW declared the strike six (6)
● To require employers (already giving their employees a 13th days after filing a strike notice, i.e., before the lapse of the
month salary or its equivalent) to give a second 13th month pay mandatory cooling-off period.
would be unfair and productive of undesirable results. To the ● It also failed to file with the MOLE before launching the strike a
employer who had acceded and is already bound to give bonuses report on the strike-vote, when it should have filed such report
to his employees, the additional burden of a 13th month pay "at least seven (7) days before the intended strike." Under the
would amount to a penalty for his munificence or liberality. The circumstances, we are perforce constrained to conclude that the
probable reaction of one so circumstanced would be to withdraw strike staged by petitioner is not in conformity with law.
the bonuses or resist further voluntary grants for fear that if and
when a law is passed giving the same benefits, his prior
concessions might not be given due credit; and this negative
attitude would have an adverse impact on the employees.
● In the case at bar, the NFSW-CAC collective bargaining
agreement provides for the grant to CAC workers of Christmas
bonus, milling bonus and amelioration bonus, the aggregate of
which is very much more than a worker's monthly pay. When a
dispute arose last year as to whether CAC workers receiving the
stipulated bonuses would additionally be entitled to a 13th month
pay, NFSW and CAC concluded a compromise agreement by
which they —
“agree(d) to abide by the final decision of the Supreme Court in any case
involving the 13th Month Pay Law if it is clearly held that the employer
is liable to pay a 13th month pay separate and distinct from the bonuses
already given."
● When this agreement was forged on November 30, 1981, the
original decision dismissing the petition in the aforecited
Marcopper case had already been promulgated by this Court.
● The Marcopper decision is therefore a Court decision but without
the necessary eight votes to be doctrinal. This being so, it cannot
be said that the Marcopper decision "clearly held" that "the
employer is liable to pay a 13th month pay separate and distinct
from the bonuses already given," within the meaning of the
NFSW-CAC compromise agreement. At any rate, in view of the
rulings made herein, NFSW cannot insist on its claim that its
 DOLE PHILIPPINES v. LEOGARDO
October 23, 1982 | Escolin | 13th month pay
DIGEST MADE BY: Nina
PETITIONER: DOLE PHILIPPINES, INC.
RESPONDENTS: THE HON. VICENTE LEOGARDO, JR. (in his capacity
as Deputy Minister of Labor), and ASSOCIATED LABOR UNION (ALU)
DOCTRINE:
In mandating the payment of the 13th month compensation to
employees earning less than P1,000.00, P.D. No. 851 obviously seeks
to remedy the sad plight of labor in a milieu of world wide inflation
vis-a-vis a static wage level. However, cognizant of the fact that the
remedy sought to be enforced had long been granted by some
employers of their own volition and magnanimity, the law (Section 2
of P.D. 851) expressly exempted from its coverage those employers
"who are already paying their employees a 13th month pay or its
equivalent."
RECIT- READY SUMMARY:
STANFILCO, a company merged with petitioner Dole Philippines, inc
entered into a collective bargaining agreement with the Associated
Labor Union. The CBA provided among others, the grant of a year-end
productivity bonus to all workers within the collective bargaining unit.
The company agrees to grant each worker within the bargaining unit a
year-end productivity bonus equivalent to ten days of his basic daily
wage if eighty percent or more of the average total production for the
two preceding calendar years together with the current year’s estimate
is attained.
Thereafter, PD 851 took effect. Section 1 thereof required all employers
to pay their employees receiving a basic salary of not more than P1,000
a month, regardless of the nature of their employment, a 13th month
pay not later than December 24 of every year. Section 2, however
exempted from its coverage those employers already paying their
employees a 13th month pay or its equivalent.
Sec. 3 of The Rules and regulations Implementing PD 851 provides that
the term “its equivalent” 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 other allowances regularly
enjoyed by the employees as well as non-monetary benefits. The rules
further added that where an employer pays less than 1/12th of the
employee’s basic salary, the employer shall pay the difference.
Complying with the provision of PD 851 and relying on the
interpretation of section 2 by the MOLE’s implementing rules,
STANFILCO paid its workers the difference between 1/12th of their
yearly basic salary and their year-end productivity bonus. Respondent
ALU, joined by petitioner’s employees filed a complaint for the non-
implementation of the CBA provision on the year-end productivity
bonus.
W/N productivity bonus agreed in the CBA is demandable aside from
the 13th month pay provided for in the PD 851–NO
Year-end productivity bonus granted by petitioner to private
respondents pursuant to their CBA is, in legal contemplation, an integral
part of their 13th month pay, notwithstanding its conditional nature. In
complying with PD 851, petitioner credited the year-end productivity
bonus as part of the 13th month pay and adopted the procedure of
paying only the difference between said bonus and 1/12th of the
worker’s yearly basic salary, it acted well within the letter and spirit of
the law and its implementing rules. For in the event that an employer
pays less than 1/12th of the employees’ basic salary, all that the said
employer is required to do under the law is to pay the difference.
FACTS:
1. On June 6, 1975, Standard Philippines Fruit Corporation or
STANFILCO, a company merged in 1981 with petitioner Dole
Philippines, Inc., entered into a collective bargaining agreement
with the Associated Labor Union, ALU for short, effective for a
period of three (3) years, beginning June 1, 1975 to May 31,
1978. The Collective Bargaining Agreement provided, among
others, the grant of a year-end productivity bonus to all workers
within the collective bargaining unit. Section 1, Article XVII
thereof reads as follows:
ARTICLE XVII YEAR-END PRODUCTIVITY BONUS
SECTION 1. The COMPANY agrees to grant each worker within the bargaining unit
 a year-end productivity bonus equivalent to ten (10) days of his basic daily wage
if eighty percent (80%) or more of the average total banana production for the
two (2) preceding calendar years together with the current year's estimate is
attained. This bonus is exclusive of any bonus which the Company may be
presently giving or may give in the future to its workers pursuant to the
COMPANY's rights under Section 4, Article I of this Agreement."
2. The 80% production level stated in said CBA having been
attained in 1975, the workers were paid the stipulated year-end
productivity bonus on December 11, 1975.
3. Shortly thereafter, or on December 16, 1975, Presidential
Decree 851 took effect. Section 1 thereof required all employers
to pay their employees receiving a basic salary of not more than
P1,000.00 a month, regardless of the nature of their
employment, a 13th month pay not later than December 24 of
every year. Section 2 of the law, however, exempted from its
coverage those employers already paying their employees a
13th month pay or its equivalent.
4. On June 22, 1975, Secretary (now Minister) of Labor, issued
the "Rules and Regulations Implementing Presidential Decree
851." Section 3(c) thereof provides that "the term 'its
equivalent' . . . 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 allowance
and other allowances regularly enjoyed by the employee as well
as non-monetary benefits . . . ."
5. The rules further added that "where an employer pays less than
1/12th of the employee's basic salary, the employer shall pay
the difference."
6. To comply with the provision of P.D. 851 on the 13th month
pay, STANFILCO paid its workers on December 29, 1975 the
difference between 1/12th of their yearly basic salary and their
year-end productivity bonus. In doing so, STANFILCO relied on
Section 2 of the decree, as interpreted by the MOLE's
implementing rules. The same method of computation was
followed in the payment of the year-end productivity bonus and
the 13th month pay for the years 1976, 1977 and 1978.
7. Questioning this procedure, respondent ALU, joined by
STANFILCO technical employees as well as its rank-and-file
workers, filed on February 19, 1979 a complaint with the South
Cotabato District Labor Office at General Santos City, ALU
charging STANFILCO with unfair labor practice and non-
implementation of the CBA provision on the year-end
productivity bonus. The following day, all the rank-and-file
workers of STANFILCO instituted another complaint before the
same district labor office, changing the company with non-
payment of the production incentive bonus for the years 1975,
1976, 1977 and 1978.
8. On May 25, 1979, the Regional Director of MOLE, Davao City,
issued an order sustaining respondents' position that the year-
end productivity bonus, being a contractual commitment, is
separate and distinct from the 13th month pay and must,
therefore, be paid separately in full.
ISSUE/S:
1. W/N productivity bonus agreed in the CBA is demandable aside
from the 13th month pay provided for in the PD 851–NO
RULING:
WHEREFORE, this petition is hereby granted and, accordingly, the order
of respondent Deputy Minister of Labor, dated October 26, 1981, is set
aside.
RATIO:
1. NO
• To resolve the growing number of controversies stemming from
the interpretation of Section 2, PD No. 851, this Court in the
case of National Federation of Sugar Workers v. Ovejera,
speaking thru Justice Plana, established definitely the legal
equivalent of the 13th month pay in this wise:
"The evident intention of the law, as revealed by the law itself,
was to grant an additional income in the form of a 13th month
pay to employees not already receiving the same. Otherwise
put, the intention was to grant some relief — not to all workers
— but only to the unfortunate ones not actually paid a 13th
month salary or what amounts to it, by whatever name called;
but it was not envisioned that a double burden would be
imposed on the employer already paying his employees a 13th
month pay or its equivalent — whether out of pure generosity
 or on the basis of a binding agreement, and in the latter case,
regardless of the conditional character of the grant (such as
making the payment dependent on profit), so long as there is
actual payment. Otherwise, what was conceived to be a 13th
month salary would in effect become a 14th or possibly 13th
month pay."
Continuing, this Court said:
"Pragmatic considerations also weigh heavily in favor of
crediting both voluntary and contractual bonuses for the
purpose of determining liability for the 13th month pay . . . ."

• Tested against this norm, it becomes clear that the year-end

productivity bonus granted by petitioner to private respondents
pursuant to their CBA is, in legal contemplation, an integral part
of their 13th month pay, notwithstanding its conditional nature.
When, therefore, petitioner, in order to comply with the
mandate of PD No. 851, credited the year-end productivity
bonus as part of the 13th month pay and adopted the procedure
of paying only the difference between said bonus and 1/12th of
the worker's yearly basic salary, it acted well within the letter
and spirit of the law and its implementing rules. For in the event
that "an employer pays less than one- twelfth of the employees'
basic salary, all that said employer is required to do under the
law is to pay the difference."
• To hold otherwise would be to impose an unreasonable and
undue burden upon those employers who had demonstrated
their sensitivity and concern for the welfare of their employees.
A contrary stance would indeed create an absurd situation
whereby an employer who started giving his employees the
13th month pay only because of the unmistakable force of the
law would be in a far better position than another who, by his
own magnanimity or by mutual agreement, had long been
extending to his employees the benefits contemplated under PD
No. 851, by whatever nomenclature these benefits have come
to be known. Indeed, PD No. 851, a legislation benevolent in its
purpose, never intended to bring about such oppressive
situation.
 UNIVERSAL CORN PRODUCTS v. NLRC
August 21, 1987 | Sarmiento | 13th month pay
DIGEST MADE BY: Seph, pamana
CLUE:
PETITIONER: Universal Corn Products (A Division Of Universal
Robina Corporation)
RESPONDENTS: The National Labor Relations Commission and
Jose Armas, Engracio Asis, Austerinao, Eleuterio, Faustino
Atienza, Mario Altares, et al (there’s like 50)
DOCTRINE:
The payment of 13th month pay as required under PD 851 does NOT
preclude the payment of the 7-day bonus provided in the CBA, the
former being mandated by law, while the latter an obligation created
by the contract between the management and workers.
RECIT- READY SUMMARY:
Petitioner and Union entered into a CBA granting all regular workers
with at least 1 year of continuous service a Christmas bonus equivalent
to regular wages for 7 working days (1972).
The CBA was good for 3 years (until 1974) but later on expired without
being renewed.
In 1979, the parties entered into an addendum stipulating wage
increases from 1974-1977 and simultaneously entered into a CBA for
the years of 1979-1981. Both the addendum and the new CBA did NOT
refer to the Christmas bonus paid but only with salary adjustments.
Petitioner asserts that the new CBA deliberately excluded the grant of
Christmas bonus with the enactment of PD 851 since it had already
been paying 13th-month pay pursuant to said PD.
For failure of the petitioner to pay the 7-day Christmas bonus for 1975-
1978 in accordance with the 1972 CBA, the union went to the LA for
relief.
LA: the payment of the 13th month pay precluded the payment of
further Christmas bonus
NLRC: reversed LA; directed petitioner to pay the union their 7-day
wage bonus in accordance with the 1972 CBA from 1975 to 1978.
Petitioner invokes NFSW v. Ovejera: that PD 851, the 13th-month
pay law, does not cover employers already paying their employees
an "equivalent" to the 13th month pay.
ISSUE – W/N payment of 13th month pay precludes payment of 7-day
bonus provided in the CBA – NO
Held - If the Christmas bonus was included in the 13th month pay,
then there would be no need for having a specific provision on
Christmas bonus in the CBA. But it did not provide for a bonus in
graduated amounts depending on the length of service of the
employee. Thus, the intention is for the seven-day bonus here
demanded to be considered in addition to the legal requirement
(13th month pay). The Christmas bonus provided in the CBA accords
a reward for loyalty , to certain employees. This is evident from the
stipulation granting the bonus in question to workers "with at least 1
year of continuous service." This is a purpose not found in PD 851.
FACTS:
1. Petitioner and the Universal Corn Products Workers Union
entered into a collective bargaining agreement:
a. “COMPANY agrees to grant ALL regular workers within
the bargaining unit, with at least one (1) year of
continuous service , a Christmas bonus equivalent to
the regular wages for seven (7) working days , effective
December 1972. The bonus shall be given to the
workers on the second week of December. In the event
 that the service of a worker is not continuous due to
factory shutdown, machine breakdown or prolonged
absences or leaves, the Christmas bonus shall be
prorated in accordance with the length of services that
worker concerned has served during the year.”
b. The agreement had a duration of 3 years , effective
June 1, 1971, or until June 1, 1974. But due to the
differences between the parties with respect to certain
economic issues, the CBA expired without being
renewed.
2. On June 1, 1979, the parties entered into an " addendum "
stipulating certain wage increases covering the years from 1974
to 1977 .
3. They also entered into a CBA for the years from 1979 to 1981
Like the "addendum," the new CBA did not refer to the
"Christmas bonus" theretofore paid but dealt only with salary
adjustments .
4. According to the petitioner, the new agreements deliberately
EXCLUDED the grant of Christmas bonus with the enactment of
PD 851 on December 16, 1975; that since 1975, it had been
paying its employees 13th-month pay pursuant to the Decree .
5. For failure of the petitioner to pay the 7-day Christmas bonus
for 1975 to 1978 inclusive, in accordance with the 1972 CBA,
the union went to the labor arbiter for relief.
6. LA: the payment of the 13th month pay precluded the payment
of further Christmas bonus
7. NLRC: reversed LA; directed petitioner to pay the union their 7-
day wage bonus in accordance with the 1972 CBA from 1975 to
1978.
a. It is clear that the company implemented the
aforequoted provision of the CBA in 1972, 1973 and
1974. Thus, the crediting of said benefit to the 13th
month pay cannot be sanctioned being contrary to
Section 10 of the Rules and Regulations Implementing
Presidential Decree No. 851. SEC 10.
i. “ Nothing herein shall be construed to authorize
any employer to eliminate , or diminish in any
way, supplements, or other employee benefits
or favorable practice being enjoyed by the
employee at the time of promulgation of this
issuance."
b. More so because the benefit was NOT magnanimously
extended by the company to its employees but was
obtained by the latter thru bargaining negotiations .
The CBA was the law between the parties and the
provisions thereof must be faithfully observed by them
during its effectivity. Note however that the same
parties entered into another 3-year CBA on June 11,
1979, which no longer provides for a 7-day wage
Christmas bonus. Thus, the parties agreed to
discontinue the privilege, which agreement should also
be respected.
ISSUE/S:
1.W/N payment of 13th month pay precludes payment of 7-day
bonus provided in the CBA - NO
RULING:
WHEREFORE, premises considered, the petition is hereby DISMISSED.
The Decision of the public respondent NLRC promulgated on February
11, 1982, and its Resolution dated March 23, 1982, are hereby
AFFIRMED. The temporary restraining order issued on May 19, 1982 is
LIFTED.
RATIO:
1. NO
● Ovejera (La Carlota) case does NOT apply. We apply instead
United CMC Textile Workers Union v. Valenzuela , a recent
decision
o If the Christmas bonus was included in the 13th month
pay, then there would be no need for having a specific
provision on Christmas bonus in the CBA. But it did not
provide for a bonus in graduated amounts depending
on the length of service of the employee.
 o The intention is clear therefore that the bonus provided claims thereon. The 1972 agreement is basis
in the CBA was meant to be IN ADDITION to the legal enough for such claims for the whole writing is
requirement . Why exclude the payment of the 1978 "'instinct with an obligation,' imperfectly
Christmas bonus and pay only the 1979-1980 bonus. expressed.
The classification of the company's workers in the CBA
according to their years of service supports the
allegation that the reason for the payment of bonus was
to give bigger award to the senior employees — a
purpose which is NOT found by P.D. 851 . A bonus
under the CBA is an obligation created by the contract
between the management and workers while the 13th
month pay is mandated by the law
● Thus, the seven-day bonus here demanded is considered "to be
in addition to the legal requirement."
● Although unlike the Valenzuela CBA , which took effect after the
promulgation of PD 851 in 1975, the subject agreement was
entered into as early as 1972, that is no bar to our application
of Valenzuela
o What is significant for us is the fact that, like the
Valenzuela agreement , the Christmas bonus provided
in the CBA accords a reward for loyalty , to certain
employees. This is evident from the stipulation granting
the bonus in question to workers "with at least 1 year
of continuous service." As we said in Valenzuela, this is
"a purpose not found in PD 851."
● RE: No CBA in force in 1974-1979
o It is claimed that as a consequence of the impasse
between the parties beginning 1974 through 1979, no
CBA was in force during those intervening years.
Hence, there is allegedly no basis for the money award
granted by the NLRC
o But under the 1972 CBA, "[i]f no agreement and
negotiations are continued, all the provisions of this
Agreement shall remain in full force up to the time a
new agreement is executed
▪ The fact, therefore, that the new agreements
are silent on the seven-day bonus demanded
should NOT preclude the private respondents'
 SAN MIGUEL CORPORATIONS v. INCIONG
February 24, 1981| De Castro, J.| 13th Month Pay
DIGEST MADE BY: Jeca
PETITIONER: San Miguel Corporation
RESPONDENTS: Hon. Amado G. Inciong, Deputy Minister of Labor and
Cagayan Coca-Cola Free Workers Union
DOCTRINE:
Under PD 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.
RECIT- READY SUMMARY:
Private respondent, Cagayan Coca-Cola Free Workers Union, herein,
filed a complaint against petitioner, San Miguel Corporation, alleging
failure or refusal of the latter to include in the computation of 13th-
month pay such items as sick, vacation or maternity leaves, premium
for work done on rest days and special holidays, including pay for
regular holidays and night differentials.
The crux of the present controversy is whether or not in the
computation of the 13th-month pay under PD 851, payments for sick,
vacation or maternity leaves, premium for work done on rest days and
special holidays, including pay for regular holidays and night
differentials should be considered. - NO
Section 2 of the IRR of PD 851 provides that 13th month pay shall mean
one twelfth (1/12) of the basic salary of an employee within a calendar
year; and that basic salary shall include all remunerations on earnings
paid by an employer to an employee for services rendered but may not
include cost-of living allowances granted pursuant to PD 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.
Under PD 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 PD 851, the following
compensations are deemed not part of the basic salary:
a) COLA granted pursuant to PD 525 and LOI 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 PD 851 issued by the then Labor Secretary Blas Ople,
overtime pay, earnings and other remunerations are excluded as part
of the basic salary and in the computation of the 13th-month pay.
The exclusion of cost-of-living allowances under PD 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 of all additions which may be in the form of
allowances or "fringe" benefits.
FACTS:
1. Cagayan Coca-Cola Free Workers Union, private respondent
herein, filed a complaint against San Miguel Corporation
(Cagayan Coca-Cola Plant), petitioner herein, alleging failure or
refusal of the latter to include in the computation of 13th-month
pay such items as sick, vacation or maternity leaves, premium
for work done on rest days and special holidays, including pay
for regular holidays and night differentials.
2. The crux of the present controversy is whether or not in the
computation of the 13th-month pay under PD 851, payments
for sick, vacation or maternity leaves, premium for work done
on rest days and special holidays, including pay for regular
holidays and night differentials should be considered.
3. Public respondent's consistent stand on the matter:
a. Since the effectivity of PD 851 is that "payments for sick
leave, vacation leave, and maternity benefits, as well
as salaries paid to employees for work performed on
rest days, special and regular holidays are included in
the computation of the 13th-month pay."
b. On its part, private respondent cited innumerable past
rulings, opinions and decisions rendered by then Acting
Labor Secretary Amado G. Inciong to the effect that, "in
computing the mandatory bonus, the basis is the total
gross basic salary paid by the employer during the
calendar year. Such gross basic salary includes:
i. regular salary or wage;
ii. payments for sick, vacation and maternity
leaves;
iii. premium for work performed on rest days or
holidays;
iv. holiday pay for worked or unworked regular
holiday; and
v. emergency allowance if given in the form of a
wage adjustment."
4. Petitioner, on the other hand, assails as erroneous the aforesaid
order, rulings and opinions;
a. vigorously contends that PD 851 speaks only of basic
salary as basis for the determination of the 13th-month
pay;
b. submits that payments for sick, vacation, or maternity
leaves, night differential pay, as well as premium paid
for work performed on rest days, special and regular
holidays do not form part of the basic salary; and
c. concludes that the inclusion of those payments in the
computation of the 13th-month pay is clearly not
sanctioned by PD 851.
ISSUE/S:
1. WON in the computation of the 13th-month pay, payments for
sick, vacation or maternity leaves, premium for work done on
rest days and special holidays, including pay for regular
holidays and night differentials should be considered.— NO
RULING:
WHEREFORE, the Orders of the Deputy Labor Minister are hereby set
aside and a new one entered as above indicated. The Temporary
Restraining Order issued by this Court is hereby made permanent. No
pronouncement as to costs.
1. NO
● The provision in dispute is Section 1 of PD 851 requires
employers to pay all their employees receiving a basic salary of
not more than P1,000 a month, regardless of the nature of the
employment, a 13th-month pay.
● Section 2 of the IRR of PD 851 provides:
o "a) Thirteenth-month pay shall mean one twelfth
(1/12) of the basic salary of an employee within a
calendar year;
o "b) Basic salary shall include all remunerations on
earnings paid by an employer to an employee for
services rendered but may not include cost-of living
allowances granted pursuant to PD 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."
● Under PD 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 IRR of PD 851, the following compensations are
deemed not part of the basic salary:
a. Cost-of-living allowances granted pursuant to PD 525
and Letter of 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 PD 851 issued by the then Labor Secretary Blas
Ople, overtime pay, earnings and other remunerations are
excluded as part of the basic salary and in the computation of
the 13th-month pay.
● The exclusion of cost-of-living allowances under PD 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 of all additions which may be in the form of
allowances or "fringe" benefits.
● Moreover, the Supplementary Rules and Regulations
Implementing PD 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.
● A cursory perusal of the old and new 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 so 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:
o "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 salary or basic salary, for
reason of which such is categorically excluded from the
definition of basic salary under the Supplementary Rules and
Regulations Implementing PD 851.
● In Article 93 of the same Code, paragraph.
o "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 that premium for special holiday which is at
least 30% of the regular wage is an additional compensation
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.
 PHILIPPINE DUPLICATORS, INC. V. NLRC
February 15, 1995 | J. Feliciano | 13th Month Pay
DIGEST MADE BY: Razon
CLUE: Productivity Bonuses vs. Commissions
PETITIONER: PHILIPPINE DUPLICATORS, INC.
RESPONDENTS: NATIONAL LABOR RELATIONS COMMISSION and
PHILIPPINE DUPLICATORS EMPLOYEES UNION-TUPAS
DOCTRINE:
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.
RECIT- READY SUMMARY:
Philippine Duplicators, Inc. pays its salesmen a small fixed or
guaranteed wage. The greater part of the latter’s wages or salaries
being composed of the sales or incentive commissions earned on actual
sales of duplicating machines closed by them. Thus, the sales
commissions received for every duplicating machine sold constituted
part of the basic compensation or remuneration of the salesmen of the
Petitioner Company for doing their job.
The Labor Arbiter directed Petitioner Duplicators to pay 13th month pay
to private respondent employees computed on the basis of their fixed
wages plus sales commission.
Sec. 4 of the Supplementary Rules and Regulations Implementing PD
No. 851 (Revised Guidelines Implementing 13th Month Pay) provides
that overtime pay, earnings and other remuneration which are
not part of the basic salary shall not be included in the
computation of the 13th month pay.
Petitioner Corporation contends that their sales commission should not
be included in the computation of the 13th month pay invoking the
consolidated cases of Boie-Takeda Chemicals, Inc. vs Hon. Dionisio dela
Serna and Philippine Fuji Xerox Corp. vs Hon. Crecencio Trajano, where
the so-called commissions of medical representatives of Boie-Takeda
Chemicals and rank-and-file employees of Fuji Xerox Co. were not
included in the term “basic salary” in computing the 13th month pay.
The issue in this case is whether or not the sales commissions
comprising a predetermined percent of the selling price of the
goods are included in the computation of the 13th month pay.
The court held YES. These commissions which are an integral part of
the basic salary structure of the Philippine Duplicator’s
employees-salesmen are not overtime payments, nor profit-sharing
payments nor any other fringe benefit. Thus, salesmen’s commissions
comprising a predetermined percent of the selling price of the goods
were properly included in the term “basic salary” for purposes of
computing the 13th month pay.
Commissions of medical representatives of Boie-Takeda Chemicals and
rank-and-file employees of Fuji Xerox Co. were not included in the term
“basic salary” because these were paid as “productivity bonuses” which
is not included in the computation of 13th month pay.
FACTS:
1. On 11 November 1993, the Supreme Court, through its Third
Division, rendered a decision dismissing the Petition for
Certiorari filed by petitioner Philippine Duplicators, Inc.
(Duplicators). The Court upheld the decision of public
respondent 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 the Motion for
Reconsideration by petitioner.
2. 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 to 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.
3. 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 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.
4. Petitioner Philippine Duplicators, Inc. pays its salesmen a small
fixed or guaranteed wage; the greater part of the salesmen's ISSUE/S:
wages or salaries being composed of the sales or incentive
commissions earned on actual sales closed by them. 1. WON the sales commissions comprising a predetermined
5. The sales commissions received for every duplicating machine percent of the selling price of the goods are included in the
sold constituted part of the basic compensation or computation of the 13th month pay — YES
remuneration of the salesmen of Philippine Duplicators for
doing their job. The portion of the salary structure representing RULING:
commissions simply comprised an automatic increment to the
monetary value initially assigned to each unit of work rendered ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for
by a salesman. Especially significant here also is the fact that Reconsideration and the (b) aforesaid Second Reconsideration are
the fixed or guaranteed portion of the wages paid to the DENIED for lack of merit. No further pleadings will be entertained.
Philippine Duplicators' salesmen represented only
15%-30% of an employee's total earnings in a year. We RATIO:
note the following facts on record: 1. YES
 ● 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 predetermined percent of the selling price of the goods sold
by each salesman, were properly included in the term
"basic salary" for purposes of computing their 13th
month pay.
BOIE-TAKEDA VS. DUPLICATORS CASE
● 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."
o 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.
o 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.
● 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.
o 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.
o 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.
RE: BONUSES
● Philippine Education Co., Inc. (PECO) v. Court of Industrial
Relations: 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… 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..."
 ● Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual
Benefit Association: 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…
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…”
● Traders Royal Bank v. National Labor Relations Commission: 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.). 'It is something given in
addition to what is ordinarily received by a strictly due the
recipient.' The granting of a bonus is basically a
management prerogative which cannot be forced upon
the employer 'who may not be obliged to assume the onerous
burden of granting bonuses or other benefits aside from the
employee's basic salaries or wages. (Kamaya Point Hotel v.
NLRC)'
PRODUCTIVITY BONUSES VS. SALES COMMISSIONS
● The SC recognizes 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.
SECOND PARAGRAPH OF SECTION 5(A) OF THE REVISED GUIDELINES
IMPLEMENTING 13TH MONTH PAY
● 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 cased 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.
● The statement of the Second Division in Boie-Takeda declaring
null and void the second paragraph of Section 5(a) of the
Revised Guidelines Implementing the 13th Month Pay issued by
former Labor Secretary Drilon, is properly understood as
holding that the 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.
 BOIE-TAKEDA CHEMICALS v. DE LA SERNA
Dec. 10, 1993 | J. Narvasa | 13 Month Pay
th
DIGEST MADE BY: Cholo Rabago
CLUE: Companies didn’t consider commissions when computing 13 th
month pay
PETITIONER:
GR 92174: BOIE-TAKEDA CHEMICALS, INC.
GR 102552: PHILIPPINE FUJI XEROX CORP.
RESPONDENTS:
GR 92174: HON. DIONISIO C. DE LA SERNA, Acting Secretary of the
Department of Labor and Employment
GR 102552: CRESENCIANO B. TRAJANO, Undersecretary of the
Department of Labor and Employment, and PHILIPPINE FUJI XEROX
EMPLOYEES UNION
DOCTRINE:
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."
RECIT- READY SUMMARY:
Routine Inspections were conducted by DOLE officers in the premises of
Boie-Takeda Chemicals Inc. and Philippine Fuji Xerox Corp. pursuant to
Inspection Authorities.
Notices of Inspection Results were issued by the DOLE officers, where it
was found that both companies made an underpayment of the 13th
month pay of its medical representatives and salesmen from 1986-1988.
The underpayment was due to the fact that the companies did not
consider commissions in the computation of the 13th month pay to be
given.
Boie-Takeda argued that commissions are not regular in nature since if
no sales are made by a representative, then no commission will be paid.
DOLE Regional Director Piezas ordered both companies to pay their
employees for the deficiency. The appeals / MRs of both companies were
denied, so they filed cases with the SC which were consolidated.
Petitioners maintain that under P. D. 851 (13th Month Pay Law), the 13th
month pay is based solely on basic salary. 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.
In addition, they argue that the Revised Guidelines on the
Implementation of the 13th Month Pay Law issued by then Secretary
Drilon, which provided for the inclusion of commissions in the 13th month
pay, were issued in excess of the statutory authority conferred by P.D.
851.
Issue
WON commissions should be included in the computation of 13th month
pay – NO
WON the Revised Guidelines on the Implementation of the 13th Month
Pay Law issued by Secretary Drilon providing for the inclusion of
commissions in the 13th month pay went beyond the law it was trying
to implement – YES
Ruling 1
“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. It means the salary
than an employee is receiving at without taking into consideration any
extra compensation to which he might be entitled for extra work.
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."
Since commissions are not part of basic salary, then they should not be
considered in the computation of 13th month pay
Ruling 2
In including commissions in the computation of the 13th month pay, 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.
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.
FACTS:
GR 92174
1. A routine inspection was conducted in the premises of petitioner
Boie-Takeda Chemicals, Inc. by Labor and Development Officer
Ramos under an Inspection Authority
2. 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 on Boie-Takeda requiring it to effect
restitution or correction of the underpayment of 13th month pay
for the year(s) 1986, 1987 and 1988 of its Medical
Representatives within 10 days from Notice.
3. Boie-Takeda wrote the Labor Department contesting the Notice.
It argued that "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.
4. DOLE Regional Director Piezas issued an order directing Boie-
Takeda to pay its medical representatives and managers P565,
746.47 representing underpayment of 13th month pay for 1986-
1988.
5. Boie-Takeda filed an MR, which was treated as an appeal. Acting
Labor Secretary Dionisio de la Serna affirmed the Regional
Director’s Order with modification.
6. Boie-Takeda filed a petition for certiorari with the SC
GR 102552
7. A Routine Inspection was conducted in the premises of Philippine
Fuji Xerox Corp. pursuant to a Routine Inspection Authority.
8. In his Notice of Inspection Results, Senior Labor and
Employment Officer Torres noted that Philippine Fuji Xerox Corp.
committed underpayment of 13th month pay for 62 employees
from 1986-1988.
9. Philippine Fuji Xerox was requested to effect rectification and/or
restitution of the noted violation within 5 days from Notice.
10. Conciliation efforts between Philippine Fuji Xerox and the
Philxerox Employees Union proved futile, so they were required
to file position papers before DOLE.
11. Regional Director Piezas issued an order requiring Philippine Fuji
Xerox to restitute to its salesmen the portion of the 13th month
pay which was not paid to them.
12. Philippine Fuji Xerox’s appealed but was denied.
13. Philippine Fuji Xerox filed a petition for certiorari with the SC.
14. Both petitions were consolidated
15. Petitioners maintain that under P. D. 851 (13th Month Pay Law),
the 13th month pay is based solely on basic salary. They claim
that based on the law, the IRR, the Supplementary Rules, and
SC 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.
 16. This being the case, the Revised Guidelines on the
Implementation of the 13th Month Pay Law issued by then
Secretary Drilon, which provided for the inclusion of commissions
in the 13th month pay, were issued in excess of the statutory
authority conferred by P.D. 851.
ISSUE/S:
1. WON commissions should be included in the computation of 13th
month pay – NO
2. WON the Revised Guidelines on the Implementation of the 13th
Month Pay Law issued by Secretary Drilon providing for the
inclusion of commissions in the 13th month pay went beyond the
law it was trying to implement - YES
RULING:
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 16,
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.
RATIO:
1. NO
• 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:
o a) Cost-of-living allowances granted pursuant to
Presidential Decree 525 and Letter of Instructions No.
174;
o b) Profit-sharing payments;
o 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, 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 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 catchall 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 additions which may be in the form of allowances or
'fringe' benefits.
• 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. They are
deemed not part of the basic salary and shall not be considered
in the computation of the 13th-month pay.
• Based on the Labor Code, overtime pay and special holiday pay
are considered additional pay other than basic salary and are not
considered in the computation of 13th month pay.
• “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. It means the salary
than an employee is receiving at without taking into
consideration any extra compensation to which he might
be entitled for extra work.
• 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."
• Since commissions are not part of basic salary, then they should
not be considered in the computation of 13th month pay

2. YES
• 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.
• 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.
 Philippine Agricultural Commercial and industrial
Workers Union (PACIWU)-TUCP vs. NLRC and
Vallacar Transit, Inc.
14 August 1995 | J. Kapunan | 13th month pay
DIGEST MADE BY: Brian Salvador
CLUE:
PETITIONER: Philippine Agricultural Commercial and industrial Workers
Union (PACIWU)-TUCP
RESPONDENTS: National Labor Relations Commission and Vallacar
Transit, Inc.
DOCTRINE:
Employees who are paid in a fixed or guaranteed wage plus
commission are also entitled to the mandated 13th month pay, based
on their total earning(s) during the calendar year, i.e., on both their
fixed and guaranteed wage and commission
RECIT- READY SUMMARY:
Philippine Agricultural Commercial and industrial Workers Union
(PACIWU)-TUCP (Petitioner Union) is the exclusive bargaining agent of
the rank and file employees of Vallacar transit (respondent). Petitioner
Union, in behalf of the drivers and conductors of Vallacar transit, filed a
complaint before the NLRC for the payment of 13th month pay on
the ground that although said drivers and conductors are compensated
on a "purely commission" basis as described in their Collective Bargaining
Agreement (CBA), they are automatically entitled to the basic
minimum pay mandated by law should said commission be less than
their basic minimum for eight (8) hours work.
Respondent contended that since said drivers and conductors are
compensated on a purely commission basis, they are not entitled to 13th
month pay pursuant to the exempting provisions enumerated in
paragraph 2 of the Revised Guidelines on the Implementation of
the Thirteenth Month Pay Law.
Pertinent provision:
○ 13th month pay shall mean one-twelfth (1/12) of the basic salary of
an employee within a calendar year.
○ basic salary shall include all remunerations or earnings paid by an
employer to an employer 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.
Respondent further contended that under the CBA, drivers and
conductors paid on a purely commission are not legally entitled to 13th
month pay. Said CBA, being the law between the parties, it must
be respected. The Labor Arbiter and NLRC both dismissed the complaint
hence the present petition
The issue in the case is WON the drivers and conductors entitled to 13th
month pay? The SC said yes.
The SC stated that every employee receiving a commission in addition
to a fixed or guaranteed wage or salary, is entitled to a 13th month pay.
The Minister of Labor and Employment (MOLE) used an explanatory note
(MOLE Explanatory Bulletin No. 86-12), stating:
“Employees who are paid in a fixed or guaranteed wage plus
commission are also entitled to the mandated 13th month pay, based
on their total earning(s) during the calendar year, i.e., on both their fixed
and guaranteed wage and commission.”
In this case, while the bus drivers and conductors of respondent company
are considered by the latter as being compensated on a commission
basis, they are not paid purely by what they receive as
commission. As admitted by respondent company, the said bus drivers
and conductors are automatically entitled to the basic minimum
pay mandated by law in case the commissions they earned be
less than their basic minimum for eight (8) hours work.
In sum, the 13th month pay of the bus drivers and conductors who are
paid a fixed or guaranteed minimum wage in case their commissions be
less than the statutory minimum, and commissions only in case where
the same is over and above the statutory minimum, must be equivalent
to one-twelfth (1/12) of their total earnings during the calendar year.
FACTS:
1. This is a petition for certiorari seeking to reverse the decision of
the National Labor Relations Commission (NLRC) in NLRC Case
No. V-0159-92 which dismissed the appeal of petitioner PACIWU
union (Petitioner Union) and in effect, affirmed the decision of
the Labor Arbiter ordering the dismissal of the complaint of
petitioner for payment of 13th month pay to the drivers and
conductors of respondent company.
2. Petitioner Union is the exclusive bargaining agent of the rank and
file employees of Vallacar transit (respondent).
3. Petitioner Union, in behalf of the drivers and conductors of
Vallacar transit, filed a complaint before the NLRC for the
payment of 13th month pay on the ground that although said
drivers and conductors are compensated on a "purely
commission" basis as described in their Collective Bargaining
Agreement (CBA), they are automatically entitled to the basic
minimum pay mandated by law should said commission be less
than their basic minimum for eight (8) hours work.
4. Vallacar Transit, Inc. contended that since said drivers and
conductors are compensated on a purely commission basis, they
are not entitled to 13th month pay pursuant to the exempting
provisions enumerated in paragraph 2 of the Revised Guidelines
on the Implementation of the Thirteenth Month Pay Law. It
further contended that under the CBA, drivers and conductors
paid on a purely commission are not legally entitled to 13th
month pay. Said CBA, being the law between the parties, it must
be respected. The Labor Arbiter and NLRC both dismissed the
complaint hence the present petition.
ISSUE/S:
1. WON the drivers and conductors are entitled to 13th month pay?
- YES
RULING:
WHEREFORE, the petition is hereby GRANTED. The decision of
respondent National Labor Relations Commission is hereby REVERSED
and SET ASIDE. The case is remanded to the labor Arbiter for the proper
computation of 13th month pay
RATIO:
1. YES
● Memorandum Order No. 28 issued by President. Corazon
Aquino modified the law to the extent that all employers are
required to pay all their rank-and-file employees a 13th
month pay not later than December 24 of every year.
o The Minister of Labor and Employment (MOLE) used
an explanatory note (MOLE Explanatory Bulletin No.
86-12), stating:
“Employees who are paid in a fixed or
guaranteed wage plus commission are also
entitled to the mandated 13th month pay, based
on their total earning(s) during the calendar
year, i.e., on both their fixed and guaranteed
wage and commission.”
• In the case at bench, while the bus drivers and conductors of
respondent company are considered by the latter as being
compensated on a commission basis, they are not paid purely by
what they receive as commission.
o As admitted by respondent company, the said bus
drivers and conductors are automatically entitled to the
basic minimum pay mandated by law in case the
commissions they earned be less than their basic
minimum for 8 hours work. Evidently therefore, the
commissions form part of the wage or salary of the bus
drivers and conductors. A contrary interpretation would
allow an employer to skirt the law and would result in an
absurd situation where an employee who receives a
guaranteed minimum basic pay cannot be entitled to a
13th month pay simply because he is technically referred
 to by his employer per the CBA as an employee ○ basic salary shall include all remunerations or earnings paid by
compensated on a purely commission basis. Such would an employer to an employer for services rendered, but may not
be a narrow interpretation of the law, certainly not in include cost of living allowances granted pursuant to Presidential
accord with the liberal spirit of our labor laws. Moreover, Decree No. 525 or Letter of Instructions No. 174, profit-sharing
what is controlling is not the label attached to the payments, and all allowances and monetary benefits which are
remuneration that the employee receives but the nature not considered or integrated as part of the regular or basic salary
of the remuneration and the purpose for which the 13th of the employee at the time of the promulgation of the Decree
month pay was given to alleviate the plight of the on December 16, 1975.
working masses who are receiving low wages
• Commission is the recompense, compensation, reward of an
employee, agent, salesman, executor, trustee, receiver, factor,
broker or bailee, when the same is calculated as a percentage on
the amount of his transactions or on the profit of the principal.
While said commissions may be in the form of incentives or
encouragement to inspire said bus drivers and conductors to put
a little more zeal and industry on their jobs, still, it is safe to say
that the same are direct remunerations for services rendered,
given the small remuneration they receive for the services they
render9 which is precisely the reason why private respondent
allowed the drivers and conductors a guaranteed minimum
wage. The conclusion is ineluctable that said commissions are
part of their salary.
• In sum, the 13th month pay of the bus drivers and conductors
who are paid a fixed or guaranteed minimum wage in case their
commissions be less than the statutory minimum, and
commissions only in case where the same is over and above the
statutory minimum, must be equivalent to one-twelfth (1/12) of
their total earnings during the calendar year.

Legal provisions cited:

● The 13th Month Pay Law states:

○ Sec. 1. All employers are hereby required to pay all their
employees receiving a 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.

● Under the IRR issued by the Secretary of Labor and Employment, 13th
month pay and basic salary are defined:
○ 13th month pay shall mean one-twelfth (1/12) of the basic
salary of an employee within a calendar year;
 DAVID VS MACASIO
July 2, 2014 | Brion, J. |
13th
month pay
DIGEST MADE BY: Ara (from pamana)
CLUE: (repeated case under concept and definition of wages thus here
is focused only on 13th month pay issue) butcher; pakyaw/ task basis
PETITIONER: ARIEL L. DAVID, doing business under the name and style
"YIELS HOG DEALER”
RESPONDENTS: JOHN G. MACASIO
DOCTRINE:
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 enumerates the exemptions from the
coverage of 13th month pay benefits. Under Section 3 (e), "employers
of those who are paid on . . . task basis, and those who are paid a fixed
amount for performing a specific work, irrespective of the time
consumed in the performance thereof" are exempted.
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.
RECIT- READY SUMMARY:
Macasio filed a complaint against David (Yiels Hog Dealer) for non-
payment of overtime pay, holiday pay and 13th month pay. David argued
that he hired Macasio as a butcher on “pakyaw” or taks basis who is,
therefore, not entitled to the said benefit, and that Macasio is paid the
fixed amount of P700 per engagement regardless of the time consumed
in the performance of his job. Macasio, on the other hand, alleged that
David exercised effective control and supervision over his work and that
the P700 indicates a daily-wage method of payment and affirms his
regular employment status.
The issues is W/N Macasio is employed in a task basis and is
therefore not, qualified avail of overtime, holiday, 13th -month
pay and payment for service incentive leave.
LA and NLRC ruled against Macasio. CA reversed the ruling. The Court
held that 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." 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.
RE: 13TH MONTH PAY (see doctrine)
Generally, 13th month benefits cover all employees.
EXCEPTION: those paid on task basis and those paid a fixed amount for
performing a specific work irrespective of the time consumed in the
performance thereof. Task based employees not entitled to 13th
month pay
FACTS:
1. In January 2009, Macasio filed before the LA a complaint 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).
2. Macasio alleged before the LA that:
a. He had been working as a butcher for David since
January 6, 1995.
 b. 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 ₱700.00, which was increased from
₱600.00 in 2007, ₱500.00 in 2006 and ₱400.00 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.
c. David employs about twenty-five (25) butchers and
delivery drivers.
d. David issued a Certificate of Employment in his favor
which placed the date of his employment, albeit
erroneously, in January 2000
3. In his defense,David claimed that:
a. He started his hog dealer business in 2005 and that he
only has ten employees.
b. He hired Macasio as a butcher or chopper on "pakyaw"
or task basis who is, therefore, not entitled to overtime
pay, holiday pay and 13th month pay pursuant to the
provisions of the Implementing Rules and Regulations
(IRR) of the Labor Code.
c. 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 ₱700.00
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.
d. He issued the Certificate of Employment, upon Macasio’s
request, only for overseas employment purposes.
4. Labor Arbiter dismissed Macasio’s claim for lack of merit. Gave
credence to David’s claim that he engaged Macasio on "pakyaw"
or task basis.
5. NLRC affirmed the LA ruling:
a. David did not require Macasio to observe an eight hour
work schedule to earn the fixed ₱700.00 wage
b. 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.
c. 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 13th month pay under the Rules
and Regulations Implementing the 13th month pay law.
6. CA: Reversed the ruling of NLRC and LA. Macasio entitled to his
monetary claims
a. 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."
b. 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 fixed
working schedule that starts at 10:00 p.m
ISSUE/S:
1. WON Macasio is entitled to 13th Month Pay – NO
2. WON Macasio is employed in a task basis -YES.
3. WON Macasio is also a field personnel - NO
4. WON Macasio is entitled to SIL and Holiday Pay - YES.
RULING:
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.
WHEREFORE, The decision of the lower court is reversed, and ON SIL and Holiday pay:
judgment is hereby rendered plaintiff for the sum of P3,290.25, and for Labor code: exempts field personnels ,xxxx, and workers who are paid
the costs of both instances. by results.
IRR: exempts Field personnel and other employees whose time and
performance is unsupervised by the employer including those who are
RATIO: engaged on task or contract basis ,XXX.
1. NO
• With respect to the payment of 13th month pay however, we find In determining whether workers engaged on "pakyaw" or task basis" is
that the CA legally erred in finding that the NLRC gravely abused entitled to holiday and SIL pay, the presence (or absence) of employer
its discretion in denying this benefit to Macasio. supervision as regards the worker's time and performance is the key. If
• The governing law on 13th month pay is PD No. 851 the worker is simply engaged on pakyaw or task basis, then the general
• As with holiday and SIL pay, 13th month pay benefits generally rule is that he is entitled to a holiday pay and SIL pay unless exempted
cover all employees; an employee must be one of those from the exceptions specifically provided under Article 94 (holiday pay)
expressly enumerated to be exempted. Section 3 of the Rules and Article 95 (SIL pay) of the Labor Code . However, if the worker
and Regulations Implementing P.D. No. 851 enumerates the engaged on pakyaw or task basis also falls within the meaning of "field
exemptions from the coverage of 13th month pay benefits. personnel" under the law, then he is not entitled to these monetary
• Under Section 3 (e), "employers of those who are paid on . . benefits.
. task basis, and those who are paid a fixed amount for
performing a specific work, irrespective of the time
consumed in the performance thereof" 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.
*this is just really the portion itself in the full text that tackled the 13th
month pay

OTHER ISSUES
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.

In this case, David confuses engagement on pakyaw or task basis with

the lack of employment relationship. 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 (having passed the 4-fold test) is David's

employee, albeit engaged on "pakyaw" or task basis.