LS 213 (CASE DIGESTS)
to petitioner and the hotel's other employees.
Mabeza v. NORMA MABEZA v NLRC, GR No. 118506, Apr. 18, 1997
NLRC, G.R.
no. 118506, FACTS
April 18, 1997 Petitioner Norma Mabeza contends that around the first week of May, 1991, she and
her co-employees at the Hotel Supreme in Baguio City were asked by the hotel's
BATONGBAK management to sign an instrument attesting to the latter's compliance with minimum
AL wage and other labor standard provisions of law. She signed the same but refused to
go to the City Prosecutor's Office to swear to the veracity and contents of the affidavit
Facilities & as instructed by management. The affidavit was nevertheless submitted on the same
Supplements day to the Regional Office of the Department of Labor and Employment in Baguio
City.
The affidavit was drawn by management for the sole purpose of refuting findings of
the Labor Inspector of DOLE, apparently adverse to the private respondent.
After she refused to proceed to the City Prosecutor's Office — on the same day the
affidavit was submitted to the Cordillera Regional Office of DOLE — petitioner avers
that she was ordered by the hotel management to turn over the keys to her living
quarters and to remove her belongings from the hotel premises. According to her,
respondent strongly rebuked her for refusing to proceed to the City Prosecutor's
Office to attest to the affidavit.
Thereafter she filed a leave of absence from her job which was denied by
management. When she attempted to return to work on May 10, 1991, the hotel's
cashier, Margarita Choy, informed her that she should not report to work and, instead,
continue with her unofficial leave of absence.
Consequently, on May 13, 1991, three days after her attempt to return to work,
petitioner filed a complaint for illegal dismissal before the Arbitration Branch of the
National Labor Relations Commission — CAR Baguio City. In addition to her
complaint for illegal dismissal, she alleged underpayment of wages, nonpayment of
holiday pay, service incentive leave pays,13th month pay, night differential and other
benefits.
Responding to the allegations made in support of petitioner's complaint for illegal
dismissal, private respondent Peter Ng alleged before Labor Arbiter Pati that
petitioner "surreptitiously left (her job) without notice to the management" and that she
actually abandoned her work. He maintained that there was no basis for the money
claims for underpayment and other benefits as these were paid in the form of facilities
On May 14, 1993, the LA dismissed her complaint on the ground of the employer’s
loss of confidence, the reason why the employer lodged a qualified theft against her.
On April 28, 1994, upon appeal affirmed the LA’s decision.
The Solicitor General, opted to set aside the NLRC’s resolution.
ISSUE
Whether or not the facilities accorded to the petitioner are deductible from her
Wages
RULING
No. Where meals and lodging were provided and indeed constituted facilities, such
facilities could not be deducted without the employer complying first with certain legal
requirements. Without satisfying these requirements, the employer simply cannot
deduct the value from the employee's wages.
1. Proof must be shown that such facilities are customarily furnished by
the trade;
2. The provision of deductible facilities must be voluntarily accepted in
writing by the employee;
3. Facilities must be charged at fair and reasonable value.
More significantly, the food and lodging, or the electricity and water consumed by the
petitioner were not facilities but supplements. A benefit or privilege granted to an
employee for the convenience of the employer is not a facility. The criterion in making
a distinction between the two not so much lies in the kind (food, lodging) but the
purpose. Considering, therefore, that hotel workers are required to work different
shifts and are expected to be available at various odd hours, their ready availability is
a necessary matter in the operations of a small hotel, such as the private
respondent's hotel.
Our Haus v. Facts:
Parian, G.R. Respondents Alexander Parian, Jay Erinco, Alexander Canlas, Jerry Sabulao and
No. 204651, Bernardo Tenedero were all laborers working for petitioner Our Haus Realty
Development Corporation (Our Haus), a company engaged in the construction
August 6,
business.
2014
Sometime in May 2010, Our Haus experienced financial distress. To alleviate its
BORLONGAN condition, Our Haus suspended some of its construction projects and asked the
affected workers, including the respondents, to take vacation leaves. Eventually, the
Facilities & respondents were asked to report back to work but instead of doing so, they filed with

Supplements
the LA a complaint for underpayment of their daily wages. They claimed that except
for respondent Bernardo N. Tenedero, their wages were below the minimum rates
prescribed in the wage orders from 2007 to 2010.
The respondents also alleged that Our Haus failed to pay them their holiday, service
incentive leave (SIL), 13th month and overtime pays.
The Labor Arbitration Rulings:
The LA ruled in favor of Our Haus. He held that if the reasonable values of the board
and lodging would be taken into account, the respondents’ daily wages would meet
the minimum wage rate. As to the other benefits, the LA found that the respondents
were not able to substantiate their claims for it.
NLRC Ruling:
The respondents appealed the LA’s decision to the NLRC, which in turn, reversed it.
Citing the case of Mayon Hotel & Restaurant v. Adana, the NLRC noted that the
respondents did not authorize Our Haus in writing to charge the values of their board
and lodging to their wages. Thus, the same cannot be credited.
It also ruled that the respondents are entitled to their respective proportionate 13 th
month payments for the year 2010 and SIL payments for at least three years,
immediately preceding May 31, 2010, the date when the respondents left Our Haus.
However, the NLRC sustained the LA’s ruling that the respondents were not entitled
to overtime pay since the exact dates and times when they rendered overtime work
had not been proven.
Our Haus moved for the reconsideration of the NLRC’s decision and submitted new
evidence (the five kasunduans) to show that the respondents authorized Our Haus in
writing to charge the values of their meals and lodging to their wages. The NLRC
denied Our Haus’ motion, thus it filed a Rule 65 petition with the CA.
The CA’s Ruling
The CA dismissed Our Haus’ certiorari petition and affirmed the NLRC rulings in toto.
· It found no real distinction between deduction and charging, and ruled that
the legal requirements before any deduction or charging can be made, apply to
both. Our Haus, however, failed to prove that it complied with any of the
requirements laid down in Mabeza v. National Labor Relations Commission.
2
· Accordingly, it cannot consider the values of its meal and housing facilities in
the computation of the respondents’ total wages.
· Also, the CA ruled that since the respondents were able to allege non-
payment of SIL in their position paper, and Our Haus, in fact, opposed it in its
various pleadings, then the NLRC properly considered it as part of the
respondents’ causes of action.
· Lastly, the CA affirmed the respondent’s entitlement to attorney’s fees.
Our Haus filed a motion for reconsideration but the CA denied its motion,
prompting it to file the present petition for review on certiorari under Rule 45.
The Petition
Our Haus submits that the CA erred in ruling that the legal requirements apply without
distinction — whether the facility’s value will be deducted or merely included in the
computation of the wages. At any rate, it complied with the requirements for
deductibility of the value of the facilities.
· First, the five kasunduans executed by the respondents constitute the written
authorization for the inclusion of the board and lodging’s values to their wages.
· Second, Our Haus only withheld the amount of P290.00 which represents the
food’s raw value; the weekly cooking cost (cook’s wage, LPG, water) at P239.40
per person is a separate expense that Our Haus did not withhold from the
respondents’ wages. This disproves the respondents’ claim that it deducted the
full amount of the meals’ value.
· Lastly, the CA erred in ruling that the claim for SIL pay may still be granted
though not raised in the complaint; and that the respondents are entitled to an
award of attorney’s fees.
The Case for the Respondents
The respondents prayed for the denial of the petition.
· They maintained that the CA did not err in ruling that the values of the board
and lodging cannot be deducted from their wages for failure to comply with the
requirements set by law.

· And though the claim for SIL pay was not included in their pro forma
complaint, they raised their claims in their position paper and Our Haus had the
opportunity to contradict it in its pleadings.
· Finally, under the PAO law, the availment of the PAO’s legal services does
not exempt its clients from an award of attorney’s fees.
Issue:
Whether or not Our Haus complied with the legal requirements on the deductibility of
the value of facilities
Ruling:
The SC denied the petition. It affirmed that the CA correctly determined that the
NLRC did not commit grave abuse of discretion in ruling on the case.
The nature of a Rule 45 petition — only questions of law.
No substantial distinction between deducting and charging a facility’s value
from the employee’s wage; the legal requirements for creditability apply to both
Our Haus’ argument is a vain attempt to circumvent the minimum wage law by trying
to create a distinction where none exists.
In reality, deduction and charging both operate to lessen the actual take-home pay of
an employee; they are two sides of the same coin. In both, the employee receives a
lessened amount because supposedly, the facility’s value, which is part of his wage,
had already been paid to him in kind. As there is no substantial distinction between
the two, the requirements set by law must apply to both. These requirements, as
summarized in Mabeza, are the following:
a. Proof must be shown that such facilities are customarily furnished by the
trade;
b. The provision of deductible facilities must be voluntarily accepted in
writing by the employee; and
c. The facilities must be charged at fair and reasonable value.
a. The facility must be customarily furnished by the trade
3
In a string of cases, the SC has concluded that one of the badges to show that a
facility is customarily furnished by the trade is the existence of a company policy or
guideline showing that provisions for a facility were designated as part of the
employees’ salaries.
Application: To comply with this, Our Haus presented in its motion for reconsideration
with the NLRC the joint sinumpaang salaysay of four of its alleged employees, who
averred that they were recipients of free lodging, electricity and water, as well as
subsidized meals from Our Haus. The SC was not convinced. It agreed with the
NLRC’s finding that the sinumpaang salaysay statements submitted by Our Haus
are self-serving.
· Our Haus only produced the documents when the NLRC had already earlier
determined that Our Haus failed to prove that it was traditionally giving the
respondents their board and lodging. This document did not state whether these
benefits had been consistently enjoyed by the rest of Our Haus’ employees.
· The records reveal that the board and lodging were given on a per project
basis. Our Haus did not show if these benefits were also provided in its other
construction projects, thus negating its claimed customary nature.
· Even assuming the sinumpaang salaysay to be true, this document would still
work against Our Haus’ case. If Our Haus really had the practice of freely giving
lodging, electricity and water provisions to its employees, then Our Haus should
not deduct its values from the respondents’ wages. Otherwise, this will run
contrary to the affiants’ claim that these benefits were traditionally given free of
charge.
Apart from company policy, the employer may also prove compliance with the first
requirement by showing the existence of an industry-wide practice of furnishing
the benefits in question among enterprises engaged in the same line of
business. However, Our Haus could not really be expected to prove compliance with
the first requirement since the living accommodation of workers in the construction
industry is not simply a matter of business practice. Peculiar to the construction
business are the occupational safety and health (OSH) services which the law itself
mandates employers to provide to their workers. This is to ensure the humane
working conditions of construction employees despite their constant exposure to
hazardous working environments. Under Section 16 of DOLE Department Order (DO)
No. 13, series of 1998, employers engaged in the construction business are required
to provide the following welfare amenities:
16.1 Adequate supply of safe drinking water;

16.2 Adequate sanitary and washing facilities
16.3 Suitable living accommodation for workers, and as may be applicable, for
their families
16.4 Separate sanitary, washing and sleeping facilities for men and women
workers.
Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for the
implementation of DOLE DO No. 13, mandates that the cost of the implementation of
the requirements for the construction safety and health of workers, shall be
integrated to the overall project cost.
Application: As part of the project cost that construction companies already charge to
their clients, the value of the housing of their workers cannot be charged again to their
employees’ salaries. Our Haus cannot pass the burden of the OSH costs of its
construction projects to its employees by deducting it as facilities. This is Our Haus’
obligation under the law.
Lastly, even if a benefit is customarily provided by the trade, it must still pass the
purpose test set by jurisprudence. Under this test, if a benefit or privilege granted to
the employee is clearly for the employer’s convenience, it will not be considered as a
facility but a supplement. Here, careful consideration is given to the nature of the
employer’s business in relation to the work performed by the employee. This test is
used to address inequitable situations wherein employers consider a benefit
deductible from the wages even if the factual circumstances show that it clearly
redounds to the employers’ greater advantage.
While the rules serve as the initial test in characterizing a benefit as a facility, the
purpose test additionally recognizes that the employer and the employee do not stand
at the same bargaining positions on benefits that must or must not form part of an
employee’s wage. In the ultimate analysis, the purpose test seeks to prevent a
circumvention of the minimum wage law.
a1. The purpose test in jurisprudence
Legal Basis: Under the law, only the value of the facilities may be deducted from the
employees’ wages but not the value of supplements. Facilities include articles or
services for the benefit of the employee or his family but exclude tools of the trade or
articles or services primarily for the benefit of the employer or necessary to the
conduct of the employer’s business. The law also prescribes that the computation of
wages shall exclude whatever benefits, supplements or allowances given to
employees. Supplements are paid to employees on top of their basic pay and are free
of charge. Since it does not form part of the wage, a supplement’s value may not be
4
included in the determination of whether an employer complied with the prescribed
minimum wage rates.
Application: The board and lodging provided by Our Haus cannot be categorized
as facilities but as supplements. In SLL International Cables Specialist v. National
Labor Relations Commission, the SC was confronted with the issue on the proper
characterization of the free board and lodging provided by the employer, thus,
explained:
The Court, at this point, makes a distinction between “facilities” and
“supplements”. It is of the view that the food and lodging, or the electricity and
water allegedly consumed by private respondents in this case were not facilities
but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co.,
the two terms were distinguished from one another in this wise:
“Supplements”, therefore, constitute extra remuneration or special privileges or
benefits given to or received by the laborers over and above their ordinary
earnings or wages. “Facilities”, on the other hand, are items of expense
necessary for the laborer's and his family's existence and subsistence so that
by express provision of law (Sec. 2[g]), they form part of the wage and when
furnished by the employer are deductible therefrom, since if they are not so
furnished, the laborer would spend and pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes an
extra remuneration above and over his basic or ordinary earning or wage is
supplement; and when said benefit or privilege is part of the laborers' basic
wages, it is a facility. The distinction lies not so much in the kind of benefit
or item (food, lodging, bonus or sick leave) given, but in the purpose for
which it is given. In the case at bench, the items provided were given freely by
SLL for the purpose of maintaining the efficiency and health of its
workers while they were working at their respective projects.
Ultimately, the real difference lies not on the kind of the benefit but on the purpose
why it was given by the employer. If it is primarily for the employee’s gain, then the
benefit is a facility; if its provision is mainly for the employer’s advantage, then it is a
supplement.
Under the purpose test, substantial consideration must be given to the nature of the
employer’s business in relation to the character or type of work performed by the
employees involved.
Our Haus is engaged in the construction business, a labor-intensive enterprise. The

success of its projects is largely a function of the physical strength, vitality and
efficiency of its laborers. Its business will be jeopardized if its workers are weak,
sickly, and lack the required energy to perform strenuous physical activities. Thus, by
ensuring that the workers are adequately and well fed, the employer is actually
investing on its business. The nature of Our Haus’ business is entirely different from
office enterprises where the work is focused on desk jobs, the construction industry
relies heavily and directly on the physical capacity and endurance of its workers. The
SC emphasized that in the construction business, bulk of the work performed are
strenuous physical activities.
Moreover, in the construction business, contractors are usually faced with the
problem of meeting target deadlines. More often than not, work is performed
continuously, day and night, in order to finish the project on the designated turn-over
date. Thus, it will be more convenient to the employer if its workers are housed near
the construction site to ensure their ready availability during urgent or emergency
circumstances. Also, productivity issues like tardiness and unexpected absences
would be minimized. This observation strongly bears in the present case since three
of the respondents are not residents of the National Capital Region. The board and
lodging provision might have been a substantial consideration in their acceptance of
employment in a place distant from their provincial residences.
The SC concluded that even under the purpose test, the subsidized meals and
free lodging provided by Our Haus are actually supplements.
b. The provision of deductible facilities must be voluntarily accepted in writing
by the employee
In Mayon Hotel, the SC reiterated that a facility may only be deducted from the wage
if the employer was authorized in writing by the concerned employee. As it diminishes
the take-home pay of an employee, the deduction must be with his express consent.
In this case, because of the surrounding circumstances in the presentation of the
supposed authority in writing by the concerned employee and the suspicious timing
when the five kasunduans were submitted as evidence, the SC agreed with the CA
that the NLRC committed no grave abuse of discretion in disregarding these
documents for being self-serving.
c. The facility must be charged at a fair and reasonable value
Our Haus’ valuation cannot be plucked out of thin air. The valuation of a facility must
be supported by relevant documents such as receipts and company records for it to
5
be considered as fair and reasonable.
In Mabeza, we noted:
Curiously, in the case at bench, the only valuations relied upon by the labor
arbiter in his decision were figures furnished by the private respondent's
own accountant, without corroborative evidence. On the pretext that
records prior to the July 16, 1990 earthquake were lost or destroyed,
respondent failed to produce payroll records, receipts and other relevant
documents, where he could have, as has been pointed out in the Solicitor
General's manifestation, “secured certified copies thereof from the nearest
regional office of the Department of Labor, the SSS or the BIR”.
Application: In the present case, Our Haus never explained how it came up with
the values it assigned for the benefits it provided; it merely listed its supposed
expenses without any supporting document. Since Our Haus is using these additional
expenses (cook’s salary, water and LPG) to support its claim that it did not withhold
the full amount of the meals’ value, Our Haus is burdened to present evidence to
corroborate its claim. The records however, are bereft of any evidence to support Our
Haus’ meal expense computation. Even the value it assigned for the respondents’
living accommodations was not supported by any documentary evidence. Without any
corroborative evidence, it cannot be said that Our Haus complied with this third
requisite.
The respondents’ are entitled to the other monetary benefits. Our haus failed to
show any credible document which will show that respondents had been paid their
13th month pay, holiday and SIL pays.
Respondents are entitled to attorney’s fees.
Millares v. FACTS:
NLRC, G.R. ● One hundred sixteen (116) petitioners occupied the positions of Technical
No. 122827, Staff, Unit Manager, Section Manager, Department Manager, Division
Manager and Vice President in the mill site of respondent Paper Industries
305 SCRA
Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur. In 1992
500, March PICOP suffered a major financial setback allegedly brought about by the joint
29, 1999 impact of restrictive government regulations on logging and the economic
crisis. To avert further losses, it undertook a retrenchment program and
CAMUA terminated the services of petitioners. Accordingly, petitioners received
separation pay computed at the rate of one (1) month basic pay for every
Facilities & year of service. Believing however that the allowances they allegedly
regularly received on a monthly basis during their employment should have

Supplements 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.
● LA — Applying Art. 97, par. (f), of the Labor Code which defines “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. NLRC and Soriano v. NLRC 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
6
petitioners Four Million Four Hundred Eighty-One Thousand Pesos
(P4,481,000.00) representing separation pay differentials plus ten percent
(10%) thereof as attorney’s fees.
● NLRC — 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. 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. NLRC
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.
ISSUE
WON subject allowances were deemed part of wages [NO].
RULING
The inevitable conclusion is that, as reached by the NLRC, subject allowances
did not form part of petitioners’ wages.
In order to ascertain whether the subject allowances form part of petitioner’s “wages,”
the Court divided 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 practice connoting
regularity. The receipt of an allowance on a monthly basis does not ipso facto
characterize it as regular and forming part of salary because the nature of the grant is
a factor worth considering. The Court agreed 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.
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.
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.
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.
Petition DISMISSED. The resolution of public respondent National Labor Relations
Commission 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 denying reconsideration, AFFIRMED.
Tri-C v. Facts:
Matuto,
G.R.No. Petitioner Tri-C General Services, Inc., a manpower agency supplying services to
PLDT Business Offices in Laguna, faced an illegal dismissal case filed by
194686, Sept.
23, 2015respondents Nolasco Matuto, Romeo Magno, and Elvira Laviña, who worked as
janitors/janitress at the PLDT Business Office in Calamba City. The respondents
CONCEPCIO alleged that, following a prior complaint in 1997 about underpayment, they faced
N harassment and intimidation after winning a 2003 case ordering the petitioner to pay
7
underpaid salaries. On November 3 and 26, 2004, Matuto, Laviña, and Magno were
Prohibition barred from their workplace, leading to the December 15, 2004, filing of the illegal
against dismissal case. The petitioner claimed that the terminations were due to cost-cutting
Wages measures and put the respondents on "floating status." In defense, the petitioner
argued that it sent multiple letters requesting the respondents to report to the office,
alleging abandonment of posts when the requests went unheeded. The Labor Arbiter
(LA) dismissed the complaint, considering the respondents on floating status, but
ordered the payment of separation pay. NLRC affirmed the decision, deleting the
separation pay, stating the filing was premature. On appeal to the CA, the decision
was reversed, declaring the respondents illegally dismissed and ordering
reinstatement with full backwages and attorney's fees.
The CA's decision, based on a petition for certiorari, annulled the NLRC's ruling, citing
the lack of evidence supporting the petitioner's claim of discontinuation due to PLDT-
Laguna's request. The CA emphasized the absence of proof regarding the
unavailability of posts for the respondents. The court ordered reinstatement with
backwages and attorney's fees, remanding the case to the Labor Arbiter for
computation. The CA's denial of the petitioner's Motion for Reconsideration upheld its
findings.
Issue: WON the CA erred in declaring Matuto, Magno, and Laviña as illegally
dismissed by Tri-C and ordering their reinstatement, and to pay the latter's
backwages inclusive of allowances and other benefits due them as well as attorney's
fees.
Ruling:
Yes, the court ruled in favor of the petitioner, Tri-C General Services, Inc., overturning
the decision of the CA. The petitioner challenged the CA's annulment of the National
Labor Relations Commission (NLRC) decision, arguing that the CA, in a certiorari
action, has the authority to evaluate evidence disregarded by the NLRC. The court, in
its review, dismissed the findings of the CA, asserting its jurisdiction to re-evaluate
evidence in labor cases. It emphasized that the employer bears the burden of proving
a valid termination, and employees must establish their dismissal with clear, positive,
and convincing evidence.
The court rejected the respondents' claim of illegal dismissal, noting the absence of

evidence supporting their allegations. The respondents failed to present the alleged
termination notice, and the petitioner's repeated summons to report to the main
office went unheeded. The court found no indication that the respondents were
barred from the premises or deprived of work assignments. It emphasized that the
burden of proof does not rest solely on the employer when the latter denies dismissal.
Regarding entitlement to reinstatement and backwages, the court disagreed with the
LA and NLRC's dismissal of the case, asserting that:
Under Article 279 of the Labor Code and as settled in jurisprudence, an employee
who is dismissed without just cause and without due process is entitled to backwages
and reinstatement or payment of separation pay in lieu thereof. While we agree with
the rulings of the LA and the NLRC that respondents were not illegally dismissed and
not guilty of abandonment, we do not agree with their decisions to dismiss the case
for lack of merit. Instead, we find that respondents are entitled to reinstatement
without payment of backwages and other monetary benefits.
It clarified that even though there was no illegal dismissal, the doctrine of "no work,
no pay" applies, and there is no justification for the award of backwages. The court
emphasized that in a case where the employee's failure to work was occasioned
neither by his abandonment nor by a termination, the burden of economic loss is not
rightfully shifted to the employer; each party must bear his own loss. It also rejected
the award of attorney's fees, citing that the respondents were not illegally dismissed,
and their wages were not withheld without valid basis.
Regarding reinstatement, if there is no evidence of a strained relationship between
the petitioner and respondents, the reinstatement order will be upheld. The doctrine of
strained relations should not be applied without consideration, particularly when the
employee has not expressed reluctance to return to work and does not hold a position
of trust in the employer's business operations. In this instance, there is no proof that
the respondents were averse to resuming their previous positions or that they held
positions of trust and confidence within the company.
Ultimately, the court granted the petitioner's appeal, reversing the CA's decision, and
ordered the reinstatement of the respondents without backwages within 30 days from
the finality of the judgment. The respondents were directed to report for work within
ten days, or their employment would be deemed abandoned.
8
Prubankers Facts:
Association ● In 1993, the Regional Tripartite Wages and Productivity Board of Region V
v. Prudential issued Wage Order No. RB 05-03 which provided for a Cost of Living
Bank, G.R. Allowance (COLA) to workers in the private sector who had rendered service
No. 131247, for at least 3 months before its effectivity, and for the same period thereafter
Jan. 25, 1999 in the following categories:
(1) P17.50 – Cities of Naga & Legaspi
PAGTALUNA (2) P15.50 – municipalities of Tabaco, Daraga, Pili and the city of Iriga
N (3) P10.00 – all other areas in the Bicol Region
● Then, the board of Region VII issued Wage Order No. RB VII-03, which
Wage directed the integration of the COLA mandated pursuant to Wage Order No.
Distortion RO VII-02-A into the basic pay of all workers. It also established an increase
in the minimum wage rates for all workers and employees in the private
sector as follows:
(1) P10.00 - cities of Cebu, Mandaue and Lapulapu
(2) P5.00 - municipalities of Compostela, Liloan, Consolacion, Cordova,
Talisay, Minglanilla, Naga and the cities of Davao, Toledo, Dumaguete, Bais,
Canlaon, and Tagbilaran.
● Prudential Bank and Trust Company then granted a COLA of P17.50 to its
employees in its Naga Branch by virtue of RB 5-03 and integrated P150.00
per month COLA into he basic pay of its rank-and-file employees at its Cebu,
Mabolo and P. del Rosario branches. These are the branches covered by RB
5-03.
● In 1994, Prubankers Association wrote to Prudential Bank requesting that the
Labor Management Committee be immediately convened to discuss and
resolve the alleged wage distortion created in the salary structure upon the
implementation of the said wage orders.
● Petitioner demanded in the Labor Management Committee meetings that the
respondent bank extend the application of the wage orders to its employees
outside Regions V and VII, claiming that the regional implementation of the
said orders created a wage distortion in the wage rates of petitioner’s
employees nationwide. As the grievance could not be settled in the said
meetings, the parties agreed to submit the matter to voluntary arbitration.
● Rulings of the Lower Tribunal/Court:
(1) Voluntary Arbitration Committee – ruled that the respondent bank’s
separate and regional implementation of Wage Order No. VII-03 at its Cebu,
Mabolo and P. del Rosario branches created a wage distortion in the Bank

nationwide which should be resolved in accordance with Art. 124 of the Labor
Code.
(2) CA – there is no wage distortion and that he variance in the salary rates
of employees in different regions of the country was justified by RA 6727
: that the underlying considerations in issuing the wage orders are diverse,
based on the distinctive situations and needs existing in each region. Hence,
there is no basis to apply the salary increases imposed by Wage Order No.
VII-03 to employees outside of Region VII
● Petitioner contends that a wage distortion exists because the implementation
of the two Wage Orders has resulted in the discrepancy in the compensation
of employees of similar pay classification in different regions. Hence,
petitioner maintains that, as a result of the two Wage Orders, the employees
in the affected regions have higher compensation than their counterparts of
the same level in other regions.
Issue:
WON the respondent bank’s separate and regional implementation of Wage Order
No. 5-03 at its Naga Branch and Wage Order No. VII-03 at its Cebu, Mabolo and P.
del Rosario branches, created a wage distortion in the bank nationwide. - NO
Held:
The statutory definition of wage distortion is found in Article 124 of the Labor Code, as
amended by Republic Act No. 6727. Wage distortion presupposes a classification of
positions and ranking of these positions at various levels. One visualizes a hierarchy
of positions with corresponding ranks basically in terms of wages and other
emoluments.
Where a significant change occurs at the lowest level of positions in terms of basic
wage without a corresponding change in the other level in the hierarchy of positions,
negating as a result thereof the distinction between one level of position from the next
higher level, and resulting in a parity between the lowest level and the next higher
level or rank, between new entrants and old hires, there exists a wage distortion.
The concept of wage distortion assumes an existing grouping or classification of
employees which establishes distinctions among such employees on some relevant
or legitimate basis. This classification is reflected in a differing wage rate for each of
the existing classes of employees. Wage distortion involves four elements:
9
(1) An existing hierarchy of positions with corresponding salary rates
A significant change in the salary rate of a lower pay class without a
concomitant increase in the salary rate of a higher one
(3) The elimination of the distinction between the two levels
(4) The existence of the distortion in the same region of the country.
In the present case, it is clear that no wage distortion resulted when respondent
implemented the subject Wage Orders in the covered branches. In the said
branches, there was an increase in the salary rates of all pay classes. Furthermore,
the hierarchy of positions based on skills, length of service and other logical
bases of differentiation was preserved. In other words, the quantitative
difference in compensation between different pay classes remained the same in
all branches in the affected region. Put differently, the distinction between Pay
Class 1 and Pay Class 2, for example, was not eliminated as a result of the
implementation of the two Wage Orders in the said region. Hence, it cannot be said
that there was a wage distortion.
Also, wage parity between employees in different rungs is not at issue here, but a
wage disparity between employees in the same rung but located in different regions
of the country. Contrary to petitioner’s postulation, a disparity in wages between
employees holding similar positions but in different regions does not constitute
wage distortion as contemplated by law. Again, it is the hierarchy of positions
and the disparity of their corresponding wages and other emoluments that are
sought to be preserved by the concept of wage distortion. Put differently, a
wage distortion arises when a wage order engenders wage parity between
employees in different rungs of the organizational ladder of the same establishment.
It bears emphasis that wage distortion involves a parity in the salary rates of different
pay classes which, as a result, eliminates the distinction between the different ranks
in the same region.
Manila Facts:
Jockey Club ● Manila Jockey Club Employees Labor Union and Manila Jockey Club, Inc.
Employees entered into a Collective Bargaining Agreement (CBA) effective January 1,
1996 to December 31, 2000. The CBA governed the economic rights and
Labor Union
obligations of respondent's regular monthly paid rank-and-file employees.
– PTWGO v. ● In the CBA, the parties agreed to a 7-hour work schedule from 9:00 a.m. to
Manila 12:00 noon and from 1:00 p.m. to 5:00 p.m. on a work week of Monday to
Jockey Club, Saturday. The CBA likewise reserved in respondent certain management

Inc., G.R. No. prerogatives, including the determination of the work schedule.
167760, ● Manila Jockey Club issued an inter-office memo declaring that the hours of
March 7, 2007 work of regular monthly-paid employees shall be from 1:00 p.m. to 8:00 p.m.
when horse races are held, that is, every Tuesday and Thursday. The
memorandum, however, maintained the 9:00 a.m. to 5:00 p.m. schedule for
REYES non-race days.
● In October 1999, petitioner and respondent entered into an Amended and
Principle of Supplemental CBA retaining Section 1 of Article IV and Section 2 of Article XI
Non- and clarified that any conflict arising therefrom shall be referred to a voluntary
Diminution of arbitrator for resolution.
Benefits ● Then, before NCMB’s panel of a voluntary arbitrators, the labor union
questioned the above office memorandum as violative of the prohibition
against non-diminution of wages and benefits guaranteed under Section 1,
Article IV, of the CBA which specified the work schedule of respondent's
employees to be from 9:00 a.m. to 5:00 p.m. Petitioner claimed that as a
result of the memorandum, the employees are precluded from rendering their
usual overtime work from 5:00 p.m. to 9:00 p.m.
● Decisions of Lower Courts/Tribunals:
(1) NCMB’S POA - Upheld respondent's prerogative to change the work
schedule of regular monthly-paid employees under Section 2, Article
XI, of the CBA.
: Petitioner moved for reconsideration but the panel denied the
motion.
: Dissatisfied, petitioner then appealed the panel's decision to the CA
(2) CA - upheld that of the panel and denied petitioner's subsequent
motion for reconsideration via its equally challenged resolution
: held that respondent did not relinquish part of its management
prerogative when it stipulated a work schedule in the CBA and that it
did not violate the non-diminution provision contained in Art. 100 of
the Labor Code
Issue:
WON the respondent violated the non-diminution provision contained in Art. 100 of
the Labor Code.
Held:
Respondent, as employer, cites the change in the program of horse races as reason
for the adjustment of the employees' work schedule. It rationalizes that when the CBA
was signed, the horse races started at 10:00 a.m. When the races were moved to
2:00 p.m., there was no other choice for management but to change the employees'
work schedule as there was no work to be done in the morning. Evidently, the
adjustment in the work schedule of the employees is justified.
10
We are not unmindful that every business enterprise endeavors to increase profits. As
it is, the Court will not interfere with the business judgment of an employer in the
exercise of its prerogative to devise means to improve its operation, provided that it
does not violate the law, CBAs, and the general principles of justice and fair play.
While it is true that Section 1, Article IV of the CBA provides for a 7-hour work
schedule from 9:00 a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. from Mondays
to Saturdays, Section 2, Article XI, however, expressly reserves on respondent the
prerogative to change existing methods or facilities to change the schedules of work.
The same provision of the CBA also grants respondent the prerogative to relieve
employees from duty because of lack of work. Petitioner's argument, therefore,
that the change in work schedule violates Article 100 of the Labor Code
because it resulted in the diminution of the benefit enjoyed by regular monthly-
paid employees of rendering overtime work with pay, is untenable. Section 1,
Article IV, of the CBA does not guarantee overtime work for all the employees but
merely provides that "all work performed in excess of seven (7) hours work schedule
and on days not included within the work week shall be considered overtime and paid
as such."
Respondent was not obliged to allow all its employees to render overtime work
everyday for the whole year, but only those employees whose services were
needed after their regular working hours and only upon the instructions of
management. The overtime pay was not given to each employee consistently,
deliberately and unconditionally, but as a compensation for additional services
rendered. Thus, overtime pay does not fall within the definition of benefits under
Article 100 of the Labor Code on prohibition against elimination or diminution of
benefits.
While the Constitution is committed to the policy of social justice and the
protection of the working class, it should not be presumed that every labor
dispute will be automatically decided in favor of labor. The partiality for labor has
not in any way diminished our belief that justice in every case is for the deserving, to
be dispensed in the light of the established facts and the applicable law and doctrine.
Royal Plant FACTS:
Workers · Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic
Union v. corporation engaged in the manufacture, sale and distribution of softdrink
products. Under the employ of each bottling plant are bottling operators.
Coca-Cola
In the case of the plant in Cebu City, there are 20 male bottling operators,
Bottlers and they are members of herein respondent Royal Plant Workers Union
Philippines, (ROPWU).

Inc. - · Prior to September 2008, the rotation is this: after two and a half (2 ½)
Cebu Plant, hours of work, the bottling operators are given a 30-minute break and this
G.R. No. goes on until the shift ends. In September 2008 and up to the present,
the rotation has changed and bottling operators are now given a 30-
198783, April
minute break after one and one half (1 ½) hours of work.
15, 2013 · In 1974, the bottling operators of then Bottling Line 2 were provided with
chairs upon their request. Sometime in September 2008, the chairs
SY, A. provided for the operators were removed pursuant to a national directive
of petitioner.
Principle of · This directive is in line with the "I Operate, I Maintain, I Clean" program of
Non- petitioner for bottling operators, wherein every bottling operator is given
the responsibility to keep the machinery and equipment assigned to him
Diminution of
clean and safe. The program reinforces the task of bottling operators to
Benefits constantly move about in the performance of their duties and
responsibilities.
· The bottling operators took issue with the removal of the chairs. Through
the representation of the respondent, they initiated the grievance
machinery of the Collective Bargaining Agreement (CBA) in November
2008.
· Respondent sent a Notice to Arbitrate, dated 16 July 2009, to petitioner
stating its position to submit the issue on the removal of the chairs for
arbitration. They then executed a Submission Agreement which was
accepted by the Arbitration Committee on 01 October 2009.
· Petitioner argued that the removal of the chairs is valid as it is a legitimate
exercise of management prerogative, does not violate the Labor Code
and the CBA it contracted with respondent.
· Respondent contended that the bottling operators have been performing
their assigned duties satisfactorily with the presence of the chairs; the
removal of the chairs constitutes a violation of the Occupational Health
and Safety Standards, the policy of the State to assure the right of
workers to just and humane conditions of work as stated in Article 3 of
the Labor Code and the Global Workplace Rights Policy.
· Ruling of the Arbitration Committee: ruled in favor of ROPWU declaring
that the removal of the operators’ chairs is not valid. CCBPI is hereby
ordered to restore the same for the use of the operators as before their
removal in 2008. It stated further that the use of chairs by the operators
had been a company practice for 34 years, that the use of the chairs by
the operators constituted a company practice favorable to the Union; that
it ripened into a benefit after it had been enjoyed by it.
· Ruling of the CA: Nullified and set aside the decision of the Arbitration
Committee. A new one is entered in its stead SUSTAINING the removal
of the chairs of the bottling operators from the manufacturing/production
11
line. The CA held, among others, that the removal of the chairs from the
manufacturing/production lines by CCBPI is within the province of
management prerogatives, and the scheme was clearly advantageous to
the bottling operators as the number of resting periods was increased.
· Disgruntled with the adverse CA decision, the Union has come to the
Supreme Court praying for its reversal.
ISSUE:
Whether or not the removal of the bottling operators’ chairs from CCBPI’s
production/manufacturing lines is a valid exercise of a management prerogative
RULING:
The Court sustains the ruling of the CA on both issues.
A Valid Exercise of Management Prerogative
· The chairs were not removed indiscriminately, and were carefully studied
with due regard to the welfare of the members of the Union. The removal
of the chairs was also compensated by: a) a reduction of the operating
hours of the bottling operators from a 2 ½ -hour rotation period to a 1 ½ -
hour rotation period; and b) an increase of the break period from 15 to 30
minutes between rotations.
· The decision to remove the chairs was done with good intentions as
CCBPI wanted to avoid instances of operators sleeping on the job while
in the performance of their duties and responsibilities and because of the
fact that the chairs were not necessary considering that the operators
constantly move about while working.
· The removal of the chairs was designed to increase work efficiency.
Hence, CCBPI’s exercise of its management prerogative was made in
good faith without doing any harm to the workers’ rights.
No Violation of Labor Laws
· There is no law that requires employers to provide chairs for bottling
operators. The CA correctly ruled that the Labor Code, specifically Article
132 thereof, only requires employers to provide seats for women. No
similar requirement is mandated for men or male workers.
· There was no violation either of the Health, Safety and Social Welfare
Benefit provisions under Book IV of the Labor Code of the Philippines. As
shown in the foregoing, the removal of the chairs was compensated by
the reduction of the working hours and increase in the rest period. The
directive did not expose the bottling operators to safety and health
hazards.
· The Union should not complain too much about standing and moving

about for 1 ½ hours because studies show that sitting in workplaces for a
long time is hazardous to one’s health.
No Violation of the CBA
· The CBA between the Union and CCBPI contains no provision
whatsoever requiring the management to provide chairs for the operators
in the production/manufacturing line while performing their duties and
responsibilities.
· On the contrary, Section 2 of Article 1 of the CBA expressly provides that
benefits and/or privileges, not expressly given therein but which are
presently being granted by the company and enjoyed by the employees,
shall be considered as purely voluntary acts by the management and that
the continuance of such benefits and/or privileges, no matter how long or
how often, shall not be understood as establishing an obligation on the
company’s part.
· Since the matter of the chairs is not expressly stated in the CBA, it is
understood that it was a purely voluntary act on the part of CCBPI and
the long practice did not convert it into an obligation or a vested right in
favor of the Union.
No Violation of the general principles of justice and fair play
· The Court completely agrees with the CA ruling that the removal of the
chairs did not violate the general principles of justice and fair play
because the bottling operators’ working time was considerably reduced
from two and a half (2 ½) hours to just one and a half (1 ½) hours and the
break period, when they could sit down, was increased to 30 minutes
between rotations.
· The bottling operators’ new work schedule is certainly advantageous to
them because it greatly increases their rest period and significantly
decreases their working time.
No Violation of Article 100 of the Labor Code
· The operators’ chairs cannot be considered as one of the employee
benefits covered in Article 100 of the Labor Code. In the Court’s view, the
term "benefits" mentioned in the non-diminution rule refers to monetary
benefits or privileges given to the employee with monetary equivalents.
· Such benefits or privileges form part of the employees’ wage, salary or
compensation making them enforceable obligations.
· We can only deduce that the other employee benefits spoken of by
Article 100 pertain only to those which are susceptible of monetary
considerations. Indeed, this could only be the most plausible
conclusion because the cases tackling Article 100 involve mainly
12
with monetary considerations or privileges converted to their
monetary equivalents.
· Equating the provision of chairs to the bottling operators as something
within the ambit of "benefits'' in the context of Article 100 of the Labor
Code is unduly stretching the coverage of the law. The interpretations of
Article 100 of the Labor Code do not show even with the slightest hint
that such provision of chairs for the bottling operators may be sheltered
under its mantle.
Jurisprudence recognizes the exercise of management prerogatives. Labor Laws also
discourage interference with an employer's judgment in the conduct of its business.
For this reason, the Court often declines to interfere in legitimate business decisions
of employers. The law must protect not only the welfare of the employees, but also
the rights of the employers.
WHEREFORE, the petition is DENIED.
Republic Facts:
Planters ● Antonio Santos was employed by Republic Planters Bank, now PNB-
Bank v. Republic Bank, for 31 years and 15 days occupying various positions. At the
NLRC, G.R. time of his retirement, Antonio was a Department Manager with a monthly
No. 117460, salary of Php 8,965.00 and accumulated leave credits of 272 days. He
January 6, received a gratuity pay of PHP 434,468.52 out of which P20,615.62 was
1997 deducted for taxes due.
● Santos, thus filed a suit for underpayment of gratuity pay, non-payment of
SY, Y., accumulated sick and vacation leaves, mid-year and year-end bonuses,
financial assistance, at the same time claiming damages and attorney’s fees.
Principle of ● LA - held in favor of Santos
Non- ● NLRC - affirmed the LA
Diminution of ● In this petition, PNB-RB alleges that the resolution of NLRC is contrary to the
Benefits evidence and existing jurisprudence and that the award to Santos of mid-year
and year-end bonuses, moral and exemplary damages and attorney’s fees
has no legal basis. Petitioner further argues that Santos is not entitled to the
award as he signed a Release, Waiver and Quitclaim therefor when he
received his gratuity pay of P434,468.52.
● PNB-RB avers that the NLRC gravely abused its discretion when it computed
the gratuity pay based on the salary rate of the next higher rank on the theory
that he acquired a vested right over it pursuant to the 1971-1973 CBA.
Petitioner posits that as the CBA had long expired it could no longer be used

as basis; instead, the computation should be based on the practice and policy
of the bank effective at the time of the employee's retirement.
Issue:
WON Santos may claim his gratuity pay pursuant to the 1971-1973 CBA.
Ruling:
Quitclaims do not constitute a bar to recovery further reliefs
● The Court held that a quitclaim by an employee in favor of his employer
amounts to a valid and binding compromise agreement between them. An
agreement voluntarily entered into which represents a reasonable settlement
is binding on the parties and may not later be disowned simply because of a
change of mind.
● On the other hand, the court reiterated that the principle that quitclaims are
ineffective to bar recovery for the full measure of the worker's rights and that
acceptance thereof does not amount to estoppel. Generally, quitclaims by
laborers are frowned upon as contrary to public policy. And the fact that the
consideration given in exchange thereof was very much less than the amount
claimed renders the quitclaim null and void.
● In the instant case, the total amount claimed by Santos is P908,022.65 of
which only P434,468.52 was received by him. Considering that the Release,
Waiver and Quitclaim was signed by Santos under protest as found by the
Labor Arbiter and the NLRC, and the difference between the amount claimed
and that paid cannot in any way be considered negligible, we deem it proper
to recompute and determine the exact amount of the retirement benefits due
private respondent. We perceive the waiver under the facts of the case to
dangerously encroach on the entrenched domain of public policy.
Santos may avail the gratuity pay as a vested right by virtue of company
practice
● The Court made mention of the ruling in Republic Planters Bank vs NLRC,
which contained facts similar to the case at hand, where it held that:
Prior to private respondent's resignation, there were other managerial
employees who resigned and/or retired from petitioner's employ who received
their corresponding gratuity benefits and the cash value of their accumulated
leave credits pursuant to the provisions of the old CBA of 1971-73 despite its
expiration in 1976. With such a practice and policy, petitioner cannot refuse
to pay private respondent his gratuity benefits under the old CBA.
13
Under Section 14(a), Rule 1 of the Rules and Regulations Implementing Book
VI of the Labor Code, it is provided:
Sec. 14. Retirement Benefits.- (a) An employee who is retired pursuant to a
bonafide retirement plan or in accordance with the applicable individual or
collective agreement or established employer policy shall be entitled to all the
retirement benefits provided therein x x x."
The foregoing provision explicitly states that a company practice or policy is a
labor standard in determining the retirement benefits of its employees.
Private respondent is a managerial employee who, by express provision of
law, is excepted from the coverage of the aforesaid contract. Private
respondent was not a party thereto and could not be bound thereby.
Since no new CBA had been entered into between the managerial
employees and petitioner upon the expiration of the said 1971-73 CBA,
private respondent has acquired a vested right to the said established policy
of petitioner in applying the 1971-73 CBA to retiring or resigning executives of
managerial employees. Such right cannot be curtailed or diminished.
● We maintain the same dictum in the case before us. A perusal of the records
show that the granting of the gratuity pay on the basis of the salary rate of the
rank next higher may be deemed to have ripened into company practice or
policy which can no longer be peremptorily withdrawn. Any benefit and
supplement being enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the employer by virtue of Sec.
10 of the Rules and Regulations Implementing P.D. No. 851 and Art. 100 of
the Labor Code which prohibits the diminution or elimination by the employer
of the employees' existing benefits.
● Leave credits should likewise be computed based on the upgraded salary
rate pursuant to Sec 14 of the 1971-73 CBA. Nothing in the provisions of the
1971 CBA from which emanated the one rank higher policy indicates a
minimum or maximum range of the next higher rank. Instead, what is
provided is an unqualified one rank higher concept. Petitioner is, therefore,
precluded from drawing a distinction where none has been stated in the
contract. Besides, assuming that an ambiguity does exist, the same must be
resolved in the light of Article 1702 of the Civil Code that: In case of doubt,
the labor legislation and all labor contracts shall be construed in favor of the

safety and decent living for the laborer. Such should be liberally construed in
favor of the persons intended to be benefited thereby.
● Gratuity pay, unlike salary, is paid to the beneficiary for the past services or
favor rendered purely out of the generosity of the giver or grantor. Gratuity,
therefore, is not intended to pay a worker for actual services rendered or for
actual performance. It is a money benefit or bounty given to the worker, the
purpose of which is to reward employees who have rendered satisfactory
service to the company.
● (3 year prescription) However, since Santos filed his complaint only on 12
July 1990, his claim for 1985 (mid-year and year-end), 1986 (mid-year and
year-end), and 1987 (mid-year) bonuses were already prescribed. As regards
bonuses for 1987 (year-end), 1988 (mid-year and year-end), 1989 (mid-year
and year-end), and 1990 (mid-year), we agree with petitioner that these
should be based on the existing salary rate at the time of their accrual. The
record shows however that in 1988 Santos was found guilty of an
administrative charge. Hence, in consonance with existing company policy,
the 1988 (mid-year and year-end) bonus should be forfeited in favor of the
Bank.
ULTIMATELY, COURT AFFIRMED LA AND NLRC WITH MODIFICATION AS TO
THE COMPUTATION OF GRATUITY
Arco Metal ARCO METAL PRODUCTS, CO., INC., and MRS. SALVADOR UY, petitioners, vs.
Products, Inc. SAMAHAN NG MGA MANGGAGAWA SA ARCO METAL-NAFLU (SAMARM-
v. Samahan NAFLU), respondent.
ng mga G.R. No. 170734 May 14, 2008
Manggagawa
sa Arco FACTS:
Metal-NAFLU, Petitioner Arco Metal Products, Co., Inc. is a company engaged in the manufacture of
G.R. No. metal products, whereas respondent SAMARM-NAFLU is the labor union of
170734, May petitioner’s rank and file employees.
14, 2008
Sometime in December 2003, petitioner paid the 13th month pay, bonus, and leave
BATONGBAK encashment of three union members in amounts proportional to the service they have
AL actually rendered in a year, which is less than a full twelve (12) months. Respondent
protested the prorated scheme, claiming that on several occasions petitioner did not
Principle of prorate the payment of the same benefits to seven (7) employees who had not served
Non- for the full 12 months. Thus, they filed a complaint before the NCMB for violation of
14
Diminution of Article 100 of the Labor Code.
Benefits
The parties submitted the case for voluntary arbitration. The voluntary arbitrator ruled
in favor of petitioner and found that the giving of the contested benefits in full,
irrespective of the actual service rendered within one year has not ripened into a
practice. The voluntary arbitrator noted the affidavit of Joselito Baingan,
manufacturing group head of petitioner, which states that the giving in full of the
benefit was a mere error. He also interpreted the phrase "for each year of service"
found in their CBA provisions which mean that an employee must have rendered one
year of service in order to be entitled to the full benefits provided in the CBA.
Respondent then filed before the Court of Appeals. The Court of Appeals found that
petitioner had an existing voluntary practice of paying the aforesaid benefits in full to
its employees, thereby rejecting the claim that petitioner erred in paying full benefits
to its seven employees. It noted that aside from the affidavit of petitioner’s officer, it
has not presented any evidence in support of its position that it has no voluntary
practice of granting the contested benefits in full and without regard to the service
actually rendered within the year. It also questioned why it took petitioner eleven (11)
years before it was able to discover the alleged error.
ISSUE:
Whether the prorated payment of the said benefits constitute diminution of benefits
under Article 100 of the Labor Code.
RULING:
The Supreme Court held that petitioner Arco Metals did not err in paying full benefits
to the employees.
First, it was provided in the CBA that there is a one-year cutoff in the entitlement to
the benefits. There is no doubt that in order to be entitled to the full monetization of
sixteen (16) days of vacation and sick leave, one must have rendered at least one
year of service.
However, Petitioner granted, in several instances, full benefits to employees who
have not served a full year. Petitioner Arco Metals describes the situation as a "clear
oversight" which should not be taken against it. To further bolster its case, petitioner
argues that for a grant of a benefit to be considered a practice, it should have been

practiced over a long period of time and must be shown to be consistent, deliberate,
and intentional, which is not what happened in this case. Any benefit and supplement
being enjoyed by 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 promote their
welfare," and "to afford labor full protection." Said mandate in turn is the basis of
Article 4 of the Labor Code which states that "all doubts in the implementation and
interpretation of this Code, including its implementing rules and regulations shall be
rendered in favor of labor."
As mentioned by the Supreme Court in several jurisprudence, in several instances
petitioner had adopted a policy of freely, voluntarily, and consistently granting full
benefits to its employees regardless of the length of service rendered. Even though
there were only a total of seven employees who benefited from such a practice, it was
an established practice nonetheless. Moreover, jurisprudence has not laid down any
rule specifying a minimum number of years within which a company practice must be
exercised in order to constitute voluntary company practice.
Coca-Cola
Bottlers Facts:
Philippines,
Inc. vs. Iloilo Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic corporation
Coca-cola engaged in the business of manufacturing and selling of leading non-alcoholic
Plant products and other beverages. It operates a manufacturing plant in Ungka, Pavia,
Employees Iloilo City, where the aggrieved former employees herein, as represented by
Labor Union respondent Iloilo Coca-Cola Plant Employees Labor Union (respondent), worked as
(ICCPELU, regular route drivers and helpers.
G.R. No.
CCBPI issued a policy involving Saturday work in which several of CCBPI's
195297,
employees were required to report for work on certain Saturdays to perform a host of
December 5,
2018 activities, usually involving maintenance of the facilities. This prerogative was
supposedly consistent with the pertinent provisions in the Collective Bargaining
BORLONGAN Agreement (CBA) between CCBPI and its employees, which stated that management
had the sole option to schedule, work on Saturdays on the basis of operational
Principle of necessity.
Non-
15
Diminution
OF Benefits CCBPI later on informed the respondent that, Saturday work would no longer be
scheduled, with CCBPI citing operational necessity as the reason for the decision.
Specifically, the discontinuance was done with the purpose of saving on operating
expenses and compensating for the anticipated decreased revenues. As Saturday
work involved maintenance-related activities, CCBPI would then only schedule the
day's work as the need arose for these particular undertakings.
Despite opposition with the proposal to stop the work schedule during Saturdays,
CCBPI pushed through with the non-scheduling of work. As a result, the respondent
submitted to CCBPI its written grievance, stating therein that CCBPI's act of
disallowing its employees to report during Saturday is a violation of the CBA
provisions, specifically Section 1, Article 10 thereof. The CCBPI responded thru a
letter which merely reiterates that under the set of facts, management has the option
to schedule work on Saturday on the basis of operational necessity.
Respondent thus brought its grievances to the office of the National Conciliation and
Mediation Board (NCMB), Regional Branch No.6, Iloilo City, and subsequently, the
parties pursuant to the provisions of their CBA submitted the case for voluntary
arbitration to resolve two issues:
1. Whether or not members of the respondent were entitled to receive their
basic pay during Saturdays under the CBA even if they would not report for work;
and
2. Whether or not CCBPI could be compelled by the respondent to provide work
to its members during Saturdays under the CBA.
After the presentation of evidence and the subsequent deliberations, the Panel
of Arbitrators ruled in favor of CCBPI. Respondent's Motion for Reconsideration to
the Panel of Arbitrators' ruling was denied for lack of merit.
The Court of Appeals (CA) subsequently rendered a Decision granting the
respondent's Petition for Review and reversing the decision of the Panel of
Arbitrators. CCBPI's Motion for Reconsideration was denied by the CA.

Issues:
1. Whether or not the CA erred in ruling that under the CBA between the
parties, scheduling Saturday work for CCBPI's employees is mandatory on the
part of the Company.
2. Whether scheduling Saturday work has ripened into a company practice, the
removal of which constituted a diminution of benefits, to which CCBPI is likewise
liable to the affected employees for, including the corresponding wage for the
Saturday work which was not performed pursuant to the policy of the Company to
remove Saturday work based on operational necessity.
Ruling:
The petition is impressed with merit.
(1) As to whether or not the CBA between the parties mandates that CCBII
schedule Saturday work for its employees.
A CBA is the negotiated contract between a legitimate labor organization and the
employer concerning wages, hours of work, and all other terms and conditions of
employment in a bargaining unit. [48] It incorporates the agreement reached after
negotiations between the employer and the bargaining agent with respect to terms
and conditions of employment.
Consequently, in this case, recourse to the CBA between CCBPI and the
respondent as regards the hours of work is essential. In Article 10 of the CBA,
the company work week is elaborated while also defining how a Saturday is treated
and in fact delineating the same from the other days of the work week:
ARTICLE 10
Hours of Work
SECTION 1. Work Week. For daily paid workers, the normal work week
shall consist of five (5) consecutive days (Monday to Friday) of eight (8)
hours and each and one (1) day (Saturday) of four (4) hours, provided,
16
however, that any worker required to work on Saturday must complete the
scheduled shift for the day and shall be entitled to the premium pay
provided in Article IX hereof. x x x x
(c) Saturdays. Saturday is a premium day but shall not be considered as a
rest day or equivalent to a Sunday. It is further agreed that management
has the option to schedule work on Saturdays on the basis of operational
necessity.
Section 5 of Article 9 of the CBA, explicitly referred to in Article 10 states:
SECTION 5. Special Bonus. When a regular employee goes out on his
route on a Saturday, Sunday, or Legal Holiday, either because he is so
required by District Sale Supervisor or because, after securing approval
from the District Sales Supervisor. he voluntarily chooses to do so. he shall
be entitled to a special bonus of P280.00.
The Court disagreed with the interpretation of the CA - the phrase "option to
schedule'' as limited merely to scheduling the time of work on Saturdays and
not the option to allow or disallow or to grant or not to grant the Saturday work
itself, is more consistent with the idea candidly stated in the CBA regarding the
work week which is comprised of five (5) consecutive days (Monday to Friday)
of eight (8) hours each and one (1) day (Saturday) of four (4) hours. In the
perusal of the same, the Court finds that a more logical and harmonious interpretation
of the CBA provisions wherein Saturday work is optional and not mandatory keeps
more with the agreement between the parties.
To note, the CBA under Article 11, Section 1(c), clearly provides that CCBPI has the
option to schedule work on Saturdays based on operational necessity. There is no
ambiguity to the provision, and no other interpretation of the word "work" other
than the work itself and not the working hours. If the parties had truly intended
that the option would be to change only the working hours, then it would have so
specified that whole term "working hours" be used, as was done in other provisions of
the CBA.
Article 11 of the CBA expressly stated that “management has the option to

schedule work on Saturdays on the basis of operational necessity.” To
emphasize, if it is only the hours that management may amend, then it would have
been so stated, with that specific term used instead of just merely "work," a more
general term.
Also, as correctly pointed out by CCBPI, if Saturday work is indeed mandatory under
the CBA, the phrase "required to work on a Saturday" in Article 10, Section 1 would
be superfluous. The same phrase is also found in Article 11, Section 2(c) which
provides that "a worker paid on daily basis required to work on a Saturday shall be
paid his basic hourly rate plus fifty (50%) percent thereof."
By not taking these provisions into account, the CA ignored the well-settled
rule that the various stipulations of a contract must be interpreted together. The
Court finds that relying on the interpretation of the CA would result in the
patent absurdity that the company would have to look for work for the
employees to do even if there is none, on the Saturday as stated. Even if one
were to downplay the lack of logic with this assertion, as mentioned the CBA
provisions are clear and unambiguous, leaving no need for a separate interpretation
of the same.
(2) As to whether scheduling Saturday work has ripened into a company
practice, the removal of which constituted a diminution of benefits.
CCBPI argued that work on a Saturday is akin to overtime work because employees
who are required to perform such work are given additional compensation or premium
in the CBA. Citing Layoc, CCBPI stressed that since overtime work does not fall
within the definition of benefits, the same is not protected by Article 100 of the Labor
Code which proscribes the diminution of benefits.
The Court did not agree with the argument of CCBPI. CCBPI overlooked the fact
that the term overtime work has an established and technical meaning under our
labor laws, to wit:
Article 87. Overtime work. Work may be performed beyond eight (8) hours a
day provided that the employee is paid for the overtime work, an additional
compensation equivalent to his regular wage plus at least twenty-five percent
17
(25%) thereof. Work performed beyond eight hours on a holiday or rest day
shall be paid an additional compensation equivalent to the rate of the first eight
hours on a holiday or rest day plus at least thirty percent (30%) thereof.
It can be deduced from the foregoing provision that overtime work is work exceeding
eight hours within the worker's 24-hour workday. What is involved in this case is work
undertaken within the normal hours of work on Saturdays and not work performed
beyond eight hours in one day. Under Article 83 of the Labor Code:
Article. 83. Normal hours of work. The normal hours of work of any employee
shall not exceed eight (8) hours a day.
Despite the mistaken notion of CCBPI that Saturday work is synonymous to
overtime work, the Court still disagrees with the CA ruling that the previous
practice of instituting Saturday work by CCBPI had ripened into a company
practice covered by Article 100 of the Labor Code.
To note, it is not Saturday work per se which constitutes a benefit to the company's
employees. Rather, the benefit involved in this case is the premium which the
company pays its employees above and beyond the minimum requirements set by
law. The CBA between CCBPI and the respondent guarantees the employees that
they will be paid their regular wage plus an additional 50% thereof for the first eight
(8) hours of work performed on Saturdays. Therefore, the benefit, if ever there is one,
is the premium pay given by reason of Saturday work, and not the grant of Saturday
work itself.
The CBA between CCBPI and the respondent has no analogous provision which
grants that the 50% premium pay would have to be paid regardless of the occurrence
of Saturday work. Thus, the non-payment of the same would not constitute a violation
of the diminution of benefits rule.
Even assuming arguendo that the Saturday work involved in this case falls within the
definition of a "benefit" protected by law, if Saturday work and its corresponding
premium pay were granted to CCBPI's employees without qualification, then the
company's policy of permitting its employees to suffer work on Saturdays could have

perhaps ripened into company practice protected by the non-diminution rule.
Lastly, the Court agrees with the assertion of CCBPI that since the affected
employees are daily[1]paid employees, they should be given their wages and
corresponding premiums for Saturday work only if they are permitted to suffer work.
Invoking the time-honored rule of "a fair day's work for a fair day's pay," the CCBPI
argues that the CA's ruling that such unworked Saturdays should be compensated is
contrary to law and the evidence on record.
The CA erred in its pronouncement that the principle of "a fair day's work for a
fair day's pay" was irrelevant to the instant case. The age-old rule governing the
relation between labor and capital, or management and employee, of a "fair day's,
wage for a fair day's labor" remains the basic factor in determining employees' wages.
Where the employee is willing and able to work and is not illegally prevented from
doing so, no wage is due to him. To hold otherwise would be to grant to the employee
that which he did not earn at the prejudice of the employer.
In the case at bar, CCBPI's employees were not illegally prevented from working on
Saturdays. The company was simply exercising its option not to schedule work
pursuant to the CBA provision which gave it the prerogative to do so. It therefore
follows that the principle of "no work, no pay" finds application in the instant case.
On a final note, the Court cannot emphasize enough that its primary role as the
vanguard of constitutional guaranties charges it with the solemn duty of affording full
protection to labor. It is, in fact, well-entrenched in the deluge of our
jurisprudence on labor law and social legislation that the scales of justice
usually tilt in favor of the workingman. Such favoritism, however, has not
blinded the Court to the rule that justice is, in every case for the deserving, to
be dispensed in the light of the established facts and applicable law and
doctrine. The law does not authorize the oppression or self-destruction of the
employer. Management also has its own rights, which, as such, are entitled to
respect and enforcement in the interest of simple fair play. After all, social justice is, in
the eloquent words of Associate Justice Jose P. Laurel, "the humanization of laws
and the equalization of social and economic forces by the State so that justice in its
rational and objectively secular conception may at least be approximated."
18
Auto Bus v. FACTS
Bautista, ● Respondent Antonio Bautista has been employed by petitioner Auto Bus
G.R.No. Transport Systems, Inc. (Autobus), as driver-conductor with travel routes
156367, 458 Manila-Tuguegarao via Baguio, Baguio- Tuguegarao via Manila and Manila-
SCRA 578, Tabuk via Baguio. Respondent was paid on commission basis, seven percent
May 16, 2005 (7%) of the total gross income per travel, on a twice a month basis.
● After Bautista figured in an accident while driving his bus with another
Autobus, allegedly he had not slept for almost twenty-four (24) hours having
CAMUA asked by Management to return to Roxas, he was terminated by Autobus.
● Thus, respondent instituted a Complaint for Illegal Dismissal with Money
Service Claims for nonpayment of 13th month pay and service incentive leave pay
Incentive against Autobus.
Leave ● Petitioner, on the other hand, maintained that respon-dent’s employment was
replete with offenses involving reckless imprudence, gross negligence, and
dishonesty. To support its claim, petitioner presented copies of letters,
memos, irregularity reports, and warrants of arrest pertaining to several
incidents wherein respondent was involved.
● LA – DISMISSED illegal dismissal complaint for lack of merit; However, still
based on the above-discussed premises, the respondent must pay to the
complainant the following:
a. his 13th month pay from the date of his hiring to the date of his dismissal,
presently computed at P78,117.87;
b. his service incentive leave pay for all the years he had been in service with the
respondent, presently computed at P13,788.05.
● NLRC – DELETED the award of 13th month pay as employee was paid on
commission basis; but all other findings AFFIRMED, in other words, the
award of SIL was maintained.
● CA – DISMISSED petition for lack of merit, AFFIRMED NLRC decision in
toto.
ISSUE
1. Whether or not respondent is entitled to service incentive leave; [YES]
2. Whether or not the three (3)-year prescriptive period provided under Article
291 of the Labor Code, as amended, is applicable to respondent’s claim of
service incentive leave pay. [NO]

RULING
(1)
As correctly concluded by the appellate court, respondent is not a field
personnel but a regular employee who performs tasks usually necessary and
desirable to the usual trade of petitioner’s business. Accordingly, respondent is
entitled to the grant of service incentive leave.
According to the Implementing Rules, Service Incentive Leave shall not apply to
employees classified as “field personnel.” The phrase “other employees whose
performance is unsupervised by the employer” must not be understood as a separate
classification of employees to which service incentive leave shall not be granted.
Rather, it serves as an amplification of the interpretation of the definition of field
personnel under the Labor Code as those “whose actual hours of work in the field
cannot be determined with reasonable certainty.”
What must be ascertained in order to resolve the issue of propriety of the grant of
service incentive leave to respondent is whether or not he is a field personnel.
According to Article 82 of the Labor Code, “field personnel” shall refer to non-
agricultural employees who regularly perform their duties away from the principal
place of business or branch office of the employer and whose actual hours of work in
the field cannot be determined with reasonable certainty. This definition is further
elaborated in the Bureau of Working Conditions (BWC), Advisory Opinion to
Philippine Technical-Clerical Commercial Employees Association which states that:
As a general rule, [field personnel] are those whose performance of their job/service
is not supervised by the employer or his representative, the workplace being away
from the principal office and whose hours and days of work cannot be determined
with reasonable certainty; hence, they are paid specific amount for rendering specific
service or performing specific work. If required to be at specific places at specific
times, employees including drivers cannot be said to be field personnel despite the
fact that they are performing work away from the principal office of the employee.
It is necessary to stress that the definition of a “field personnel” is not merely
concerned with the location where the employee regularly performs his duties but
also with the fact that the employee’s performance is unsupervised by the employer.
As discussed above, field personnel are those who regularly perform their duties
away from the principal place of business of the employer and whose actual hours of
19
work in the field cannot be determined with reasonable certainty. Thus, in order to
conclude whether an employee is a field employee, it is also necessary to ascertain if
actual hours of work in the field can be determined with reasonable certainty by the
employer. In so doing, an inquiry must be made as to whether or not the employee’s
time and performance are constantly supervised by the employer.
As observed by the Labor Arbiter and concurred in by the Court of Appeals: It is of
judicial notice that along the routes that are plied by these bus companies, there are
its inspectors assigned at strategic places who board the bus and inspect the
passengers, the punched tickets, and the conductor’s reports. There is also the
mandatory once-a-week car barn or shop day, where the bus is regularly checked as
to its mechanical, electrical, and hydraulic aspects, whether or not there are problems
thereon as reported by the driver and/or conductor. They too, must be at specific
place as [sic] specified time, as they generally observe prompt departure and arrival
from their point of origin to their point of destination. In each and every depot, there is
always the Dispatcher whose function is precisely to see to it that the bus and its crew
leave the premises at specific times and arrive at the estimated proper time. These,
are present in the case at bar. The driver, the complainant herein, was therefore
under constant supervision while in the performance of this work. He cannot be
considered a field personnel.
(2)
The question now that must be addressed is up to what amount of service incentive
leave pay respondent is entitled to.
The response to this query inevitably leads us to the correlative issue of whether or
not the three (3)-year prescriptive period under Article 291 of the Labor Code is
applicable to respondent’s claim of service incentive leave pay.
Article 291 of the Labor Code states that all money claims arising from employer-
employee relationship shall be filed within three (3) years from the time the cause of
action accrued; otherwise, they shall be forever barred.
Applying Article 291 of the Labor Code in light of this peculiarity of the service
incentive leave, we can conclude that the three (3)-year prescriptive period
commences, not at the end of the year when the employee becomes entitled to the
commutation of his service incentive leave, but from the time when the employer
refuses to pay its monetary equivalent after demand of commutation or upon

termination of the employee’s services, as the case may be.
In the case at bar, respondent had not made use of his service incentive leave nor
demanded for its commutation until his employment was terminated by petitioner.
Neither did petitioner compensate his accumulated service incentive leave pay at the
time of his dismissal. It was only upon his filing of a complaint for illegal dismissal,
one month from the time of his dismissal, that respondent demanded from his former
employer commutation of his accumulated leave credits. His cause of action to claim
the payment of his accumulated service incentive leave thus accrued from the time
when his employer dismissed him and failed to pay his accumulated leave credits.
Therefore, the prescriptive period with respect to his claim for service incentive leave
pay only commenced from the time the employer failed to compensate his
accumulated service incentive leave pay at the time of his dismissal. Since
respondent had filed his money claim after only one month from the time of his
dismissal, necessarily, his money claim was filed within the prescriptive period
provided for by Article 291 of the Labor Code.
Petition DENIED. The assailed Decision of the Court of Appeals AFFIRMED.
Mejila v. Facts:
Wrigley
Philippines,
WPI, engaged in chewing gum manufacturing, initially hired Mejila as an occupational
health practitioner on a contractual basis, later regularizing her employment in
Inc., G.R. No.
199469,January 2007. On October 26, 2007, Wrigley Philippines, Inc. (WPI) notified
Gertrudes D. Mejila that her position was abolished due to the company's manpower
September
rationalization program, leading to her termination effective November 26. Although
11, 2019
Mejila was no longer required to work from October 26, her salary would be paid until
the termination date. WPI granted separation pay, cash conversion of unused leaves,
CONCEPCIO an extension of medical insurance, and pro rata additional pays upon the return of
N company properties and completion of the exit clearance process.
Garden Leave Concurrently, WPI informed the Department of Labor and Employment's (DOLE)
Rizal Field Office about Mejila's termination and engaged Activeone Health, Inc. to
take over clinic services, part of WPI's Headcount Optimization Program. This
program aimed to improve cost efficiency by outsourcing non-core functions, leading
to the termination of Mejila and two others, Dr. Marilou L. Fonollera and nurse
Soccoro Laarni B. Edurise, on grounds of redundancy.
20
Mejila filed an illegal dismissal complaint, arguing that WPI failed to adhere to
procedural due process and that outsourcing clinic operations was more expensive
than retaining in-house services. The LA ruled in favor of Mejila, ordering her
reinstatement and awarding various monetary benefits. The NLRC overturned the
decision, highlighting the cost savings achieved through outsourcing and deeming the
notice to the Rizal Provincial Office as sufficient for procedural due process.
Mejila sought recourse with the CA, which affirmed her dismissal but found WPI
deficient in properly serving the termination notice to the DOLE Regional Office. As a
result, the CA awarded nominal damages and attorney's fees to Mejila. Dissatisfied
with aspects of the CA's ruling, both Mejila and WPI filed separate appeals with the
Supreme Court.
Issues:
1. WON the petitioner was illegally dismissed.
2. WON the respondent correctly implemented the redundancy program.
Ruling:
1. No. The court ruling addresses the termination of employment on grounds of
redundancy by Wrigley Philippines, Inc. (WPI). Redundancy, recognized as
an authorized cause under the Labor Code as it provides in Article 298
(formerly Article 283) provides:
Art. 298. Closure of establishment and reduction of personnel. - The
employer may also terminate the employment of any employee due to the
installation of labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment
or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the
intended date thereof, in case of termination due to the installation of labor-
saving devices or redundancy, the worker affected thereby shall be entitled
to a separation pay equivalent to at least his 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 in cases of closures or cessation
of operations of establishment or undertaking not due to serious business
losses or financial reverses, 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.
Of course, a company cannot simply declare redundancy without basis. It is
not enough for a company to merely declare that it has become overmanned.
It must produce adequate proof that such is the actual situation to justify
the dismissal of the affected employees, for redundancy. We have
considered evidence such as the new staffing pattern, feasibility studies,
proposal on the viability of the newly created positions, job description and
the approval by the management of the restructuring, among others, as
adequate to substantiate a claim for redundancy.
WPI's Headcount Optimization Program, outsourcing clinic operations, is
deemed a fair exercise of business prerogative, supported by evidence of
feasibility studies and cost savings. WPI's rationale for outsourcing its clinic
operations is reasonable, it wanted to focus on the core business of gum
manufacturing, and clinic operations is not an integral part of it.
Moreover, Mejila failed to prove WPI's malicious intent in implementing the
redundancy program. Her evidence was largely hearsay and speculative,
while WPI's past actions demonstrated a non-discriminatory approach in its
Headcount Optimization Program, having terminated at least 10 other
employees before Mejila. While the company must justify employee
dismissals for redundancy, the employee accusing bad faith bears the burden
of proving it with clear and convincing evidence, as bad faith cannot be
presumed.
2. No. In executing a redundancy program, Article 298 mandates employers to
issue a written notice to affected employees and the Department of Labor
and Employment (DOLE) at least one month before the intended termination.
The Court of Appeals (CA) initially deemed Mejila's termination notice invalid
for causing immediate severance, but upon WPI's motion for reconsideration,
it upheld that the notice didn't prompt immediate severance, maintaining its
invalidity for lack of DOLE notice.
The court discussed the concept of "garden leave," wherein the employee
might be given no work or limited duties, or be required to be available
21
during the notice period to, for example, assist with the completion of
work or ensure the smooth transition of work to their successor.
Otherwise, the employee is given no work and is directed to have no contact
with clients or continuing employees. During the period of garden leave,
employees continue to be paid their salary and any other contractual benefits
as if they were rendering their services to the employer. In a sense, the
employee remains employed for the period of the leave but is expected to do
no work; he could, then, "stay home and tend the garden."
This setup offers employers the necessary protection, is equitable for
employees, and has received widespread acceptance and enforcement by
the courts in the United Kingdom. While this practice originated in the United
Kingdom, the Philippines does not prohibit garden leave clauses in
employment contracts, and it is commonly associated with the 30-day
notice period for authorized terminations.
The CA found WPI's notice to the DOLE Rizal Field Office insufficient,
emphasizing that compliance must be with the appropriate regional
office. The court ruled that WPI's failure to adhere to procedural
requirements warranted nominal damages of P50,000. WPI's argument of
substantial compliance was rejected, emphasizing strict adherence to
procedure. The court also concurred with WPI that attorney's fees were
unwarranted due to insufficient proof of bad faith, noting the CA's error in
awarding fees based on Article 111 of the Labor Code, which applies only to
unlawful withholding of wages.