Title II

WAGES

Chapter I

PRELIMINARY MATTERS

Art. 97. Definitions. As used in this Title:

a. “Person” means an individual, partnership, association, corporation, business trust, legal

representatives, or any organized group of persons.

b. “Employer” includes any person acting directly or indirectly in the interest of an employer in relation to
an employee and shall include the government and all its branches, subdivisions and instrumentalities,
all government-owned or controlled corporations and institutions, as well as non-profit private
institutions, or organizations.

c. “Employee” includes any individual employed by an employer.

d. “Agriculture” includes farming in all its branches and, among other things, includes cultivation and
tillage of soil, dairying, the production, cultivation, growing and harvesting of any agricultural and
horticultural commodities, the raising of livestock or poultry, and any practices performed by a farmer
on a farm as an incident to or in conjunction with such farming operations, but does not include the
manufacturing or processing of sugar, coconuts, abaca, tobacco, pineapples or other farm products.

e. “Employ” includes to suffer or permit to work.

f. “Wage” paid to any employee shall mean the remuneration or earnings, however designated, capable
of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair and reasonable value, as determined by the
Secretary of Labor and Employment, 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.

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.

DEPARTMENT ORDER NO. 174

RULES IMPLEMENTING ARTICLES 106-109 OF THE LABOR CODE, AS AMENDED

By virtue of the power vested in the Secretary of Labor and Employment under Articles 5 and 106 to 109 of
the Labor Code of the Philippines, as amended, the following regulations governing contracting and
subcontracting arrangements are hereby issued:
Section 1. Guiding Principle. Non-permissible forms of contracting and subcontracting arrangements
undermine the Constitutional and statutory right to security of tenure of workers.

Section 2. Coverage. These Rules shall apply to all parties in an arrangement where employer-employee
relationship exists.

Contractors and subcontractors referred to in these Rules are prohibited from engaging in recruitment and
placement activities as defined in Article 13(b) of the Labor Code, whether local or overseas employment.

Section 3. Definition of terms. The following terms, as used in these Rules, shall mean:

a) “Bond” – refers to the bond under Article 108 of the Labor Code that the principal may require from the
contractor to be posted equal to the cost of labor under contract.

b) “Cabo” – refers to the person or group of persons or to a labor group which, under the guise of a labor
organization, cooperative or any entity, supplies workers to an employer, with or without any monetary or other
consideration, whether in the capacity of an agent of the employer or as an ostensible independent contractor.

c) “Contracting” or “Subcontracting” – refers to an arrangement whereby a principal agrees to farm out to a

contractor the performance or completion of a specific job or work within a definite or predetermined period,
regardless of whether such job or work is to be performed or completed within or outside the premises of the
principal.

d) “Contractor” – refers to any person or entity engaged in a legitimate contracting or subcontracting agreement
providing services for a specific job or undertaking farmed out by principal under a Service Agreement.

e) “Contractor’s employee” – refers to employee of the contractor hired to perform or complete a job or work
farmed out by the principal pursuant to a Service Agreement with the latter.

f) “In-house agency” – refers to a contractor which is owned, managed, or controlled directly or indirectly by
the principal or one where the principal owns/represents any share of stock, and which operates solely or mainly
for the principal.

g) “In-house cooperative” – refers to a cooperative which is managed, or controlled directly or indirectly by the
principal or one where the principal or any of its officers owns/represents any equity or interest, and which
operates solely or mainly for the principal.

h) “Labor-only contracting” – refers to arrangement where the contractor or subcontractor merely recruits,
supplies or places workers to perform a job or work for a principal and the elements enumerated in Section 5
hereunder are present.

h) “Principal” – refers to any natural or juridical entity, whether an employer or not, who puts out or farms out
a job or work to a contractor.

j) “Service Agreement” – refers to the contract between the principal and contractor containing the terms and
conditions governing the performance or completion of a specific job or work being farmed out for a definite or
predetermined period.

k) “Solidary liability” – refers to the liability of the principal, pursuant to the provision of Article 109 of the Labor
Code, as direct employer together with the contractor for any violation of the Labor Code.
It also refers to the liability of the principal, in the same manner and extent that heshe is liable to his/he direct
employees, to the extent of the work performed under the contract when the contractor fails to pay the wages
of his/her employees, as provided in Article 106 of the Labor Code, as amended.

l) “Substantial Capital” – refers to paid-up capital stock/shares at least Five Million Pesos (P5,000,000.00) in the
case of corporations, partnerships and cooperatives; in the case of single proprietorship, a net worth of at least
Five Million Pesos (P5,000,000.00).

Section 4. Regulation of Contracting or Subcontracting. The Secretary of Labor and Employment shall
regulate contracting and subcontracting arrangement by absolutely prohibiting labor-only contracting, and
restricting job contracting allowed under the provisions of the Labor Code, as amended.

Section 5. Absolute Prohibition against Labor-only Contracting. Labor-only contracting, which is totally
prohibited, refers to an arrangement where:

(a) i. The contractor or subcontractor does not have substantial capital, or

• ii. The contractor or subcontractor does not have investments in the form of tools, equipment,
machineries, supervision, work premises, among others, and

• iii. The contractor’s or subcontractor’s employees recruited and placed are performing activities which
are directly related to the main business operation of the principal;

or

(b) The contractor or subcontractor does not exercise the right to control over the performance of the work of
the employees.

Section 6. Other Illicit Forms of Employment Arrangements. In addition to Section 5 of these Rules, the
following are hereby declared prohibited for being contrary to the law or public policy:

a) When the principal farms out work to a “Cabo”.

b) Contracting out of job or work through an in-house agency.

c) Contracting out of job or work through an in-house cooperative which merely supplies workers to the
principal.

d) Contracting out of a job or work by reason of a strike or lockout whether actual or imminent;

e) Contracting out of a job or work being performed by union members and such will interfere with, restrain or
coerce employees in the exercise of their rights to self-organization as provided in Article 259 of the Labor Code,
as amended.

f) Requiring the contractor’s/subcontractor’s employees to perform functions which are currently being
performed by the regular employees of the principal.

g) Requiring the contractor’s/subcontractor’s employees to sign, as a precondition to employment or continued

employment, an antedated resignation letter; a blank payroll; a waiver of labor standards including minimum
wages and social or welfare benefits; or a quitclaim releasing the principal or contractor from liability as to
payment of future claims; or require the employee to become member of a cooperative;

h) Repeated hiring by the contractor/subcontractor of employees under an employment contract of short

duration.

i) Requiring employees under contracting/subcontracting arrangements to sign a contract fixing the period of
employment to a term shorter than the term of the Service Agreement, unless the contract is divisible into
phases for which substantially different skills are required and this is made known to the employee at the time
of engagement.

j) Such other practices, schemes or employment arrangements designed to circumvent the right of workers to
security of tenure.

Section 7. When principal is deemed the direct employer of the contractor’s or subcontractor’s
employees. In the event that there is a finding that the contractor or subcontractor is engaged in labor-only
contracting under Section 5 and other illicit forms of employment arrangements under Section 6 of these Rules,
the principal shall be deemed the direct employer of the contractor’s or subcontractor’s employees.

Section 8. Permissible Contracting or Subcontracting Arrangements. Notwithstanding Sections 5 and 6

hereof, contracting or subcontracting shall only be allowed if all the following circumstances occur:

• a) The contractor or subcontractor is engaged in a distinct and independent business and undertakes
to perform the job or work on its own responsibility, according to its own manner and method;

• b) The contractor or subcontractor has substantial capital to carry out the job farmed out by the
principal on his account, manner and method, investment in the form of tools, equipment, machinery
and supervision;

• c) In performing the work farmed out, the contractor or subcontractor is free from the control and/or
direction of the principal in all matters connected with the performance of the work except as to the
result thereto; and

• d) The Service Agreement ensures compliance with all the rights and benefits for all the employees of
the contractor or subcontractor under the labor laws.

Section 9. Solidary Liability. In the event of violation of any provision of the Labor Code, including the failure
to pay wages, there exists a solidary liability on the part of the principal and the contractor for purposes of
enforcing the provisions of the Labor Code and other social legislations, to the extent of the work performed
under the employment contract.

Section 10. Rights of Contractor’s/ Subcontractor’s Employees. All contractor’s/ subcontractor’s employees,
shall be entitled to security of tenure and all the rights and privileges as provided for in the Labor Code, as
amended, to include the following:

• a) Safe and healthful working conditions;

• b) Labor standards such as but not limited to service incentive leave, rest days, overtime pay, holiday
pay, 13thmonth pay, and separation pay;
 • c) Retirement benefits under the SSS or retirement plans of the contractor/subcontractor;

• d) Social security and welfare benefits; and

• e) Self-organization, collective bargaining and peaceful concerted activities including the right to strike.

Section 11. Required Contracts under these Rules.

a) Employment contract between the contractor/subcontractor and its employees. Notwithstanding any oral or
written stipulations to the contrary, the contract between the contractor/subcontractor and its employees shall
be governed by the provisions of Articles 294 and 295 of the Labor Code, as amended, including the provisions
on general labor standards. It shall include the following stipulations:

• i. The specific description of the job or work to be performed by the employee; and

• ii. The place of work and terms and condition of employment, including a statement of the wage rate
applicable to the individual employee.

b) Service Agreement between the principal and the contractor. The Service Agreement shall include the
following:

• i. The specific description of the job or work being subcontracted, including its term or duration;

• ii. The place or work and terms and conditions governing the contracting arrangement, to include the
agreed amount of the contracted job or work as well as the standard administrative fee of not less
than ten percent (10%) of the total contract cost; and

• iii. A provision on the issuance of the bond/s as defined in Section 3(a) renewable every year.

Section 12. Effect of Violation of the Provisions on the Rights of Contractor’s Employees and Required
Contracts. A finding of violation of either Sections 10 or 11 hereof, shall render the principal the direct employer
of the employees of the contractor or subcontractor, pursuant to Article 109 of the Labor Code, as amended.

Section 13. Effect of Termination of Employment. The termination of employment of the contractor’s/
subcontractor’s employee prior to the expiration of the Service Agreement shall be governed by Articles 297,
298 and 299 of the Labor Code.

In case the termination of employment is caused by the pre-termination of the Service Agreement not due to
authorized causes under Article 298, the right of the contractor’s/ subcontractor’s employee to unpaid wages
and other unpaid benefits including unremitted legal mandatory contributions, e.g., SSS, Philhealth, Pag-IBIG,
ECC, shall be borne by the party at fault, without prejudice to the solidary liability of the parties to the Service
Agreement.

Where the termination results from the expiration of the Service Agreement, or from the completion of the
phase of the job or work for which the employee is engaged, the latter may opt to wait for re-employment within
three (3) months to resign and transfer to another contractor-employer. Failure of the contractor to provide
new employment for the employee shall entitle the latter to payment of separation benefits as may be provided
by law or the Service Agreement, whichever is higher, without prejudice to his/her entitlement to completion
bonuses or other emoluments, including retirement benefits whenever applicable. The mere expiration of the
Service Agreement shall not be deemed as a termination of employment of the contractor’s/ subcontractor’s
employees who are regular employees of the latter.

Section 14. Mandatory Registration and Registry of Legitimate Contractors. Consistent with the authority
of the Secretary of Labor and Employment to restrict or prohibit the contracting out of labor to protect the rights
of workers, it shall be mandatory for all persons or entities acting as contractors to register with the Regional
Office of the Department of Labor and Employment (DOLE) where it principally operates.

Failure to register shall give rise to the presumption that the contractor is engaged in labor-only-contracting.

Accordingly, the registration system, governing contracting arrangements and implemented by the Regional
Offices of the DOLE is hereby established, with the Bureau of Working Conditions (BWC) as the central registry.

Section 15. Requirements for Registration. The verified application for registration as a contractor shall be
filed at the DOLE Regional Office in the region where it seeks to principally operate. Whenever applicable, the
applicant shall provide in the application form the following information:

• a) The name and business address of the applicant and the areas where it seeks to operate;

• b) The names and addresses of officers, if the applicant is a corporation, partnership, cooperative or a
labor organization;

• c) The nature of the applicant’s business and the industry or industries where the applicant seeks to
operate;

• d) The number of regular workers and the total workforce;

• e) The list of clients, if any, the number of personnel assigned to each client, if any, and the services
provided to the client;

• f) The description of the phases of the contract, including the number of employees covered in each
phase, where appropriate; and

• g) Proof of compliance with substantial capital requirement as defined in Section 3(l) of these Rules.

The application shall be supported by:

• a) A certified true copy of a certificate of registration of firm or business name from the Securities and
Exchange Commission (SEC), Department of Trade and Industry (DTI), Cooperative Development
Authority (CDA), or from the DOLE if the applicant is a labor organization;

• b) A certified true copy of the license or business permit issued by the local government unit or units
where the contractor operates;

• c) A certified listing, with proof of ownership or lease contract, of facilities, tools, equipment, premises
implements, machineries and work premises, that are actually and directly used by the contractor in
the performance or completion of the specific job or work contracted out. In addition, the applicant
shall submit a photo of the office building and premises where it holds office;
 • d) A copy of audited financial statements if the applicant is a corporation, partnership, cooperative or a
labor organization, or a copy of the latest IRT if the applicant is a sole proprietorship; and

• e) A sworn disclosure that the registrant, its officers and owners or principal stockholders or any one of
them, has not been operating or previously operating as a contractor under a different business name
or entity or with pending cases of violations of these Rules and/or labor standards, or with a cancelled
registration. In case any of the foregoing has a pending case, a copy of the complaint and the latest
status of the case shall be attached.

Section 16. Filing and Processing of Application. The application, with all supporting documents, shall be filed
in triplicate in the Regional Office where the applicant principally operates. No application for registration shall
be accepted unless all the requirements in the preceding Section are complied with.

Section 17. Verification Inspection. Within two (2) working days upon receipt of the application with complete
supporting documents, the authorized representative of the Regional Director shall conduct a verification
inspection of the facilities, tools, equipment, and work premises of the applicant.

Section 18. Approval or Denial of the Application. The Reginal Office shall deny or approve the application
within three (3) working days after the verification inspection.

Applications that fail to meet the requirements set forth in Section 15 of these Rules shall be denied.

Section 19. Registration Fee. Payment of registration fee of One Hundred Thousand (P100,000) shall be
required upon approval of the application.

Upon registration, the Regional Office shall return one set of the duly-stamped application documents to the
applicant and retain one set for its file, and transmit the remaining set to the Bureau of Working Conditions
(BWC) within five (5) days from registration.

Section 20. Validity of Certificate of Registration. The contractor shall be deemed registered only on the date
of issuance of its Certificate of Registration.

The Certificate of Registration shall be effective for two (2) years, unless cancelled after due process. The same
shall be valid in the region where it is registered.

In case the contractor has Service Agreements or operates outside the jurisdiction of the Regional Office where
it is registered, it shall request a duly authenticated copy of its Certificate of Registration from the registering
Regional Office and submit the same to the DOLE Regional Office where it seeks to operate together with a copy
of its Service Agreement/s in the area, for purposes of monitoring compliance with these Rules.

Section 21. Renewal of Registration. All registered contractors shall apply for renewal of their Certificates of
Registration thirty (30) days before the expiration of their registration to remain in the roster of legitimate
service contractors. The applicant shall pay a registration renewal fee of One Hundred Thousand Pesos
(P100,000.00) to the DOLE Regional Office.

Copies of all the updated supporting documents in letters (a) to (e) of Section 15 hereof shall be attached to the
duly accomplished application form, including the following:

a) Certificate of membership and proof of payment of SSS, Philhealth, BIR, ECC and Pag-IBIG contributors for
the last three (3) years, as well as loan amortization; and
b) Certificate of pending or no pending labor standards violation case/s with the National Labor Relations
Commission (NLRC) and Department of Labor and Employment (DOLE). The pendency of a case will not
prejudice the renewal of the registration, unless there is a finding of violation of labor standards by the DOLE
Regional Director.

Section 22. Semi-Annual Reporting. The contractor shall submit in triplicate its subscribed semi-annual report
using a prescribed form to appropriate Regional Office. The report shall include:

a) A list of contracts entered with the principal during the subject reporting method period;

b) The number of workers covered by each contract with the principal;

c) Proof of payment of the Social Security System (SSS), the Pag-IBIG Fund, PhilHealth, Employees Compensation
Commission (ECC), and Bureau of Internal Revenue (BIR) remittances due its employees during the subject
reporting period and of amortization of declared loans due from its employees; and

d) A certified list of all cases filed against the contractor before the NLRC and DOLE.

The Regional Office shall return one set of the duly-stamped report to the contractor, retain one set for its files,
and transmit the remaining set to the NWC within five (5) days from receipt thereof.

Section 23. Grounds for Cancellation of Registration. The Regional Director shall, upon a verified complaint,
cancel or revoke the registration of a contractor after due process, based on any of the following grounds:

a) Misrepresentation of facts in the application;

b) Submission of falsified or tampered application or supporting documents to the application for registration;

c) Non-submission of Service Agreement between the principal and the contractor when required to do so;

d) Non-submission of the required semi-annual report as provided in Section 22 (Semi-Annual reporting)

thereof;

e) Final findings that the contractor has engaged in labor-only contracting and/or other illicit forms of
employment arrangements as provided in Section 6 hereof;

f) Non-compliance with labor standards and working conditions;

g) Findings of violation of Section 10 (Rights of contractors employees), and Section 11 (Required contracts);

h) Non-compliance with SSS, the HDMF, Pag-IBIG, PhilHealth, and ECC Laws;

i) Collecting any fees not authorized by law and other applicable rules and regulations; and

j) Violations of any provisions of the Labor Code.

Section 24. Due Process in Cancellation of Registration. Complaint/s based on any of the grounds
enumerated in the preceding Section against the contractor shall be filed in writing and under oath with the
Regional Office which issued the Certificate of Registration.
The complaint/s shall state the following:

(a) The name/s and address/es of the complainant/s;

(b) Name and address of the contractor;

(c) The grounds;

(d) When and where the action complained of happened;

(e) The amount of claim, if any; and

(f) Th relief sought.

Upon receipt of the complaint, the Regional Director shall direct, with notice to the complainant, to file a verified
answer/counter-affidavit within seven (7) working days without extension, incorporating therein all pertinent
documents in support of his or her defense, with proof of service of a copy to the complainant. Failure to file an
answer/counter-affidavit shall constitute a waiver on the part of the respondent. No motion to dismiss shall be
entertained.

The Regional Director or his duly authorized representative may conduct a clarificatory hearing within seven (7)
calendar days within which to file a verified answer/counter-affidavit.

Within the said seven (7) calendar days period, the contractor shall make necessary corrections/rectifications
on the violations that are immediately rectifiable upon its initiative in order to be fully compliant.

The Regional Director may avail himself of all reasonable means to ascertain the facts of the case, including
conduct of inspection, where appropriate, and examination of informed persons.

The proceedings before the Regional Director shall be summary in nature.

The conduct of hearings shall be terminated within ten (10) calendar days from the first scheduled clarificatory
hearing. The Regional Director shall resolve the case within seven (7) working days from the date of the last
hearing. If there is no necessity to conduct a hearing, the case shall be resolved within seven (7) working days
from receipt of the verified answer/counter-affidavit.

Any motion for reconsideration from the Order of the Regional Director shall be treated as an appeal.

Section 25. Appeal. The Order of the Regional Director is appealable to the Secretary within ten (10) working
days from receipt of the copy of the Order. The appeal shall be filed with the Regional Office which issued the
cancellation Order. The Office of the Secretary shall have thirty (30) working days from receipt of the records of
the case to resolve the appeal. The Decision of the Secretary shall be final and executory after ten (10) days from
the receipt thereof by the parties. No motion for reconsideration of the Decision shall be entertained.

Section 26. Effects of Cancellation of Registration. A final Order of cancellation shall divest the contractor of
its legitimate status to engage in contracting/subcontracting.

Such Order of cancellation shall be a ground to deny registration of an application for renewal of registration to
a contractor under the Rules.
No contractor whose registration is cancelled under these Rules or any of its officers shall be allowed to operate,
and apply for new registration as contractor under either the same or different name.

The cancellation of the registration of the contractor for engaging in labor-only contracting or for violation of
any of the provisions of these Rules involving a particular service agreement will not, however, impair the validity
of existing legitimate job-contracting arrangements the contractor may have entered into with other principal
prior to the cancellation of its registration. Any valid and subsisting Service Agreement shall be respected until
its expiration; thereafter, contracting with a delisted contractor shall make the principal direct employer of all
employees under the Service Agreement pursuant to Articles 106 and 109 of the Labor Code, as amended.

Section 27. Retaliatory Measures. Pursuant to Article 118 of the Labor Code, as amended, it shall be unlawful
for the principal, contractor, or any party privy to the contract or services provided to refuse to pay or reduce
the wages and benefits, and discharge or any manner discriminate against any worker who has filed any
complaint of instituted any proceeding on wages (under Title II, Book III of the Labor Code), labor standards
violations, or has testified or is about to testify in such proceedings.

Section 28. Enforcement of Labor Standards and Working Conditions. Consistent with Article 128 of the
Labor Code, as amended, the Regional Directory through his/her duly authorized representatives, shall conduct
routine inspection of establishments engaged in contracting arrangement regardless of the number of
employees engaged by the principal or by the contractor. They shall have access to employer’s records and
premises at any time of the day or night whenever work is being undertaken therein, and the right to copy
therefrom, to question any employee and investigate any fact, condition or matter which may be necessary to
determine violations or which may aid in the enforcement of the Labor Code and of any labor law, wage order,
or rules and regulations issued pursuant thereto.

The findings of the duly authorized representative shall be referred to the Regional Director for appropriate
action as provided for in Article 128, and shall be furnished the collective bargaining agent, if any.

Based on the visitorial and enforcement power of the Secretary of Labor and Employment in Article 128 (a), (b),
(c), and (d), the Regional Director shall use compliance orders to give effect to the labor standards provisions of
the Labor Code, other labor legislation, and these Rules.

Section 29. Duty to Procure Copy of Contract between the Principal and the Contractor. The principal or
the contractor shall be under obligation to produce a copy of the Service Agreement in the ordinary course of
inspection. The contractor shall likewise be under an obligation to provide a copy of any contract of employment
when directed to do so by the Regional Director or his/her authorized representative.

Section 30. Tripartite Implementation and Monitoring of Compliance. A region-based tripartite monitoring
team on the observance of labor standards in contracting and subcontracting arrangements shall be constituted
as a subcommittee of the Regional Tripartite Industrial Peace Council (RTIPC) within fifteen (15) days from the
effectivity of these Rules. It shall submit a quarterly regional monitoring report to the DOLE Secretary and to the
National Tripartite Industrial Peace Council (NTIPC). The Bureau of Working Conditions (BWC) shall ensure the
implementation of this provision, and shall conduct capacity building to the members of the regional tripartite
monitoring team.

Section 31. Financial Relief Program; Tripartite Co-Regulation Engagement. A Financial Relief Program or
Unemployment Assistance Fund shall be established for employees under a Service Agreement or employees
in transition from one Service Agreement to the next. For this purpose, the National Industrial Peace Council
(NTIPC), upon the effectivity of this issuance, shall constitute a Local Service Provider Tripartite Working Group
(LSP-TWG) composed of representatives of the stakeholders in the industry. The LSP-TWG shall:
a) Recommend the mechanics and details in setting up the Financial Relief Program or Unemployment
Assistance Fund with proposed funding sources before end of June 2018; and

b) Draw-up the terms of a Tripartite Co-Regulation Engagement in ensuring full compliance with labor laws for
approval/endorsement by the NTIPCs, including a proposed Table of Progressive Rate of Increases in the
minimum capitalization requirement at reasonable intervals to ensure that only legitimate contractors can
engage in subcontracting arrangements.

Section 32. Enrollment in DOLE Programs on Improving Compliance with Labor Standards. For purposes
of ensuring compliance with labor standards, the principal and subcontractors covered by these Rules are
mandatorily required to enroll and participate in the DOLE programs such as the Incentivizing Compliance
Program (Department Order No. 115-11).

Section 33. Contracting or Subcontracting in the Construction and Other Industries. Contracting or
subcontracting arrangements in the Construction Industry, under the licensing coverage of the Philippine
Construction Accreditation Board (PCAB), shall not be covered by the provisions of these Rules and shall
continue to be governed by Department Order No. 19, Series of 1993 (Guidelines Governing the Employment of
Workers in the Construction Industry) and Department Order No. 13, Series of 1998 (Guidelines Governing the
Occupational Safety and Health in the Construction Industry); and DOLE-DPWH-DILG-DTI and PCAB
Memorandum of Agreement-Joint Administrative Order No. 1, Series of 2011 (on coordination and
harmonization of policies and programs on occupational safety and health in the construction industry).

In industries covered by a separate regulation of the DOLE or other government agency, contracting therein
shall be governed by these Rules unless expressly provided otherwise.

Section 34. Prohibition on DOLE officials or employees. Any official or employee of the DOLE or its attached
agencies is prohibited from engaging or having any interest in any contracting or subcontracting business.

Section 35. Supersession. All rules and regulations issued by the Secretary of Labor and Employment
inconsistent with the provision of these Rules are hereby superseded.

Section 36. Separability Clause. If any provision or portion of these Rules are declared void or unconstitutional,
the remaining portions or provisions hereof shall continue to be valid and effective.

Section 37. Effectivity. This Department Order shall be effective fifteen (15) days after completion of its
publication in a newspaper of general circulation.
 Article 97

G.R. No. L-50999 March 23, 1990

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

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

Raul E. Espinosa for petitioners.

Lucas Emmanuel B. Canilao for petitioner A. Manuel.

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

MEDIALDEA, J.:

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

The antecedent facts are as follows:

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

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

ARTICLE XIV — Retirement Gratuity

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

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

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

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

xxx

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

xxx

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

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

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

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

SO ORDERED.

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

Hence, the present petition.

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

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

The petition is impressed with merit.

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

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

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

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

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

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

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

x x x.

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

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

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

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

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

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

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

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

Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base that should be used in
computing the separation pay, We held that:

The commissions also claimed by petitioner ('override commission' plus 'net deposit incentive') are
not properly includible in such base figure since such commissions must be earned by actual market
transactions attributable to petitioner.

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

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

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

SO ORDERED.

SECOND DIVISION

[G.R. No. 122827. March 29, 1999]

LIDUVINO M. MILLARES, J. CAPISTRANO CORDITA, SHIRLEY P. UY, DIONISIO J. REQUINA,

GABRIEL A. DEJERO, NELSON T. GOMONIT, IMELDA IMPEYNADO SULPICIO B. SUMILE, MA.
CONSUELO AVIEL, SILVINO S. GUEVARRA, FIDEL DUMANHOG, NELFA T. POLOTAN, LEMUEL
C. RISMA, JUANITO M. GONZALES, ROGELIO B. CABATUAN, EPIFANCIO E. GANANCIAL,
DOMINADOR D. ATOK, CONRADO U. SERRANO, ISIDRO J. BARNAJA, ROMEO VIRTUDAZO,
AVELINO NABLE, EDGAR TAMPOS, ERNESTO ORIAS, DALMACIO LEGARAY, ROMEO R . BULA,
ROBERTO G. GARCIA, RUDOLFO SUZON, JERRY S. DANO, AUGUST G. ESCUDERO, OSCAR B.
CATBAGAN, TEOFILO C. SISON, NARCISO BULASA, ALBERTO CORTEZ, LILIA C. CABRERA,
NESTOR A. ACASO, BIENVENIDO MOZO, ISIDORO A. ALMENDAREZ, VICENTE M. PILONGO,
ROBERTO N. LUMPOT, PATRICIO BANDOLA, MANUEL S. ESPINA, ISIDRO K. BALCITA, JR.,
EMMANUEL O. ABRAHAM, OLEGARIO A. EPIS, NESTOR D. PEREGRINO, RAMON A.
USANAGA, PRESTO BARTOLOME, BRADY EMPEYNADO, PORFERIO N. CONDADO, AQUILLO
V. CORDOVA, LEONARDO ESTOSI, PACIFICO B. DACORINA, PABLITO B. LLUBIT, ANTONIO
DOZA, LEONITO LABADIA, EDGARDO BELLIZA, FEDENCIO P. GEBERTAS, VIRGILIO D.
GULBE, MANUEL A. LERIO, JR., ROGELIO B. OCAMIA, RODOLFO A. CASTILLO, EDMUNDO L
PLAZA, ROBERTO D. YAGONIA, JR., PETRONIO ESTELA, JR, CRISOLOGO A. LOGRONIO,
ERNESTO T. MORIO, ROGELIO M. DAVID, BENJAMIN U. ARLIGUE, APOLONIO MUNDO, JR.,
NENE M. E NOSA, NILO B. BALAORO, GERONIMO S. CONVI, VICENTE R. TARAGOZA,
YOLANDO A. SALAZAR, MANUEL A. NERI, ROGELIO C. TICAR, ROBERTO A. MACALAM,
MIGUEL MACARIOLA, WALTERIO DAPADAP, SILVERIO CUAMAG, EUPARQUIO PLANOS,
GILBERTO M. MIRA, REYNALDO BACSARSA, DIOSDADO B. ABING, ARISTARCO V. SALON,
TOMAS N. CATACTE, RODOLFO MEMORIA, PAPENIANO CURIAS, JOSE S. CANDIA,
DESIDERIO C. NAVARRO, EMMANUEL O. ABRAHAM, JOSELITO D. ARLAN, FRANCISCO S.
SANCHEZ, MANSUETO B. LINGGO, ISIDRO BARNAJA, ROMEO S. CABRERA, LEODEGARIO
CAINTIC, NESTOR G. BLANDO, FLORENCIO B. DELIZO, MILAN M. ETES, GONZALO C.
PADILLO, LEONARDO CAGAKIT, JOSEFINO E. DULGUIME, PEPITO G. ARREZA, AMADOR G.
CAGALAWAN, GAUDENCIO C. SARMIENTO, FLORENTINO J. BRACAMONTE, DOMINADOR H.
TY, LEOPOLDO T. SUPIL, JOSE A. DOHINOG, ANIANO T. REYES, CARLITO G. UY, PLACIDO D.
PADILLO, TERESITA C. ADRIANO, CANDIDO S. ADRIANO, and AVELINO G.
VENERACION, Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION, (FIFTH
DIVISION), and PAPER INDUSTRIES CORPORATION OF THE PHILIPPINES
(PICOP), Respondents.

DECISION

BELLOSILLO, J.:
Petitioners numbering one hundred sixteen (116)1 occupied the positions of Technical Staff, Unit
Manager, Section Manager, Department Manager, Division Manager and Vice President in the mill site
of respondent Paper Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur. In
1992 PICOP suffered a major financial setback allegedly brought about by the joint impact of
restrictive government regulations on logging and the economic crisis. To avert further losses, it
undertook a retrenchment program and terminated the services of petitioners. Accordingly,
petitioners received separation pay computed at the rate of one (1) month basic pay for every year
of service. Believing however that the allowances they allegedly regularly received on a monthly
basis during their employment should have been included in the computation thereof they lodged a
complaint for separation pay differentials.

The allowances in question pertained to the following -

1. Staff/Manager's Allowance -

Respondent PICOP provides free housing facilities to supervisory and managerial employees assigned
in Bislig. The privilege includes free water and electric consumption. Owing however to shortage of
such facilities, it was constrained to grant Staff allowance instead to those who live in rented houses
outside but near the vicinity of the mill site. But the allowance ceases whenever a vacancy occurs in
the company's housing facilities. The former grantee is then directed to fill the vacancy. For Unit,
Section and Department Managers, respondent PICOP gives an additional amount to meet the same
kind of expenses called Manager's allowance.

2. Transportation Allowance -

To relieve respondent PICOP's motor pool in Bislig from a barrage of requests for company vehicles
and to stabilize company vehicle requirements it grants transportation allowance to key officers and
Managers assigned in the mill site who use their own vehicles in the performance of their duties. It is
a conditional grant such that when the conditions no longer obtain, the privilege is discontinued. The
recipients of this kind of allowance are required to liquidate it by submitting a report with a detailed
enumeration of expenses incurred.

3. Bislig Allowance -

The Bislig Allowance is given to Division Managers and corporate officers assigned in Bislig on
account of the hostile environment prevailing therein. But once the recipient is transferred elsewhere
outside Bislig, the allowance ceases.

Applying Art.,97, par. (f), of the Labor Code which defines if wage," the Executive Labor Arbiter
opined that the subject allowances, being customarily furnished by respondent PICOP and regularly
received by petitioners, formed part of the latter's wages. Resolving the controversy from another
angle, on the strength of the ruling in Santos v. NLRC2 and Soriano v. NLRC3 that in the computation
of separation pay account should be taken not just of the basic salary but also of the regular
allowances that the employee had been receiving, he concluded that the allowances should be
included in petitioners' base pay. Thus respondent PICOP was ordered on 28 April 1994 to pay
petitioners Four Million Four Hundred Eighty-One Thousand Pesos (P4,481,000.00) representing
separation pay differentials plus ten per cent (10%) thereof as attorney's fees.4

The National Labor Relations Commission (NLRC) did not share the view of the Executive Labor
Arbiter. On 7 October 1994 it set aside the assailed decision by decreeing that the allowances did not
form part of the salary base used in computing separation pay.5 cräläwvirtuali brä ry

Its ruling was based on the finding that the cases relied upon by the Executive Labor Arbiter were
inapplicable since they involved illegal dismissal where separation pay was granted in lieu of
reinstatement which was no longer feasible. Instead, what it considered in point was Estate of the
late Eugene J. Kneebone v. NLRC6 where the Court held that representation and transportation
allowances were deemed not part of salary and should therefore be excluded in the computation of
separation benefits. Relating the present case with Art. 97, par. (f), of the Labor Code, the NLRC
likewise found that petitioners' allowances were contingency-based and thus not included in their
salaries. On 26 September 1995 reconsideration was denied.7 cräläwvirtua lib räry

In this petition for certiorari, petitioners submit that their allowances are included in the definition of
"facilities" in Art. 97, par. (f), of the Labor Code, being necessary and indispensable for their
existence and subsistence. Furthermore they claim that their availment of the monetary equivalent of
those "facilities" on a monthly basis was characterized by permanency, regularity and customariness.
And to fortify their arguments they insist on the applicability of Santos,8 Soriano,9The Insular Life
Assurance Company,10 Planters Products, Inc.11 and Songco12 which are all against the NLRC holding
that the salary base in computing separation pay includes not just the basic salary but also the
regular allowances.

There is no showing of grave abuse of discretion on the part of the NLRC. In case of retrenchment to
prevent losses, Art. 283 of the the Labor Code imposes on the employer an obligation to grant to the
affected employees separation pay equivalent to one (1) month pay or at least one-half (1/2) month
pay for every year of service, whichever is higher. Since the law speaks of "pay," the question arises,
"What exactly does the term connote?" We correlate Art. 283 with Art. 97 of the same Code on
definition of terms. "Pay" is not defined therein but "wage." In Songco the Court explained that both
words (as well as salary) generally refer to one and the same meaning, i.e., a reward or recompense
for services performed. Specifically, "wage" is defined in letter (f) as the remuneration or earnings,
however designated, capable of being expressed in terms of money, whether fixed or ascertained on
a time, task, piece, or commission basis, or other method of calculating the same, which is payable
by an employer to an employee under a written or unwritten contract of employment for work done
or to be done, or for services rendered or to be rendered and includes the fair and reasonable value,
as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished
by the employer to the employee.

We invite attention to the above-underlined clause. Stated differently, when an employer customarily
furnishes his employee board, lodging or other facilities, the fair and reasonable value thereof, as
determined by the Secretary of Labor and Employment, is included in "wage." In order to ascertain
whether the subject allowances form part of petitioner's "wages," we divide the discussion on the
following - "customarily furnished;" "board, lodging or other facilities;" and, "fair and reasonable
value as determined by the Secretary of Labor."

"Customary" is founded on long-established and constant practice13 connoting regularity.14 The

receipt of an allowance on a monthly basis does not ipso facto characterize it as regular and forming
part of salary15 because the nature of the grant is a factor worth considering. We agree with the
observation of the Office of the Solicitor General- that the subject allowances were temporarily, not
regularly, received by petitioners because -

In the case of the housing allowance, once a vacancy occurs in the company-provided housing
accommodations, the employee concerned transfers to the company premises and his housing
allowance is discontinued x x x x

On the other hand, the transportation allowance is in the form of advances for actual transportation
expenses subject to liquidation x x x given only to employees who have personal cars.

The Bislig allowance is given to Division Managers and corporate officers assigned in Bislig, Surigao
del Norte. Once the officer is transferred outside Bislig, the allowance stops.16

We add that in the availment of the transportation allowance, respondent PICOP set another
requirement that the personal cars be used by the employees in the performance of their duties.
When the conditions for availment ceased to exist, the allowance reached the cutoff point. The
finding of the NLRC along the same line likewise merits concurrence, i.e., petitioners' continuous
enjoyment of the disputed allowances was based on contingencies the occurrence of which
wrote finis to such enjoyment.

Although it is quite easy to comprehend "board" and "lodging," it is not so with "facilities." Thus Sec.
5, Rule VII, Book III, of the Rules Implementing the Labor Code gives meaning to the term as
including articles or services for the benefit of the employee or his family but excluding tools of the
trade or articles or service primarily for the benefit of the employer or necessary to the conduct of
the employer's business. The Staff /Manager's allowance may fall under "lodging" but the
transportation and Bislig allowances are not embraced in "facilities" on the main consideration that
they are granted as well as the Staff/Manager's allowance for respondent PICOP's benefit and
convenience, i.e., to insure that petitioners render quality performance. In determining whether a
privilege is a facility, the criterion is not so much its kind but its purpose.17 That the assailed
allowances were for the benefit and convenience of respondent company was supported by the
circumstance that they were not subjected to withholding tax. Revenue Audit Memo Order No. 1-87
pertinently provides -

3.2 x x x x transportation, representation or entertainment expenses shall not constitute taxable

compensation if:

(a) It is for necessary travelling and representation or entertainment expenses paid or incurred by
the employee in the pursuit of the trade or business of the employer, and

(b) The employee is required to, and does, make an accounting/liquidation for such expense in
accordance with the specific requirements of substantiation for such category or expense.

Board and lodging allowances furnished to an employee not in excess of the latter's needs and given
free of charge, constitute income to the latter except if such allowances or benefits are furnished to
the employee for the convenience of the employer and as necessary incident to proper performance
of his duties in which case such benefits or allowances do not constitute taxable income. 18

The Secretary of Labor and Employment under Sec. 6, Rule VII, Book III, of the Rules Implementing
the Labor Code may from time to time fix in appropriate issuances the "fair and reasonable value of
board, lodging and other facilities customarily furnished by an employer to his employees."
Petitioners' allowances do not represent such fair and reasonable value as determined by the proper
authority simply because the Staff/Manager's allowance and transportation allowance were amounts
given by respondent company in lieu of actual provisions for housing and transportation needs
whereas the Bislig allowance was given in consideration of being assigned to the hostile environment
then prevailing in Bislig.

The inevitable conclusion is that, as reached by the NLRC, subject allowances did not form part of
petitioners' wages.

In Santos19 the Court decreed that in the computation of separation pay awarded in lieu of
reinstatement, account must be taken not only of the basic salary but also of transportation and
emergency living allowances. Later, the Court in Soriano, citing Santos, was general in its holding
that the salary base properly used in computing separation pay where reinstatement was no longer
feasible should include not just the basic salary but also the regular allowances that the employee
had been receiving. Insular merely reiterated the aforementioned rulings. The rationale is not difficult
to discern. It is the obligation of the employer to pay an illegally dismissed employee the whole
amount of his salaries plus all other benefits, bonuses and general increases to which he would have
been normally entitled had he not been dismissed and had not stopped working. 20 The same holds
true in case of retrenched employees. And thus we applied Insular and Soriano in Planters in the
computation of separation pay of retrenched employees. Songco likewise involved retrenchment and
was relied upon in Planters, Soriano and Santos in determining the proper amount of separation pay.
As culled from the foregoing jurisprudence, separation pay when awarded to an illegally dismissed
employee in lieu of reinstatement or to a retrenched employee should be computed based not only
on the basic salary but also on the regular allowances that the employee had been receiving. But in
view of the previous discussion that the disputed allowances were not regularly received by
petitioners herein, there was no reason at all for petitioners to resort to the above cases.

Neither is Kneebone applicable, contrary to the finding of the NLRC, because of the difference in
factual circumstances. In Kneebone, the Court was tasked to resolve the issue whether the
representation and transportation allowances formed part of salary as to be considered in the
computation of retirement benefits. The ruling was in the negative on the main ground that the
retirement plan of the company expressly excluded such allowances from salary.

WHEREFORE, the petition is DISMISSED. The resolution of public respondent National Labor
Relations Commission dated 7 October 1994 holding that the Staff /Manager's, transportation and
Bislig allowances did not form part of the salary base used in computing the separation pay of
petitioners, as well as its resolution dated 26 September 1995 denying reconsideration, is AFFIRMED.
No costs.

SO ORDERED.

Puno, Mendoza, Quisumbing, and Buena, JJ., concur.

 Article 100

SECOND DIVISION

[G.R. NO. 155059. April 29, 2005]

AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES UNION, Petitioner, v. AMERICAN
WIRE AND CABLE CO., INC. and THE COURT OF APPEALS, Respondents.

DECISION

CHICO-NAZARIO, J.:

Before Us is a special civil action for certiorari, assailing the Decision1 of the Special Eighth Division of
the Court of Appeals dated 06 March 2002. Said Decision upheld the Decision2 and Order3 of
Voluntary Arbitrator Angel A. Ancheta of the National Conciliation and Mediation Board (NCMB) dated
25 September 2001 and 05 November 2001, respectively, which declared the private respondent
herein not guilty of violating Article 100 of the Labor Code, as amended. Assailed likewise, is the
Resolution4 of the Court of Appeals dated 12 July 2002, which denied the motion for reconsideration
of the petitioner, for lack of merit.

THE FACTS

The facts of this case are quite simple and not in dispute.

American Wire and Cable Co., Inc., is a corporation engaged in the manufacture of wires and cables.
There are two unions in this company, the American Wire and Cable Monthly-Rated Employees Union
(Monthly-Rated Union) and the American Wire and Cable Daily-Rated Employees Union (Daily-Rated
Union).

On 16 February 2001, an original action was filed before the NCMB of the Department of Labor and
Employment (DOLE) by the two unions for voluntary arbitration. They alleged that the private
respondent, without valid cause, suddenly and unilaterally withdrew and denied certain benefits and
entitlements which they have long enjoyed. These are the following:

A. Service Award;

b. 35% premium pay of an employee's basic pay for the work rendered during Holy Monday, Holy
Tuesday, Holy Wednesday, December 23, 26, 27, 28 and 29;

c. Christmas Party; and cralawlib rary

d. Promotional Increase.

A promotional increase was asked by the petitioner for fifteen (15) of its members who were given or
assigned new job classifications. According to petitioner, the new job classifications were in the
nature of a promotion, necessitating the grant of an increase in the salaries of the said 15 members.

On 21 June 2001, a Submission Agreement was filed by the parties before the Office for Voluntary
Arbitration. Assigned as Voluntary Arbitrator was Angel A. Ancheta.

On 04 July 2001, the parties simultaneously filed their respective position papers with the Office of
the Voluntary Arbitrator, NCMB, and DOLE.
On 25 September 2001, a Decision5 was rendered by Voluntary Arbitrator Angel A. Ancheta in favor
of the private respondent. The dispositive portion of the said Decision is quoted hereunder:

WHEREFORE, with all the foregoing considerations, it is hereby declared that the Company is not
guilty of violating Article 100 of the Labor Code, as amended, or specifically for withdrawing the
service award, Christmas party and 35% premium for work rendered during Holy Week and
Christmas season and for not granting any promotional increase to the alleged fifteen (15) Daily-
Rated Union Members in the absence of a promotion. The Company however, is directed to grant the
service award to deserving employees in amounts and extent at its discretion, in consultation with
the Unions on grounds of equity and fairness.6

A motion for reconsideration was filed by both unions7 where they alleged that the Voluntary
Arbitrator manifestly erred in finding that the company did not violate Article 100 of the Labor Code,
as amended, when it unilaterally withdrew the subject benefits, and when no promotional increase
was granted to the affected employees.

On 05 November 2001, an Order8 was issued by Voluntary Arbitrator Angel A. Ancheta. Part of the
Order is quoted hereunder:

Considering that the issues raised in the instant case were meticulously evaluated and length[i]ly
discussed and explained based on the pleadings and documentary evidenc[e] adduced by the
contending parties, we find no cogent reason to change, modify, or disturb said decision.

WHEREFORE, let the instant MOTION[S] FOR RECONSIDERATION be, as they are hereby, denied for
lack of merit. Our decision dated 25 September 2001 is affirmed "en toto."9

An appeal under Rule 43 of the 1997 Rules on Civil Procedure was made by the Daily-Rated Union
before the Court of Appeals10 and docketed as CA-G.R. SP No. 68182. The petitioner averred that
Voluntary Arbitrator Angel A. Ancheta erred in finding that the company did not violate Article 100 of
the Labor Code, as amended, when the subject benefits were unilaterally withdrawn. Further, they
assert, the Voluntary Arbitrator erred in adopting the company's unaudited Revenues and Profitability
Analysis for the years 1996-2000 in justifying the latter's withdrawal of the questioned benefits.11

On 06 March 2002, a Decision in favor of herein respondent company was promulgated by the
Special Eighth Division of the Court of Appeals in CA-G.R. SP No. 68182. The decretal portion of the
decision reads:

WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and
accordingly DISMISSED, for lack of merit. The Decision of Voluntary Arbitrator Angel A. Ancheta
dated September 25, 2001 and his Order dated November 5, 2001 in VA Case No. AAA-10-6-4-2001
are hereby AFFIRMED and UPHELD.12

A motion for reconsideration13 was filed by the petitioner, contending that the Court of Appeals
misappreciated the facts of the case, and that it committed serious error when it ruled that the
unaudited financial statement bears no importance in the instant case.

The Court of Appeals denied the motion in its Resolution dated 12 July 200214 because it did not
present any new matter which had not been considered in arriving at the decision. The dispositive
portion of the Resolution states:

WHEREFORE, the motion for reconsideration is hereby DENIED for lack of merit.15

Dissatisfied with the court a quo's ruling, petitioner instituted the instant special civil action
for certiorari,16 citing grave abuse of discretion amounting to lack of jurisdiction.
 ASSIGNMENT OF ERRORS

The petitioner assigns as errors the following:

THE COURT OF APPEALS ERRED IN HOLDING THAT THE COMPANY DID NOT VIOLATE ARTICLE 100
OF THE LABOR CODE, AS AMENDED, WHEN IT UNILATERALLY WITHDREW THE BENEFITS OF THE
MEMBERS OF PETITIONER UNION, TO WIT: 1) 35% PREMIUM PAY; 2) CHRISTMAS PARTY AND ITS
INCIDENTAL BENEFITS; AND 3) SERVICE AWARD, WHICH IN TRUTH AND IN FACT SAID
BENEFITS/ENTITLEMENTS HAVE BEEN GIVEN THEM SINCE TIME IMMEMORIAL, AS A MATTER OF
LONG ESTABLISHED COMPANY PRACTICE, WITH THE FURTHER FACT THAT THE SAME NOT BEING
DEPENDENT ON PROFITS.

II

THE COURT OF APPEALS ERRED WHEN IT JUST ACCEPTED HOOK, LINE AND SINKER, THE
RESPONDENT COMPANY'S SELF SERVING AND UNAUDITED REVENUES AND PROFITABILITY
ANALYSIS FOR THE YEARS 1996-2000 WHICH THEY SUBMITTED TO FALSELY JUSTIFY THEIR
UNLAWFUL ACT OF UNILATERALLY AND SUDDENLY WITHDRAWING OR DENYING FROM THE
PETITIONER THE SUBJECT BENEFITS/ENTITLEMENTS.

III

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE YEARLY SERVICE AWARD IS NOT
DEPENDENT ON PROFIT BUT ON SERVICE AND THUS, CANNOT BE UNILATERALLY WITHDRAWN BY
RESPONDENT COMPANY.

ISSUE

Synthesized, the solitary issue that must be addressed by this Court is whether or not private
respondent is guilty of violating Article 100 of the Labor Code, as amended, when the
benefits/entitlements given to the members of petitioner union were withdrawn.

THE COURT'S RULING

Before we address the sole issue presented in the instant case, it is best to first discuss a matter
which was raised by the private respondent in its Comment. The private respondent contends that
this case should have been dismissed outright because of petitioner's error in the mode of appeal.
According to it, the petitioner should have elevated the instant case to this Court through a Petition
for Review on Certiorari under Rule 45, and not through a special civil action for certiorari under Rule
65, of the 1997 Rules on Civil Procedure.17

Assuming arguendo that the mode of appeal taken by the petitioner is improper, there is no question
that the Supreme Court has the discretion to dismiss it if it is defective. However, sound policy
dictates that it is far better to dispose the case on the merits, rather than on technicality. 18

The Supreme Court may brush aside the procedural barrier and take cognizance of the petition as it
raises an issue of paramount importance. The Court shall resolve the solitary issue on the merits for
future guidance of the bench and bar.19

With that out of the way, we shall now resolve whether or not the respondent company is guilty of
violating Article 100 of the Labor Code, as amended.
Article 100 of the Labor Code provides:

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.

The petitioner submits that the withdrawal of the private respondent of the 35% premium pay for
selected days during the Holy Week and Christmas season, the holding of the Christmas Party and its
incidental benefits, and the giving of service awards violated Article 100 of the Labor Code. The grant
of these benefits was a customary practice that can no longer be unilaterally withdrawn by private
respondent without the tacit consent of the petitioner. The benefits in question were given by the
respondent to the petitioner consistently, deliberately, and unconditionally since time immemorial.
The benefits/entitlements were not given to petitioner due to an error in interpretation, or a
construction of a difficult question of law, but simply, the grant has been a practice over a long
period of time. As such, it cannot be withdrawn from the petitioner at respondent's whim and caprice,
and without the consent of the former. The benefits given by the respondent cannot be considered as
a "bonus" as they are not founded on profit. Even assuming that it can be treated as a "bonus," the
grant of the same, by reason of its long and regular concession, may be regarded as part of regular
compensation.20

With respect to the fifteen (15) employees who are members of petitioner union that were given new
job classifications, it asserts that a promotional increase in their salaries was in order. Salary
adjustment is a must due to their promotion.21

On respondent company's Revenues and Profitability Analysis for the years 1996-2000, the petitioner
insists that since the former was unaudited, it should not have justified the company's sudden
withdrawal of the benefits/entitlements. The normal and/or legal method for establishing profit and
loss of a company is through a financial statement audited by an independent auditor.22

The petitioner cites our ruling in the case of Saballa v. NLRC,23 where we held that financial
statements audited by independent auditors constitute the normal method of proof of the profit and
loss performance of the company. Our ruling in the case of Bogo-Medellin Sugarcane Planters
Association, Inc., et al. v. NLRC, et al.24 was likewise invoked. In this case, we held:

'The Court has previously ruled that financial statements audited by independent external auditors
constitute the normal method of proof of the profit and loss performance of a company.

On the matter of the withdrawal of the service award, the petitioner argues that it is the employee's
length of service which is taken as a factor in the grant of this benefit, and not whether the company
acquired profit or not.25

In answer to all these, the respondent corporation avers that the grant of all subject benefits has not
ripened into practice that the employees concerned can claim a demandable right over them. The
grant of these benefits was conditional based upon the financial performance of the company and
that conditions/circumstances that existed before have indeed substantially changed thereby
justifying the discontinuance of said grants. The company's financial performance was affected by the
recent political turmoil and instability that led the entire nation to a bleeding economy. Hence, it only
necessarily follows that the company's financial situation at present is already very much different
from where it was three or four years ago.26

On the subject of the unaudited financial statement presented by the private respondent, the latter
contends that the cases cited by the petitioner indeed uniformly ruled that financial statements
audited by independent external auditors constitute the normal method of proof of the profit and loss
performance of a company. However, these cases do not require that the only legal method to
ascertain profit and loss is through an audited financial statement. The cases only provide that an
audited financial statement is the normal method.27

The respondent company likewise asseverates that the 15 members of petitioner union were not
actually promoted. There was only a realignment of positions.28

From the foregoing contentions, it appears that for the Court to resolve the issue presented, it is
critical that a determination must be first made on whether the benefits/entitlements are in the
nature of a bonus or not, and assuming they are so, whether they are demandable and enforceable
obligations.

In the case of Producers Bank of the Philippines v. NLRC29 we have characterized what a bonus
is, viz:

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 granted by an enlightened employer to spur the employee to greater efforts for the
success of the business and realization of bigger profits. The granting of a bonus is a management
prerogative, something given in addition to what is ordinarily received by or strictly due the recipient.
Thus, a bonus is not a demandable and enforceable obligation, except when it is made part of the
wage, salary or compensation of the employee.

Based on the foregoing pronouncement, it is obvious that the benefits/entitlements subjects of the
instant case are all bonuses which were given by the private respondent out of its generosity and
munificence. The additional 35% premium pay for work done during selected days of the Holy Week
and Christmas season, the holding of Christmas parties with raffle, and the cash incentives given
together with the service awards are all in excess of what the law requires each employer to give its
employees. Since they are above what is strictly due to the members of petitioner-union, the
granting of the same was a management prerogative, which, whenever management sees necessary,
may be withdrawn, unless they have been made a part of the wage or salary or compensation of the
employees.

The consequential question therefore that needs to be settled is if the subject benefits/entitlements,
which are bonuses, are demandable or not. Stated another way, can these bonuses be considered
part of the wage or salary or compensation making them enforceable obligations? chanroblesvi rt ualawlib ra ry

The Court does not believe so.

For a bonus to be enforceable, it must have been promised by the employer and expressly agreed
upon by the parties,30 or it must have had a fixed amount31 and had been a long and regular practice
on the part of the employer.32

The benefits/entitlements in question were never subjects of any express agreement between the
parties. They were never incorporated in the Collective Bargaining Agreement (CBA). As observed by
the Voluntary Arbitrator, the records reveal that these benefits/entitlements have not been subjects
of any express agreement between the union and the company, and have not yet been incorporated
in the CBA. In fact, the petitioner has not denied having made proposals with the private respondent
for the service award and the additional 35% premium pay to be made part of the CBA.33

The Christmas parties and its incidental benefits, and the giving of cash incentive together with the
service award cannot be said to have fixed amounts. What is clear from the records is that over the
years, there had been a downtrend in the amount given as service award.34 There was also a
downtrend with respect to the holding of the Christmas parties in the sense that its location changed
from paid venues to one which was free of charge,35 evidently to cut costs. Also, the grant of these
two aforementioned bonuses cannot be considered to have been the private respondent's long and
regular practice. To be considered a "regular practice," the giving of the bonus should have been
done over a long period of time, and must be shown to have been consistent and deliberate.36 The
downtrend in the grant of these two bonuses over the years demonstrates that there is nothing
consistent about it. Further, as held by the Court of Appeals:

Anent the Christmas party and raffle of prizes, We agree with the Voluntary Arbitrator that the same
was merely sponsored by the respondent corporation out of generosity and that the same is
dependent on the financial performance of the company for a particular year'37

The additional 35% premium pay for work rendered during selected days of the Holy Week and
Christmas season cannot be held to have ripened into a company practice that the petitioner herein
have a right to demand. Aside from the general averment of the petitioner that this benefit had been
granted by the private respondent since time immemorial, there had been no evidence adduced that
it had been a regular practice. As propitiously observed by the Court of Appeals:

. . . [N]otwithstanding that the subject 35% premium pay was deliberately given and the same was
in excess of that provided by the law, the same however did not ripen into a company practice on
account of the fact that it was only granted for two (2) years and with the express reservation from
respondent corporation's owner that it cannot continue to rant the same in view of the company's
current financial situation.38

To hold that an employer should be forced to distribute bonuses which it granted out of kindness is to
penalize him for his past generosity.39

Having thus ruled that the additional 35% premium pay for work rendered during selected days of
the Holy Week and Christmas season, the holding of Christmas parties with its incidental benefits,
and the grant of cash incentive together with the service award are all bonuses which are neither
demandable nor enforceable obligations of the private respondent, it is not necessary anymore to
delve into the Revenues and Profitability Analysis for the years 1996-2000 submitted by the private
respondent.

On the alleged promotion of 15 members of the petitioner union that should warrant an increase in
their salaries, the factual finding of the Voluntary Arbitrator is revealing, viz:

'Considering that the Union was unable to adduce proof that a promotion indeed occur[ed] with
respect to the 15 employees, the Daily Rated Union's claim for promotional increase likewise fall[s]
there being no promotion established under the records at hand.40

WHEREFORE, in view of all the foregoing, the assailed Decision and Resolution of the Court of
Appeals dated 06 March 2002 and 12 July 2002, respectively, which affirmed and upheld the decision
of the Voluntary Arbitrator, are hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

G.R. No. 180866 March 2, 2010

LEPANTO CERAMICS, INC., Petitioner,

vs.
LEPANTO CERAMICS EMPLOYEES ASSOCIATION, Respondent.

DECISION

PEREZ, J.:

Before this Court is a Petition for Review on Certiorari under Rule 451 of the 1997 Rules of Civil Procedure filed by
petitioner Lepanto Ceramics, Inc. (petitioner), assailing the: (1) Decision2 of the Court of Appeals, dated 5 April
2006, in CA-G.R. SP No. 78334 which affirmed in toto the decision of the Voluntary Arbitrator3 granting the
members of the respondent association a Christmas Bonus in the amount of Three Thousand Pesos (₱3,000.00), or
the balance of Two Thousand Four Hundred Pesos (₱2,400.00) for the year 2002, and the (2) Resolution4 of the
same court dated 13 December 2007 denying Petitioner’s Motion for Reconsideration.

The facts are:

Petitioner Lepanto Ceramics, Incorporated is a duly organized corporation existing and operating by virtue of
Philippine Laws. Its business is primarily to manufacture, make, buy and sell, on wholesale basis, among others,
tiles, marbles, mosaics and other similar products.5

Respondent Lepanto Ceramics Employees Association (respondent Association) is a legitimate labor organization
duly registered with the Department of Labor and Employment. It is the sole and exclusive bargaining agent in the
establishment of petitioner.6

In December 1998, petitioner gave a ₱3,000.00 bonus to its employees, members of the respondent Association.7

Subsequently, in September 1999, petitioner and respondent Association entered into a Collective Bargaining
Agreement (CBA) which provides for, among others, the grant of a Christmas gift package/bonus to the members of
the respondent Association.8 The Christmas bonus was one of the enumerated "existing benefit, practice of
traditional rights" which "shall remain in full force and effect."

The text reads:

Section 8. – All other existing benefits, practice of traditional rights consisting of Christmas Gift
package/bonus, reimbursement of transportation expenses in case of breakdown of service vehicle and
medical services and safety devices by virtue of company policies by the UNION and employees shall
remain in full force and effect.

Section 1. EFFECTIVITY

This agreement shall become effective on September 1, 1999 and shall remain in full force and effect
without change for a period of four (4) years or up to August 31, 2004 except as to the representation aspect
which shall be effective for a period of five (5) years. It shall bind each and every employee in the bargaining
unit including the present and future officers of the Union.

In the succeeding years, 1999, 2000 and 2001, the bonus was not in cash. Instead, petitioner gave each of the
members of respondent Association Tile Redemption Certificates equivalent to ₱3,000.00.9 The bonus for the year
2002 is the root of the present dispute. Petitioner gave a year-end cash benefit of Six Hundred Pesos (₱600.00) and
offered a cash advance to interested employees equivalent to one (1) month salary payable in one year.10 The
respondent Association objected to the ₱600.00 cash benefit and argued that this was in violation of the CBA it
executed with the petitioner.

The parties failed to amicably settle the dispute. The respondent Association filed a Notice of Strike with the
National Conciliation Mediation Board, Regional Branch No. IV, alleging the violation of the CBA. The case was
placed under preventive mediation. The efforts to conciliate failed. The case was then referred to the Voluntary
Arbitrator for resolution where the Complaint was docketed as Case No. LAG-PM-12-095-02.

In support of its claim, respondent Association insisted that it has been the traditional practice of the company to
grant its members Christmas bonuses during the end of the calendar year, each in the amount of ₱3,000.00 as an
expression of gratitude to the employees for their participation in the company’s continued existence in the market.
The bonus was either in cash or in the form of company tiles. In 2002, in a speech during the Christmas celebration,
one of the company’s top executives assured the employees of said bonus. However, the Human Resources
Development Manager informed them that the traditional bonus would not be given as the company’s earnings were
intended for the payment of its bank loans. Respondent Association argued that this was in violation of their CBA.

The petitioner averred that the complaint for nonpayment of the 2002 Christmas bonus had no basis as the same
was not a demandable and enforceable obligation. It argued that the giving of extra compensation was based on the
company’s available resources for a given year and the workers are not entitled to a bonus if the company does not
make profits. Petitioner adverted to the fact that it was debt-ridden having incurred net losses for the years 2001 and
2002 totaling to ₱1.5 billion; and since 1999, when the CBA was signed, the company’s accumulated losses
amounted to over ₱2.7 billion. Petitioner further argued that the grant of a one (1) month salary cash advance was
not meant to take the place of a bonus but was meant to show the company’s sincere desire to help its employees
despite its precarious financial condition. Petitioner also averred that the CBA provision on a "Christmas gift/bonus"
refers to alternative benefits. Finally, petitioner emphasized that even if the CBA contained an unconditional
obligation to grant the bonus to the respondent Association, the present difficult economic times had already legally
released it therefrom pursuant to Article 1267 of the Civil Code.11

The Voluntary Arbitrator rendered a Decision dated 2 June 2003, declaring that petitioner is bound to grant each of
its workers a Christmas bonus of ₱3,000.00 for the reason that the bonus was given prior to the effectivity of the
CBA between the parties and that the financial losses of the company is not a sufficient reason to exempt it from
granting the same. It stressed that the CBA is a binding contract and constitutes the law between the parties. The
Voluntary Arbitrator further expounded that since the employees had already been given ₱600.00 cash bonus, the
same should be deducted from the claimed amount of ₱3,000.00, thus leaving a balance of ₱2,400.00. The
dispositive portion of the decision states, viz:

Wherefore, in view of the foregoing respondent LCI is hereby ordered to pay the members of the complainant union
LCEA their respective Christmas bonus in the amount of three thousand (₱3,000.00) pesos for the year 2002 less
the ₱600.00 already given or a balance of ₱2,400.00.12

Petitioner sought reconsideration but the same was denied by the Voluntary Arbitrator in an Order dated 27 June
2003, in this wise:

The Motion for Reconsideration filed by the respondent in the above-entitled case which was received by the
Undersigned on June 26, 2003 is hereby denied pursuant to Section 7 Rule XIX on Grievance Machinery and
Voluntary Arbitration; Amending The Implementing Rules of Book V of the Labor Code of the Philippines; to wit:

Section 7. Finality of Award/Decision − The decision, order, resolution or award of the voluntary arbitrator or panel of
voluntary arbitrators shall be final and executory after ten (10) calendar days from receipt of the copy of the award or
decision by the parties and it shall not be subject of a motion for reconsideration.13

Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari under Rule 65 of the Rules of Court
docketed as CA-G.R. SP No. 78334.14 As adverted to earlier, the Court of Appeals affirmed in toto the decision of
the Voluntary Arbitrator. The appellate court also denied petitioner’s motion for reconsideration.

In affirming respondent Association’s right to the Christmas bonus, the Court of Appeals held:

In the case at bar, it is indubitable that petitioner offered private respondent a Christmas bonus/gift in 1998 or before
the execution of the 1999 CBA which incorporated the said benefit as a traditional right of the employees. Hence,
the grant of said bonus to private respondent can be deemed a practice as the same has not been given only in the
1999 CBA. Apparently, this is the reason why petitioner specifically recognized the grant of a Christmas bonus/gift
as a practice or tradition as stated in the CBA. x x x.
xxxx

Evidently, the argument of petitioner that the giving of a Christmas bonus is a management prerogative holds no
water. There were no conditions specified in the CBA for the grant of said benefit contrary to the claim of petitioner
that the same is justified only when there are profits earned by the company. As can be gleaned from the CBA, the
payment of Christmas bonus was not contingent upon the realization of profits. It does not state that if the company
derives no profits, there are no bonuses to be given to the employees. In fine, the payment thereof was not related
to the profitability of business operations.

Moreover, it is undisputed that petitioner, aside from giving the mandated 13th month pay, has further been giving
its employees an additional Christmas bonus at the end of the year since 1998 or before the effectivity of the CBA in
September 1999. Clearly, the grant of Christmas bonus from 1998 up to 2001, which brought about the filing of the
complaint for alleged non-payment of the 2002 Christmas bonus does not involve the exercise of management
prerogative as the same was given continuously on or about Christmas time pursuant to the CBA. Consequently,
the giving of said bonus can no longer be withdrawn by the petitioner as this would amount to a diminution of the
employee’s existing benefits.15

Not to be dissuaded, petitioner is now before this Court. The only issue before us is whether or not the Court of
Appeals erred in affirming the ruling of the voluntary arbitrator that the petitioner is obliged to give the members of
the respondent Association a Christmas bonus in the amount of ₱3,000.00 in 2002.16

We uphold the rulings of the voluntary arbitrator and of the Court of Appeals. Findings of labor officials, who are
deemed to have acquired expertise in matters within their respective jurisdictions, are generally accorded not only
respect but even finality, and bind us when supported by substantial evidence. This is the rule particularly where the
findings of both the arbitrator and the Court of Appeals coincide.17

As a general proposition, an arbitrator is confined to the interpretation and application of the CBA. He does not sit to
dispense his own brand of industrial justice: his award is legitimate only in so far as it draws its essence from the
CBA.18 That was done in this case.

By definition, a "bonus" is a gratuity or act of liberality of the giver. It is something given in addition to what is
ordinarily received by or strictly due the recipient. A bonus is granted and paid to an employee for his industry and
loyalty which contributed to the success of the employer’s business and made possible the realization of profits.19

A bonus 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.20

Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be enforceable, it must have
been promised by the employer and expressly agreed upon by the parties.21 Given that the bonus in this case is
integrated in the CBA, the same partakes the nature of a demandable obligation. Verily, by virtue of its incorporation
in the CBA, the Christmas bonus due to respondent Association has become more than just an act of generosity on
the part of the petitioner but a contractual obligation it has undertaken.22

A CBA refers to a negotiated contract between a legitimate labor organization and the employer, concerning wages,
hours of work and all other terms and conditions of employment in a bargaining unit. As in all other contracts, the
parties to a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient,
provided these are not contrary to law, morals, good customs, public order or public policy.23

It is a familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are
obliged to comply with its provisions.24 This principle stands strong and true in the case at bar.1avvphi 1

A reading of the provision of the CBA reveals that the same provides for the giving of a "Christmas gift
package/bonus" without qualification. Terse and clear, the said provision did not state that the Christmas package
shall be made to depend on the petitioner’s financial standing. The records are also bereft of any showing that the
petitioner made it clear during CBA negotiations that the bonus was dependent on any condition. Indeed, if the
petitioner and respondent Association intended that the ₱3,000.00 bonus would be dependent on the company
earnings, such intention should have been expressed in the CBA.
It is noteworthy that in petitioner’s 1998 and 1999 Financial Statements, it took note that "the 1997 financial crisis in
the Asian region adversely affected the Philippine economy."25

From the foregoing, petitioner cannot insist on business losses as a basis for disregarding its undertaking. It is
manifestly clear that petitioner was very much aware of the imminence and possibility of business losses owing to
the 1997 financial crisis. In 1998, petitioner suffered a net loss of ₱14,347,548.00.26 Yet it gave a ₱3,000.00 bonus
to the members of the respondent Association. In 1999, when petitioner’s very own financial statement reflected that
"the positive developments in the economy have yet to favorably affect the operations of the company,"27 and
reported a loss of ₱346,025,733.00,28 it entered into the CBA with the respondent Association whereby it contracted
to grant a Christmas gift package/bonus to the latter. Petitioner supposedly continued to incur losses in the years
200029 and 2001. Still and all, this did not deter it from honoring the CBA provision on Christmas bonus as it
continued to give ₱3,000.00 each to the members of the respondent Association in the years 1999, 2000 and 2001.

All given, business losses are a feeble ground for petitioner to repudiate its obligation under the CBA. The rule is
settled that any benefit and supplement being enjoyed by the employees cannot be reduced, diminished,
discontinued or eliminated by the employer. The principle of non-diminution of benefits is founded on the
constitutional mandate to protect the rights of workers and to promote their welfare and to afford labor full
protection.30

Hence, absent any proof that petitioner’s consent was vitiated by fraud, mistake or duress, it is presumed that it
entered into the CBA voluntarily and had full knowledge of the contents thereof and was aware of its commitments
under the contract.

The Court is fully aware that implementation to the letter of the subject CBA provision may further deplete
petitioner’s resources. Petitioner’s remedy though lies not in the Court’s invalidation of the provision but in the
parties’ clarification of the same in subsequent CBA negotiations. Article 253 of the Labor Code is relevant:

Art. 253. Duty to bargain collectively when there exists a collective bargaining agreement. - When there is a
collective bargaining agreement, the duty to bargain collectively shall also mean that neither party shall terminate
nor modify such agreement during its lifetime. However, either party can serve a written notice to terminate or
modify the agreement at least sixty (60) days prior to its expiration date. It shall be the duty of both parties to keep
the status quo and to continue in full force and effect the terms and conditions of the existing agreement during the
sixty (60)-day period and/or until a new agreement is reached by the parties.

WHEREFORE, Premises considered, the petition is DENIED for lack of merit. The Decision of the Court of Appeals
dated 5 April 2006 and the Resolution of the same court dated 13 December 2007 in CA-G.R. SP No. 78334
are AFFIRMED.

SO ORDERED.

JOSE PORTUGAL PEREZ

Associate Justice

WE CONCUR:
 THIRD DIVISION

[G.R. No. 185665 : February 08, 2012]

EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., PETITIONER, VS. EASTERN

TELECOMS EMPLOYEES UNION, RESPONDENT.

DECISION

MENDOZA, J.:

Before the Court is a petition for review on certiorari seeking modification of the June 25, 2008
Decision[1] of the Court of Appeals (CA) and its December 12, 2008 Resolution,[2] in CA-G.R. SP No.
91974, annulling the April 28, 2005 Resolution[3] of the National Labor Relations Commission (NLRC)
in NLRC-NCR-CC-000273-04 entitled �In the Matter of the Labor Dispute in Eastern
Telecommunications, Philippines, Inc.� cralaw

The Facts

As synthesized by the NLRC, the facts of the case are as follows, viz:

Eastern Telecommunications Phils., Inc. (ETPI) is a corporation engaged in the business of providing
telecommunications facilities, particularly leasing international date lines or circuits, regular landlines,
internet and data services, employing approximately 400 employees.

Eastern Telecoms Employees Union (ETEU) is the certified exclusive bargaining agent of the
company�s rank and file employees with a strong following of 147 regular members. It has an
existing collecti[ve] bargaining agreement with the company to expire in the year 2004 with a Side
Agreement signed on September 3, 2001.

In essence, the labor dispute was a spin-off of the company�s plan to defer payment of the 2003
14th, 15th and 16th month bonuses sometime in April 2004. The company�s main ground in
postponing the payment of bonuses is due to allege continuing deterioration of company�s
financial position which started in the year 2000. However, ETPI while postponing payment of
bonuses sometime in April 2004, such payment would also be subject to availability of funds.

Invoking the Side Agreement of the existing Collective Bargaining Agreement for the period 2001-
2004 between ETPI and ETEU which stated as follows:

�4. Employment Related Bonuses. The Company confirms that the 14th, 15th and 16th month
bonuses (other than 13th month pay) are granted.�

The union strongly opposed the deferment in payment of the bonuses by filing a preventive
mediation complaint with the NCMB on July 3, 2003, the purpose of which complaint is to determine
the date when the bonus should be paid.

In the conference held at the NCMB, ETPI reiterated its stand that payment of the bonuses would
only be made in April 2004 to which date of payment, the union agreed. Thus, considering the
agreement forged between the parties, the said agreement was reduced to a Memorandum of
Agreement. The union requested that the President of the company should be made a signatory to
the agreement, however, the latter refused to sign. In addition to such a refusal, the company made
a sudden turnaround in its position by declaring that they will no longer pay the bonuses until the
issue is resolved through compulsory arbitration.

The company�s change in position was contained in a letter dated April 14, 2004 written to the
union by Mr. Sonny Javier, Vice-President for Human Resources and Administration, stating that
�the deferred release of bonuses had been superseded and voided due to the union�s filing of
the issue to the NCMB on July 18, 2003.� He declared that �until the matter is resolved in a
compulsory arbitration, the company cannot and will not pay any �bonuses� to any and all union
members.�

Thus, on April 26, 2004, ETEU filed a Notice of Strike on the ground of unfair labor practice for failure
of ETPI to pay the bonuses in gross violation of the economic provision of the existing CBA.

On May 19, 2004, the Secretary of Labor and Employment, finding that the company is engaged in
an industry considered vital to the economy and any work disruption thereat will adversely affect not
only its operation but also that of the other business relying on its services, certified the labor dispute
for compulsory arbitration pursuant to Article 263 (q) of the Labor Code as amended.

Acting on the certified labor dispute, a hearing was called on July 16, 2004 wherein the parties have
submitted that the issues for resolution are (1) unfair labor practice and (2) the grant of 14th,
15th and 16th month bonuses for 2003, and 14th month bonus for 2004. Thereafter, they were
directed to submit their respective position papers and evidence in support thereof after which
submission, they agreed to have the case considered submitted for decision.[4]

In its position paper,[5] the Eastern Telecoms Employees Union (ETEU) claimed that Eastern
Telecommunications Philippines, Inc. (ETPI) had consistently and voluntarily been giving out
14th month bonus during the month of April, and 15th and 16th month bonuses every December of
each year (subject bonuses) to its employees from 1975 to 2002, even when it did not realize any
net profits. ETEU posited that by reason of its long and regular concession, the payment of these
monetary benefits had ripened into a company practice which could no longer be unilaterally
withdrawn by ETPI. ETEU added that this long-standing company practice had been expressly
confirmed in the Side Agreements of the 1998-2001 and 2001-2004 Collective Bargaining
Agreements (CBA) which provided for the continuous grant of these bonuses in no uncertain terms.
ETEU theorized that the grant of the subject bonuses is not only a company practice but also a
contractual obligation of ETPI to the union members.

ETEU contended that the unjustified and malicious refusal of the company to pay the subject bonuses
was a clear violation of the economic provision of the CBA and constitutes unfair labor practice (ULP).
According to ETEU, such refusal was nothing but a ploy to spite the union for bringing the matter of
delay in the payment of the subject bonuses to the National Conciliation and Mediation Board
(NCMB). It prayed for the award of moral and exemplary damages as well as attorney�s fees for
the unfair labor practice allegedly committed by the company.

On the other hand, ETPI in its position paper,[6] questioned the authority of the NLRC to take
cognizance of the case contending that it had no jurisdiction over the issue which merely involved the
interpretation of the economic provision of the 2001-2004 CBA Side Agreement. Nonetheless, it
maintained that the complaint for nonpayment of 14th, 15th and 16th month bonuses for 2003 and
14th month bonus for 2004 was bereft of any legal and factual basis. It averred that the subject
bonuses were not part of the legally demandable wage and the grant thereof to its employees was an
act of pure gratuity and generosity on its part, involving the exercise of management prerogative and
always dependent on the financial performance and realization of profits. It posited that it resorted to
the discontinuance of payment of the bonuses due to the unabated huge losses that the company
had continuously experienced. It claimed that it had been suffering serious business losses since
2000 and to require the company to pay the subject bonuses during its dire financial straits would in
effect penalize it for its past generosity. It alleged that the non-payment of the subject bonuses was
neither flagrant nor malicious and, hence, would not amount to unfair labor practice.

Further, ETPI argued that the bonus provision in the 2001-2004 CBA Side Agreement was a mere
affirmation that the distribution of bonuses was discretionary to the company, premised and
conditioned on the success of the business and availability of cash. It submitted that said bonus
provision partook of the nature of a �one-time� grant which the employees may demand only
during the year when the Side Agreement was executed and was never intended to cover the entire
term of the CBA. Finally, ETPI emphasized that even if it had an unconditional obligation to grant
bonuses to its employees, the drastic decline in its financial condition had already legally released it
therefrom pursuant to Article 1267 of the Civil Code.

On April 28, 2005, the NLRC issued its Resolution dismissing ETEU�s complaint and held that ETPI
could not be forced to pay the union members the 14th, 15th and 16th month bonuses for the year
2003 and the 14th month bonus for the year 2004 inasmuch as the payment of these additional
benefits was basically a management prerogative, being an act of generosity and munificence on the
part of the company and contingent upon the realization of profits. The NLRC pronounced that ETPI
may not be obliged to pay these extra compensations in view of the substantial decline in its financial
condition. Likewise, the NLRC found that ETPI was not guilty of the ULP charge elaborating that no
sufficient and substantial evidence was adduced to attribute malice to the company for its refusal to
pay the subject bonuses. The dispositive portion of the resolution reads:

WHEREFORE, premises considered, the instant complaint is hereby DISMISSED for lack of merit.

SO ORDERED.[7]

Respondent ETEU moved for reconsideration but the motion was denied by the NLRC in its Resolution
dated August 31, 2005.

Aggrieved, ETEU filed a petition for certiorari[8] before the CA ascribing grave abuse of discretion on
the NLRC for disregarding its evidence which allegedly would prove that the subject bonuses were
part of the union members� wages, salaries or compensations. In addition, ETEU asserted that the
NLRC committed grave abuse of discretion when it ruled that ETPI is not contractually bound to give
said bonuses to the union members.

In its assailed June 25, 2008 Decision, the CA declared that the Side Agreements of the 1998 and
2001 CBA created a contractual obligation on ETPI to confer the subject bonuses to its employees
without qualification or condition. It also found that the grant of said bonuses has already ripened
into a company practice and their denial would amount to diminution of the employees� benefits.
It held that ETPI could not seek refuge under Article 1267 of the Civil Code because this provision
would apply only when the difficulty in fulfilling the contractual obligation was manifestly beyond the
contemplation of the parties, which was not the case therein. The CA, however, sustained the NLRC
finding that the allegation of ULP was devoid of merit. The dispositive portion of the questioned
decision reads:

WHEREFORE, premises considered, the instant petition is GRANTED and the resolution of the National
Labor Relations Commission dated April 28, 2005 is hereby ANNULLED and SET ASIDE. Respondent
Eastern Telecommunications Philippines, Inc. is ordered to pay the members of petitioner their 14th,
15th and 16th month bonuses for the year 2003 and 14th month for the year 2004. The complaint
for unfair labor practice against said respondent is DISMISSED.

SO ORDERED.[9]

ISSUES

Dissatisfied, ETPI now comes to this Court via Rule 45, raising the following errors allegedly
committed by the CA, to wit:

I.

THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT ANNULLED AND SET
ASIDE THE RESOLUTIONS OF THE NLRC DISREGARDING THE WELL SETTLED RULE THAT A
WRIT OF CERTIORARI (UNDER RULE 65) ISSUES ONLY FOR CORRECTION OF ERRORS OF
JURISDICTION OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION.

II.

THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT DISREGARDED THE
RULE THAT FINDINGS OF FACTS OF QUASI-JUDICIAL BODIES ARE ACCORDED FINALITY IF
THEY ARE SUPPORTED BY SUBSTANTIAL EVIDENCE CONSIDERING THAT THE
CONCLUSIONS OF THE NLRC WERE BASED ON SUBSTANTIAL AND OVERWHELMING
EVIDENCE AND UNDISPUTED FACTS.

III.

IT WAS A GRAVE ERROR OF LAW FOR THE COURT OF APPEALS TO CONSIDER THAT THE
BONUS GIVEN BY EASTERN COMMUNICATIONS TO ITS EMPLOYEES IS NOT DEPENDENT ON
THE REALIZATION OF PROFITS.

IV.

THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT DISREGARDED

THE UNDISPUTED FACT THAT EASTERN COMMUNICATIONS IS SUFFERING FROM
TREMENDOUS FINANCIAL LOSSES, AND ORDERED EASTERN COMMUNICATIONS TO GRANT
THE BONUSES REGARDLESS OF THE FINANCIAL DISTRESS OF EASTERN
COMMUNICATIONS.

V.

THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT ARRIVED AT THE
CONCLUSION THAT THE GRANT OF BONUS GIVEN BY EASTERN COMMUNICATIONS TO ITS
EMPLOYEES HAS RIPENED INTO A COMPANY PRACTICE.[10]

A careful perusal of the voluminous pleadings filed by the parties leads the Court to conclude that
this case revolves around the following core issues:

1. Whether or not petitioner ETPI is liable to pay 14th, 15th and 16th month bonuses for the year 2003
and 14th month bonus for the year 2004 to the members of respondent union; and

2. Whether or not the CA erred in not dismissing outright ETEU�s petition for certiorari.

ETPI insists that it is under no legal compulsion to pay 14th, 15th and 16th month bonuses for the year
2003 and 14th month bonus for the year 2004 contending that they are not part of the demandable
wage or salary and that their grant is conditional based on successful business performance and the
availability of company profits from which to source the same. To thwart ETEU�s monetary claims,
it insists that the distribution of the subject bonuses falls well within the company�s prerogative,
being an act of pure gratuity and generosity on its part. Thus, it can withhold the grant thereof
especially since it is currently plagued with economic difficulties and financial losses. It alleges that
the company�s fiscal situation greatly declined due to tremendous and extraordinary losses it
sustained beginning the year 2000. It claims that it cannot be compelled to act liberally and confer
upon its employees additional benefits over and above those mandated by law when it cannot afford
to do so. It posits that so long as the giving of bonuses will result in the financial ruin of an already
distressed company, the employer cannot be forced to grant the same.

ETPI further avers that the act of giving the subject bonuses did not ripen into a company practice
arguing that it has always been a contingent one dependent on the realization of profits and, hence,
the workers are not entitled to bonuses if the company does not make profits for a given year. It
asseverates that the 1998 and 2001 CBA Side Agreements did not contractually afford ETEU a vested
property right to a perennial payment of the bonuses. It opines that the bonus provision in the Side
Agreement allows the giving of benefits only at the time of its execution. For this reason, it cannot be
said that the grant has ripened into a company practice. In addition, it argues that even if such
traditional company practice exists, the CA should have applied Article 1267 of the Civil Code which
releases the obligor from the performance of an obligation when it has become so difficult to fulfill
the same.

It is the petitioner�s stance that the CA should have dismissed outright the respondent union�s
petition for certiorari alleging that no question of jurisdiction whatsoever was raised therein but,
instead, what was being sought was a judicial re-evaluation of the adequacy or inadequacy of the
evidence on record. It claims that the CA erred in disregarding the findings of the NLRC which were
based on substantial and overwhelming evidence as well as on undisputed facts. ETPI added that the
CA court should have refrained from tackling issues of fact and, instead, limited itself on issues of
jurisdiction and grave abuse of jurisdiction amounting to lack or excess of it.

The Court�s Ruling

As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does not
normally embark on a re-examination of the evidence presented by the contending parties during the
trial of the case considering that the findings of facts of the CA are conclusive and binding on the
Court. The rule, however, admits of several exceptions, one of which is when the findings of the
appellate court are contrary to those of the trial court or the lower administrative body, as the case
may be.[11] Considering the incongruent factual conclusions of the CA and the NLRC, this Court finds
Itself obliged to resolve it.

The pivotal question determinative of this controversy is whether the members of ETEU are entitled
to the payment of 14th, 15th and 16th month bonuses for the year 2003 and 14th month bonus for
year 2004.

After an assiduous assessment of the record, the Court finds no merit in the petition.

From a legal point of view, 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.[12] The grant 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.[13]

A bonus, however, becomes a demandable or enforceable obligation when it is made part of the
wage or salary or compensation of the employee.[14] Particularly instructive is the ruling of the Court
in Metro Transit Organization, Inc. v. National Labor Relations Commission,[15] where it was written:

Whether or not a bonus forms part of wages depends upon the circumstances and conditions for its
payment. If it is 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 if a certain level of
productivity is achieved, it cannot be considered part of the wage. Where it is not payable to all but
only to some employees and only when their labor becomes more efficient or more productive, it is
only an inducement for efficiency, a prize therefore, not a part of the wage.

The consequential question that needs to be settled, therefore, is whether the subject bonuses are
demandable or not. Stated differently, can these bonuses be considered part of the wage, salary or
compensation making them enforceable obligations?
The Court believes so.

In the case at bench, it is indubitable that ETPI and ETEU agreed on the inclusion of a provision for
the grant of 14th, 15th and 16th month bonuses in the 1998-2001 CBA Side Agreement,[16] as well
as in the 2001-2004 CBA Side Agreement,[17] which was signed on September 3, 2001. The
provision, which was similarly worded, states:

Employment-Related Bonuses

The Company confirms that the 14th, 15th and 16th month bonuses (other than the 13th month pay)
are granted.

A reading of the above provision reveals that the same provides for the giving of 14th, 15th and
16th month bonuses without qualification. The wording of the provision does not allow any other
interpretation. There were no conditions specified in the CBA Side Agreements for the grant of the
benefits contrary to the claim of ETPI that the same is justified only when there are profits earned by
the company. Terse and clear, the said provision does not state that the subject bonuses shall be
made to depend on the ETPI�s financial standing or that their payment was contingent upon the
realization of profits. Neither does it state that if the company derives no profits, no bonuses are to
be given to the employees. In fine, the payment of these bonuses was not related to the profitability
of business operations.

The records are also bereft of any showing that the ETPI made it clear before or during the execution
of the Side Agreements that the bonuses shall be subject to any condition. Indeed, if ETPI and ETEU
intended that the subject bonuses would be dependent on the company earnings, such intention
should have been expressly declared in the Side Agreements or the bonus provision should have
been deleted altogether. In the absence of any proof that ETPI�s consent was vitiated by fraud,
mistake or duress, it is presumed that it entered into the Side Agreements voluntarily, that it had full
knowledge of the contents thereof and that it was aware of its commitment under the contract.
Verily, by virtue of its incorporation in the CBA Side Agreements, the grant of 14th, 15th and
16th month bonuses has become more than just an act of generosity on the part of ETPI but a
contractual obligation it has undertaken. Moreover, the continuous conferment of bonuses by ETPI to
the union members from 1998 to 2002 by virtue of the Side Agreements evidently negates its
argument that the giving of the subject bonuses is a management prerogative.

From the foregoing, ETPI cannot insist on business losses as a basis for disregarding its undertaking.
It is manifestly clear that although it incurred business losses of P149,068,063.00 in the year 2000, it
continued to distribute 14th, 15th and 16th month bonuses for said year. Notwithstanding such huge
losses, ETPI entered into the 2001-2004 CBA Side Agreement on September 3, 2001 whereby it
contracted to grant the subject bonuses to ETEU in no uncertain terms. ETPI continued to sustain
losses for the succeeding years of 2001 and 2002 in the amounts of P348,783,013.00 and
P315,474,444.00, respectively. Still and all, this did not deter it from honoring the bonus provision in
the Side Agreement as it continued to give the subject bonuses to each of the union members in
2001 and 2002 despite its alleged precarious financial condition. Parenthetically, it must be
emphasized that ETPI even agreed to the payment of the 14th, 15th and 16th month bonuses for 2003
although it opted to defer the actual grant in April 2004. All given, business losses could not be cited
as grounds for ETPI to repudiate its obligation under the 2001-2004 CBA Side Agreement.

The Court finds no merit in ETPI�s contention that the bonus provision confirms the grant of the
subject bonuses only on a single instance because if this is so, the parties should have included such
limitation in the agreement. Nowhere in the Side Agreement does it say that the subject bonuses
shall be conferred once during the year the Side Agreement was signed. The Court quotes with
approval the observation of the CA in this regard:

ETPI argues that assuming the bonus provision in the Side Agreement of the 2001-2004 CBA entitles
the union members to the subject bonuses, it is merely in the nature of a �one-time� grant and
not intended to cover the entire term of the CBA. The contention is untenable. The bonus provision in
question is exactly the same as that contained in the Side Agreement of the 1998-2001 CBA and
there is no denying that from 1998 to 2001, ETPI granted the subject bonuses for each of those
years. Thus, ETPI may not now claim that the bonus provision in the Side Agreement of the 2001-
2004 CBA is only a �one-time� grant.[18]

ETPI then argues that even if it is contractually bound to distribute the subject bonuses to ETEU
members under the Side Agreements, its current financial difficulties should have released it from the
obligatory force of said contract invoking Article 1267 of the Civil Code. Said provision declares:

Article 1267. When the service has become so difficult as to be manifestly beyond the contemplation
of the parties, the obligor may also be released therefrom, in whole or in part.

The Court is not persuaded.

The parties to the contract must be presumed to have assumed the risks of unfavorable
developments. It is, therefore, only in absolutely exceptional changes of circumstances that equity
demands assistance for the debtor.[19] In the case at bench, the Court determines that ETPI�s
claimed depressed financial state will not release it from the binding effect of the 2001-2004 CBA
Side Agreement.

ETPI appears to be well aware of its deteriorating financial condition when it entered into the 2001-
2004 CBA Side Agreement with ETEU and obliged itself to pay bonuses to the members of ETEU.
Considering that ETPI had been continuously suffering huge losses from 2000 to 2002, its business
losses in the year 2003 were not exactly unforeseen or unexpected. Consequently, it cannot be said
that the difficulty in complying with its obligation under the Side Agreement was �manifestly
beyond the contemplation of the parties.� Besides, as held in Central Bank of the Philippines v.
Court of Appeals,[20] mere pecuniary inability to fulfill an engagement does not discharge a
contractual obligation. Contracts, once perfected, are binding between the contracting parties.
Obligations arising therefrom have the force of law and should be complied with in good faith. ETPI
cannot renege from the obligation it has freely assumed when it signed the 2001-2004 CBA Side
Agreement.

Granting arguendo that the CBA Side Agreement does not contractually bind petitioner ETPI to give
the subject bonuses, nevertheless, the Court finds that its act of granting the same has become an
established company practice such that it has virtually become part of the employees� salary or
wage. A bonus may be granted on equitable consideration when the giving of such bonus has been
the company�s long and regular practice. In Philippine Appliance Corporation v. Court of
Appeals,[21] it was pronounced:

To be considered a �regular practice,� however, the giving of the bonus should have been done
over a long period of time, and must be shown to have been consistent and deliberate. The test or
rationale of this rule on long practice requires an indubitable showing that the employer agreed to
continue giving the benefits knowing fully well that said employees are not covered by the law
requiring payment thereof.

The records show that ETPI, aside from complying with the regular 13th month bonus, has been
further giving its employees 14th month bonus every April as well as 15th and 16th month bonuses
every December of the year, without fail, from 1975 to 2002 or for 27 years whether it earned profits
or not. The considerable length of time ETPI has been giving the special grants to its employees
indicates a unilateral and voluntary act on its part to continue giving said benefits knowing that such
act was not required by law. Accordingly, a company practice in favor of the employees has been
established and the payments made by ETPI pursuant thereto ripened into benefits enjoyed by the
employees.
The giving of the subject bonuses cannot be peremptorily withdrawn by ETPI without violating Article
100 of the Labor Code:

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.

The rule is settled that any benefit and supplement being enjoyed by the employees cannot be
reduced, diminished, discontinued or eliminated by the employer. The principle of non-diminution of
benefits is founded on the constitutional mandate to protect the rights of workers and to promote
their welfare and to afford labor full protection.[22]

Interestingly, ETPI never presented countervailing evidence to refute ETEU�s claim that the
company has been continuously paying bonuses since 1975 up to 2002 regardless of its financial
state. Its failure to controvert the allegation, when it had the opportunity and resources to do so,
works in favor of ETEU. Time and again, it has been held that should doubts exist between the
evidence presented by the employer and the employee, the scales of justice must be tilted in favor of
the latter.[23]
cralaw

WHEREFORE, the petition is DENIED. The June 25, 2008 Decision of the Court of Appeals and its
December 12, 2008 Resolution are AFFIRMED.

SO ORDERED.

Velasco, Jr., (Chairperson), Bersamin,* Abad, and Perlas-Bernabe, JJ., concur.

 DO 174-17

G.R. No. 174084 August 25, 2010

SPIC N' SPAN SERVICES CORPORATION, Petitioner,

vs.
GLORIA PAJE, LOLITA GOMEZ, MIRIAM CATACUTAN, ESTRELLA ZAPATA, GLORIA SUMANG, JULIET
DINGAL, MYRA AMANTE, and FE S. BERNANDO, Respondents.

DECISION

BRION, J.:

Before the Court is the petition for review on certiorari1 filed by Spic N’ Span Services Corporation (SNS) to seek the
reversal of the October 25, 2004 Decision2 and the August 2, 2006 Resolution3 of the Court of Appeals (CA) in CA-
G.R. SP No. 83215, entitled "Gloria Paje, Lolita Gomez, Miriam Catacutan, Estrella Zapata, Gloria Sumang, Juliet
Dingal, Myra Amante and Fe S. Bernardo v. National Labor Relations Commission, Spic N Span Service
Corporation and Swift Foods, Inc."

Background Facts

Swift Foods, Inc. (Swift) is a subsidiary of RFM Corporation that manufactures and processes meat products and
other food products. SNS’s business is to supply manpower services to its clients for a fee. Swift and SNS have a
contract to promote Swift products.

Inocencio Fernandez, Edelisa F. David, Thelma Guardian, Juliet C. Dingal, Fe S. Bernardo, Lolita Gomez, Myra
Amante, Miriam S. Catacutan, Gloria O. Sumang, Gloria O. Paje, and Estrella Zapata (complainants) worked as
Deli/Promo Girls of Swift products in various supermarkets in Tarlac and Pampanga. They were all dismissed from
their employment on February 28, 1998. They filed two complaints for illegal dismissal against SNS and Swift before
the National Labor Relations Commission (NLRC) Regional Arbitration Branch III, San Fernando, Pampanga,
docketed as Case Nos. 03-9131-98 and 07-9295-98. These cases were subsequently consolidated.

After two unsuccessful conciliation hearings, the Labor Arbiter ordered the parties to submit their position papers.
Swift filed its position paper; SNS did not.4 The complainants’ position papers were signed by Florencio P. Peralta
who was not a lawyer and who claimed to be the complainants’ representative, although he never showed any proof
of his authority to represent them.

In their position papers, the complainants alleged that they were employees of Swift and SNS, and their services
were terminated without cause and without due process. The termination came on the day they received their
notices; thus, they were denied the procedural due process requirements of notice and hearing prior to their
termination of employment.5 Swift, in its position paper, moved to dismiss the complaints on the ground that it
entered into an independent labor contract with SNS for the promotion of its products; it alleged that the
complainants were the employees of SNS, not of Swift.6

The Labor Arbiter7 found SNS to be the agent of Swift, and ordered SNS and Swift to jointly and severally pay
Edelisa David ₱115,637.50 and Inocencio Fernandez ₱192,197.50, representing their retirement pay and service
incentive leave pay. He dismissed, without prejudice, the claims of the other complainants because they failed to
verify their position paper. He also denied all other claims for lack of factual basis.8

Both Swift and the complainants appealed to the NLRC. Swift filed a memorandum of appeal, while the
complainants filed a partial memorandum of appeal.9

The NLRC denied the complainants’ appeal for lack of merit.10 It dismissed the complaint against Swift, and ordered
SNS to pay Edelisa David a total of ₱256,620.13, and Inocencio Fernandez a total of ₱280,912.63, representing
backwages, separation pay, and service incentive leave pay. It dismissed all other claims for lack of merit.
Thereafter, Edelisa David and Inocencio Fernandez agreed to a settlement, and their cases were thus closed.11
The complainants whose claims were dismissed, namely, Gloria Paje, Lolita Gomez, Miriam Catacutan, Estrella
Zapata, Gloria Sumang, Juliet Dingal, Myra Amante, and Fe S. Bernardo (respondents), moved for the
reconsideration of the NLRC’s ruling. This time, they were represented by the Public Attorney’s Office. The NLRC
denied their motion.12

The respondents then sought relief with the CA through a petition for certiorari, based on the alleged grave abuse of
discretion committed by the NLRC. The CA found the petition meritorious, in its assailed decision of October 25,
2004, and ruled that the respondents’ failure to sign the verification in their position paper was a formal defect that
was not fatal to their case. It concluded that SNS was merely an agent of Swift; thus, the latter should not be exempt
from liability. It ordered the remand of the case to the Labor Arbiter for the computation of the respondents’
backwages, separation pay, and service incentive leave pay. SNS and Swift filed their motions for reconsideration
which the CA denied.

SNS is now before us on a petition for review on certiorari, and submits the following –

I. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN
IT RULED THAT THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN DISMISSING THE
CLAIMS OF HEREIN RESPONDENTS "ON THE GROUND OF NON-SIGNING OF THE POSITION
PAPER."

II. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN
HOLDING THAT ALTHOUGH THE RESPONDENTS WERE NOT REPRESENTED BY A LAWYER BUT BY
ONE WHO IS NOT A MEMBER OF THE BAR, SAID FACT IS "SUFFICIENT JUSTIFICATION FOR THE
PETITIONERS’ FAILURE TO COMPLY WITH THE REQUIREMENTS OF LAW."

III. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN
"REMANDING THE CASE TO THE LABOR ARBITER FOR THE COMPUTATION OF THE MONEY
CLAIMS OF THE RESPONDENTS, TO WIT: 1) BACKWAGES, 2) SEPARATION PAY, AND 3) SERVICE
INCENTIVE LEAVE," DESPITE THE FACT THAT NOWHERE IN THE DECISIONS OF THE LABOR
ARBITER, THE NATIONAL LABOR RELATIONS COMMISSION, AND COURT OF APPEALS IS IT
STATED THAT HEREIN RESPONDENTS WERE ILLEGALLY DISMISSED."13

The Court’s Ruling

We find the petition unmeritorious.

SNS submits that since respondents did not sign the verification in their position paper, the CA erred when it ruled
that the NLRC committed grave abuse of discretion in dismissing the respondents’ complaints. SNS stressed the
importance of a signature in a pleading, and harped on the respondents’ failure to sign their position paper. 14 This,
to SNS, is fatal to the respondents’ case.

We do not agree with SNS.

As we previously explained in Torres v. Specialized Packaging Development Corporation,15 where only two of the 25
real parties-in-interest signed the verification, the verification by the two could be sufficient assurance that the
allegations in the petition were made in good faith, are true and correct, and are not speculative. The lack of a
verification in a pleading is only a formal defect, not a jurisdictional defect, and is not necessarily fatal to a
case.16 The primary reason for requiring a verification is simply to ensure that the allegations in the pleading are
done in good faith, are true and correct, and are not mere speculations.17

The CA, in its assailed decision, cited Philippine Telegraph and Telephone Corporation v. NLRC18 to emphasize that
in labor cases, the deciding authority should use every reasonable means to speedily and objectively ascertain the
facts, without regard to technicalities of law and procedure. Technical rules of evidence are not strictly binding in
labor cases.19

In the hierarchy observed in the dispensation of justice, rules of procedure can be disregarded in order to serve the
ends of justice. This was explained by Justice Bernando P. Pardo, in Aguam v. Court of Appeals,20 when he said –
Litigations must be decided on their merits and not on technicality. Every party litigant must be afforded the amplest
opportunity for the proper and just determination of his cause, free from the unacceptable plea of technicalities.
Thus, dismissal of appeals purely on technical grounds is frowned upon where the policy of the court is to
encourage hearings of appeals on their merits and the rules of procedure ought not to be applied in a very rigid,
technical sense; rules of procedure are used only to help secure, not override substantial justice. It is a far better
and more prudent course of action for the court to excuse a technical lapse and afford the parties a review of the
case on appeal to attain the ends of justice rather than dispose of the case on technicality and cause a grave
injustice to the parties, giving a false impression of speedy disposal of cases while actually resulting in more delay, if
not a miscarriage of justice.21

We should remember, too, that certain labor rights assume preferred positions in our legal hierarchy. Under the
Constitution and the Labor Code, the State is bound to protect labor and assure the rights of workers to security of
tenure.22 Article 4 of the Labor Code provides that all doubts in the implementation and interpretation of its
provisions (including its implementing rules and regulations) shall be resolved in favor of labor. The Constitution, on
the other hand, characterizes labor as a primary social economic force. The State is bound to "protect the rights of
workers and promote their welfare,"23 and the workers are "entitled to security of tenure, humane conditions of work,
and a living wage."24 Under these fundamental guidelines, respondents’ right to security of tenure is a preferred
constitutional right that technical infirmities in labor pleadings cannot defeat.

1. SNS submits that the CA committed a serious error in ruling that the respondents’ representative’s non-
membership in the bar is sufficient justification for their failure to comply with the requirements of the law. SNS
argues that this ruling excuses the employment of a non-lawyer and places the acts of the latter on the same level
as those of a member of the Bar.25 Our Labor Code allows a non-lawyer to represent a party before the Labor
Arbiter and the Commission,26 but provides limitations: Non-lawyers may appear before the Commission or any
Labor Arbiter only: (1) If they represent themselves; or (2) If they represent their organization or members
thereof.27 Thus, SNS concludes that the respondents’ representative had no personality to appear before the Labor
Arbiter or the NLRC, and his representation for the respondents should produce no legal effect.

Our approach to these arguments is simple as the problem boils down to a balance between a technical rule and
protected constitutional interests. The cited technical infirmity cannot defeat the respondents’ preferred right to
security of tenure which has primacy over technical requirements. Thus, we affirm the CA’s ruling on this point,
without prejudice to whatever action may be taken against the representative, if he had indeed been engaged in the
unauthorized practice of law.

2. SNS also claims serious error on the part of the CA in remanding the case to the Labor Arbiter, for computation of
the respondents’ backwages, separation pay and service incentive leave pay despite the fact that nowhere in the
decisions of the Labor Arbiter, the NLRC, and CA was there any finding that respondents had been illegally
dismissed.

We find this to be the first argument of its kind from SNS, and, in fact, is the first ever submission from SNS before it
filed a motion for reconsideration with the CA. To recall, SNS did not file its position paper before the labor arbiter,
nor did it file its appeal before the NLRC; only Swift and the complainants did.28 It was only Swift, too, that filed its
comment to the herein respondents’ petition for certiorari.29

The records do not show if SNS filed its memorandum before the CA, although SNS filed a motion for
reconsideration of the CA decision. It then claimed that the CA erred in ruling that the NLRC committed grave abuse
of discretion when it dismissed respondents’ claim; that a petition for certiorari under Rule 65 of the Rules of Court is
not the proper remedy to correct the NLRC’s alleged grave abuse of discretion; and that the respondents were
bound by the mistakes of their non-lawyer representative.30 Significantly, SNS did not raise the question of the CA’s
failure to state that the respondents had been illegally dismissed. At this point, it is too late for SNS to raise the
issue.

Nothing on record indicates the reason for the respondents’ termination from employment, although the fact of
termination was never disputed. Swift denied liability on the basis of its contract with SNS. The contract was not
presented before the Labor Arbiter, although Swift averred that under the contract, SNS would supply promo girls,
merchandisers and other promotional personnel to handle all promotional aspects and merchandising strategy of
Swift.31 We can assume, for lack of proof to the contrary, that the respondents’ termination from employment was
illegal since neither SNS nor Swift, as employers, presented any proof that their termination from employment was
legal. Upon proof of termination of employment, the employer has the burden of proof that the dismissal was valid;
absent this proof, the termination from employment is deemed illegal, as alleged by the dismissed employees.

3. In order that a labor relationship can be categorized as legitimate/permissible job contracting or as prohibited
labor-only contracting, the totality of the facts and the surrounding circumstances of the relationship ought to be
considered.32 Every case is unique and has to be assessed on the basis of its facts and of the features of the
relationship in question. In permissible job contracting, the principal agrees to put out or farm out with a contractor or
subcontractor the performance or completion of a specific job, work or service within a definite or predetermined
period, regardless of whether such job, work or service is to be performed or completed within or outside the
premises of the principal. The test is whether the independent contractor has contracted to do the work according to
his own methods and without being subject to the principal’s control except only as to the results, he has substantial
capital, and he has assured the contractual employees entitlement to all labor and occupational safety and health
standards, free exercise of the right to self-organization, security of tenure, and social and welfare benefits.33

The CA found SNS to be Swift’s agent, and explained its ruling as follows34 –

To be legitimate, contracting or subcontracting must satisfy the following requirements: 1) The contractor or
subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on
its own account and under its own responsibility, according to its own manners and methods, and free from the
control and direction of the principal in all matters connected with the performance of the work except as to the
results thereof; 2) the contractor or subcontractor has substantial capital or investment; and 3) the agreement
between the principal and contractor or subcontractor assures the contractual employees’ entitlement to all labor
and occupational safety and health standards, free exercise of right to self-organization, security of tenure, and
social and welfare benefit (Vinoya v. NLRC, 324 SCRA 469).

The parties failed to attach a copy of the agreement entered into between SNS and Swift. Neither did they attach a
1âw phi 1

copy of the financial statement of SNS. Thus, we are constrained to rule on the issue involved on the basis of the
findings of both the Labor Arbiter and the NLRC.

The Labor Arbiter, in finding that SNS was merely a labor-only contractor, cited the following reasons: First, the
agreement between SNS and Swift shows that the latter exercised control over the promo girls and/or
merchandisers through the services of coordinators. Second, it cannot be said that SNS has substantial capital.
Third, the duties of the petitioners were directly related, necessary and vital to the day-to-day operations of Swift.
Lastly, the uniform and identification cards used by the petitioners were subject to the approval of Swift.

The NLRC, on the other hand, in finding that SNS is an independent contractor gave the following reasons: First,
there is no evidence that Swift exercised the power of control over the petitioners. Rather, it is SNS who exercised
direct control and supervision over the nature and performance of the works of herein petitioners. Second, by law,
Swift and SNS have distinct and separate juridical personality from each other.

The decision of the NLRC is bereft of explanation as to the existence of circumstances that would make SNS an
independent contractor as would exempt the "principal" from liabilities to the employees.

Nowhere in the decision of both the Labor Arbiter and the NLRC shows that SNS had full control of the means and
methods of the performance of their work. Moreover, as found by the Labor Arbiter, there was no evidence that SNS
has substantial capital or investment. Lastly, there was no finding by the Labor Arbiter nor the NLRC that the
agreement between the principal (Swift) and contractor (SNS) assures the contractual employees’ entitlement to all
labor and occupational safety and health standards, free exercise of right to self-organization, security of tenure, and
social and welfare benefit.

In view of the foregoing, we conclude that the requisites above-mentioned are not obtaining in the present
case. Hence, SNS is considered merely an agent of Swift which does not exempt the latter from liability.
1âwphi1

We note that the present decision does not affect the settlement entered into between Edeliza David and Inocencio
Fernandez, on the one hand and SNS, on the other. As held by the NLRC, their complaints are considered closed
and terminated.
WHEREFORE, premises considered, the instant petition is hereby GRANTED. The Resolutions of the NLRC dated
January 11, 2002 and December 23, 2003 are SET ASIDE in so far as the dismissal of the petitioners’ case is
concerned and in so far as Swift is found not liable for the payment of the petitioners’ money claims.

The present case is hereby REMANDED to the Labor Arbiter for the computation of the money claims of the
petitioners, to wit: 1) Backwages; 2) Separation Pay; and 3) Service Incentive Leave Pay.

The settlement of the claims of David and Fernandez is not affected by this decision.

We fully agree with this ruling. What we have before us, therefore, is a case of illegal dismissal perpetrated by a
principal and its illegal contractor-agent. Thus, we affirm the ruling of the CA with the modification that the
respondents are also entitled to nominal damages, for violation of their due process rights to notice and hearing,
pursuant to our ruling in Agabon v. NLRC.35 We peg this amount at ₱30,000.00 for each of the respondents.

WHEREFORE, premises considered, we hereby AFFIRM the Court of Appeals’ October 25, 2004 Decision and
August 2, 2006 Resolution in CA-G.R. SP No. 83215, with the modification that nominal damages in the amount of
₱30,000.00 should additionally be paid to each of the respondents, for violation of their procedural due process
rights. Costs against the petitioner.

SO ORDERED.

ARTURO D. BRION
Associate Justice

WE CONCUR:
G.R. No. 157647 October 15, 2007

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, LANTING SECURITY and WATCHMAN AGENCY, TOMAS
LANTING, DANIEL FANILA,* HECTOR MORENO, ISAURO FERRER,** RUBIN WILFREDO, JESUS DELIMA,
JR., MARIA LEGASPI, SANTIAGO NOTO, JR., and VIRGILIO SORIANO, Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari of the Decision1 dated July 25, 2002 of the Court of Appeals
(CA) in CA-G.R. SP No. 61570 and the CA Resolution2 dated March 19, 2003 which denied the motion for
reconsideration thereof.

The facts:

Tomas Lanting, doing business under the name and style of Lanting Security and Watchman Agency (LSWA)
entered into a Security Service Contract to provide security guards to the properties of the Government Service
Insurance System (GSIS) at the contract rate of ₱3,000.00 per guard per month.3

During the effectivity of the contract, LSWA requested the GSIS for an upward adjustment of the contract rate in
view of Section 7 of Wage Order No. 1 and Section 3 of Wage Order No. 2, which were issued by the Regional
Tripartite Wages and Productivity Board-NCR pursuant to Republic Act No. 6727, otherwise known as the Wage
Rationalization Act.

Acting on the request of LSWA, the GSIS, through its Board of Trustees and under Board Resolution No. 207, dated
May 24, 1991, approved the upward adjustments of the contract price from ₱3,000.00 to ₱3,716.07 per guard, per
month effective November 1, 1990 to January 7, 1991, and ₱4,200.00 effective January 8, 1991 to May 31, 1991.4

LSWA assigned security guards Daniel Fanila, Hector Moreno, Isauro Ferrer, Rubin Wilfredo, Jesus Delima, Jr.,
Maria Legaspi, Santiago Noto, Jr., and Virgilio Soriano (hereafter complainants) to guard one of GSIS's properties.
The complainants have the following dates of employment and compensation package with LSWA:

1. Daniel Fanila 3/28/91-3/15/93 P3,100/month

2. Virgilio Soriano 10/0/91-3/15/93 P3,100/month

3. Hector Moreno 1/04/89-3/15/93 P3,100/month

4. Isauro Torres 11/ /88-3/15/93 P3,100/month

5. Rubin Wilfredo 3/08/91-3/15/93 P3,100/month

6. Jesus Delima, Jr. 3/28/91-3/15/93 P3,100/month

7. Maria Legaspi 3/13/91-3/15/93 P3,100/month

On March 15, 1993, GSIS terminated the Security Service Contract with LSWA. All the complainants, except Virgilio
Soriano, were absorbed by the incoming security agency.

On March 7, 1994, complainants filed separate complaints against LSWA for underpayment of wages and non-
payment of labor standard benefits from March 1991 to March 15, 1993. Virgilio Soriano also complained of illegal
dismissal.
In its Position Paper, LSWA alleged that complainants were estopped from claiming that they were underpaid
because they were informed that the pay and benefits given to them were based on the contract rate of ₱103.00 per
eight hours of work or about ₱3,100.00 per month.

On August 9, 1994, LSWA filed a Third-Party Complaint5 against GSIS for underpayment of complainants' wages.

In its Position Paper,6 GSIS alleged that the Third-Party Complaint states no cause of action against it; that LSWA
obligated itself in the Security Service Contract to be solely liable for the enforcement of and compliance with all
existing labor laws, rules and regulations; that the GSIS Board of Trustees approved the upward adjustment on a
month-to-month basis, at ₱4,200 per guard per month, effective January 8, 1991 to May 31, 1991, under Board
Resolution No. 207 dated May 24, 1991, which was incorporated in the Security Service Contract; that GSIS fully
paid the services of the security guards as agreed upon in the Security Service Contract.

On August 27, 1996, Labor Arbiter Renato Bugarin rendered a Decision7 in favor of complainants, the dispositive
portion of which reads:

WHEREFORE, premises considered judgment is hereby rendered:

1. Ordering respondents Lanting Security and Watchman Agency and Tomas Lanting to reinstate
complainant Virgilio Soriano without loss of seniority rights and benefits and to pay his backwages
amounting to P161,400.47, computed up to the promulgation of this decision. Failure to reinstate
complainant to his former position as hereby ordered, his backwages shall continue to run but in no case
shall exceed three (3) years;

2. Ordering, respondents Lanting Security and Watchman Agency and/or Thomas Lanting and the
Government Service Insurance System, jointly and severally liable to pay the complainants, their salary
differentials; cash equivalent of their service incentive leaves and proportionate 13th month pay covering the
period from June 1, 1991 to March 15, 1993, hereto indicated as follows:

1.Daniel Fanila,Jr. – P18, 439.50

2. Hector Moreno - P18, 439.50

3. Isauro Torres - P18, 439.50

4. Rubin Wilfredo - P18, 439.50

5. Jesus Delima, Jr. - P18, 439.50

6. Maria Legaspi - P18, 439.50

7. Virgilio Soriano - P18, 439.50

3. All other claims are hereby dismissed for lack of merit.

SO ORDERED.8

The Labor Arbiter held LSWA and GSIS jointly and severally liable for the payment of complainants' money claims,
pursuant to Articles 106 and 107 of the Labor Code.

LSWA appealed to the NLRC. On April 14, 2000, the NLRC issued a Resolution,9 the dispositive portion of which
reads:

WHEREFORE, premises considered, the Appeal is hereby GRANTED. Accordingly, the Decision appealed from is
SUSTAINED subject to the modification that Complainant-Appellee Soriano was not illegally dismissed and hence,
is not entitled to reinstatement to his former position and to payment of any backwages; that from the other
Complainants-Appellees' awarded salary differentials from 7 March 1991 to 1 June 1991 in the amount of (sic) each
should be deducted from their awarded total salary differentials in the sum of P10,917.00 each; and that the Third-
Party Respondent GSIS is alone liable for payment of their salary differentials.

SO ORDERED.10

The NLRC held the GSIS solely liable for payment of complainants' money claims.

Dissatisfied, the GSIS filed on May 15, 2000 a Motion for Reconsideration.11 On August 20, 2000, the NLRC issued
a Resolution12 denying GSIS's Motion for Reconsideration.

On November 6, 2000, the GSIS filed a Petition for Certiorari13 with the CA arguing that the NLRC gravely abused
its discretion in holding GSIS solely liable for complainants' money claims.

On July 25, 2002, the CA rendered a Decision,14 the dispositive portion of which reads:

WHEREFORE, the petition is GRANTED for being meritorious. The questioned resolution dated 14 April 2000 of the
NLRC is hereby modified insofar as it holds petitioner GSIS solely liable for the salary differentials of the
complainants. Instead, We revert back to the ruling of the Honorable Labor Arbiter and hold petitioner GSIS and
respondent Lanting Security and Watchman Agency and/or Tomas Lanting jointly and severally liable for the
payment of complainants' salary differentials.

SO ORDERED.15

While finding that the GSIS complied with its obligations under Wage Order Nos. 1 and 2 by incorporating the
mandated increase in the Security Service Contract, the CA held the GSIS jointly and severally liable with LSWA for
complainants' money claims pursuant to Articles 106 and 107 of the Labor Code.

On September 3, 2002, the GSIS filed a Motion for Reconsideration.16 In a Resolution17 dated March 19, 2003, the
CA denied the motion for reconsideration.

Hence, the present petition anchored on the following assigned error:

THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN HOLDING THAT PETITIONER
GSIS IS SOLIDARILY LIABLE FOR PAYMENT OF COMPLAINANTS-RESPONDNENTS' SALARY
DIFFERENTIALS.18

The GSIS avers that it cannot twice be held liable for complainants' salary differentials since it fully paid
complainants' salaries by incorporating in the Security Service Contract the salary rate increases mandated by
Wage Order Nos. 1 and 2; otherwise, it would be unjust enrichment on the part of complainants and/or LSWA at its
expense. It submits that Articles 106 and 107 of the Labor Code were not contemplated by its framers to cover
principals or clients of service contractors who had already paid for the wages of the contractor or subcontractor.

In its Comment,19 LSWA maintains that the GSIS is jointly and severally liable with LSWA because Articles 106 and
107 of the Labor Code provide so and these provisions were intended to ensure that employees are paid the wages
due them in case of violation of the Labor Code of either the contractor or the principal; that the GSIS cannot claim
that holding it jointly and severally liable with LSWA would result in grave injustice since the law did not leave it
without recourse as the GSIS has the right of reimbursement from its co-debtor under Article 121720 of the Civil
Code.

In their Comment,21 complainants argue that the GSIS is jointly and severally liable with LSWA for complainants'
money claims since LSWA actually paid only the sum of ₱3,100.00 a month, even though the GSIS incorporated in
the Security Service Contract the mandated wage increases in Wage Order Nos. 1 and 2; that although the Security
Service Contract provided that there shall be employer-employer relationship between LSWA and/or its security
guards and the GSIS, Article 106 of the Labor Code establishes an employer-employee relationship between the
employer and the job contractor's employees for a limited purpose, that is, in order to ensure that the latter get paid
the wages due them.
The Court gave due course to the petition and required the parties to submit their respective memoranda.22 Only the
GSIS complied.23 In the interest of justice and speedy disposition of cases, the Court resolved to dispense with the
filing of the respective memoranda of LSWA and the complainants and to decide the case based on the pleadings
filed.24

The petition is bereft of merit.

Articles 106 and 107 of the Labor Code provide:

ART. 106. Contractor or subcontractor.– Whenever an employer enters into contract with another person for the
performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wage of his employees in accordance with
this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the same manner and extent that he is
liable to employees directly employed by him.

xxx

ART. 107 Indirect employer.– The provisions of the immediately preceding Article shall likewise apply to any person,
partnership, association or corporation which, not being an employer, contracts with an independent contractor for
the performance of any work, task, job or project. (Emphasis supplied.)

In this case, the GSIS cannot evade liability by claiming that it had fully paid complainants' salaries by incorporating
in the Security Service Contract the salary rate increases mandated by Wage Order Nos. 1 and 2 by increasing the
contract price from ₱3,000.00 to ₱3,176.07 per guard per month effective November 1, 1990 to January 7, 1991,
and ₱4,200.00 effective January 8, 1991 to May 31, 1991.

In Rosewood Processing, Inc. v. National Labor Relations Commission,25 the Court explained the rationale for the
joint and several liability of the employer, thus:

The joint and several liability of the employer or principal was enacted to ensure compliance with the
provisions of the Code, principally those on statutory minimum wage. The contractor or subcontractor is made
liable by virtue of his or her status as a direct employer, and the principal as the indirect employer of the contractor’s
employees. This liability facilitates, if not guarantees, payment of the workers’ compensation, thus, giving
the workers ample protection as mandated by the 1987 Constitution. This is not unduly burdensome to the
employer. Should the indirect employer be constrained to pay the workers, it can recover whatever amount
it had paid in accordance with the terms of the service contract between itself and the contractor.(Emphasis
supplied)26

Thus, the Court does not agree with the GSIS's claim that a double burden would be imposed upon the latter
because it would be paying twice for complainants' services. Such fears are unfounded. Under Article 1217 of the
Civil Code, if the GSIS should pay the money claims of complainants, it has the right to recover from LSWA
whatever amount it has paid in accordance with the terms of the service contract between the LSWA and the GSIS. 1âwphi1

Joint and solidary liability is simply meant to assure aggrieved workers of immediate and sufficient payment of what
is due them. This is in line with the policy of the State to protect and alleviate the plight of the working class.

WHEREFORE, the petition is DENIED. The Decision dated July 25, 2002 and the Resolution dated March 19, 2003
of the Court of Appeals (CA) in CA-G.R. SP No. 61570 are AFFIRMED with the MODIFICATION that the joint and
solidary liability of LSWA and the GSIS to pay complainants' salary differentials shall be without prejudice to the
GSIS's right of reimbursement from LSWA.

SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice

WE CONCUR

G.R. No. 160506 : March 9, 2010

JOEB M. ALIVIADO, ARTHUR CORPUZ, ERIC ALIVIADO, MONCHITO AMPELOQUIO,

ABRAHAM BASMAYOR, JONATHAN MATEO, LORENZO PLATON, JOSE FERNANDO
GUTIERREZ, ESTANISLAO BUENAVENTURA, LOPE SALONGA, FRANZ DAVID, NESTOR
IGNACIO, JULIO REY, RUBEN MARQUEZ, JR., MAXIMINO PASCUAL, ERNESTO CALANAO,
ROLANDO ROMASANTA, RHUEL AGOO, BONIFACIO ORTEGA, ARSENIO SORIANO, JR.,
ARNEL ENDAYA, ROBERTO ENRIQUEZ, NESTOR BAQUILA, EDGARDO QUIAMBAO, SANTOS
BACALSO, SAMSON BASCO, ALADINO GREGORO, JR., EDWIN GARCIA, ARMANDO VILLAR,
EMIL TAWAT, MARIO P. LIONGSON, CRESENTE J. GARCIA, FERNANDO MACABENTE,
MELECIO CASAPAO, REYNALDO JACABAN, FERDINAND SALVO, ALSTANDO MONTOS,
RAINER N. SALVADOR, RAMIL REYES, PEDRO G. ROY, LEONARDO P. TALLEDO, ENRIQUE F.
TALLEDO, WILLIE ORTIZ, ERNESTO SOYOSA, ROMEO VASQUEZ, JOEL BILLONES, ALLAN
BALTAZAR, NOLI GABUYO, EMMANUEL E. LABAN, RAMIR E. PIAT, RAUL DULAY, TADEO
DURAN, JOSEPH BANICO, ALBERT LEYNES, ANTONIO DACUNA, RENATO DELA CRUZ,
ROMEO VIERNES, JR., ELAIS BASEO, WILFREDO TORRES, MELCHOR CARDANO, MARIANO
NARANIAN, JOHN SUMERGIDO, ROBERTO ROSALES, GERRY C. GATPO, GERMAN N.
GUEVARRA, GILBERT Y. MIRANDA, RODOLFO C. TOLEDO, ARNOLD D. LASTONA, PHILIP M.
LOZA, MARIO N. CULDAYON, ORLANDO P. JIMENEZ, FRED P. JIMENEZ, RESTITUTO C.
PAMINTUAN, JR., ROLANDO J. DE ANDRES, ARTUZ BUSTENERA, ROBERTO B. CRUZ,
ROSEDY O. YORDAN, DENNIS DACASIN, ALEJANDRINO ABATON, and ORLANDO S.
BALANGUE, Petitioners, v. PROCTER & GAMBLE PHILS., INC., and PROMM-GEM
INC., Respondents.

DECISION

DEL CASTILLO, J.:

Labor laws expressly prohibit "labor-only" contracting. To prevent its circumvention, the Labor Code
establishes an employer-employee relationship between the employer and the employees of the
labor-only contractor.
chanroblesv irtu a|awlibary

The instant petition for review assails the March 21, 2003 Decision1 of the Court of Appeals (CA) in
c�fa

CA-G.R. SP No. 52082 and its October 20, 2003 Resolution2 denying the motions for reconsideration
c�fa

separately filed by petitioners and respondent Procter & Gamble Phils. Inc. (P&G). The appellate
court affirmed the July 27, 1998 Decision of the National Labor Relations Commission (NLRC), which
in turn affirmed the November 29, 1996 Decision3 of the Labor Arbiter. All these decisions found
c�fa

Promm-Gem, Inc. (Promm-Gem) and Sales and Promotions Services (SAPS) to be legitimate
independent contractors and the employers of the petitioners.

Factual Antecedents
Petitioners worked as merchandisers of P&G from various dates, allegedly starting as early as 1982
or as late as June 1991, to either May 5, 1992 or March 11, 1993, more specifically as follows:

Name Date Employed Date Dismissed

1. Joeb M. Aliviado November, 1985 May 5, 1992
2. Arthur Corpuz 1988 March 11, 1993
3. Eric Aliviado 1985 March 11, 1993
4. Monchito Ampeloquio September, 1988 March 11, 1993
5. Abraham Basmayor[, Jr.] 1987 March 11, 1993
6. Jonathan Mateo May, 1988 March 11, 1993
7. Lorenzo Platon 1985 March 11, 1993
8. Jose Fernando Gutierrez 1988 May 5, 1992
9. Estanislao Buenaventura June, 1988 March 11, 1993
10. Lope Salonga 1982 March 11, 1993
11. Franz David 1989 March 11, 1993
12. Nestor Ignacio 1982 March 11, 1993
13. Julio Rey 1989 May 5, 1992
14. Ruben [Vasquez], Jr. 1985 May 5, 1992
15. Maximino Pascual 1990 May 5, 1992
16. Ernesto Calanao[, Jr.] 1987 May 5, 1992
17. Rolando Romasanta 1983 March 11, 1993
18. [Roehl] Agoo 1988 March 11, 1993
19. Bonifacio Ortega 1988 March 11, 1993
20. Arsenio Soriano, Jr. 1985 March 11, 1993
21. Arnel Endaya 1983 March 11, 1993
22. Roberto Enriquez December, 1988 March 11, 1993
23. Nestor [Es]quila 1983 May 5, 1992
24. Ed[g]ardo Quiambao 1989 March 11, 1993
25. Santos Bacalso 1990 March 11, 1993
26. Samson Basco 1984 March 11, 1993
27. Aladino Gregor[e], Jr. 1980 May 5, 1992
28. Edwin Garcia 1987 May 5, 1992
29. Armando Villar 1990 May 5, 1992
30. Emil Tawat 1988 March 11, 1993
31. Mario P. Liongson 1991 May 5, 1992
32. Cresente J. Garcia 1984 March 11, 1993
33. Fernando Macabent[a] 1990 May 5, 1992
34. Melecio Casapao 1987 March 11, 1993
35. Reynaldo Jacaban 1990 May 5, 1992
36. Ferdinand Salvo 1985 May 5, 1992
37. Alstando Montos 1984 March 11, 1993
38. Rainer N. Salvador 1984 May 5, 1992
39. Ramil Reyes 1984 March 11, 1993
40. Pedro G. Roy 1987
41. Leonardo [F]. Talledo 1985 March 11, 1993
42. Enrique [F]. Talledo 1988 March 11, 1993
43. Willie Ortiz 1987 May 5, 1992
44. Ernesto Soyosa 1988 May 5, 1992
45. Romeo Vasquez 1985 March 11, 1993
46. Joel Billones 1987 March 11, 1993
47. Allan Baltazar 1989 March 11, 1993
48. Noli Gabuyo 1991 March 11, 1993
49. Emmanuel E. Laban 1987 May 5, 1992
50. Ramir[o] E. [Pita] 1990 May 5, 1992
51. Raul Dulay 1988 May 5, 1992
52. Tadeo Duran[o] 1988 May 5, 1992
53. Joseph Banico 1988 March 11, 1993
54. Albert Leynes 1990 May 5, 1992
55. Antonio Dacu[m]a 1990 May 5, 1992
56. Renato dela Cruz 1982
57. Romeo Viernes, Jr. 1986
58. El[ia]s Bas[c]o 1989
59. Wilfredo Torres 1986 May 5, 1992
 60. Melchor Carda[ñ]o 1991 May 5, 1992
61. [Marino] [Maranion] 1989 May 5, 1992
62. John Sumergido 1987 May 5, 1992
63. Roberto Rosales May, 1987 May 5, 1992
64. Gerry [G]. Gatpo November, 1990 March 11, 1993
65. German N. Guevara May, 1990 March 11, 1993
66. Gilbert Y. Miranda June, 1991 March 11, 1993
67. Rodolfo C. Toledo[, Jr.] May 14, 1991 March 11, 1993
68. Arnold D. [Laspoña] June 1991 March 11, 1993
69. Philip M. Loza March 5, 1992 March 11, 1993
70. Mario N. C[o]ldayon May 14, 1991 March 11, 1993
71. Orlando P. Jimenez November 6, 1992 March 11, 1993
72. Fred P. Jimenez September, 1991 March 11, 1993
73. Restituto C. Pamintuan, Jr. March 5, 1992 March 11, 1993
74. Rolando J. de Andres June, 1991 March 11, 1993
75. Artuz Bustenera[, Jr.] December, 1989 March 11, 1993
76. Roberto B. Cruz May 4, 1990 March 11, 1993
77. Rosedy O. Yordan June, 1991 May 5, 1992
78. Dennis Dacasin May. 1990 May 5, 1992
79. Alejandrino Abaton 1988 May 5, 1992
80. Orlando S. Balangue March, 1989 March 11, 19934 c�fa

They all individually signed employment contracts with either Promm-Gem or SAPS for periods of
cralaw

more or less five months at a time.5 They were assigned at different outlets, supermarkets and
c�fa

stores where they handled all the products of P&G. They received their wages from Promm-Gem or
SAPS.6 c�fa

SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such as
habitual absenteeism, dishonesty or changing day-off without prior notice.7 c�fa

P&G is principally engaged in the manufacture and production of different consumer and health
products, which it sells on a wholesale basis to various supermarkets and distributors. 8 To enhance c�fa

consumer awareness and acceptance of the products, P&G entered into contracts with Promm-Gem
and SAPS for the promotion and merchandising of its products.9 c�fa

In December 1991, petitioners filed a complaint10 against P&G for regularization, service incentive
c�fa

leave pay and other benefits with damages. The complaint was later amended11 to include the c�fa

matter of their subsequent dismissal.

Ruling of the Labor Arbiter

On November 29, 1996, the Labor Arbiter dismissed the complaint for lack of merit and ruled that
there was no employer-employee relationship between petitioners and P&G. He found that the
selection and engagement of the petitioners, the payment of their wages, the power of dismissal and
control with respect to the means and methods by which their work was accomplished, were all done
and exercised by Promm-Gem/SAPS. He further found that Promm-Gem and SAPS were legitimate
independent job contractors. The dispositive portion of his Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered Dismissing the above-entitled cases
against respondent Procter & Gamble (Phils.), Inc. for lack of merit.

SO ORDERED.12 c�fa

Ruling of the NLRC

Appealing to the NLRC, petitioners disputed the Labor Arbiters findings. On July 27, 1998, the NLRC
rendered a Decision13 disposing as follows:
c�fa

WHEREFORE, premises considered, the appeal of complainants is hereby DISMISSED and the
decision appealed from AFFIRMED.

SO ORDERED.14 c�fa

Petitioners filed a motion for reconsideration but the motion was denied in the November 19, 1998
Resolution.15c�fa

Ruling of the Court of Appeals

Petitioners then filed a petition for certiorari with the CA, alleging grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the Labor Arbiter and the NLRC. However,
said petition was also denied by the CA which disposed as follows:

WHEREFORE, the decision of the National Labor Relations Commission dated July 27, 1998 is
AFFIRMED with the MODIFICATION that respondent Procter & Gamble Phils., Inc. is ordered to pay
service incentive leave pay to petitioners. chanroblesvi rtua|awl ibary

SO ORDERED.16 c�fa

Petitioners filed a motion for reconsideration but the motion was also denied. Hence, this petition.

Issues

Petitioners now come before us raising the following issues:

I.
chanrob lesvi rtua|awli bary

WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A] REVERSIBLE ERROR
WHEN IT DID NOT FIND THE PUBLIC RESPONDENTS TO HAVE ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION IN RENDERING THE
QUESTIONED JUDGMENT WHEN, OBVIOUSLY, THE PETITIONERS WERE ABLE TO PROVE AND
ESTABLISH THAT RESPONDENT PROCTER & GAMBLE PHILS., INC. IS THEIR EMPLOYER AND THAT
THEY WERE ILLEGALLY DISMISSED BY THE FORMER.
 II.
chanroble svi rtua|awli bary

WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A] REVERSIBLE ERROR
WHEN IT DID NOT DECLARE THAT THE PUBLIC RESPONDENTS HAD ACTED WITH GRAVE ABUSE OF
DISCRETION WHEN THE LATTER DID NOT FIND THE PRIVATE RESPONDENTS LIABLE TO THE
PETITIONERS FOR PAYMENT OF ACTUAL, MORAL AND EXEMPLARY DAMAGES AS WELL AS
LITIGATION COSTS AND ATTORNEYS FEES.17 c�fa

Simply stated, the issues are: (1) whether P&G is the employer of petitioners; (2) whether
petitioners were illegally dismissed; and (3) whether petitioners are entitled for payment of actual,
moral and exemplary damages as well as litigation costs and attorneys fees.

Petitioners Arguments

Petitioners insist that they are employees of P&G. They claim that they were recruited by the
salesmen of P&G and were engaged to undertake merchandising chores for P&G long before the
existence of Promm-Gem and/or SAPS. They further claim that when the latter had its so-called re-
alignment program, petitioners were instructed to fill up application forms and report to the agencies
which P&G created.18 c�fa

Petitioners further claim that P&G instigated their dismissal from work as can be gleaned from its
letter19 to SAPS dated February 24, 1993, informing the latter that their Merchandising Services
c�fa

Contract will no longer be renewed. chanroble svirtua|awliba ry

Petitioners further assert that Promm-Gem and SAPS are labor-only contractors providing services of
manpower to their client. They claim that the contractors have neither substantial capital nor tools
and equipment to undertake independent labor contracting. Petitioners insist that since they had
been engaged to perform activities which are necessary or desirable in the usual business or trade of
P&G, then they are its regular employees.20 c�fa

Respondents Arguments

On the other hand, P&G points out that the instant petition raises only questions of fact and should
thus be thrown out as the Court is not a trier of facts. It argues that findings of facts of the NLRC,
particularly where the NLRC and the Labor Arbiter are in agreement, are deemed binding and
conclusive on the Supreme Court. chanroble svirtua|awliba ry

P&G further argues that there is no employment relationship between it and petitioners. It was
Promm-Gem or SAPS that (1) selected petitioners and engaged their services; (2) paid their salaries;
(3) wielded the power of dismissal; and (4) had the power of control over their conduct of work. chanroblesvi rtua|awl ibary

P&G also contends that the Labor Code neither defines nor limits which services or activities may be
validly outsourced. Thus, an employer can farm out any of its activities to an independent contractor,
regardless of whether such activity is peripheral or core in nature. It insists that the determination of
whether to engage the services of a job contractor or to engage in direct hiring is within the ambit of
management prerogative. chanrob lesvi rtua|awl ibary

At this juncture, it is worth mentioning that on January 29, 2007, we deemed as waived the filing of
the Comment of Promm-Gem on the petition.21 Also, although SAPS was impleaded as a party in the c�fa

proceedings before the Labor Arbiter and the NLRC, it was no longer impleaded as a party in the
proceedings before the CA.22 Hence, our pronouncements with regard to SAPS are only for the
c�fa

purpose of determining the obligations of P&G, if any.

Our Ruling
 The petition has merit. chanroble svirtua|awliba ry

As a rule, the Court refrains from reviewing factual assessments of lower courts and agencies
exercising adjudicative functions, such as the NLRC. Occasionally, however, the Court is constrained
to wade into factual matters when there is insufficient or insubstantial evidence on record to support
those factual findings; or when too much is concluded, inferred or deduced from the bare or
incomplete facts appearing on record.23 In the present case, we find the need to review the records
c�fa

to ascertain the facts.

Labor-only contracting and job contracting

In order to resolve the issue of whether P&G is the employer of petitioners, it is necessary to first
determine whether Promm-Gem and SAPS are labor-only contractors or legitimate job contractors.

The pertinent Labor Code provision on the matter states:

ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code. chanroble svirtua|awliba ry

In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the
same manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall
be considered the employer for purposes of this Code, to prevent any violation or circumvention of
any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises,
among others, and the workers recruited and placed by such person are performing activities which
are directly related to the principal business of such employer. In such cases, the person or
intermediary shall be considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him. (Emphasis
and underscoring supplied.)

Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by
Department Order No. 18-02,24 distinguishes between legitimate and labor-only contracting:
c�fa

xxxx

Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists

a trilateral relationship under which there is a contract for a specific job, work or service between the
principal and the contractor or subcontractor, and a contract of employment between the contractor
or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the
principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently undertake the performance of the job, work or
service, and the contractual workers engaged by the contractor or subcontractor to accomplish the
job[,] work or service.chanrobl esvirt ua|awliba ry

xxxx
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the
contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or
service for a principal, and any of the following elements are present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to
the job, work or service to be performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are directly related to the main business
of the principal; or

ii) [T]he contractor does not exercise the right to control over the performance of the work of the
contractual employee. chanrobles virtua|awl ibary

The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor
Code, as amended. chanroblesvi rtua|awli bary

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly
used by the contractor or subcontractor in the performance or completion of the job, work or service
contracted out. chanroblesvi rtua|awl ibary

The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the
manner and means to be used in reaching that end.

x x x x (Underscoring supplied.)

Clearly, the law and its implementing rules allow contracting arrangements for the performance of
specific jobs, works or services. Indeed, it is management prerogative to farm out any of its
activities, regardless of whether such activity is peripheral or core in nature. However, in order for
such outsourcing to be valid, it must be made to an independent contractor because the current labor
rules expressly prohibit labor-only contracting. chanroble svirtua|awliba ry

To emphasize, there is labor-only contracting when the contractor or sub-contractor merely recruits,
supplies or places workers to perform a job, work or service for a principal25 and any of the following c�fa

elements are present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to
the job, work or service to be performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are directly related to the main business
of the principal; or

ii) The contractor does not exercise the right to control over the performance of the work of
the contractual employee. (Underscoring supplied)

In the instant case, the financial statements26 of Promm-Gem show that it c�fa

has authorized capital stock of P1 million and a paid-in capital, or capital available for operations,
of P500,000.00 as of 1990.27 It also has long term assets worth P432,895.28 and current assets c�fa

of P719,042.32. Promm-Gem has also proven that it maintained its own warehouse and office space
with a floor area of 870 square meters.28 It also had under its name three registered vehicles which c�fa

were used for its promotional/merchandising business.29 Promm-Gem also has other clients30 aside c�fa c�fa

from P&G.31 Under the circumstances, we find that Promm-Gem has substantial investment which
c�fa

relates to the work to be performed. These factors negate the existence of the element specified in
Section 5(i) of DOLE Department Order No. 18-02. chanroble svi rtua|awliba ry
The records also show that Promm-Gem supplied its complainant-workers with the relevant
materials, such as markers, tapes, liners and cutters, necessary for them to perform their work.
Promm-Gem also issued uniforms to them. It is also relevant to mention that Promm-Gem already
considered the complainants working under it as its regular, not merely contractual or project,
employees.32 This circumstance negates the existence of element (ii) as stated in Section 5 of DOLE
c�fa

Department Order No. 18-02, which speaks of contractual employees. This, furthermore, negates on
the part of Promm-Gem bad faith and intent to circumvent labor laws which factors have often been
tipping points that lead the Court to strike down the employment practice or agreement concerned as
contrary to public policy, morals, good customs or public order.33 c�fa

Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor. We find that
it is a legitimate independent contractor. chanroblesvi rtua|awli bary

On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of
only P31,250.00. There is no other evidence presented to show how much its working capital and
assets are. Furthermore, there is no showing of substantial investment in tools, equipment or other
assets.chanroblesvi rtua|awl ibary

In Vinoya v. National Labor Relations Commission,34 the Court held that "[w]ith the current economic c�fa

atmosphere in the country, the paid-in capitalization of PMCI amounting to P75,000.00 cannot be
considered as substantial capital and, as such, PMCI cannot qualify as an independent
contractor."35 Applying the same rationale to the present case, it is clear that SAPS having a paid-in
c�fa

capital of only P31,250 - has no substantial capital. SAPS lack of substantial capital is underlined by
the records36 which show that its payroll for its merchandisers alone for one month would already
c�fa

total P44,561.00. It had 6-month contracts with P&G.37 Yet SAPS failed to show that it could c�fa

complete the 6-month contracts using its own capital and investment. Its capital is not even
sufficient for one months payroll. SAPS failed to show that its paid-in capital of P31,250.00 is
sufficient for the period required for it to generate its needed revenue to sustain its operations
independently. Substantial capital refers to capitalization used in the performance or completion of
the job, work or service contracted out. In the present case, SAPS has failed to show substantial
capital. chanroblesvi rtua|awli bary

Furthermore, the petitioners have been charged with the merchandising and promotion of the
products of P&G, an activity that has already been considered by the Court as doubtlessly directly
related to the manufacturing business,38 which is the principal business of P&G. Considering that
c�fa

SAPS has no substantial capital or investment and the workers it recruited are performing activities
which are directly related to the principal business of P&G, we find that the former is engaged in
"labor-only contracting". chanroblesv irt ua|awliba ry

"Where labor-only contracting exists, the Labor Code itself establishes an employer-employee
relationship between the employer and the employees of the labor-only contractor."39 The statute c�fa

establishes this relationship for a comprehensive purpose: to prevent a circumvention of labor laws.
The contractor is considered merely an agent of the principal employer and the latter is responsible
to the employees of the labor-only contractor as if such employees had been directly employed by
the principal employer.40 c�fa

Consequently, the following petitioners, having been recruited and supplied by SAPS41 -- which c�fa

engaged in labor-only contracting -- are considered as the employees of P&G: Arthur Corpuz, Eric
Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao
Buenaventura, Lope Salonga, Franz David, Nestor Ignacio, Jr., Rolando Romasanta, Roehl Agoo,
Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto Enriquez, Edgardo Quiambao, Santos
Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo,
Enrique F. Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert
V. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoña, Philip M. Loza, Mario N. Coldayon, Orlando P.
Jimenez, Fred P. Jimenez, Restituto C. Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr.,
Roberto B. Cruz, Rosedy O. Yordan, Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, Melencio
Casapao, Romeo Vasquez, Renato dela Cruz, Romeo Viernes, Jr., Elias Basco and Dennis Dacasin. chanroblesvi rt ua|awliba ry

The following petitioners, having worked under, and been dismissed by Promm-Gem, are considered
the employees of Promm-Gem, not of P&G: Wilfredo Torres, John Sumergido, Edwin Garcia, Mario P.
Liongson, Jr., Ferdinand Salvo, Alejandrino Abaton, Emmanuel A. Laban, Ernesto Soyosa, Aladino
Gregore, Jr., Ramil Reyes, Ruben Vasquez, Jr., Maximino Pascual, Willie Ortiz, Armando Villar, Jose
Fernando Gutierrez, Ramiro Pita, Fernando Macabenta, Nestor Esquila, Julio Rey, Albert Leynes,
Ernesto Calanao, Roberto Rosales, Antonio Dacuma, Tadeo Durano, Raul Dulay, Marino Maranion,
Joseph Banico, Melchor Cardano, Reynaldo Jacaban, and Joeb Aliviado.42 c�fa

Termination of services

We now discuss the issue of whether petitioners were illegally dismissed. In cases of regular
employment, the employer shall not terminate the services of an employee except for a just 43 or c�fa

authorized44 cause.c�fa chanroblesvi rt ua|awlibary

In the instant case, the termination letters given by Promm-Gem to its employees uniformly specified
the cause of dismissal as grave misconduct and breach of trust, as follows:

xxxx

This informs you that effective May 5, 1992, your employment with our company, Promm-Gem, Inc.
has been terminated. We find your expressed admission, that you considered yourself as an
employee of Procter & Gamble Phils., Inc. and assailing the integrity of the Company as legitimate
and independent promotion firm, is deemed as an act of disloyalty prejudicial to the interests of our
Company: serious misconduct and breach of trust reposed upon you as employee of our Company
which [co]nstitute just cause for the termination of your employment. chanroble svirtua|awliba ry

x x x x45 c�fa

Misconduct has been defined as improper or wrong conduct; the transgression of some established
and definite rule of action, a forbidden act, a dereliction of duty, unlawful in character implying
wrongful intent and not mere error of judgment. The misconduct to be serious must be of such grave
and aggravated character and not merely trivial and unimportant.46 To be a just cause for dismissal,
c�fa

such misconduct (a) must be serious; (b) must relate to the performance of the employees duties;
and (c) must show that the employee has become unfit to continue working for the employer.47 c�fa

In other words, in order to constitute serious misconduct which will warrant the dismissal of an
employee under paragraph (a) of Article 282 of the Labor Code, it is not sufficient that the act or
conduct complained of has violated some established rules or policies. It is equally important and
required that the act or conduct must have been performed with wrongful intent. 48 In the instant c�fa

case, petitioners-employees of Promm-Gem may have committed an error of judgment in claiming to

be employees of P&G, but it cannot be said that they were motivated by any wrongful intent in doing
so. As such, we find them guilty of only simple misconduct for assailing the integrity of Promm-Gem
as a legitimate and independent promotion firm. A misconduct which is not serious or grave, as that
existing in the instant case, cannot be a valid basis for dismissing an employee. chanroblesvi rt ua|awlibary

Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based on the willful
breach of the trust reposed in the employee by his employer. Ordinary breach will not suffice. A
breach of trust is willful if it is done intentionally, knowingly and purposely, without justifiable excuse,
as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. 49 c�fa

Loss of trust and confidence, as a cause for termination of employment, is premised on the fact that
the employee concerned holds a position of responsibility or of trust and confidence. As such, he
must be invested with confidence on delicate matters, such as custody, handling or care and
protection of the property and assets of the employer. And, in order to constitute a just cause for
dismissal, the act complained of must be work-related and must show that the employee is unfit to
continue to work for the employer.50 In the instant case, the petitioners-employees of Promm-Gem
c�fa

have not been shown to be occupying positions of responsibility or of trust and confidence. Neither is
there any evidence to show that they are unfit to continue to work as merchandisers for Promm-
Gem. chanroblesvi rt ua|awlibary

All told, we find no valid cause for the dismissal of petitioners-employees of Promm-Gem. chanroblesv irtua|awlibary

While Promm-Gem had complied with the procedural aspect of due process in terminating the
employment of petitioners-employees, i.e., giving two notices and in between such notices, an
opportunity for the employees to answer and rebut the charges against them, it failed to comply with
the substantive aspect of due process as the acts complained of neither constitute serious
misconduct nor breach of trust. Hence, the dismissal is illegal.
chanroblesvi rtua|awl ibary

With regard to the petitioners placed with P&G by SAPS, they were given no written notice of
dismissal. The records show that upon receipt by SAPS of P&Gs letter terminating their
"Merchandising Services Contact" effective March 11, 1993, they in turn verbally informed the
concerned petitioners not to report for work anymore. The concerned petitioners related their
dismissal as follows:

xxxx

5. On March 11, 1993, we were called to a meeting at SAPS office. We were told by Mr. Saturnino A.
Ponce that we should already stop working immediately because that was the order of Procter and
Gamble. According to him he could not do otherwise because Procter and Gamble was the one paying
us. To prove that Procter and Gamble was the one responsible in our dismissal, he showed to us the
letter51 dated February 24, 1993, x x x
c�fa

February 24, 1993

Sales and Promotions Services

Armons Bldg., 142 Kamias Road,
Quezon City

Attention: Mr. Saturnino A. Ponce

President & General Manager

Gentlemen:

Based on our discussions last 5 and 19 February 1993, this formally informs you that we will not be
renewing our Merchandising Services Contract with your agency. chanroble svirtua|awliba ry

Please immediately undertake efforts to ensure that your services to the Company will terminate
effective close of business hours of 11 March 1993.

This is without prejudice to whatever obligations you may have to the company under the
abovementioned contract.

Very truly yours,

(Sgd.)
EMMANUEL M. NON
Sales Merchandising III

6. On March 12, 1993, we reported to our respective outlet assignments. But, we were no longer
cralaw

allowed to work and we were refused entrance by the security guards posted. According to the
security guards, all merchandisers of Procter and Gamble under S[APS] who filed a case in the Dept.
of Labor are already dismissed as per letter of Procter and Gamble dated February 25, 1993. x x x52 c�fa

Neither SAPS nor P&G dispute the existence of these circumstances. Parenthetically, unlike Promm-
Gem which dismissed its employees for grave misconduct and breach of trust due to disloyalty, SAPS
dismissed its employees upon the initiation of P&G. It is evident that SAPS does not carry on its own
business because the termination of its contract with P&G automatically meant for it also the
termination of its employees services. It is obvious from its act that SAPS had no other clients and
had no intention of seeking other clients in order to further its merchandising business. From all
indications SAPS, existed to cater solely to the need of P&G for the supply of employees in the latters
merchandising concerns only. Under the circumstances prevailing in the instant case, we cannot
consider SAPS as an independent contractor. chanrobles virtua|awl ibary

Going back to the matter of dismissal, it must be emphasized that the onus probandi to prove the
lawfulness of the dismissal rests with the employer.53 In termination cases, the burden of proof rests c�fa

upon the employer to show that the dismissal is for just and valid cause.54 In the instant case, P&G c�fa

failed to discharge the burden of proving the legality and validity of the dismissals of those
petitioners who are considered its employees. Hence, the dismissals necessarily were not justified
and are therefore illegal.

Damages

We now go to the issue of whether petitioners are entitled to damages. Moral

and exemplary damages are recoverable where the dismissal of an employee was attended by bad
faith or fraud or constituted an act oppressive to labor or was done in a manner contrary to morals,
good customs or public policy.55 c�fa

With regard to the employees of Promm-Gem, there being no evidence of bad faith, fraud or any
oppressive act on the part of the latter, we find no support for the award of damages. chanroble svirtua|awliba ry

As for P&G, the records show that it dismissed its employees through SAPS in a manner oppressive
to labor. The sudden and peremptory barring of the concerned petitioners from work, and from
admission to the work place, after just a one-day verbal notice, and for no valid cause bellows
oppression and utter disregard of the right to due process of the concerned petitioners. Hence, an
award of moral damages is called for. chanroble svi rtua|awlib ary

Attorneys fees may likewise be awarded to the concerned petitioners who were illegally dismissed in
bad faith and were compelled to litigate or incur expenses to protect their rights by reason of the
oppressive acts56 of P&G.
c�fa chanroble svirtua|awliba ry

Lastly, under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and other privileges, inclusive of
allowances, and other benefits or their monetary equivalent from the time the compensation was
withheld up to the time of actual reinstatement.57 Hence, all the petitioners, having been illegally c�fa

dismissed are entitled to reinstatement without loss of seniority rights and with full back wages and
other benefits from the time of their illegal dismissal up to the time of their actual reinstatement.
WHEREFORE, the petition is GRANTED. The Decision dated March 21, 2003 of the Court of Appeals
in CA-G.R. SP No. 52082 and the Resolution dated October 20, 2003 are REVERSED and SET
ASIDE. Procter & Gamble Phils., Inc. and Promm-Gem, Inc. are ORDERED to reinstate their
respective employees immediately without loss of seniority rights and with full backwages and other
benefits from the time of their illegal dismissal up to the time of their actual reinstatement. Procter &
Gamble Phils., Inc. is further ORDERED to pay each of those petitioners considered as its
employees, namely Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr.,
Jonathan Mateo, Lorenzo Platon, Estanislao Buenaventura, Lope Salonga, Franz David, Nestor
Ignacio, Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya,
Roberto Enriquez, Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, Rainer N.
Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones, Allan Baltazar, Noli
Gabuyo, Gerry Gatpo, German Guevara, Gilbert Y. Miranda, Rodolfo C. Toledo, Jr., Arnold D.
Laspoña, Philip M. Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C.
Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan,
Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo Vasquez, Renato
dela Cruz, Romeo Viernes, Jr., Elias Basco and Dennis Dacasin, P25,000.00 as moral damages plus
ten percent of the total sum as and for attorneys fees. chanroblesvi rtua|awl ibary

Let this case be REMANDED to the Labor Arbiter for the computation, within 30 days from receipt of
this Decision, of petitioners backwages and other benefits; and ten percent of the total sum as and
for attorneys fees as stated above; and for immediate execution.

SO ORDERED