Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 172161

March 2, 2011

SLL INTERNATIONAL CABLES SPECIALIST and SONNY L. LAGON, Petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, 4th DIVISION, ROLDAN LOPEZ, EDGARDO ZUIGA and
DANILO CAETE, Respondents.
DECISION
MENDOZA, J.:
Assailed in this petition for review on certiorari are the January 11, 2006 Decision 1 and the March 31, 2006
Resolution2 of the Court of Appeals (CA), in CA-G.R. SP No. 00598 which affirmed with modification the March
31, 2004 Decision3 and December 15, 2004 Resolution4 of the National Labor Relations
Commission (NLRC). The NLRC Decision found the petitioners, SLL International Cables Specialist (SLL) and
its manager, Sonny L. Lagon(petitioners), not liable for the illegal dismissal of Roldan Lopez, Danilo Caete
and Edgardo Zuiga (private respondents) but held them jointly and severally liable for payment of certain
monetary claims to said respondents.
A chronicle of the factual antecedents has been succinctly summarized by the CA as follows:
Sometime in 1996, and January 1997, private respondents Roldan Lopez (Lopez for brevity) and Danilo
Caete (Caete for brevity), and Edgardo Zuiga (Zuiga for brevity) respectively, were hired by petitioner
Lagon as apprentice or trainee cable/lineman. The three were paid the full minimum wage and other benefits
but since they were only trainees, they did not report for work regularly but came in as substitutes to the regular
workers or in undertakings that needed extra workers to expedite completion of work. After their training,
Zuiga, Caete and Lopez were engaged as project employees by the petitioners in their Islacom project in
Bohol. Private respondents started on March 15, 1997 until December 1997. Upon the completion of their
project, their employment was also terminated. Private respondents received the amount of P145.00, the
minimum prescribed daily wage for Region VII. In July 1997, the amount of P145 was increased to P150.00 by
the Regional Wage Board (RWB) and in October of the same year, the latter was increased to P155.00.
Sometime in March 1998, Zuiga and Caete were engaged again by Lagon as project employees for its PLDT
Antipolo, Rizal project, which ended sometime in (sic) the late September 1998. As a consequence, Zuiga and
Caetes employment was terminated. For this project, Zuiga and Caete received only the wage of P145.00
daily. The minimum prescribed wage for Rizal at that time was P160.00.
Sometime in late November 1998, private respondents re-applied in the Racitelcom project of Lagon in
Bulacan. Zuiga and Caete were re-employed. Lopez was also hired for the said specific project. For this,
private respondents received the wage of P145.00. Again, after the completion of their project in March 1999,
private respondents went home to Cebu City.
On May 21, 1999, private respondents for the 4th time worked with Lagons project in Camarin, Caloocan City
with Furukawa Corporation as the general contractor. Their contract would expire on February 28, 2000, the
period of completion of the project. From May 21, 1997-December 1999, private respondents received the

wage ofP145.00. At this time, the minimum prescribed rate for Manila was P198.00. In January to February 28,
the three received the wage of P165.00. The existing rate at that time was P213.00.
For reasons of delay on the delivery of imported materials from Furukawa Corporation, the Camarin project
was not completed on the scheduled date of completion. Face[d] with economic problem[s], Lagon was
constrained to cut down the overtime work of its worker[s][,] including private respondents. Thus, when
requested by private respondents on February 28, 2000 to work overtime, Lagon refused and told private
respondents that if they insist, they would have to go home at their own expense and that they would not be
given anymore time nor allowed to stay in the quarters. This prompted private respondents to leave their work
and went home to Cebu. On March 3, 2000, private respondents filed a complaint for illegal dismissal, nonpayment of wages, holiday pay, 13th month pay for 1997 and 1998 and service incentive leave pay as well as
damages and attorneys fees.
In their answers, petitioners admit employment of private respondents but claimed that the latter were only
project employees[,] for their services were merely engaged for a specific project or undertaking and the same
were covered by contracts duly signed by private respondents. Petitioners further alleged that the food
allowance ofP63.00 per day as well as private respondents allowance for lodging house, transportation,
electricity, water and snacks allowance should be added to their basic pay. With these, petitioners claimed that
private respondents received higher wage rate than that prescribed in Rizal and Manila.
Lastly, petitioners alleged that since the workplaces of private respondents were all in Manila, the complaint
should be filed there. Thus, petitioners prayed for the dismissal of the complaint for lack of jurisdiction and utter
lack of merit. (Citations omitted.)
On January 18, 2001, Labor Arbiter Reynoso Belarmino (LA) rendered his decision5 declaring that his office
had jurisdiction to hear and decide the complaint filed by private respondents. Referring to Rule IV, Sec. 1 (a) of
the NLRC Rules of Procedure prevailing at that time, 6 the LA ruled that it had jurisdiction because the
"workplace," as defined in the said rule, included the place where the employee was supposed to report back
after a temporary detail, assignment or travel, which in this case was Cebu.
As to the status of their employment, the LA opined that private respondents were regular employees because
they were repeatedly hired by petitioners and they performed activities which were usual, necessary and
desirable in the business or trade of the employer.
With regard to the underpayment of wages, the LA found that private respondents were underpaid. It ruled that
the free board and lodging, electricity, water, and food enjoyed by them could not be included in the
computation of their wages because these were given without their written consent.
The LA, however, found that petitioners were not liable for illegal dismissal. The LA viewed private respondents
act of going home as an act of indifference when petitioners decided to prohibit overtime work. 7
In its March 31, 2004 Decision, the NLRC affirmed the findings of the LA. In addition, the NLRC noted that not
a single report of project completion was filed with the nearest Public Employment Office as required
by the Department of Labor and Employment (DOLE) Department Order No. 19, Series of 1993. 8 The NLRC
later denied9 the motion for reconsideration10 subsequently filed by petitioners.
When the matter was elevated to the CA on a petition for certiorari, it affirmed the findings that the private
respondents were regular employees. It considered the fact that they performed functions which were the
regular and usual business of petitioners. According to the CA, they were clearly members of a work pool from
which petitioners drew their project employees.

The CA also stated that the failure of petitioners to comply with the simple but compulsory requirement to
submit a report of termination to the nearest Public Employment Office every time private respondents
employment was terminated was proof that the latter were not project employees but regular employees.
The CA likewise found that the private respondents were underpaid. It ruled that the board and lodging,
electricity, water, and food enjoyed by the private respondents could not be included in the computation of their
wages because these were given without their written consent. The CA added that the private respondents
were entitled to 13th month pay.
The CA also agreed with the NLRC that there was no illegal dismissal. The CA opined that it was the
petitioners prerogative to grant or deny any request for overtime work and that the private respondents act of
leaving the workplace after their request was denied was an act of abandonment.
In modifying the decision of the labor tribunal, however, the CA noted that respondent Roldan Lopez did not
work in the Antipolo project and, thus, was not entitled to wage differentials. Also, in computing the differentials
for the period January and February 2000, the CA disagreed in the award of differentials based on the
minimum daily wage of P223.00, as the prevailing minimum daily wage then was only P213.00. Petitioners
sought reconsideration but the CA denied it in its March 31, 2006 Resolution. 11
In this petition for review on certiorari,12 petitioners seek the reversal and setting aside of the CA decision
anchored on this lone:
GROUND/ASSIGNMENT OF ERROR
THE PUBLIC RESPONDENT NLRC COMMITTED A SERIOUS ERROR IN LAW IN AWARDING WAGE
DIFFERENTIALS TO THE PRIVATE COMPLAINANTS ON THE BASES OF MERE TECHNICALITIES, THAT
IS, FOR LACK OF WRITTEN CONFORMITY x x x AND LACK OF NOTICE TO THE DEPARTMENT OF
LABOR AND EMPLOYMENT (DOLE)[,] AND THUS, THE COURT OF APPEALS GRAVELY ERRED IN
AFFIRMING WITH MODIFICATION THE NLRC DECISION IN THE LIGHT OF THE RULING IN THE CASE
OF JENNY M. AGABON and VIRGILIO AGABON vs, NLRC, ET AL., GR NO. 158963, NOVEMBER 17, 2004,
442 SCRA 573, [AND SUBSEQUENTLY IN THE CASE OF GLAXO WELLCOME PHILIPPINES, INC.
VS. NAGAKAKAISANG EMPLEYADO NG WELLCOME-DFA (NEW DFA), ET AL., GR NO. 149349, 11
MARCH 2005], WHICH FINDS APPLICATION IN THE INSTANT CASE BY ANALOGY.13
Petitioners reiterated their position that the value of the facilities that the private respondents enjoyed should be
included in the computation of the "wages" received by them. They argued that the rulings in Agabon v.
NLRC14and Glaxo Wellcome Philippines, Inc. v. Nagkakaisang Empleyado Ng Wellcome-DFA15 should be
applied by analogy, in the sense that the lack of written acceptance of the employees of the facilities enjoyed by
them should not mean that the value of the facilities could not be included in the computation of the private
respondents "wages."
On November 29, 2006, the Court resolved to issue a Temporary Restraining Order (TRO) enjoining the public
respondent from enforcing the NLRC and CA decisions until further orders from the Court.
After a thorough review of the records, however, the Court finds no merit in the petition.
This petition generally involves factual issues, such as, whether or not there is evidence on record to support
the findings of the LA, the NLRC and the CA that private respondents were project or regular employees and
that their salary differentials had been paid. This calls for a re-examination of the evidence, which the Court
cannot entertain. Settled is the rule that factual findings of labor officials, who are deemed to have acquired

expertise in matters within their respective jurisdiction, are generally accorded not only respect but even finality,
and bind the Court when supported by substantial evidence. It is not the Courts function to assess and
evaluate the evidence
all over again, particularly where the findings of both the Labor tribunals and the CA concur.

16

As a general rule, on payment of wages, a party who alleges payment as a defense has the burden of proving
it.17Specifically with respect to labor cases, the burden of proving payment of monetary claims rests on the
employer, the rationale being that the pertinent personnel files, payrolls, records, remittances and other similar
documents which will show that overtime, differentials, service incentive leave and other claims of workers
have been paid are not in the possession of the worker but in the custody and absolute control of the
employer.18
In this case, petitioners, aside from bare allegations that private respondents received wages higher than the
prescribed minimum, failed to present any evidence, such as payroll or payslips, to support their defense of
payment. Thus, petitioners utterly failed to discharge the onus probandi.
Private respondents, on the other hand, are entitled to be paid the minimum wage, whether they are regular or
non-regular employees.
Section 3, Rule VII of the Rules to Implement the Labor Code 19 specifically enumerates those who are not
covered by the payment of minimum wage. Project employees are not among them.
On whether the value of the facilities should be included in the computation of the "wages" received by private
respondents, Section 1 of DOLE Memorandum Circular No. 2 provides that an employer may provide
subsidized meals and snacks to his employees provided that the subsidy shall not be less that 30% of the fair
and reasonable value of such facilities. In such cases, the employer may deduct from the wages of the
employees not more than 70% of the value of the meals and snacks enjoyed by the latter, provided that such
deduction is with the written authorization of the employees concerned.
Moreover, before the value of facilities can be deducted from the employees wages, the following requisites
must all be attendant: first, proof must be shown that such facilities are customarily furnished by the trade;
second, the provision of deductible facilities must be voluntarily accepted in writing by the employee;
and finally, facilities must be charged at reasonable value.20 Mere availment is not sufficient to allow deductions
from employees wages.21
These requirements, however, have not been met in this case. SLL failed to present any company policy or
guideline showing that provisions for meals and lodging were part of the employees salaries. It also failed to
provide proof of the employees written authorization, much less show how they arrived at their valuations. At
any rate, it is not even clear whether private respondents actually enjoyed said facilities.
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.,22 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.23 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.
1avvphi1

For said reason, the cases of Agabon and Glaxo are inapplicable in this case. At any rate, these were cases of
dismissal with just and authorized causes. The present case involves the matter of the failure of the petitioners
to comply with the payment of the prescribed minimum wage.
The Court sustains the deletion of the award of differentials with respect to respondent Roldan Lopez. As
correctly pointed out by the CA, he did not work for the project in Antipolo.
WHEREFORE, the petition is DENIED. The temporary restraining order issued by the Court on November 29,
2006 is deemed, as it is hereby ordered, DISSOLVED.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-44169 December 3, 1985
ROSARIO A. GAA, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, EUROPHIL INDUSTRIES CORPORATION, and CESAR R.
ROXAS, Deputy Sheriff of Manila, respondents.
Federico C. Alikpala and Federico Y. Alikpala, Jr. for petitioner.
Borbe and Palma for private respondent.

PATAJO, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals promulgated on March 30,
1976, affirming the decision of the Court of First Instance of Manila.
It appears that respondent Europhil Industries Corporation was formerly one of the tenants in Trinity Building at
T.M. Kalaw Street, Manila, while petitioner Rosario A. Gaa was then the building administrator. On December
12, 1973, Europhil Industries commenced an action (Civil Case No. 92744) in the Court of First Instance of
Manila for damages against petitioner "for having perpetrated certain acts that Europhil Industries considered a
trespass upon its rights, namely, cutting of its electricity, and removing its name from the building directory and
gate passes of its officials and employees" (p. 87 Rollo). On June 28, 1974, said court rendered judgment in

favor of respondent Europhil Industries, ordering petitioner to pay the former the sum of P10,000.00 as actual
damages, P5,000.00 as moral damages, P5,000.00 as exemplary damages and to pay the costs.
The said decision having become final and executory, a writ of garnishment was issued pursuant to which
Deputy Sheriff Cesar A. Roxas on August 1, 1975 served a Notice of Garnishment upon El Grande Hotel,
where petitioner was then employed, garnishing her "salary, commission and/or remuneration." Petitioner then
filed with the Court of First Instance of Manila a motion to lift said garnishment on the ground that her "salaries,
commission and, or remuneration are exempted from execution under Article 1708 of the New Civil Code. Said
motion was denied by the lower Court in an order dated November 7, 1975. A motion for reconsideration of said
order was likewise denied, and on January 26, 1976 petitioner filed with the Court of Appeals a petition for
certiorari against filed with the Court of Appeals a petition for certiorari against said order of November 7, 1975.
On March 30, 1976, the Court of Appeals dismissed the petition for certiorari. In dismissing the petition, the
Court of Appeals held that petitioner is not a mere laborer as contemplated under Article 1708 as the term
laborer does not apply to one who holds a managerial or supervisory position like that of petitioner, but only to
those "laborers occupying the lower strata." It also held that the term "wages" means the pay given" as hire or
reward to artisans, mechanics, domestics or menial servants, and laborers employed in manufactories,
agriculture, mines, and other manual occupation and usually employed to distinguish the sums paid to persons
hired to perform manual labor, skilled or unskilled, paid at stated times, and measured by the day, week, month,
or season," citing 67 C.J. 285, which is the ordinary acceptation of the said term, and that "wages" in Spanish is
"jornal" and one who receives a wage is a "jornalero."
In the present petition for review on certiorari of the aforesaid decision of the Court of Appeals, petitioner
questions the correctness of the interpretation of the then Court of Appeals of Article 1708 of the New Civil
Code which reads as follows:
ART. 1708. The laborer's wage shall not be subject to execution or attachment, except for
debts incurred for food, shelter, clothing and medical attendance.
It is beyond dispute that petitioner is not an ordinary or rank and file laborer but "a responsibly place
employee," of El Grande Hotel, "responsible for planning, directing, controlling, and coordinating the activities
of all housekeeping personnel" (p. 95, Rollo) so as to ensure the cleanliness, maintenance and orderliness of
all guest rooms, function rooms, public areas, and the surroundings of the hotel. Considering the importance of
petitioner's function in El Grande Hotel, it is undeniable that petitioner is occupying a position equivalent to that
of a managerial or supervisory position.
In its broadest sense, the word "laborer" includes everyone who performs any kind of mental or physical labor,
but as commonly and customarily used and understood, it only applies to one engaged in some form of manual
or physical labor. That is the sense in which the courts generally apply the term as applied in exemption acts,
since persons of that class usually look to the reward of a day's labor for immediate or present support and so
are more in need of the exemption than are other. (22 Am. Jur. 22 citing Briscoe vs. Montgomery, 93 Ga 602,
20 SE 40;Miller vs. Dugas, 77 Ga 4 Am St Rep 192; State ex rel I.X.L. Grocery vs. Land, 108 La 512, 32 So
433; Wildner vs. Ferguson, 42 Minn 112, 43 NW 793; 6 LRA 338; Anno 102 Am St Rep. 84.
In Oliver vs. Macon Hardware Co., 98 Ga 249 SE 403, it was held that in determining whether a particular
laborer or employee is really a "laborer," the character of the word he does must be taken into consideration.
He must be classified not according to the arbitrary designation given to his calling, but with reference to the
character of the service required of him by his employer.
In Wildner vs. Ferguson, 42 Minn 112, 43 NW 793, the Court also held that all men who earn compensation by
labor or work of any kind, whether of the head or hands, including judges, laywers, bankers, merchants, officers
of corporations, and the like, are in some sense "laboring men." But they are not "laboring men" in the popular
sense of the term, when used to refer to a must presume, the legislature used the term. The Court further held
in said case:

There are many cases holding that contractors, consulting or assistant engineers, agents,
superintendents, secretaries of corporations and livery stable keepers, do not come within the
meaning of the term. (Powell v. Eldred, 39 Mich, 554, Atkin v. Wasson, 25 N.Y. 482; Short v.
Medberry, 29 Hun. 39; Dean v. De Wolf, 16 Hun. 186; Krausen v. Buckel, 17 Hun.
463; Ericson v. Brown, 39 Barb. 390; Coffin v. Reynolds, 37 N.Y. 640; Brusie v. Griffith, 34 Cal.
306; Dave v. Nunan,62 Cal. 400).
Thus, in Jones vs. Avery, 50 Mich, 326, 15 N.W. Rep. 494, it was held that a traveling salesman, selling by
sample, did not come within the meaning of a constitutional provision making stockholders of a corporation
liable for "labor debts" of the corporation.
In Kline vs. Russell 113 Ga. 1085, 39 SE 477, citing Oliver vs. Macon Hardware Co., supra, it was held that a
laborer, within the statute exempting from garnishment the wages of a "laborer," is one whose work depends on
mere physical power to perform ordinary manual labor, and not one engaged in services consisting mainly of
work requiring mental skill or business capacity, and involving the exercise of intellectual faculties.
So, also in Wakefield vs. Fargo, 90 N.Y. 213, the Court, in construing an act making stockholders in a
corporation liable for debts due "laborers, servants and apprentices" for services performed for the corporation,
held that a "laborer" is one who performs menial or manual services and usually looks to the reward of a day's
labor or services for immediate or present support. And in Weymouth vs. Sanborn, 43 N.H. 173, 80 Am. Dec.
144, it was held that "laborer" is a term ordinarily employed to denote one who subsists by physical toil in
contradistinction to those who subsists by professional skill. And in Consolidated Tank Line Co. vs. Hunt, 83
Iowa, 6, 32 Am. St. Rep. 285, 43 N.W. 1057, 12 L.R.A. 476, it was stated that "laborers" are those persons who
earn a livelihood by their own manual labor.
Article 1708 used the word "wages" and not "salary" in relation to "laborer" when it declared what are to be
exempted from attachment and execution. The term "wages" as distinguished from "salary", applies to the
compensation for manual labor, skilled or unskilled, paid at stated times, and measured by the day, week,
month, or season, while "salary" denotes a higher degree of employment, or a superior grade of services, and
implies a position of office: by contrast, the term wages " indicates considerable pay for a lower and less
responsible character of employment, while "salary" is suggestive of a larger and more important service (35
Am. Jur. 496).
The distinction between wages and salary was adverted to in Bell vs. Indian Livestock Co. (Tex. Sup.), 11 S.W.
344, wherein it was said: "'Wages' are the compensation given to a hired person for service, and the same is
true of 'salary'. The words seem to be synonymous, convertible terms, though we believe that use and general
acceptation have given to the word 'salary' a significance somewhat different from the word 'wages' in this: that
the former is understood to relate to position of office, to be the compensation given for official or other service,
as distinguished from 'wages', the compensation for labor." Annotation 102 Am. St. Rep. 81, 95.
We do not think that the legislature intended the exemption in Article 1708 of the New Civil Code to operate in
favor of any but those who are laboring men or women in the sense that their work is manual. Persons
belonging to this class usually look to the reward of a day's labor for immediate or present support, and such
persons are more in need of the exemption than any others. Petitioner Rosario A. Gaa is definitely not within
that class.
We find, therefore, and so hold that the Trial Court did not err in denying in its order of November 7, 1975 the
motion of petitioner to lift the notice of garnishment against her salaries, commission and other remuneration
from El Grande Hotel since said salaries, Commission and other remuneration due her from the El Grande
Hotel do not constitute wages due a laborer which, under Article 1708 of the Civil Code, are not subject to
execution or attachment.
IN VIEW OF THE FOREGOING, We find the present petition to be without merit and hereby AFFIRM the
decision of the Court of Appeals, with costs against petitioner.
SO ORDERED.

Teehankee (Chairman), Plana, Gutierrez, Jr. and De la Fuente, JJ., concur.

Melencio-Herrera (Chairperson) and Relova, JJ., is on leave.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-50999 March 23, 1990
JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners,
vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER FLAVIO AGUAS, and
F.E. ZUELLIG (M), INC., respondents.
Raul E. Espinosa for petitioners.
Lucas Emmanuel B. Canilao for petitioner A. Manuel.
Atienza, Tabora, Del Rosario & Castillo for private respondent.

MEDIALDEA, J.:
This is a petition for certiorari seeking to modify the decision of the National Labor Relations Commission in
NLRC Case No. RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres, Complainants-Appellants, v.

F.E. Zuellig (M), Inc., Respondent-Appellee" and NLRC Case No. RN- IV-20855-78-T entitled, "Amancio
Manuel, Complainant-Appellant, v. F.E. Zuellig (M), Inc., Respondent-Appellee," which dismissed the appeal of
petitioners herein and in effect affirmed the decision of the Labor Arbiter ordering private respondent to pay
petitioners separation pay equivalent to their one month salary (exclusive of commissions, allowances, etc.) for
every year of service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with the Department of Labor
(Regional Office No. 4) an application seeking clearance to terminate the services of petitioners Jose Songco,
Romeo Cipres, and Amancio Manuel (hereinafter referred to as petitioners) allegedly on the ground of
retrenchment due to financial losses. This application was seasonably opposed by petitioners alleging that the
company is not suffering from any losses. They alleged further that they are being dismissed because of their
membership in the union. At the last hearing of the case, however, petitioners manifested that they are no
longer contesting their dismissal. The parties then agreed that the sole issue to be resolved is the basis of the
separation pay due to petitioners. Petitioners, who were in the sales force of Zuellig received monthly salaries
of at least P40,000. In addition, they received commissions for every sale they made.
The collective Bargaining Agreement entered into between Zuellig and F.E. Zuellig Employees Association, of
which petitioners are members, contains the following provision (p. 71, Rollo):
ARTICLE XIV Retirement Gratuity
Section l(a)-Any employee, who is separated from employment due to old age, sickness,
death or permanent lay-off not due to the fault of said employee shall receive from the
company a retirement gratuity in an amount equivalent to one (1) month's salary per year of
service. One month of salary as used in this paragraph shall be deemed equivalent to
the salary at date of retirement; years of service shall be deemed equivalent to total service
credits, a fraction of at least six months being considered one year, including probationary
employment. (Emphasis supplied)
On the other hand, Article 284 of the Labor Code then prevailing provides:
Art. 284. Reduction of personnel. The termination of employment of any employee due to
the installation of labor saving-devices, redundancy, retrenchment to prevent losses, and other
similar causes, shall entitle the employee affected thereby to separation pay. In case of
termination due to the installation of labor-saving devices or redundancy, the separation pay
shall be equivalent to one (1) month pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent losses and other similar
causes, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year. (Emphasis supplied)
In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the Labor Code provide:
xxx
Sec. 9(b). Where the termination of employment is due to retrechment initiated by the
employer to prevent losses or other similar causes, or where the employee suffers from a
disease and his continued employment is prohibited by law or is prejudicial to his health or to

the health of his co-employees, the employee shall be entitled to termination pay equivalent at
least to his one month salary, or to one-half month pay for every year of service, whichever is
higher, a fraction of at least six (6) months being considered as one whole year.
xxx
Sec. 10. Basis of termination pay. The computation of the termination pay of an employee
as provided herein shall be based on his latest salary rate, unless the same was reduced by
the employer to defeat the intention of the Code, in which case the basis of computation shall
be the rate before its deduction. (Emphasis supplied)
On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of which reads (p. 78, Rollo):
RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby, ordered to pay
the complainants separation pay equivalent to their one month salary (exclusive of
commissions, allowances, etc.) for every year of service that they have worked with the
company.
SO ORDERED.
The appeal by petitioners to the National Labor Relations Commission was dismissed for lack of merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified "Notice of Voluntary Abandonment and Withdrawal of Petition
dated April 7, 1980 filed by petitioner Romeo Cipres, based on the ground that he wants "to abide by the
decision appealed from" since he had "received, to his full and complete satisfaction, his separation pay,"
resolved to dismiss the petition as to him.
The issue is whether or not earned sales commissions and allowances should be included in the monthly
salary of petitioners for the purpose of computation of their separation pay.
The petition is impressed with merit.
Petitioners' position was that in arriving at the correct and legal amount of separation pay due them, whether
under the Labor Code or the CBA, their basic salary, earned sales commissions and allowances should be
added together. They cited Article 97(f) of the Labor Code which includes commission as part on one's salary,
to wit;
(f) 'Wage' paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or ascertained on a
time, task, piece, or commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten contract of employment
for work done or to be done, or for services rendered or to be rendered, and includes the fair
and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the employee. 'Fair reasonable value' shall
not include any profit to the employer or to any person affiliated with the employer.
Zuellig argues that if it were really the intention of the Labor Code as well as its implementing rules to include
commission in the computation of separation pay, it could have explicitly said so in clear and unequivocal

terms. Furthermore, in the definition of the term "wage", "commission" is used only as one of the features or
designations attached to the word remuneration or earnings.
Insofar as the issue of whether or not allowances should be included in the monthly salary of petitioners for the
purpose of computation of their separation pay is concerned, this has been settled in the case of Santos v.
NLRC, et al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where We ruled that "in the computation of
backwages and separation pay, account must be taken not only of the basic salary of petitioner but also of her
transportation and emergency living allowances." This ruling was reiterated in Soriano v. NLRC, et al., G.R. No.
75510, October 27, 1987, 155 SCRA 124 and recently, in Planters Products, Inc. v. NLRC, et al., G.R. No.
78524, January 20, 1989.
We shall concern ourselves now with the issue of whether or not earned sales commission should be included
in the monthly salary of petitioner for the purpose of computation of their separation pay.
Article 97(f) by itself is explicit that commission is included in the definition of the term "wage". It has been
repeatedly declared by the courts that where the law speaks in clear and categorical language, there is no
room for interpretation or construction; there is only room for application (Cebu Portland Cement Co. v.
Municipality of Naga, G.R. Nos. 24116-17, August 22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals,
G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A plain and unambiguous statute speaks for itself, and any
attempt to make it clearer is vain labor and tends only to obscurity. How ever, it may be argued that if We
correlate Article 97(f) with Article XIV of the Collective Bargaining Agreement, Article 284 of the Labor Code and
Sections 9(b) and 10 of the Implementing Rules, there appears to be an ambiguity. In this regard, the Labor
Arbiter rationalized his decision in this manner (pp. 74-76, Rollo):
The definition of 'wage' provided in Article 96 (sic) of the Code can be correctly be (sic) stated
as a general definition. It is 'wage ' in its generic sense. A careful perusal of the same does not
show any indication that commission is part of salary. We can say that commission by itself
may be considered a wage. This is not something novel for it cannot be gainsaid that certain
types of employees like agents, field personnel and salesmen do not earn any regular daily,
weekly or monthly salaries, but rely mainly on commission earned.
Upon the other hand, the provisions of Section 10, Rule 1, Book VI of the implementing rules
in conjunction with Articles 273 and 274 (sic) of the Code specifically states that the basis of
the termination pay due to one who is sought to be legally separated from the service is 'his
latest salary rates.
x x x.
Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly salary'.
The above terms found in those Articles and the particular Rules were intentionally used to
express the intent of the framers of the law that for purposes of separation pay they mean to
be specifically referring to salary only.
.... Each particular benefit provided in the Code and other Decrees on Labor has its own
pecularities and nuances and should be interpreted in that light. Thus, for a specific provision,
a specific meaning is attached to simplify matters that may arise there from. The general
guidelines in (sic) the formation of specific rules for particular purpose. Thus, that what should
be controlling in matters concerning termination pay should be the specific provisions of both
Book VI of the Code and the Rules. At any rate, settled is the rule that in matters of conflict

between the general provision of law and that of a particular- or specific provision, the latter
should prevail.
On its part, the NLRC ruled (p. 110, Rollo):
From the aforequoted provisions of the law and the implementing rules, it could be deduced
that wage is used in its generic sense and obviously refers to the basic wage rate to be
ascertained on a time, task, piece or commission basis or other method of calculating the
same. It does not, however, mean that commission, allowances or analogous income
necessarily forms part of the employee's salary because to do so would lead to anomalies
(sic), if not absurd, construction of the word "salary." For what will prevent the employee from
insisting that emergency living allowance, 13th month pay, overtime, and premium pay, and
other fringe benefits should be added to the computation of their separation pay. This
situation, to our mind, is not the real intent of the Code and its rules.
We rule otherwise. The ambiguity between Article 97(f), which defines the term 'wage' and Article XIV of the
Collective Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the Implementing
Rules, which mention the terms "pay" and "salary", is more apparent than real. Broadly, the word "salary"
means a recompense or consideration made to a person for his pains or industry in another man's business.
Whether it be derived from "salarium," or more fancifully from "sal," the pay of the Roman soldier, it carries with
it the fundamental idea of compensation for services rendered. Indeed, there is eminent authority for holding
that the words "wages" and "salary" are in essence synonymous (Words and Phrases, Vol. 38 Permanent
Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S. 839,841,89 App. Div. 481; 38 Am. Jur. 496). "Salary," the
etymology of which is the Latin word "salarium," is often used interchangeably with "wage", the etymology of
which is the Middle English word "wagen". Both words generally refer to one and the same meaning, that is, a
reward or recompense for services performed. Likewise, "pay" is the synonym of "wages" and "salary" (Black's
Law Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and "salary" have the same meaning, and
commission is included in the definition of "wage", the logical conclusion, therefore, is, in the computation of the
separation pay of petitioners, their salary base should include also their earned sales commissions.
The aforequoted provisions are not the only consideration for deciding the petition in favor of the petitioners.
We agree with the Solicitor General that granting, in gratia argumenti, that the commissions were in the form of
incentives or encouragement, so that the petitioners would be inspired to put a little more industry on the jobs
particularly assigned to them, still these commissions are direct remuneration services rendered which
contributed to the increase of income of Zuellig . Commission is the recompense, compensation or reward of
an agent, salesman, executor, trustees, receiver, factor, broker or bailee, when the same is calculated as a
percentage on the amount of his transactions or on the profit to the principal (Black's Law Dictionary, 5th Ed.,
citing Weiner v. Swales, 217 Md. 123, 141 A.2d 749, 750). The nature of the work of a salesman and the
reason for such type of remuneration for services rendered demonstrate clearly that commission are part of
petitioners' wage or salary. We take judicial notice of the fact that some salesmen do not receive any basic
salary but depend on commissions and allowances or commissions alone, are part of petitioners' wage or
salary. We take judicial notice of the fact that some salesman do not received any basic salary but depend on
commissions and allowances or commissions alone, although an employer-employee relationship exists.
Bearing in mind the preceeding dicussions, if we adopt the opposite view that commissions, do not form part of
wage or salary, then, in effect, We will be saying that this kind of salesmen do not receive any salary and
therefore, not entitled to separation pay in the event of discharge from employment. Will this not be absurd?
This narrow interpretation is not in accord with the liberal spirit of our labor laws and considering the purpose of
separation pay which is, to alleviate the difficulties which confront a dismissed employee thrown the the streets
to face the harsh necessities of life.

Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base that should be used in
computing the separation pay, We held that:
The commissions also claimed by petitioner ('override commission' plus 'net deposit
incentive') are not properly includible in such base figure since such commissions must be
earned by actual market transactions attributable to petitioner.
Applying this by analogy, since the commissions in the present case were earned by actual market transactions
attributable to petitioners, these should be included in their separation pay. In the computation thereof, what
should be taken into account is the average commissions earned during their last year of employment.
The final consideration is, in carrying out and interpreting the Labor Code's provisions and its implementing
regulations, the workingman's welfare should be the primordial and paramount consideration. This kind of
interpretation gives meaning and substance to the liberal and compassionate spirit of the law as provided for in
Article 4 of the Labor Code which states that "all doubts in the implementation and interpretation of the
provisions of the Labor Code including its implementing rules and regulations shall be resolved in favor of
labor" (Abella v. NLRC, G.R. No. 71812, July 30,1987,152 SCRA 140; Manila Electric Company v. NLRC, et al.,
G.R. No. 78763, July 12,1989), and Article 1702 of the Civil Code which provides that "in case of doubt, all
labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer.
ACCORDINGLY, the petition is hereby GRANTED. The decision of the respondent National Labor Relations
Commission is MODIFIED by including allowances and commissions in the separation pay of petitioners Jose
Songco and Amancio Manuel. The case is remanded to the Labor Arbiter for the proper computation of said
separation pay.
SO ORDERED.
Narvasa (Chairman), Cruz, Gancayco and Grio-Aquino, JJ., concur.

SECOND DIVISION
ZAYBER JOHN B. PROTACIO, G.R. No. 168654
Petitioner,
Present:
MARTINEZ,*
- versus - CORONA,**
TINGA,
Acting Chairperson,
VELASCO, JR., and
LAYA MANANGHAYA & CO. BRION, JJ.
and/or MARIO T. MANANGHAYA,
Respondents.
Promulgated:
March 25, 2009
x----------------------------------------------------------------------------x

DECISION
TINGA, J.:
Before the Court is a petition for review on certiorari [1] under Rule 45 of the 1997
Rules of Civil Procedure, assailing the decision[2]and resolution[3] of the Court of
Appeals in CA-G.R. SP No. 85038. The Court of Appeals decision reduced the
monetary award granted to petitioner by the National Labor Relations Commission
(NLRC) while the resolution denied petitioners motion for reconsideration for lack
of merit.
The following factual antecedents are matters of record.
Respondent KPMG Laya Mananghaya & Co. (respondent firm) is a general
professional partnership duly organized under the laws of the Philippines.
Respondent firm hired petitioner Zayber John B. Protacio as Tax Manager on 01
April 1996. He was subsequently promoted to the position of Senior Tax Manager.

On 01 October 1997, petitioner was again promoted to the position of Tax

Principal.[4]
However, on 30 August 1999, petitioner tendered his resignation effective 30
September 1999. Then, on 01 December 1999, petitioner sent a letter to respondent
firm demanding the immediate payment of his 13 th month pay, the cash
commutation of his leave credits and the issuance of his 1999 Certificate of Income
Tax Withheld on Compensation. Petitioner sent to respondent firm two more
demand letters for the payment of his reimbursement claims under pain of the legal
action.[5]
Respondent firm failed to act upon the demand letters. Thus, on 15
December 1999, petitioner filed before the NLRC a complaint for the non-issuance
of petitioners W-2 tax form for 1999 and the non-payment of the following
benefits: (1) cash equivalent of petitioners leave credits in the amount
of P55,467.60; (2) proportionate 13th month pay for the year 1999; (3)
reimbursement claims in the amount of P19,012.00; and (4) lump sum pay for the
fiscal year 1999 in the amount of P674,756.70. Petitioner also sought moral and
exemplary damages and attorneys fees. Respondent Mario T. Managhaya was also
impleaded in his official capacity as respondent firms managing partner.[6]
In his complaint,[7] petitioner averred, inter alia, that when he was promoted
to the position of Tax Principal in October 1997, his compensation package had
consisted of a monthly gross compensation of P60,000.00, a 13th month pay and a
lump sum payment for the year 1997 in the amount of P240,000.00 that was paid
to him on 08 February 1998.
According to petitioner, beginning 01 October 1998, his compensation
package was revised as follows: (a) monthly gross compensation of P95,000.00,
inclusive of nontaxable allowance; (b) 13th month pay; and (c) a lump sum amount
in addition to the aggregate monthly gross compensation. On 12 April 1999,
petitioner received the lump sum amount of P573,000.00 for the fiscal year ending
1998.[8]

Respondent firm denied it had intentionally delayed the processing of

petitioners claims but alleged that the abrupt departure of petitioner and three other
members of the firms Tax Division had created problems in the determination of
petitioners various accountabilities, which could be finished only by going over
voluminous documents. Respondents further averred that they had been taken
aback upon learning about the labor case filed by petitioner when all along they
had done their best to facilitate the processing of his claims.[9]
During the pendency of the case before the Labor Arbiter, respondent firm
on three occasions sent check payments to petitioner in the following amounts:
(1) P71,250.00, representing petitioners 13th month pay; (2) P54,824.18, as
payments for the cash equivalent of petitioners leave credits and reimbursement
claims; and (3) P10,762.57, for the refund of petitioners taxes withheld on his
vacation leave credits. Petitioners copies of his withholding tax certificates were
sent to him along with the check payments. [10]Petitioner acknowledged the receipt
of the 13th month pay but disputed the computation of the cash value of his
vacation leave credits and reimbursement claims.[11]

[12]

On 07 June 2002, Labor Arbiter Eduardo J. Carpio rendered a decision,

the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering respondents to
jointly and solidarily pay complainant the following:
P12,681.00 - representing the reimbursement claims of complainant;
P28,407.08 - representing the underpayment of the cash equivalent of the
unused leave credits of complainant;
P573,000.00 - representing complainants 1999 year-end lump sum
payment; and

10% of the total judgment awards way of attorneys fees.

SO ORDERED.[13]

The Labor Arbiter awarded petitioners reimbursement claims on the ground

that respondent firms refusal to grant the same was not so much because the claim
was baseless but because petitioner had failed to file the requisite reimbursement
forms. He held that the formal defect was cured when petitioner filed several
demand letters as well as the case before him.[14]
The Labor Arbiter held that petitioner was not fully paid of the cash
equivalent of the leave credits due him because respondent firm had erroneously
based the computation on a basic pay of P61,000.00. He held that the evidence
showed that petitioners monthly basic salary was P95,000.00 inclusive of the other
benefits that were deemed included and integrated in the basic salary and that
respondent firm had computed petitioners 13th month pay based on a monthly basic
pay of P95,000.00; thus, the cash commutation of the leave credits should also be
based on this figure.[15]
The Labor Arbiter also ruled that petitioner was entitled to a year-end
payment of P573,000.00 on the basis of the company policy of granting yearly
lump sum payments to petitioner during all the years of service and that respondent
firm had failed to give petitioner the same benefit for the year 1999 without any
explanation.[16]
Aggrieved, respondent firm appealed to the NLRC. On 21 August 2003, the
NLRC rendered a modified judgment,[17] the dispositive portion of which states:
WHEREFORE, the Decision dated June 7, 2002 is hereby Affirmed with
the modification that the complainant is only entitled to receiveP2,301.00 as
reimbursement claims. The award of P12,681.00 representing the reimbursement
claims of complainant is set aside for lack of basis.
SO ORDERED.[18]

From the amount of P12,681.00 awarded by the Labor Arbiter as payment

for the reimbursement claims, the NLRC lowered the same to P2,301.00

representing the amount which remained unpaid. [19] As regards the issues on the
lump sum payments and cash equivalent of the leave credits, the NLRC affirmed
the findings of the Labor Arbiter.
Respondents filed a motion for reconsideration[20] but the NLRC denied the
motion for lack of merit.[21] Hence, respondents elevated the matter to the Court of
Appeals via a petition for certiorari.[22]
In the assailed Decision dated 19 April 2005, the Court of Appeals further
reduced the total money award to petitioner, to wit:
WHEREFORE, in the light of the foregoing, the assailed resolution of
public respondent NLRC dated August 21, 2003 in NLRC NCR Case No. 30-1200927-99 (CA No. 032304-02) is hereby MODIFIED, ordering petitioner firm to
pay private respondent the following:
(1) P2,301.00 representing private respondents reimbursement claims;
(2) P9,802.83 representing the underpayment of the cash equivalent of
private respondents unused leave credits;
(3) P10,000.00 attorneys fees.
SO ORDERED.[23]

Petitioner sought reconsideration. In the assailed Resolution dated 27 June 2005,

the Court of Appeals denied petitioners motion for reconsideration for lack of
merit.
Hence, the instant petition, raising the following issues:
I.
WHETHER PUBLIC RESPONDENT COURT OF APPEALS SUMMARY
DENIAL OF PETITIONERS MOTION FOR RECONSIDERATION VIOLATES
THE
CONSTITUTIONAL
REQUIREMENT
THAT COURT DECISIONS MUST STATE THE LEGAL AND FACTUAL
BASIS [THEREOF].
II

WHETHER PUBLIC RESPONDENT COURT OF APPEALS COMMITTED

GRAVE ABUSE OF DISCRETION AND ACTED IN WANTON EXCESS OF
JURISDICTION
IN
TAKING
COGNIZANCE
OF
[RESPONDENTS] PETITION FOR CERTIORARI WHEN THE RESOLUTION
THEREOF HINGES ON MERE EVALUATION OF EVIDENCE.
III.
WHETHER PUBLIC RESPONDENT COURT OF APPEALS WANTONLY
ABUSED ITS DISCRETION IN EMPLOYING A LARGER DIVISOR TO
COMPUTE PETITIONERS DAILY SALARY RATE THEREBY DIMINISHING
HIS BENEFITS, IN [VIOLATION] OF THE LABOR CODE.
IV.
WHETHER PUBLIC RESPONDENT COURT OF APPEALS CAPRICIOUSLY
ABUSED ITS DISCRETION IN REVERSING THE [CONCURRING]
FINDINGS OF BOTH LABOR ARBITER AND NLRC ON THE
COMPENSABLE NATURE OF PETITIONERS YEAR END [LUMP] SUM
PLAY [sic] CLAIM.[24]

Before delving into the merits of the petition, the issues raised by petitioner
adverting to the Constitution must be addressed. Petitioner contends that the Court
of Appeals resolution which denied his motion for reconsideration violated Article
VIII, Section 14 of the Constitution, which states:
Section 14. No decision shall be rendered by any court without expressing
therein clearly and distinctly the facts and the law on which it is based.
No petition for review or motion for reconsideration of a decision of the
court shall be refused due course or denied without stating the legal basis therefor.

Obviously, the assailed resolution is not a decision within the meaning of the
Constitutional requirement. This mandate is applicable only in cases submitted for
decision, i.e., given due course and after filing of briefs or memoranda and/or other
pleadings, as the case may be.[25] The requirement is not applicable to a resolution
denying a motion for reconsideration of the decision. What is applicable is the
second paragraph of the above-quoted Constitutional provision referring to motion

for reconsideration of a decision of the court. The assailed resolution complied

with the requirement therein that a resolution denying a motion for reconsideration
should state the legal basis of the denial. It sufficiently explained that after reading
the pleadings filed by the parties, the appellate court did not find any cogent reason
to reverse itself.
Next, petitioner argues that the Court of Appeals erred in giving due course
to the petition for certiorari when the resolution thereof hinged on mere evaluation
of evidence. Petitioner opines that respondents failed to make its case in showing
that the Labor Arbiter and the NLRC had exercised their discretion in an arbitrary
and despotic manner.
As a general rule, in certiorari proceedings under Rule 65 of the Rules of
Court, the appellate court does not assess and weigh the sufficiency of evidence
upon which the Labor Arbiter and the NLRC based their conclusion. The query in
this proceeding is limited to the determination of whether or not the NLRC acted
without or in excess of its jurisdiction or with grave abuse of discretion in
rendering its decision. However, as an exception, the appellate court may examine
and measure the factual findings of the NLRC if the same are not supported by
substantial evidence.[26] The Court has not hesitated to affirm the appellate courts
reversals of the decisions of labor tribunals if they are not supported by substantial
evidence.[27]
The Court is not unaware that the appellate court had reexamined and
weighed the evidence on record in modifying the monetary award of the NLRC.
The Court of Appeals held that the amount of the year-end lump sum compensation
was not fully justified and supported by the evidence on record. The Court fully
agrees that the lump sum award of P573,000.00 to petitioner seemed to have been
plucked out of thin air. Noteworthy is the fact that in his position paper, petitioner
claimed that he was entitled to the amount of P674,756.70.[28] The variance
between the claim and the amount awarded, with the record bereft of any proof to
support either amount only shows that the appellate court was correct in holding
that the award was a mere speculation devoid of any factual basis. In the

exceptional circumstance as in the instant case, the Court finds no error in the
appellate courts review of the evidence on record.
After an assessment of the evidence on record, the Court of Appeals reversed
the findings of the NLRC and the Labor Arbiter with respect to the award of the
year-end lump sum pay and the cash value of petitioners leave credits. The
appellate court held that while the lump sum payment was in the nature of a
proportionate share in the firms annual income to which petitioner was entitled, the
payment thereof was contingent upon the financial position of the firm. According
to the Court of Appeals, since no evidence was adduced showing the net income of
the firm for fiscal year ending 1999 as well as petitioners corresponding share
therein, the amount awarded by the labor tribunals was a baseless speculation and
as such must be deleted.[29]

On the other hand, the NLRC affirmed the Labor Arbiters award of the lump
sum payment in the amount of P573,000.00 on the basis that the payment thereof
had become a company policy which could not be withdrawn arbitrarily.
Furthermore, the NLRC held that respondent firm had failed to controvert
petitioners claim that he was responsible for generating some P7,365,044.47 in
cash revenue during the fiscal year ending 1999.
The evidence on record establishes that aside from the basic monthly
compensation,[30] petitioner received a yearly lump sum amount during the first two
years[31] of his employment, with the payments made to him after the annual net
incomes of the firm had been determined. Thus, the amounts thereof varied and
were dependent on the firms cash position and financial performance. [32] In one of
the letters of respondent Mananghaya to petitioner, the amount was referred to as
petitioners share in the incentive compensation program.[33]

While the amount was drawn from the annual net income of the firm, the
distribution thereof to non-partners or employees of the firm was not, strictly
speaking, a profit-sharing arrangement between petitioner and respondent firm

contrary to the Court of Appeals finding. The payment thereof to non-partners of

the firm like herein petitioner was discretionary on the part of the chairman and
managing partner coming from their authority to fix the compensation of any
employee based on a share in the partnerships net income. [34] The distribution being
merely discretionary, the year-end lump sum payment may properly be considered
as a year-end bonus or incentive. Contrary to petitioners claim, the granting of the
year-end lump sum amount was precisely dependent on the firms net income;
hence, the same was payable only after the firms annual net income and cash
position were determined.
By definition, a bonus is a gratuity or act of liberality of the giver. It is
something given in addition to what is ordinarily received by or strictly due the
recipient.[35] A bonus is granted and paid to an employee for his industry and
loyalty which contributed to the success of the employers business and made
possible the realization of profits.[36] Generally, a bonus is not a demandable and
enforceable obligation. It is so only when it is made part of the wage or salary or
compensation. When considered as part of the compensation and therefore
demandable and enforceable, the amount is usually fixed. If the amount would be a
contingent one dependent upon the realization of the profits, the bonus is also not
demandable and enforceable.[37]
In the instant case, petitioners claim that the year-end lump sum represented
the balance of his total compensation package is incorrect. The fact remains that
the amounts paid to petitioner on the two occasions varied and were always
dependent upon the firms financial position.
Moreover, in Philippine Duplicators, Inc. v. NLRC,[38] the Court held that if
the bonus is paid only if profits are realized or a certain amount of productivity
achieved, it cannot be considered part of wages. If the desired goal of production is
not obtained, of the amount of actual work accomplished, the bonus does not
accrue.[39] Only when the employer promises and agrees to give without any
conditions imposed for its payment, such as success of business or greater
production or output, does the bonus become part of the wage.[40]

Petitioners assertion that he was responsible for generating revenues

amounting to more than P7 million remains a mereallegation in his pleadings. The
records are absolutely bereft of any supporting evidence to substantiate the
allegation.
The granting of a bonus is basically a management prerogative which cannot
be forced upon the employer who may not be obliged to assume the onerous
burden of granting bonuses or other benefits aside from the employees basic
salaries or wages.[41]Respondents had consistently maintained from the start that
petitioner was not entitled to the bonus as a matter of right. The payment of the
year-end lump sum bonus based upon the firms productivity or the individual
performance of its employees was well within respondent firms prerogative. Thus,
respondent firm was also justified in declining to give the bonus to petitioner on
account of the latters unsatisfactory performance.

Petitioner failed to present evidence refuting respondents allegation and

proof that they received a number of complaints from clients about petitioners poor
services. For purposes of determining whether or not petitioner was entitled to the
year-end lump sum bonus, respondents were not legally obliged to raise the issue
of substandard performance with petitioner, unlike what the Labor Arbiter had
suggested. Of course, if what was in question was petitioners continued
employment vis--vis the allegations of unsatisfactory performance, then respondent
firm was required under the law to give petitioner due process to explain his side
before instituting any disciplinary measure. However, in the instant case, the
granting of the year-end lump sum bonus was discretionary and conditional, thus,
petitioner may not question the basis for the granting of a mere privilege.
With regard to the computation of the cash equivalent of petitioners leave
credits, the Court of Appeals used a base figure ofP71,250.00 representing
petitioners monthly salary as opposed to P95,000.00 used by the Labor Arbiter and
NLRC. Meanwhile, respondents insist on a base figure of only P61,000.00, which
excludes the advance incentive pay of P15,000.00, transportationallowance

of P15,000.00 and representation allowance of P4,000.00, which petitioner

regularly received every month. Because of a lower base figure (representing the
monthly salary) used by the appellate court, the cash equivalent of petitioners leave
credits was lowered from P28,407.08 to P9,802.83.
The monthly compensation of P71,250.00 used as base figure by the Court
of Appeals is totally without basis. As correctly held by the Labor Arbiter and the
NLRC, the evidence on record reveals that petitioner was receiving a monthly
compensation ofP95,000.00 consisting of a basic salary of P61,000.00, advance
incentive pay of P15,000.00, transportation allowance of P15,000.00 and
representation allowance of P4,000.00. These amounts totaling P95,000.00 are all
deemed part of petitioners monthly compensation package and, therefore, should
be the basis in the cash commutation of the petitioners leave credits. These
allowances were customarily furnished by respondent firm and regularly received
by petitioner on top of the basic monthly pay of P61,000.00. Moreover, the Labor
Arbiter noted that respondent firms act of paying petitioner a 13 th month-pay at the
rate of P95,000.00 was an admission on its part that petitioners basic monthly
salary was P95,000.00

The Court of Appeals, Labor Arbiter and NLRC used a 30-working day
divisor instead of 26 days which petitioner insists. The Court of Appeals relied on
Section 2, Rule IV, Book III[42] of the implementing rules of the Labor Code in
using the 30-working day divisor. The provision essentially states that monthlypaid employees are presumed to be paid for all days in the month whether worked
or not.

The provision has long been nullified in Insular Bank of Asia and American
Employees Union (IBAAEU) v. Hon. Inciong,etc., et al.,[43] where the Court ruled
that the provision amended the Labor Codes provisions on holiday pay by
enlarging the scope of their exclusion.[44] In any case, the provision is inapplicable
to the instant case because it referred to the computation of holiday pay for
monthly-paid employees.

Petitioners claim that respondent firm used a 26-working day divisor is

supported by the evidence on record. In a letter addressed to

petitioner,[45] respondents counsel expressly admitted that respondent used a 26working day divisor. The Court is perplexed why the tribunals below used a 30-day
divisor when there was an express admission on respondents part that they used a
26-day divisor in the cash commutation of leave credits. Thus, with a monthly
compensation of P95,000.00 and using a 26-working day divisor,petitioners daily
rate is P3,653.85.[46] Based on this rate, petitioners cash equivalent of his leave
credits of 23.5 is P85,865.48.[47]Since petitioner has already received the
amount P46,009.67, a balance of P39,855.80 remains payable to petitioner.
WHEREFORE, the instant petition for review on certiorari is PARTLY
GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 85038
is AFFIRMED with the MODIFICATION that respondents are liable for the
underpayment of the cash equivalent of petitioners leave credits in the amount
of P39,855.80.
SO ORDERED.

DANTE O. TINGA Associate Justice

SECOND DIVISION

LEPANTO
INC.,

CERAMICS,

G.R. No. 180866

Petitioner,

Present:

- versus -

CARPIO, J.,
Chairperson,
BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.

LEPANTO
CERAMICS
EMPLOYEES
ASSOCIATION,
Respondent.

Promulgated:

March 2, 2010
x-------------------------------------------------- - - - - - - - - -x

DECISION

PEREZ, J.:

Before this Court is a Petition for Review on Certiorari under

Rule 45[1] of the 1997 Rules of Civil Procedure filed by petitioner
Lepanto Ceramics, Inc. (petitioner), assailing the: (1) Decision [2] of
the Court of Appeals, dated 5 April 2006, in CA-G.R. SP No. 78334
which
affirmed in
toto the
decision
of
the
Voluntary
[3]
Arbitrator granting the members of the respondent association a
Christmas Bonus in the amount of Three Thousand Pesos
(P3,000.00), or the balance of Two Thousand Four Hundred Pesos
(P2,400.00) for the year 2002, and the (2) Resolution [4] of the
same court dated 13 December 2007 denying Petitioners Motion
for Reconsideration.

The facts are:

Petitioner Lepanto Ceramics, Incorporated is a duly

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

Respondent Lepanto Ceramics Employees Association

(respondent Association) is a legitimate labor organization duly

registered with the Department of Labor and Employment. It is

the sole and exclusive bargaining agent in the establishment of
petitioner.[6]

In December 1998, petitioner gave a P3,000.00 bonus to its

employees, members of the respondent Association. [7]

Subsequently, in September 1999, petitioner and respondent

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

The text reads:

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

Section 1. EFFECTIVITY

This
agreement
shall
become
effective
on September 1, 1999 and shall remain in full force
and effect without change for a period of four (4)
years or up to August 31, 2004 except as to the
representation aspect which shall be effective for a

period of five (5) years. It shall bind each and every

employee in the bargaining unit including the
present and future officers of the Union.

In the succeeding years, 1999, 2000 and 2001, the bonus

was not in cash. Instead, petitioner gave each of the members of
respondent Association Tile Redemption Certificates equivalent
to P3,000.00.[9] The bonus for the year 2002 is the root of the
present dispute. Petitioner gave a year-end cash benefit of Six
Hundred Pesos (P600.00) and offered a cash advance to
interested employees equivalent to one (1) month salary payable
in one year.[10] The respondent Association objected to
the P600.00 cash benefit and argued that this was in violation of
the CBA it executed with the petitioner.

The parties failed to amicably settle the dispute. The

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

In support of its claim, respondent Association insisted that it has

been the traditional practice of the company to grant its members
Christmas bonuses during the end of the calendar year, each in
the amount of P3,000.00 as an expression of gratitude to the
employees for their participation in the companys continued
existence in the market. The bonus was either in cash or in the
form of company tiles. In 2002, in a speech during the Christmas
celebration, one of the companys top executives assured the
employees of said bonus. However, the Human Resources
Development Manager informed them that the traditional bonus
would not be given as the companys earnings were intended for

the payment of its bank loans. Respondent Association argued

that this was in violation of their CBA.

The petitioner averred that the complaint for nonpayment of

the 2002 Christmas bonus had no basis as the same was not a
demandable and enforceable obligation. It argued that the giving
of extra compensation was based on the companys available
resources for a given year and the workers are not entitled to a
bonus if the company does not make profits. Petitioner adverted
to the fact that it was debt-ridden having incurred net losses for
the years 2001 and 2002 totaling to P1.5 billion; and since 1999,
when the CBA was signed, the companys accumulated losses
amounted to over P2.7 billion. Petitioner further argued that the
grant of a one (1) month salary cash advance was not meant to
take the place of a bonus but was meant to show the companys
sincere desire to help its employees despite its precarious
financial condition. Petitioner also averred that the CBA provision
on a Christmas gift/bonus refers to alternative benefits. Finally,
petitioner emphasized that even if the CBA contained an
unconditional obligation to grant the bonus to the respondent
Association, the present difficult economic times had already
legally released it therefrom pursuant to Article 1267 of the Civil
Code.[11]

The Voluntary Arbitrator rendered a Decision dated 2 June

2003, declaring that petitioner is bound to grant each of its
workers a Christmas bonus of P3,000.00 for the reason that the
bonus was given prior to the effectivity of the CBA between the
parties and that the financial losses of the company is not a
sufficient reason to exempt it from granting the same. It stressed
that the CBA is a binding contract and constitutes the law
between the parties. The Voluntary Arbitrator further expounded
that since the employees had already been given P600.00 cash
bonus, the same should be deducted from the claimed amount
of P3,000.00, thus leaving a balance of P2,400.00. The dispositive
portion of the decision states, viz:

Wherefore, in view of the foregoing respondent LCI

is hereby ordered to pay the members of the complainant
union LCEA their respective Christmas bonus in the
amount of three thousand (P3,000.00) pesos for the year
2002 less the P600.00 already given or a balance
of P2,400.00.[12]

Petitioner sought reconsideration but the same was denied

by the Voluntary Arbitrator in an Order dated 27 June 2003, in this
wise:

The Motion for Reconsideration filed by the

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

Section 7. Finality of Award/Decision

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

Petitioner elevated the case to the Court of Appeals via a

Petition for Certiorari under Rule 65 of the Rules of Court docketed
as CA-G.R. SP No. 78334. [14] As adverted to earlier, the Court of
Appeals affirmed in toto the decision of the Voluntary Arbitrator.
The appellate court also denied petitioners motion for
reconsideration.

In affirming respondent Associations right to the Christmas

bonus, the Court of Appeals held:

In the case at bar, it is indubitable that petitioner

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

xxxx

Evidently, the argument of petitioner that the giving

of a Christmas bonus is a management prerogative holds
no water. There were no conditions specified in the CBA
for the grant of said benefit contrary to the claim of
petitioner that the same is justified only when there are
profits earned by the company. As can be gleaned from
the CBA, the payment of Christmas bonus was not

contingent upon the realization of profits. It does not state

that if the company derives no profits, there are no
bonuses to be given to the employees. In fine, the
payment thereof was not related to the profitability of
business operations.

Moreover, it is undisputed that petitioner, aside from

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

Not to be dissuaded, petitioner is now before this Court. The

only issue before us is whether or not the Court of Appeals erred
in affirming the ruling of the voluntary arbitrator that the
petitioner is obliged to give the members of the respondent
Association a Christmas bonus in the amount of P3,000.00 in
2002.[16]

We uphold the rulings of the voluntary arbitrator and of the

Court of Appeals. Findings of labor officials, who are deemed to
have acquired expertise in matters within their respective

jurisdictions, are generally accorded not only respect but even

finality, and bind us when supported by substantial evidence. This
is the rule particularly where the findings of both the arbitrator
and the Court of Appeals coincide.[17]

As a general proposition, an arbitrator is confined to the

interpretation and application of the CBA. He does not sit to
dispense his own brand of industrial justice: his award is
legitimate only in so far as it draws its essence from the CBA.
[18]
That was done in this case.
By definition, a bonus is a gratuity or act of liberality of the
giver. It is something given in addition to what is ordinarily
received by or strictly due the recipient. A bonus is granted and
paid to an employee for his industry and loyalty which contributed
to the success of the employers business and made possible the
realization of profits.[19]

A bonus is also granted by an enlightened employer to spur

the employee to greater efforts for the success of the business
and realization of bigger profits.[20]

Generally, a bonus is not a demandable and enforceable

obligation. For a bonus to be enforceable, it must have been
promised by the employer and expressly agreed upon by the
parties.[21] Given that the bonus in this case is integrated in the
CBA, the same partakes the nature of a demandable
obligation. Verily, by virtue of its incorporation in the CBA, the
Christmas bonus due to respondent Association has become more
than just an act of generosity on the part of the petitioner but a
contractual obligation it has undertaken. [22]

A CBA refers to a negotiated contract between a legitimate labor

organization and the employer, concerning wages, hours of work
and all other terms and conditions of employment in a bargaining

unit. As in all other contracts, the parties to a CBA may establish

such stipulations, clauses, terms and conditions as they may
deem convenient, provided these are not contrary to law, morals,
good customs, public order or public policy. [23]

It is a familiar and fundamental doctrine in labor law that the

CBA is the law between the parties and they are obliged to
comply with its provisions. [24] This principle stands strong and true
in the case at bar.

A reading of the provision of the CBA reveals that the same

provides for the giving of a Christmas gift package/bonus without
qualification. Terse and clear, the said provision did not state that
the Christmas package shall be made to depend on the
petitioners financial standing. The records are also bereft of any
showing that the petitioner made it clear during CBA negotiations
that the bonus was dependent on any condition. Indeed, if the
petitioner
and
respondent
Association
intended
that
the P3,000.00 bonus would be dependent on the company
earnings, such intention should have been expressed in the CBA.

It is noteworthy that in petitioners 1998 and 1999 Financial

Statements, it took note that the 1997 financial crisis in the Asian
region adversely affected the Philippine economy. [25]

From the foregoing, petitioner cannot insist on business

losses as a basis for disregarding its undertaking. It is manifestly
clear that petitioner was very much aware of the imminence and
possibility of business losses owing to the 1997 financial crisis. In
1998, petitioner suffered a net loss of P14,347,548.00.[26] Yet it
gave a P3,000.00 bonus to the members of the respondent
Association. In 1999, when petitioners very own financial
statement reflected that the positive developments in the
economy have yet to favorably affect the operations of the

company,[27] and reported a loss of P346,025,733.00,[28] it entered

into the CBA with the respondent Association whereby it
contracted to grant a Christmas gift package/bonus to the
latter. Petitioner supposedly continued to incur losses in the years
2000[29] and 2001. Still and all, this did not deter it from honoring
the CBA provision on Christmas bonus as it continued to
give P3,000.00 each to the members of the respondent
Association in the years 1999, 2000 and 2001.

All given, business losses are a feeble ground for petitioner

to repudiate its obligation under the CBA. The rule is settled that
any benefit and supplement being enjoyed by the employees
cannot be reduced, diminished, discontinued or eliminated by the
employer. The principle of non-diminution of benefits is founded
on the constitutional mandate to protect the rights of workers and
to promote their welfare and to afford labor full protection. [30]
Hence, absent any proof that petitioners consent was
vitiated by fraud, mistake or duress, it is presumed that it entered
into the CBA voluntarily and had full knowledge of the contents
thereof and was aware of its commitments under the contract.

The Court is fully aware that implementation to the letter of

the subject CBA provision may further deplete petitioners
resources. Petitioners remedy though lies not in the Courts
invalidation of the provision but in the parties clarification of the
same in subsequent CBA negotiations. Article 253 of the Labor
Code is relevant:
Art. 253. Duty to bargain collectively when
there exists a collective bargaining agreement. When there is a collective bargaining agreement,
the duty to bargain collectively shall also mean
that neither party shall terminate nor modify such
agreement during its lifetime. However, either
party can serve a written notice to terminate or
modify the agreement at least sixty (60) days prior

to its expiration date. It shall be the duty of both

parties to keep the status quo and to continue in
full force and effect the terms and conditions of the
existing agreement during the sixty (60)-day
period and/or until a new agreement is reached by
the parties.

WHEREFORE,
Premises
considered,
the
petition
is DENIED for lack of merit. The Decision of the Court of Appeals
dated5 April 2006 and the Resolution of the same court dated 13
December 2007 in CA-G.R. SP No. 78334 are AFFIRMED.

SO ORDERED.

JOSE PORTUGAL PEREZ

Associate Justice

FIRST DIVISION
MANILA JOCKEY CLUB G.R. No. 167760
EMPLOYEES LABOR UNIONPTGWO,
Petitioner, Present:
PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
- versus - CORONA,
AZCUNA, and
GARCIA, JJ.

MANILA JOCKEY CLUB, INC., Promulgated:

Respondent. March 7, 2007
x----------------------- ------------------------x

DECISION
GARCIA, J.:

Challenged in this petition for review under Rule 45 of the Rules of

Court is the decision[1] dated December 17, 2004 of the Court of
Appeals (CA), as reiterated in its resolution [2] of April 4, 2005,
dismissing the petition for review of herein petitioner in CA-G.R.
SP No. 69240, entitled Manila Jockey Club Employees Labor
Union- PTGWO v. Manila Jockey Club, Inc.

The facts:

Petitioner Manila Jockey Club Employees Labor Union-PTGWO and

respondent Manila Jockey Club, Inc., a corporation with a
legislative franchise to conduct, operate and maintain horse
races, entered into a Collective Bargaining Agreement (CBA)
effectiveJanuary 1, 1996 to December 31, 2000. The CBA
governed the economic rights and obligations of respondents
regular monthly paid rank-and-file employees. [3] In the CBA, the
parties agreed to 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. on a work
week of Monday to Saturday, as contained under Section 1,
Article IV,[4] of the same CBA, to wit:

Section 1. Both parties to this Agreement agree to observe the sevenhour work schedule herewith scheduled to be from 9:00
a.m. to 12:00 noonand 1:00 p.m. to 5 p.m. on work week of Monday to
Saturday. All work performed in excess of seven (7) hours work
schedule and on days not included within the work week shall be
considered overtime and paid as such. Except those monthly
compensation which includes work performed during Saturday,
Sunday, and Holiday when races are held at the Club.

xxx xxx xxx

Accordingly, overtime on an ordinary working day shall be

remunerated in an amount equivalent to the worker's regular basic

wage plus twenty five percent (25%) thereof. Where the employee is
permitted or suffered to work on legally mandated holidays or on his
designated rest day which is not a legally mandated holiday, thirty
percent (30%) shall be added to his basic wage for a seven hour work;
while work rendered in excess of seven hours on legally mandated
holidays and rest days not falling within the aforestated categories
day shall be additionally compensated for the overtime work
equivalent to his rate for the first seven hours on a legally mandated
holiday or rest day plus thirty percent (30%) thereof.

The CBA likewise reserved in respondent certain management

prerogatives, including the determination of the work schedule, as
provided under Section 2, Article XI:

Section 2. The COMPANY shall have exclusive control in the

management of the offices and direction of the employees. This shall
include, but shall not be limited to, the right to plan, direct and control
office operations, to hire, assign and transfer employees from one job
to another or from one department to another; to promote, demote,
discipline, suspend, discharge or terminate employees for proper
cause and/or in accordance with law, to relieve employees from duty
because of lack of work or for other legitimate reasons; or to introduce
new or improved methods or facilities; or to change existing methods
or facilities to change the schedules of work; and to make and enforce
rules and regulations to carry out the functions of management,
provided, however, that the COMPANY will not use these rights for the
purpose of discrimination against any employee because of his
membership in the UNION. Provided, further, that the prerogatives
provided for under this Section shall be subject to, and in accordance
with pertinent directives, proclamations and their implementing rules
and regulations.

On April 3, 1999, respondent issued an inter-office

memorandum declaring that, effective April 20, 1999, the hours
of work of regular monthly-paid employees shall be from 1:00
p.m. to 8:00 p.m. when horse races are held, that is, every

Tuesday and Thursday. The memorandum, however, maintained

the 9:00 a.m. to 5:00 p.m. schedule for non-race days.

On October 12, 1999, petitioner and respondent entered

into an Amended and Supplemental CBA retaining Section 1 of
Article IV and Section 2 of Article XI, supra, and clarified that any
conflict arising therefrom shall be referred to a voluntary
arbitrator for resolution.

Subsequently, before a panel of voluntary arbitrators of the

National Conciliation and Mediation Board (NCMB), petitioner
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.

The NCMBs panel of voluntary arbitrators, in a decision

dated October 18, 2001, 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 panels decision to
the CA in CA-G.R. SP No. 69240. In the herein assailed decision
of December 17, 2004, the CA upheld that of the panel and
denied petitioners subsequent motion for reconsideration via its
equally challenged resolution of April 4, 2005.

Hence, petitioners present recourse, raising the following

issues:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN

HOLDING THAT RESPONDENT MJCI DID NOT RELINQUISH PART OF ITS
MANAGEMENT PREROGATIVE WHEN IT STIPULATED A WORK
SCHEDULE IN THE CBA.

II

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN

HOLDING THAT RESPONDENT MJCI DID NOT VIOLATE THE NONDIMINUTION PROVISION CONTAINED IN ARTICLE 100 OF THE LABOR
CODE.

We DENY.

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.

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. We have thus held that management is
free to regulate, according to its own discretion and judgment, all
aspects of employment, including hiring, work assignments,
working methods,time, place and manner of work, processes to
be followed, supervision of workers, working regulations, transfer
of employees, work supervision, layoff of workers and discipline,
dismissal, and recall of workers.[5]

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. As aptly ruled by the CA:

x x x. Such exact language lends no other meaning but that

while respondent may have allowed the initial determination of the
work schedule to be done through collective bargaining, it expressly
retained the prerogative to change it.

Moreover, it cannot be said that in agreeing to Section 1 of

Article IV, respondent already waived that customary prerogative of
management to set the work schedule. Had that been the intention,
Section 2 of Article XI would not have made any reference at all to the
retention by respondent of that prerogative. The CBA would have
instead expressly prohibited respondent from exercising it. x x x As it
were, however, the CBA expressly recognized in respondent the
prerogative to change the work schedule. This effectively rules out
any notion of waiver on the part of respondent of its prerogative to
change the work schedule.

The same provision of the CBA also grants respondent the

prerogative to relieve employees from duty because of lack of
work.Petitioners 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 thoseemplo
yees
whose services were needed after their regular working hours an
d only
upon the instructions of management. Theovertime 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 10
0 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.[6]

WHEREFORE, the instant petition is DENIED and the assailed

decision and resolution of the CA are AFFIRMED.
Costs against petitioner.

SO ORDERED.

CANCIO C. GARCIA
Associate Justice

THIRD DIVISION
[G.R. No. 121439. January 25, 2000]
AKLAN ELECTRIC COOPERATIVE INCORPORATED
(AKELCO), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION
(Fourth Division), RODOLFO M. RETISO and 165 OTHERS, respondents.
[1]

DECISION
GONZAGA-REYES, J.:
In his petition for certiorari and prohibition with prayer for writ of preliminary
injunction and/or temporary restraining order, petitioner assails (a) the decision dated
April 20, 1995, of public respondent National Labor Relations Commission (NLRC),
Fourth (4th) Division, Cebu City, in NLRC Case No. V-0143-94 reversing the
February 25, 1994 decision of Labor Arbiter Dennis D. Juanon and ordering petitioner
to pay wages in the aggregate amount of P6,485,767.90 to private respondents, and
(b) the resolution dated July 28, 1995 denying petitioners motion for reconsideration,
for having been issued with grave abuse of discretion.
A temporary restraining order was issued by this Court on October 9, 1995 enjoining
public respondent from executing the questioned decision upon a surety bond posted
by petitioner in the amount of P6,400,000.00.
[2]

The facts as found by the Labor Arbiter are as follows:

[3]

"These are consolidated cases/claims for non-payment of salaries and

wages, 13th month pay, ECOLA and other fringe benefits as rice,
medical and clothing allowances, submitted by complainant Rodolfo M.
Retiso and 163 others, Lyn E. Banilla and Wilson B. Sallador against
respondents Aklan Electric Cooperative, Inc. (AKELCO), Atty.
Leovigildo Mationg in his capacity as General Manager; Manuel Calizo,
in his capacity as Acting Board President, Board of Directors, AKELCO.
Complainants alleged that prior to the temporary transfer of the office of
AKELCO from Lezo Aklan to Amon Theater, Kalibo, Aklan,

complainants were continuously performing their task and were duly

paid of their salaries at their main office located at Lezo, Aklan.
That on January 22, 1992, by way of resolution of the Board of Directors
of AKELCO allowed the temporary transfer holding of office at Amon
Theater, Kalibo, Aklan per information by their Project Supervisor, Atty.
Leovigildo Mationg, that their head office is closed and that it is
dangerous to hold office thereat;
Nevertheless, majority of the employees including herein complainants
continued to report for work at Lezo Aklan and were paid of their
salaries.
That on February 6, 1992, the administrator of NEA, Rodrigo Cabrera,
wrote a letter addressed to the Board of AKELCO, that he is not
interposing any objections to the action taken by respondent Mationg
That on February 11, 1992, unnumbered resolution was passed by the
Board of AKELCO withdrawing the temporary designation of office at
Kalibo, Aklan, and that the daily operations must be held again at the
main office of Lezo, Aklan;
[4]

That complainants who were then reporting at the Lezo office from
January 1992 up to May 1992 were duly paid of their salaries, while in
the meantime some of the employees through the instigation of
respondent Mationg continued to remain and work at Kalibo, Aklan;
That from June 1992 up to March 18, 1993, complainants who
continuously reported for work at Lezo, Aklan in compliance with the
aforementioned resolution were not paid their salaries;
That on March 19, 1993 up to the present, complainants were again
allowed to draw their salaries; with the exception of a few complainants
who were not paid their salaries for the months of April and May 1993;
Per allegations of the respondents, the following are the facts:

1. That these complainants voluntarily abandoned their respective

work/job assignments, without any justifiable reason and without
notifying the management of the Aklan Electric Cooperative, Inc.
(AKELCO), hence the cooperative suffered damages and systems loss;
2. That the complainants herein defied the lawful orders and other
issuances by the General Manager and the Board of Directors of the
AKELCO. These complainants were requested to report to work at the
Kalibo office x x x but despite these lawful orders of the General
Manager, the complainants did not follow and wilfully and maliciously
defied said orders and issuance of the General Manager; that the Board
of Directors passed a Resolution resisting and denying the claims of
these complainants, x x x under the principle of "no work no pay" which
is legally justified; That these complainants have "mass leave" from their
customary work on June 1992 up to March 18, 1993 and had a "sitdown" stance for these periods of time in their alleged protest of the
appointment of respondent Atty. Leovigildo Mationg as the new General
Manager of the Aklan Electric Cooperative, Inc. (AKELCO) by the
Board of Directors and confirmed by the Administrator of the National
Electrification Administration (NEA), Quezon City; That they engaged
in " . . . slowdown mass leaves, sit downs, attempts to damage, destroy
or sabotage plant equipment and facilities of the Aklan Electric
Cooperative, Inc. (AKELCO)."
On February 25, 1994, a decision was rendered by Labor Arbiter Dennis D. Juanon
dismissing the complaints.
[5]

Dissatisfied with the decision, private respondents appealed to the respondent

Commission.
On appeal, the NLRCs Fourth Division, Cebu City, reversed and set aside the Labor
Arbiters decision and held that private respondents are entitled to unpaid wages from
June 16, 1992 to March 18, 1993, thus:
[6]

[7]

"The evidence on records, more specifically the evidence submitted by

the complainants, which are: the letter dated April 7, 1993 of Pedrito L.
Leyson, Office Manager of AKELCO (Annex "C"; complainants

position paper; Rollo, p.102) addressed to respondent Atty. Leovigildo T.

Mationg; respondent AKELCO General Manager; the memorandum of
said Atty. Mationg dated 14 April 1993, in answer to the letter of Pedrito
Leyson (Annex "D" complainants position paper); as well as the
computation of the unpaid wages due to complainants (Annexes "E" to
"E-3"; complainants position paper, Rollo, pages 1024 to 1027) clearly
show that complainants had rendered services during the period - June
16, 1992 to March 18, 1993. The record is bereft of any showing that the
respondents had submitted any evidence, documentary or otherwise, to
controvert this asseveration of the complainants that services were
rendered during this period. Subjecting these evidences submitted by the
complainants to the crucible of scrutiny, We find that respondent Atty.
Mationg responded to the request of the Office Manager, Mr. Leyson,
which We quote, to wit:
"Rest assured that We shall recommend your aforesaid
request to our Board of Directors for their consideration
and appropriate action. This payment, however, shall be
subject, among others, to the availability of funds."
This assurance is an admission that complainants are entitled to payment
for services rendered from June 16, 1992 to March 18, 1993, specially so
that the recommendation and request comes from the office manager
himself who has direct knowledge regarding the services and
performance of employees under him. For how could one office manager
recommend payment of wages, if no services were rendered by
employees under him. An office manager is the most qualified person to
know the performance of personnel under him. And therefore, any
request coming from him for payment of wages addressed to his superior
as in the instant case shall be given weight.
Furthermore, the record is clear that complainants were paid of their
wages and other fringe benefits from January, 1992 to May, 1992 and
from March 19, 1993 up to the time complainants filed the instant cases.
In the interegnum, from June 16, 1992 to March 18, 1993, complainants
were not paid of their salaries, hence these claims. We could see no
rhyme nor reason in respondents refusal to pay complainants salaries

during this period when complainants had worked and actually rendered
service to AKELCO.
While the respondents maintain that complainants were not paid during
this interim period under the principle of "no work, no pay", however, no
proof was submitted by the respondents to substantiate this allegation.
The labor arbiter, therefore, erred in dismissing the claims of the
complainants, when he adopted the "no work, no pay" principle
advanced by the respondents.
WHEREFORE, in view of the foregoing, the appealed decision dated
February 25, 1994 is hereby Reversed and Set Aside and a new one
entered ordering respondent AKELCO to pay complainants their claims
amounting to P6,485,767.90 as shown in the computation (Annexes "E"
to "E-3")."
A motion for reconsideration was filed by petitioner but the same was denied by
public respondent in a resolution dated July 28, 1995.
[8]

Petitioner brought the case to this Court alleging that respondent NLRC committed
grave abuse of discretion citing the following grounds:
[9]

1. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF

DISCRETION IN REVERSING THE FACTUAL FINDINGS AND
CONCLUSIONS OF THE LABOR ARBITER, AND DISREGARDING
THE EXPRESS ADMISSION OF PRIVATE RESPONDENTS THAT
THEY DEFIED PETITIONERS ORDER TRANSFERRING THE
PETITIONERS OFFICIAL BUSINESS OFFICE FROM LEZO TO
KALIBO AND FOR THEM TO REPORT THEREAT.
2. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF
DISCRETION IN CONCLUDING THAT PRIVATE RESPONDENTS
WERE REALLY WORKING OR RENDERING SERVICE ON THE
BASIS OF THE COMPUTATION OF WAGES AND THE BIASED
RECOMMENDATION SUBMITTED BY LEYSON WHO IS ONE OF
THE PRIVATE RESPONDENTS WHO DEFIED THE LAWFUL
ORDERS OF PETITIONER.

3. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF

DISCRETION IN CONSIDERING THE ASSURANCE BY
PETITIONERS GENERAL MANAGER MATIONG TO
RECOMMEND THE PAYMENT OF THE CLAIMS OF PRIVATE
RESPONDENTS AS AN ADMISSION OF LIABILITY OR A
RECOGNITION THAT COMPENSABLE SERVICES WERE
ACTUALLY RENDERED.
4. GRANTING THAT PRIVATE RESPONDENTS CONTINUED TO
REPORT AT THE LEZO OFFICE, IT IS STILL GRAVE ABUSE OF
DISCRETION FOR PUBLIC RESPONDENT TO CONSIDER THAT
PETITIONER IS LEGALLY OBLIGATED TO RECOGNIZE SAID
CIRCUMSTANCE AS COMPENSABLE SERVICE AND PAY WAGES
TO PRIVATE RESPONDENTS FOR DEFYING THE ORDER FOR
THEM TO REPORT FOR WORK AT THE KALIBO OFFICE WHERE
THE OFFICIAL BUSINESS AND OPERATIONS WERE
CONDUCTED.
5. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF
DISCRETION AND SERIOUS, PATENT AND PALPABLE ERROR IN
RULING THAT THE "NO WORK, NO PAY" PRINCIPLE DOES NOT
APPLY FOR LACK OF EVIDENTIARY SUPPORT WHEN PRIVATE
REPONDENTS ALREADY ADMITTED THAT THEY DID NOT
REPORT FOR WORK AT THE KALIBO OFFICE.
6. PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF
DISCRETION IN ACCORDING WEIGHT AND CREDIBILITY TO
THE SELF-SERVING AND BIASED ALLEGATIONS OF PRIVATE
RESPONDENTS, AND ACCEPTING THEM AS PROOF, DESPITE
THE ESTABLISHED FACT AND ADMISSION THAT PRIVATE
RESPONDENTS DID NOT REPORT FOR WORK AT THE KALIBO
OFFICE, OR THAT THEY WERE NEVER PAID FOR ANY WAGES
FROM THE TIME THEY DEFIED PETITIONERS ORDERS.
Petitioner contends that public respondent committed grave abuse of discretion in
finding that private respondents are entitled to their wages from June 16, 1992 to
March 18, 1993, thus disregarding the principle of "no work, no pay". It alleges that

private respondents stated in their pleadings that they not only objected to the transfer
of petitioners business office to Kalibo but they also defied the directive to report
thereat because they considered the transfer illegal. It further claims that private
respondents refused to recognize the authority of petitioners lawful officers and agents
resulting in the disruption of petitioners business operations in its official business
office in Lezo, AKlan, forcing petitioner to transfer its office from Lezo to Kalibo
transferring all its equipments, records and facilities; that private respondents cannot
choose where to work, thus, when they defied the lawful orders of petitioner to report
at Kalibo, private respondents were considered dismissed as far as petitioner was
concerned. Petitioner also disputes private respondents allegation that they were paid
their salaries from January to May 1992 and again from March 19, 1993 up to the
present but not for the period from June 1992 to March 18, 1993 saying that private
respondents illegally collected fees and charges due petitioner and appropriated the
collections among themselves for which reason they are claiming salaries only for the
period from June 1992 to March 1993 and that private respondents were paid their
salaries starting only in April 1993 when petitioners Board agreed to accept private
respondents back to work at Kalibo office out of compassion and not for the reason
that they rendered service at the Lezo office. Petitioner also adds that compensable
service is best shown by timecards, payslips and other similar documents and it was
an error for public respondent to consider the computation of the claims for wages and
benefits submitted merely by private respondents as substantial evidence.
The Solicitor General filed its Manifestation in lieu of Comment praying that the
decision of respondent NLRC be set aside and payment of wages claimed by private
respondents be denied for lack of merit alleging that private respondents could not
have worked for petitioner's office in Lezo during the stated period since petitioner
transferred its business operation in Kalibo where all its records and equipments were
brought; that computations of the claims for wages and benefits submitted by private
respondents to petitioner is not proof of rendition of work. Filing its own Comment,
public respondent NLRC claims that the original and exclusive jurisdiction of this
Court to review decisions or resolutions of respondent NLRC does not include a
correction of its evaluation of evidence as factual issues are not fit subject
forcertiorari.
Private respondents, in their Comment, allege that review of a decision of NLRC in a
petition for certiorari under Rule 65 does not include the correctness of its evaluation

of the evidence but is confined to issues of jurisdiction or grave abuse of discretion

and that factual findings of administrative bodies are entitled to great weight, and
accorded not only respect but even finality when supported by substantial evidence.
They claim that petitioner's Board of Directors passed an unnumbered resolution on
February 11, 1992 returning back the office to Lezo from Kalibo Aklan with a
directive for all employees to immediately report at Lezo; that the letter-reply of Atty.
Mationg to the letter of office manager Leyson that he will recommend the payment
of the private respondents' salary from June 16, 1992 to March 18, 1993 to the Board
of Directors was an admission that private respondents are entitled to such payment
for services rendered. Private respondents state that in appreciating the evidence in
their favor, public respondent NLRC at most may be liable for errors of judgment
which, as differentiated from errors of jurisdiction, are not within the province of the
special civil action of certiorari.
Petitioner filed its Reply alleging that review of the decision of public respondent is
proper if there is a conflict in the factual findings of the labor arbiter and the NLRC
and when the evidence is insufficient and insubstantial to support NLRCs factual
findings; that public respondents findings that private respondents rendered
compensable services were merely based on private respondents computation of
claims which is self-serving; that the alleged unnumbered board resolution dated
February 11, 1992, directing all employees to report to Lezo Office was never
implemented because it was not a valid action of AKELCOs legitimate board.
The sole issue for determination is whether or not public respondent NLRC
committed grave abuse of discretion amounting to excess or want of jurisdiction when
it reversed the findings of the Labor Arbiter that private respondents refused to work
under the lawful orders of the petitioner AKELCO management; hence they are
covered by the "no work, no pay" principle and are thus not entitled to the claim for
unpaid wages from June 16, 1992 to March 18, 1993.
We find merit in the petition.
At the outset, we reiterate the rule that in certiorari proceedings under Rule 65, this
Court does not assess and weigh the sufficiency of evidence upon which the labor
arbiter and public respondent NLRC based their resolutions. Our query is limited to
the determination of whether or not public respondent NLRC acted without or in
excess of its jurisdiction or with grave abuse of discretion in rendering the assailed

resolutions. While administrative findings of fact are accorded great respect, and
even finality when supported by substantial evidence, nevertheless, when it can be
shown that administrative bodies grossly misappreciated evidence of such nature as to
compel a contrary conclusion, this court had not hesitated to reverse their factual
findings. Factual findings of administrative agencies are not infallible and will be set
aside when they fail the test of arbitrariness. Moreover, where the findings of NLRC
contradict those of the labor arbiter, this Court, in the exercise of its equity
jurisdiction, may look into the records of the case and reexamine the questioned
findings.
[10]

[11]

[12]

[13]

We find cogent reason, as shown by the petitioner and the Solicitor General, not to
affirm the factual findings of public respondent NLRC.
We do not agree with the finding that private respondents had rendered services from
June 16, 1992 to March 18, 1993 so as to entitle them to payment of wages. Public
respondent based its conclusion on the following: (a) the letter dated April 7, 1993 of
Pedrito L. Leyson, Office Manager of AKELCO addressed to AKELCOs General
Manager, Atty. Leovigildo T. Mationg, requesting for the payment of private
respondents unpaid wages from June 16, 1992 to March 18, 1993; (b) the
memorandum of said Atty. Mationg dated 14 April 1993, in answer to the letter
request of Pedrito Leyson where Atty. Mationg made an assurance that he will
recommend such request; (c) the private respondents own computation of their unpaid
wages. We find that the foregoing does not constitute substantial evidence to support
the conclusion that private respondents are entitled to the payment of wages from June
16, 1992 to March 18, 1993. Substantial evidence is that amount of relevant evidence
which a reasonable mind might accept as adequate to justify a conclusion. These
evidences relied upon by public respondent did not establish the fact that private
respondents actually rendered services in the Kalibo office during the stated period.
[14]

The letter of Pedrito Leyson to Atty. Mationg was considered by public respondent as
evidence that services were rendered by private respondents during the stated period,
as the recommendation and request came from the office manager who has direct
knowledge regarding the services and performance of employees under him. We are
not convinced. Pedrito Leyson is one of the herein private respondents who are
claiming for unpaid wages and we find his actuation of requesting in behalf of the
other private respondents for the payment of their backwages to be biased and selfserving, thus not credible.

On the other hand, petitioner was able to show that private respondents did not render
services during the stated period. Petitioners evidences show that on January 22, 1992,
petitioners Board of Directors passed a resolution temporarily transferring the Office
from Lezo, Aklan to Amon Theater, Kalibo, Aklan upon the recommendation of Atty.
Leovigildo Mationg, then project supervisor, on the ground that the office at Lezo was
dangerous and unsafe. Such transfer was approved by then NEA Administrator,
Rodrigo E. Cabrera, in a letter dated February 6, 1992 addressed to petitioners Board
of Directors. Thus, the NEA Administrator, in the exercise of supervision and control
over all electric cooperatives, including petitioner, wrote a letter dated February 6,
1992 addressed to the Provincial Director PC/INP Kalibo Aklan requesting for
military assistance for the petitioners team in retrieving the electric cooperatives
equipments and other removable facilities and/or fixtures consequential to the transfer
of its principal business address from Lezo to Kalibo and in maintaining peace and
order in the cooperatives coverage area. The foregoing establishes the fact that the
continuous operation of the petitioners business office in Lezo Aklan would pose a
serious and imminent threat to petitioners officials and other employees, hence the
necessity of temporarily transferring the operation of its business office from Lezo to
Kalibo. Such transfer was done in the exercise of a management prerogative and in
the absence of contrary evidence is not unjustified. With the transfer of petitioners
business office from its former office, Lezo, to Kalibo, Aklan, its equipments, records
and facilities were also removed from Lezo and brought to the Kalibo office where
petitioners official business was being conducted; thus private respondents allegations
that they continued to report for work at Lezo to support their claim for wages has no
basis.
[15]

[16]

Moreover, private respondents in their position paper admitted that they did not report
at the Kalibo office, as Lezo remained to be their office where they continuously
reported, to wit:
[17]

"On January 22, 1991 by way of a resolution of the Board of Directors of

AKELCO it allowed the temporary holding of office at Amon Theater,
Kalibo, Aklan, per information by their project supervisor, Atty.
Leovigildo Mationg that their head office is closed and that it is
dangerous to hold office thereat.

Nevertheless, majority of the employees including the herein

complainants, continued to report for work at Lezo, Aklan and were paid
of their salaries.
xxx
The transfer of office from Lezo, Aklan to Kalibo, Aklan being illegal
for failure to comply with the legal requirements under P.D. 269, the
complainants remained and continued to work at the Lezo Office until
they were illegally locked out therefrom by the respondents. Despite the
illegal lock out however, complainants continued to report daily to the
location of the Lezo Office, prepared to continue in the performance of
their regular duties.
Complainants thus could not be considered to have abandoned their
work as Lezo remained to be their office and not Kalibo despite the
temporary transfer thereto. Further the fact that they were allowed to
draw their salaries up to May, 1992 is an acknowledgment by the
management that they are working during the period.
xxx
It must be pointed out that complainants worked and continuously
reported at Lezo office despite the management holding office at Kalibo.
In fact, they were paid their wages before it was withheld and then were
allowed to draw their salaries again on March 1993 while reporting at
Lezo up to the present.
Respondents acts and payment of complainants salaries and again from
March 1993 is an unequivocal recognition on the part of respondents that
the work of complainants is continuing and uninterrupted and they are
therefore entitled to their unpaid wages for the period from June 1992 to
March 1993."
The admission is detrimental to private respondents cause. Their excuse is that the
transfer to Kalibo was illegal but we agree with the Labor Arbiter that it was not for
private respondents to declare the managements act of temporarily transferring the
AKELCO office to Kalibo as an illegal act. There is no allegation nor proof that the

transfer was made in bad faith or with malice. The Labor Arbiter correctly rationalized
in its decision as follows:
[18]

"We do not subscribe to complainants theory and assertions. They, by

their own allegations, have unilaterally committed acts in violation of
managements/respondents directives purely classified as management
prerogative. They have taken amongst themselves declaring
managements acts of temporarily transferring the holding of the
AKELCO office from Lezo to Kalibo, Aklan as illegal. It is never
incumbent upon themselves to declare the same as such. It is lodged in
another forum or body legally mantled to do the same. What they should
have done was first to follow managements
orders temporarily transferring office for it has the first presumption of
legality. Further, the transfer was only temporary. For:
"The employer as owner of the business, also has inherent
rights, among which are the right to select the persons to be
hired and discharge them for just and valid cause; to
promulgate and enforce reasonable employment rules and
regulations and to modify, amend or revoke the same; to
designate the work as well as the employee or employees to
perform it; to transfer or promote employees; to schedule,
direct, curtail or control company operations; to introduce
or install new or improved labor or money savings
methods, facilities or devices; to create, merge, divide,
reclassify and abolish departments or positions in the
company and to sell or close the business.
xxx
Even as the law is solicitous of the welfare of the
employees it must also protect the right of an employer to
exercise what are clearly management prerogatives. The
free will of management to conduct its own business affairs
to achieve its purpose can not be denied. The transfer of
assignment of a medical representative from Manila to the
province has therefore been held lawful where this was

demanded by the requirements of the drug companys

marketing operations and the former had at the time of his
employment undertaken to accept assignment anywhere in
the Philippines. (Abbot Laboratories (Phils.), Inc., et al. vs.
NLRC, et al., G.R. No. L-76959, Oct. 12, 1987).
It is the employers prerogative to abolish a position which it deems no
longer necessary, and the courts, absent any findings of malice on the
part of the management, cannot erase that initiative simply to protect the
person holding office (Great Pacific Life Assurance Corporation vs.
NLRC, et al., G.R. No. 88011, July 30, 1990)."
Private respondents claim that petitioners Board of Directors passed an unnumbered
resolution dated February 11, 1992 returning back the office from its temporary office
in Kalibo to Lezo. Thus, they did not defy any lawful order of petitioner and were
justified in continuing to remain at Lezo office. This allegation was controverted by
petitioner in its Reply saying that such unnumbered resolution was never implemented
as it was not a valid act of petitioners Board. We are convinced by petitioners
argument that such unnumbered resolution was not a valid act of petitioners legitimate
Board considering the subsequent actions taken by the petitioners Board of Directors
decrying private respondents inimical act and defiance, to wit (1) Resolution No. 411,
s. of 1992 on September 9, 1992, dismissing all AKELCO employees who were on
illegal strike and who refused to return to work effective January 31, 1992 despite the
directive of the NEA project supervisor and petitioners acting general manager; (2)
Resolution No. 477, s. of 1993 dated March 10, 1993 accepting back private
respondents who staged illegal strike, defied legal orders and issuances, out of
compassion, reconciliation, Christian values and humanitarian reason subject to the
condition of "no work, no pay" (3) Resolution No. 496, s. of 1993 dated June 4,
1993, rejecting the demands of private respondents for backwages from June 16, 1992
to March 1993 adopting the policy of "no work, no pay" as such demand has no basis,
and directing the COOP Legal Counsel to file criminal cases against employees who
misappropriated collections and officers who authorized disbursements of funds
without legal authority from the NEA and the AKELCO Board. If indeed there was a
valid board resolution transferring back petitioners office to Lezo from its temporary
office in Kalibo, there was no need for the Board to pass the above-cited resolutions.
[19]

[20]

[21]

We are also unable to agree with public respondent NLRC when it held that the
assurance made by Atty. Mationg to the letter-request of office manager Leyson for
the payment of private respondents wages from June 1992 to March 1993 was an
admission on the part of general manager Mationg that private respondents are indeed
entitled to the same. The letter reply of Atty. Mationg to Leyson merely stated that he
will recommend the request for payment of backwages to the Board of Directors for
their consideration and appropriate action and nothing else, thus, the ultimate approval
will come from the Board of Directors. We find well-taken the argument advanced by
the Solicitor General as follows:
[22]

The allegation of private respondents that petitioner had already

approved payment of their wages is without basis. Mationgs offer to
recommend the payment of private respondents' wages is hardly
approval of their claim for wages. It is just an undertaking to recommend
payment. Moreover, the offer is conditional. It is subject to the condition
that petitioners Board of Directors will give its approval and that funds
were available. Mationgs reply to Leysons letter for payment of wages
did not constitute approval or assurance of payment. The fact is that, the
Board of Directors of petitioner rejected private respondents demand for
payment (Board Resolution No. 496, s. 1993).
We are accordingly constrained to overturn public respondents findings that petitioner
is not justified in its refusal to pay private respondents wages and other fringe benefits
from June 16, 1992 to March 18, 1993; public respondents stated that private
respondents were paid their salaries from January to May 1992 and again from March
19, 1993 up to the present. As cited earlier, petitioners Board in a Resolution No. 411
dated September 9, 1992 dismissed private respondents who were on illegal strike and
who refused to report for work at Kalibo office effective January 31, 1992; since no
services were rendered by private respondents they were not paid their salaries.
Private respondents never questioned nor controverted the Resolution dismissing them
and nowhere in their Comment is it stated that they questioned such dismissal. Private
respondents also have not rebutted petitioners claim that private respondents illegally
collected fees and charges due petitioner and appropriated the collections among
themselves to satisfy their salaries from January to May 1992, for which reason,
private respondents are merely claiming salaries only for the period from June 16,
1992 to March 1993.

Private respondents were dismissed by petitioner effective January 31, 1992 and were
accepted back by petitioner, as an act of compassion, subject to the condition of "no
work, no pay" effective March 1993 which explains why private respondents were
allowed to draw their salaries again. Notably, the letter-request of Mr. Leyson for the
payment of backwages and other fringe benefits in behalf of private respondents was
made only in April 1993, after a Board Resolution accepting them back to work out of
compassion and humanitarian reason. It took private respondents about ten months
before they requested for the payment of their backwages, and the long inaction of
private respondents to file their claim for unpaid wages cast doubts as to the veracity
of their claim.
The age-old rule governing the relation between labor and capital, or management and
employee of a "fair days wage for a fair days labor" remains as the basic factor in
determining employees wages. If there is no work performed by the employee there
can be no wage or pay unless, of course, the laborer was able, willing and ready to
work but was illegally locked out, suspended or dismissed, or otherwise illegally
prevented from working, a situation which we find is not present in the instant case.
It would neither be fair nor just to allow private respondents to recover something
they have not earned and could not have earned because they did not render services
at the Kalibo office during the stated period.
[23]

[24]

Finally, we hold that public respondent erred in merely relying on the computations of
compensable services submitted by private respondents. There must be competent
proof such as time cards or office records to show that they actually rendered
compensable service during the stated period to entitle them to wages. It has been
established that the petitioners business office was transferred to Kalibo and all its
equipments, records and facilities were transferred thereat and that it conducted its
official business in Kalibo during the period in question. It was incumbent upon
private respondents to prove that they indeed rendered services for petitioner, which
they failed to do. It is a basic rule in evidence that each party must prove his
affirmative allegation. Since the burden of evidence lies with the party who asserts the
affirmative allegation, the plaintiff or complainant has to prove his affirmative
allegations in the complaint and the defendant or the respondent has to prove the
affirmative allegation in his affirmative defenses and counterclaim.
[25]

WHEREFORE, in view of the foregoing, the petition for CERTIORARI is

GRANTED. Consequently the decision of public respondent NLRC dated April 20,

1995 and the Resolution dated July 28, 1995 in NLRC Case No. V-0143-94 are hereby
REVERSED and SET ASIDE for having been rendered with grave abuse of discretion
amounting to lack or excess of jurisdiction. Private respondents complaint for
payment of unpaid wages before the Labor Arbiter is DISMISSED.
SO ORDERED.
Melo, (Chairman), Vitug, Panganiban, and Purisima, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 128845

June 1, 2000

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner,

vs.
HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor and Employment; HON.
CRESENCIANO B. TRAJANO in his capacity as the Acting Secretary of Labor and Employment; DR.

BRIAN MACCAULEY in his capacity as the Superintendent of International School-Manila; and

INTERNATIONAL SCHOOL, INC., respondents.
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent School,
mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their colleagues in other
schools is, of course, beside the point. The point is that employees should be given equal pay for work of equal
value. That is a principle long honored in this jurisdiction. That is a principle that rests on fundamental notions
of justice. That is the principle we uphold today.
1wphi1.nt

Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree 732, is a
domestic educational institution established primarily for dependents of foreign diplomatic personnel and other
temporary residents.1 To enable the School to continue carrying out its educational program and improve its
standard of instruction, Section 2(c) of the same decree authorizes the School to employ its own teaching and
management personnel selected by it either locally or abroad, from Philippine or other nationalities, such
personnel being exempt from otherwise applicable laws and regulations attending their employment, except
laws that have been or will be enacted for the protection of employees.
Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the same
into two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine whether a faculty
member should be classified as a foreign-hire or a local hire:
a. What is one's domicile?
b. Where is one's home economy?
c. To which country does one owe economic allegiance?
d. Was the individual hired abroad specifically to work in the School and was the School responsible
for bringing that individual to the Philippines?2
Should the answer to any of these queries point to the Philippines, the faculty member is classified as a local
hire; otherwise, he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not accorded local-hires. These include housing,
transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a salary
rate twenty-five percent (25%) more than local-hires. The School justifies the difference on two "significant
economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation factor" and (b) limited
tenure. The School explains:
1avvphi1

A foreign-hire would necessarily have to uproot himself from his home country, leave his family and
friends, and take the risk of deviating from a promising career path all for the purpose of pursuing
his profession as an educator, but this time in a foreign land. The new foreign hire is faced with
economic realities: decent abode for oneself and/or for one's family, effective means of transportation,
allowance for the education of one's children, adequate insurance against illness and death, and of
course the primary benefit of a basic salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted again with the same economic reality after
his term: that he will eventually and inevitably return to his home country where he will have to confront
the uncertainty of obtaining suitable employment after along period in a foreign land.
The compensation scheme is simply the School's adaptive measure to remain competitive on an
international level in terms of attracting competent professionals in the field of international education. 3

When negotiations for a new collective bargaining agreement were held on June 1995, petitioner International
School Alliance of Educators, "a legitimate labor union and the collective bargaining representative of all faculty
members"4 of the School, contested the difference in salary rates between foreign and local-hires. This issue,
as well as the question of whether foreign-hires should be included in the appropriate bargaining unit,
eventually caused a deadlock between the parties.
On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and Mediation
Board to bring the parties to a compromise prompted the Department of Labor and Employment (DOLE) to
assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting Secretary, Crescenciano B. Trajano,
issued an Order resolving the parity and representation issues in favor of the School. Then DOLE Secretary
Leonardo A. Quisumbing subsequently denied petitioner's motion for reconsideration in an Order dated March
19, 1997. Petitioner now seeks relief in this Court.
Petitioner claims that the point-of-hire classification employed by the School is discriminatory to Filipinos and
that the grant of higher salaries to foreign-hires constitutes racial discrimination.
The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all, with
nationalities other than Filipino, who have been hired locally and classified as local hires. 5 The Acting Secretary
of Labor found that these non-Filipino local-hires received the same benefits as the Filipino local-hires.
The compensation package given to local-hires has been shown to apply to all, regardless of race.
Truth to tell, there are foreigners who have been hired locally and who are paid equally as Filipino local
hires.6
The Acting secretary upheld the point-of-hire classification for the distinction in salary rates:
The Principle "equal pay for equal work" does not find applications in the present case. The
international character of the School requires the hiring of foreign personnel to deal with different
nationalities and different cultures, among the student population.
We also take cognizance of the existence of a system of salaries and benefits accorded to foreign
hired personnel which system is universally recognized. We agree that certain amenities have to be
provided to these people in order to entice them to render their services in the Philippines and in the
process remain competitive in the international market.
Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike the
local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits would
also require parity in other terms and conditions of employment which include the employment which
include the employment contract.
A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and
professional compensation wherein the parties agree as follows:
All members of the bargaining unit shall be compensated only in accordance with Appendix C
hereof provided that the Superintendent of the School has the discretion to recruit and hire
expatriate teachers from abroad, under terms and conditions that are consistent with accepted
international practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS)
salary schedule. The 25% differential is reflective of the agreed value of system displacement
and contracted status of the OSRS as differentiated from the tenured status of Locally
Recruited Staff (LRS).

To our mind, these provisions demonstrate the parties' recognition of the difference in the status of two
types of employees, hence, the difference in their salaries.
The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an
established principle of constitutional law that the guarantee of equal protection of the laws is not
violated by legislation or private covenants based on reasonable classification. A classification is
reasonable if it is based on substantial distinctions and apply to all members of the same class. Verily,
there is a substantial distinction between foreign hires and local hires, the former enjoying only a
limited tenure, having no amenities of their own in the Philippines and have to be given a good
compensation package in order to attract them to join the teaching faculty of the School. 7
We cannot agree.
That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws reflect
the policy against these evils. The Constitution8 in the Article on Social Justice and Human Rights exhorts
Congress to "give highest priority to the enactment of measures that protect and enhance the right of all people
to human dignity, reduce social, economic, and political inequalities." The very broad Article 19 of the Civil
Code requires every person, "in the exercise of his rights and in the performance of his duties, [to] act with
justice, give everyone his due, and observe honesty and good faith.
International law, which springs from general principles of law,9 likewise proscribes discrimination. General
principles of law include principles of equity, 10 i.e., the general principles of fairness and justice, based on the
test of what is reasonable. 11 The Universal Declaration of Human Rights, 12 the International Covenant on
Economic, Social, and Cultural Rights, 13 the International Convention on the Elimination of All Forms of Racial
Discrimination, 14 the Convention against Discrimination in Education, 15 the Convention (No. 111) Concerning
Discrimination in Respect of Employment and Occupation 16 all embody the general principle against
discrimination, the very antithesis of fairness and justice. The Philippines, through its Constitution, has
incorporated this principle as part of its national laws.
In the workplace, where the relations between capital and labor are often skewed in favor of capital, inequality
and discrimination by the employer are all the more reprehensible.
The Constitution 17 specifically provides that labor is entitled to "humane conditions of work." These conditions
are not restricted to the physical workplace the factory, the office or the field but include as well the
manner by which employers treat their employees.
The Constitution 18 also directs the State to promote "equality of employment opportunities for all." Similarly, the
Labor Code 19 provides that the State shall "ensure equal work opportunities regardless of sex, race or creed."
It would be an affront to both the spirit and letter of these provisions if the State, in spite of its primordial
obligation to promote and ensure equal employment opportunities, closes its eyes to unequal and
discriminatory terms and conditions of employment. 20
Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for example,
prohibits and penalizes 21 the payment of lesser compensation to a female employee as against a male
employee for work of equal value. Article 248 declares it an unfair labor practice for an employer to discriminate
in regard to wages in order to encourage or discourage membership in any labor organization.
Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof,
provides:
The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just
and favourable conditions of work, which ensure, in particular:
a. Remuneration which provides all workers, as a minimum, with:

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

xxx

xxx

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of "equal
pay for equal work." Persons who work with substantially equal qualifications, skill, effort and responsibility,
under similar conditions, should be paid similar salaries. 22 This rule applies to the School, its "international
character" notwithstanding.
The School contends that petitioner has not adduced evidence that local-hires perform work equal to that of
foreign-hires. 23 The Court finds this argument a little cavalier. If an employer accords employees the same
position and rank, the presumption is that these employees perform equal work. This presumption is borne by
logic and human experience. If the employer pays one employee less than the rest, it is not for that employee
to explain why he receives less or why the others receive more. That would be adding insult to injury. The
employer has discriminated against that employee; it is for the employer to explain why the employee is treated
unfairly.
The employer in this case has failed to discharge this burden. There is no evidence here that foreign-hires
perform 25% more efficiently or effectively than the local-hires. Both groups have similar functions and
responsibilities, which they perform under similar working conditions.
The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the distinction in
salary rates without violating the principle of equal work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services performed."
Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration paid at regular intervals
for the rendering of services." In Songco v. National Labor Relations Commission, 24 we said that:
"salary" means a recompense or consideration made to a person for his pains or industry in another
man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the
Roman soldier, it carries with it the fundamental idea of compensation for services rendered.
(Emphasis supplied.)
While we recognize the need of the School to attract foreign-hires, salaries should not be used as an
enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires and they
ought to be paid the same salaries as the latter. For the same reason, the "dislocation factor" and the foreignhires' limited tenure also cannot serve as valid bases for the distinction in salary rates. The dislocation factor
and limited tenure affecting foreign-hires are adequately compensated by certain benefits accorded them which
are not enjoyed by local-hires, such as housing, transportation, shipping costs, taxes and home leave travel
allowances.
The Constitution enjoins the State to "protect the rights of workers and promote their welfare," 25 "to afford labor
full protection." 26 The State, therefore, has the right and duty to regulate the relations between labor and
capital.27 These relations are not merely contractual but are so impressed with public interest that labor
contracts, collective bargaining agreements included, must yield to the common good. 28 Should such contracts
contain stipulations that are contrary to public policy, courts will not hesitate to strike down these stipulations.
In this case, we find the point-of-hire classification employed by respondent School to justify the distinction in
the salary rates of foreign-hires and local hires to be an invalid classification. There is no reasonable distinction
between the services rendered by foreign-hires and local-hires. The practice of the School of according higher
salaries to foreign-hires contravenes public policy and, certainly, does not deserve the sympathy of this Court.
1avvphi1

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

A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the entire
body of employees, consistent with equity to the employer, indicate to be the best suited to serve the reciprocal
rights and duties of the parties under the collective bargaining provisions of the law." 29 The factors in
determining the appropriate collective bargaining unit are (1) the will of the employees (Globe Doctrine); (2)
affinity and unity of the employees' interest, such as substantial similarity of work and duties, or similarity of
compensation and working conditions (Substantial Mutual Interests Rule); (3) prior collective bargaining history;
and (4) similarity of employment status. 30 The basic test of an asserted bargaining unit's acceptability is
whether or not it is fundamentally the combination which will best assure to all employees the exercise of their
collective bargaining rights. 31
It does not appear that foreign-hires have indicated their intention to be grouped together with local-hires for
purposes of collective bargaining. The collective bargaining history in the School also shows that these groups
were always treated separately. Foreign-hires have limited tenure; local-hires enjoy security of tenure. Although
foreign-hires perform similar functions under the same working conditions as the local-hires, foreign-hires are
accorded certain benefits not granted to local-hires. These benefits, such as housing, transportation, shipping
costs, taxes, and home leave travel allowance, are reasonably related to their status as foreign-hires, and
justify the exclusion of the former from the latter. To include foreign-hires in a bargaining unit with local-hires
would not assure either group the exercise of their respective collective bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART. The Orders
of the Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997, are hereby REVERSED
and SET ASIDE insofar as they uphold the practice of respondent School of according foreign-hires higher
salaries than local-hires.
SO ORDERED.
Puno and Pardo, JJ., concur.
Davide, Jr., C.J., on official leave.
Ynares-Santiago, J., is on leave.

Footnotes

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 79351 November 28, 1989
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
THE HON. SECRETARY OF LABOR, CRESENCIA DIFONTORUM, ET AL., respondents.

The Chief Legal Counsel for petitioner.

Dante P. Sindac for private respondents.

CORTES, J.:
Petitioner Development Bank of the Philippines seeks the nullification of an order dated July 29, 1987 and
issued by the Undersecretary of Labor and Employment, affirming that of National Capital Region Officer-inCharge Romeo A. Young, directing the petitioner to deliver the properties of Riverside Mills Corporation (RMC)
which it had in its possession to the Ministry (now Department) of Labor and Employment (MOLE) for proper
disposition in Case No. NCR-LSED-7-334-84 pursuant to Article 110 of the Labor Code.
Labor Case No. NCR-LSED-7-334-84 involves a complaint for illegal dismissal, unfair labor practice, illegal
deductions from salaries and violation of the minimum wage law filed by private respondents herein against
RMC. On July 3, 1985, a decision was rendered by Director Severo M. Pucan of the National Capital Region,
MOLE, ordering RMC to pay private respondents backwages and separation benefits. A corresponding writ of
execution was issued on October 22, 1985 directing the sheriff to collect the amount of ONE MILLION TWO
HUNDRED FIFTY-SIX THOUSAND SIX HUNDRED SEVENTY-EIGHT PESOS AND SEVENTY SIX
CENTAVOS (P1,256,678.76) from RMC and, in case of failure to collect, to execute the writ by selling the
goods and chattel of RMC not exempt from execution or, in case of insufficiency thereof, the real or immovable
properties of RMC.
However, on May 23, 1986, the writ of execution was returned unserved and unsatisfied, with the information
that the company premises of RMC had been padlocked and foreclosed by petitioner. It appears that petitioner
had instituted extra-judicial foreclosure proceedings as early as 1983 on the properties and other assets of
RMC as a result of the latter's failure to meet its obligations on the loans it secured from petitioner.
Consequently, private respondents filed with the MOLE a "Motion for Delivery of Properties of the [RMC] in the
Possession of the [DBP] to the [MOLE] for Proper Disposition," stating that pursuant to Article 110 of the Labor
Code, they enjoy first preference over the mortgaged properties of RMC for the satisfaction of the judgment
rendered in their favor notwithstanding the foreclosure of the same by petitioner as mortgage creditor [Rollo,
pp. 16-17]. Petitioner filed its opposition.
In an order signed by Officer-in-Charge Romeo A. Young and dated December 11, 1986, private respondents'
motion was granted based on the finding that Article 110 of the Labor Code and the ruling laid down
in Philippine Commercial and Industrial Bank v. Natural Mines and Allied Workers' (NAMAWU-MIF) [G.R. No.
50402, August 19, 1982, 115 SCRA 873] support the conclusion that private respondents still enjoyed a
preferential lien for the payment of their backwages and separation benefits over the properties of RMC which
were foreclosed by petitioner [Rollo, pp. 21-22].
Petitioner then filed its motion for reconsideration on December 24,1986 contending that Article 110 of the
Labor Code finds no application in the case at bar for the following reasons: (1) The properties sought to be
delivered have ceased to belong to RMC in view of the fact that petitioner had foreclosed on the mortgage, and
the properties have been sold and delivered to third parties; (2) The requisite condition for the application of
Article 110 of the Labor Code is not present since no bankruptcy or insolvency proceedings over RMC
properties and assets have been undertaken [Rollo, pp. 24-28]. In an order dated July 29, 1987, petitioner's
motion for reconsideration was denied for lack of merit by Undersecretary Dionisio C. dela Serna.

Hence, petitioner filed this special civil action for certiorari with prayer for the issuance of a writ of preliminary
injunction. On August 27, 1987, this Court issued a temporary restraining order enjoining public respondent
from enforcing or carrying out its order dated July 29, 1987. After considering the allegations made and issues
raised in the petition, comments thereto and reply, the Court, on March 14, 1988, resolved to give due course
to the petition and to require the parties to submit their respective memoranda. Petitioner and private
respondent submitted their memoranda, while public respondent adopted as its memorandum the comment it
had previously submitted.
After a careful study of the various arguments adduced, as well as the legal provisions and jurisprudence on
the matter, the Court finds the petition impressed with merit. Indeed, the assailed Order suffers from infirmities
which must be rectified by the grant of a writ of certiorari in favor of petitioner.
Firstly, public respondent acted with grave abuse of discretion amounting to lack or excess of jurisdiction in
enforcing private respondents' right of first preference under Article 110 of the Labor Code notwithstanding the
absence of bankruptcy, liquidation or insolvency proceedings against RMC.
Article 110 of the Labor Code and Section 10, Rule VIII, Book III of the Omnibus Rules Implementing the Labor
Code provide the following:
Article 110. WORKER PREFERENCE IN CASE OF BANKRUPTCY.In the event of
bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as
regards wages due them for services rendered during the period prior to the bankruptcy or
liquidation, any provision of law to the contrary notwithstanding. Unpaid wages shall be paid in
full before other creditors may establish any claim to a share in the assets of the employer
[Emphasis supplied].
Section 10. PAYMENT OF WAGES IN CASE OF BANKRUPTCY. Unpaid wages earned by
the employees before the declaration of bankruptcy or judicial liquidation of the employer's
business shall be given first preference and shall be paid in full before other creditors may
establish any claim to a share in the assets of the employer.
It is clear from the wording of the law that the preferential right accorded to employees and workers under
Article 110 may be invoked only during bankruptcy or judicial liquidation proceedings against the employer. The
law is unequivocal and admits of no other construction.
Respondents contend that the terms "bankruptcy" or "liquidation" are broad enough to cover a situation where
there is a cessation of the operation of the employer's business as in the case at bar. However, this very same
contention was struck down as unmeritorious in the case of Development Bank of the Philippines vs. Hon.
Labor Arbiter Ariel C. Santos [G.R. Nos. 78261-62, March 8, 1989] involving a group of RMC employees which
sought to enforce its preference of credit Article 110 against DBP over certain RMC real properties. In that
case, the Court laid down the ruling that Article 110 of the Labor Code, which cannot be viewed in isolation of,
and must always be reckoned with the provisions of the Civil Code on concurrence and preference of credits,
may not be invoked by employees or workers of RMC like private respondents herein, in the absence of a
formal declaration of bankruptcy or a judicial liquidation order of RMC.
The rationale for making the application of Article 110 of the Labor Code contingent upon the institution of
bankruptcy or judicial liquidation proceedings against the employer is premised upon the very nature of a
preferential right of credit. A preference of credit bestows upon the preferred creditor an advantage of having
his credit satisfied first ahead of other claims which may be established against the debtor. Logically, it
becomes material only when the properties and assets of the debtor are insufficient to pay his debts in full; for if

the debtor is amply able to pay his various creditors in full, how can the necessity exist to determine which of
his creditors shall be paid first or whether they shall be paid out of the proceeds of the sale of the debtor's
specific property? Indubitably, the preferential right of credit attains significance only after the properties of the
debtor have been inventoried and liquidated, and the claims held by his various creditors have been
established [Kuenzle & Streiff (Ltd.) v. Villanueva, 41 Phil. 611 (1916); Barrette v. Villanueva, G.R. No. L-14938,
December 29, 1962, 6 SCRA 928; Philippine Savings Bank v. Lantin, G.R. No. L-33929, September 2, 1983,
124 SCRA 476].
In this jurisdiction, bankruptcy, insolvency and general judicial liquidation proceedings provide the only proper
venue for the enforcement of a creditor's preferential right such as that established in Article 110 of the Labor
Code, for these are in rem proceedings binding against the whole world where all persons having any interest
in the assets of the debtor are given the opportunity to establish their respective credits [Philippine Savings
Bank v. Lantin, supra; Development Bank of the Philippines v. Santos supra].
Secondly, public respondent's Order directing petitioner to deliver to the MOLE the properties it had foreclosed
from RMC for the purpose of executing the judgment rendered against RMC in Case No. NCR-LSED 7-334-84
violates the basic rule that the power of a court or tribunal in the execution of its judgment extends only over
properties unquestionably belonging to the judgment debtor [Special Services Corporation v. Centro La Paz,
G.R. No. L- 44100, April 28, 1983, 121 SCRA 748; National Mines and Allied Workers' Union v. Vera, G.R. No.
L-44230, November 19, 1984, 133 SCRA 295].
It appears on record, and remains undisputed by respondents, that petitioner had extra-judicially foreclosed the
subject properties from RMC as early as 1983 and purchased the same at public auction, and that RMC had
failed to exercise its right to redeem. Thus, when Officer-in-Charge Young issued on December 11, 1986 the
order which directed the delivery of these properties to the MOLE, RMC had ceased to be the absolute owner
thereof [See Dizon v. Gaborra, G.R. No. L-36821, June 22, 1978, 83 SCRA 688]. Consequently, the order was
directed against properties which no longer belonged to the judgment debtor RMC.
However, respondents, in citing the case of PCIB v. NAMAWU-MIF [supra], argue that by virtue of Article 110 of
the Labor Code, an "automatic first lien" was created in favor of private respondents on RMC propertiesa
"lien" which predated the foreclosure of the subject properties by petitioner, and remained vested on these
properties even after its sale to petitioner and other parties.
There is no merit to this contention. It proceeds from a misconception which must be corrected.
What Article 110 of the Labor Code establishes is not a lien, but a preference of credit in favor of employees
[See Republic v. Peralta, G.R. No. 56568, May 20, 1987, 150 SCRA 37]. This simply means that during
bankruptcy, insolvency or liquidation proceedings involving the existing properties of the employer, the
employees have the advantage of having their unpaid wages satisfied ahead of certain claims which may be
proved therein.
It bears repeating that a preference of credit points out solely the order in which creditors would be paid from
the properties of a debtor inventoried and appraised during bankruptcy, insolvency or liquidation proceedings.
Moreover, a preference does not exist in any effective way prior to, and apart from, the institution of these
proceedings, for it is only then that the legal provisions on concurrence and preference of credits begin to
apply. Unlike a lien, a preference of credit does not create in favor of the preferred creditor a charge or
proprietary interest upon any particular property of the debtor. Neither does it vest as a matter of course upon
the mere accrual of a money claim against the debtor. Certainly, the debtor could very well sell, mortgage or
pledge his property, and convey good title thereon, to third parties free from such preference [Kuenzle & Streiff
v. Villanueva,supra].

Incidentally, the Court is not unmindful of the 1989 amendments to the article introduced by Section 1, R.A. No.
6715 [March 21, 1989]. Article 110 of the Labor Code as amended reads:
WORKER PREFERENCE IN CASE OF BANKRUPTCY. In the event of bankruptcy or
liquidation of an employer's business, his workers shall enjoy first preference as regards their
unpaid wages and other monetary claims, any provision of law to the contrary
notwithstanding. Such unpaid wages and monetary claims shall be paid in full before the
claims of the Government and other creditors may be paid. [Amendments indicated.]
However, these amendments only relate to the scheme of concurrence and preference of credits; they do not
affect the issues heretofore discussed regarding the applicability of Article 110 to the attendant facts.
WHEREFORE, considering the foregoing, the present petition is hereby GRANTED. The assailed order dated
July 29, 1987 is SET ASIDE and the temporary restraining order issued by the Court on August 27, 1987 is
made PERMANENT.
SO ORDERED.
Fernan (C.J.), Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

FIRST DIVISION
[G.R. No. 128003. July 26, 2000]
RUBBERWORLD [PHILS.], INC., and JULIE YAO ONG, petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION, AQUINO MAGSALIN,
PEDRO MAIBO, RICARDO BORJA, ALICIA M. SAN PEDRO AND
FELOMENA B. TOLIN, respondents.
DECISION
PARDO, J.:
What is before the Court for resolution is a petition to annul the
resolution of the National Labor Relations Commission (NLRC),
affirming the labor-arbiter's award but deleting the moral and exemplary
damages.
[1]

The facts are as follows:

Petitioner Rubberworld (Phils.), Inc. [hereinafter Rubberworld], a
corporation established in 1965, was engaged in manufacturing
footwear, bags and garments.
Aquilino Magsalin, Pedro Manibo, Ricardo Borja, Benjamin Camitan,
Alicia M. San Pedro, and Felomena Tolin were employed as dispatcher,
warehouseman, issue monitor, foreman, jacks cementer and outer sole
attacher, respectively.
On August 26, 1994, Rubberworld filed with the Department of Labor
and Employment a notice of temporary shutdown of operations to take
effect on September 26, 1994. Before the effectivity date, however,
Rubberworld was forced to prematurely shutdown its operations.

On November 11, 1994, private respondents filed with the National

Labor Relations Commission a complaint against petitioner for illegal
dismissal and non-payment of separation pay.
[2]

On November 22, 1994, Rubberworld filed with the Securities and

Exchange Commission (SEC) a petition for declaration of suspension of
payments with a proposed rehabilitation plan.
[3]

On December 28, 1994, SEC issued the following order:

"Accordingly, with the creation of the Management Committee, all
actions for claims against Rubberworld Philippines, Inc. pending
before any court, tribunal, office, board, body, Commission or
sheriff are hereby deemed SUSPENDED.
"Consequently, all pending incidents for preliminary injunctions,
writ or attachments, foreclosures and the like are hereby rendered
moot and academic.
"SO ORDERED."

[4]

On January 24, 1995, petitioners submitted to the labor arbiter a motion

to suspend the proceedings invoking the SEC order dated December
28, 1994. The labor arbiter did not act on the motion and ordered the
parties to submit their respective position papers.
On December 10, 1995, the labor arbiter rendered a decision, which
provides:
"In the light of the foregoing, respondents are hereby declared
guilty of ILLEGAL SHUTDOWN and that respondents are ordered
to pay complainants their separation pay equivalent to one (1)
month pay for every year of service.
Considering the malicious act of closing the business precipitately
without due regard to the rights of complainants, moral damages
and exemplary damage in the sum of P 50,000.00 and P

30,000.00 respectively is hereby awarded for each of the

complainants.
Finally 10 % of all sums owing to complainants is hereby
adjudged as attorney's fees.
SO ORDERED."

[5]

On February 5, 1996, petitioners appealed to the National Labor

Relations Commission (NLRC) alleging abuse of discretion and serious
errors in the findings of facts of the labor arbiter.
On August 30, 1996, NLRC issued a resolution, the dispositive portion
of which reads:
"PREMISES CONSIDERED, the decision appealed from is
hereby, AFFIRMED with MODIFICATION in that the award of
moral and exemplary damages is hereby, DELETED.
SO ORDERED."

[6]

On November 20, 1996, NLRC denied petitioners' motion for

reconsideration.
Hence, this petition.

[7]

The issue is whether or not the Department of Labor and Employment,

the Labor Arbiter and the National Labor Relations Commission may
legally act on the claims of respondents despite the order of the
Securities and Exchange Commission suspending all actions against a
company under rehabilitation by a management committee created by
the Securities and Exchange Commission.
Presidential Decree No. 902-A is clear that "all actions for claims against
corporations, partnerships or associations under management or
receivership pending before any court, tribunal, board or body shall be
suspended accordingly." The law did not make any exception in favor of
labor claims.
[8]

"The justification for the automatic stay of all pending actions for claims
is to enable the management committee or the rehabilitation receiver to
effectively exercise its/his powers free from any judicial or extra judicial
interference that might unduly hinder or prevent the 'rescue' of the
debtor company. To allow such other actions to continue would only add
to the burden of the management committee or rehabilitation receiver,
whose time, effort and resources would be wasted in defending claims
against the corporation instead of being directed toward its restructuring
and rehabilitation."
[9]

Thus, the labor case would defeat the purpose of an automatic stay. To
rule otherwise would open the floodgates to numerous claims and would
defeat the rescue efforts of the management committee.
Besides, even if an award is given to private respondents, the ruling
could not be enforced as long as petitioner is under management
committee.
[10]

This finds ratiocination in that the power to hear and decide labor
disputes is deemed suspended when the Securities and Exchange
Commission puts the corporation under rehabilitation.
Thus, when NLRC proceeded to decide the case despite the SEC
suspension order, the NLRC acted without or in excess of its jurisdiction
to hear and decide cases. As a consequence, any resolution, decision
or order that it rendered or issued without jurisdiction is a nullity.
WHEREFORE, the petition is hereby GRANTED. The decision of the
labor arbiter dated December 10, 1995 and the NLRC resolution dated
August 30, 1996, are SET ASIDE.
No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago,
JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 96078 January 9, 1992

HILARIO RADA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Second Division) and PHILNOR CONSULTANTS AND
PLANNERS, INC., respondents.
Cabellero, Calub, Aumentado & Associates Law Offices for petitioner.

REGALADO, J.:
In this special civil action for certiorari, petitioner Rada seeks to annul the decision of respondent National
Labor Relations Commission (NLRC), dated November 19, 1990, reversing the decision of the labor arbiter
which ordered the reinstatement of petitioner with backwages and awarded him overtime pay. 1
The facts, as stated in the Comment of private respondent Philnor Consultants and Planners, Inc. (Philnor), are
as follows:

Petitioner's initial employment with this Respondent was under a "Contract of Employment for
a Definite Period" dated July 7, 1977, copy of which is hereto attached and made an integral
part hereof as Annex A whereby Petitioner was hired as "Driver" for the construction
supervision phase of the Manila North Expressway Extension, Second Stage (hereinafter
referred to as MNEE Stage 2) for a term of "about 24 months effective July 1, 1977.
xxx xxx xxx
Highlighting the nature of Petitioner's employment, Annex A specifically provides as follows:
It is hereby understood that the Employer does not have a continuing need
for the services of the Employee beyond the termination date of this contract
and that the Employee's services shall automatically, and without notice,
terminate upon the completion of the above specified phase of the project;
and that it is further understood that the engagement of his/her services is
coterminus with the same and not with the whole project or other phases
thereof wherein other employees of similar position as he/she have been
hired. (Par. 7, emphasis supplied)
Petitioner's first contract of employment expired on June 30, 1979. Meanwhile, the main
project, MNEE Stage 2, was not finished on account of various constraints, not the least of
which was inadequate funding, and the same was extended and remained in progress beyond
the original period of 2.3 years. Fortunately for the Petitioner, at the time the first contract of
employment expired, Respondent was in need of Driver for the extended project. Since
Petitioner had the necessary experience and his performance under the first contract of
employment was found satisfactory, the position of Driver was offered to Petitioner, which he
accepted. Hence a second Contract of Employment for a Definite Period of 10 months, that is,
from July 1, 1979 to April 30, 1980 was executed between Petitioner and Respondent on July
7, 1979. . . .
In March 1980 some of the areas or phases of the project were completed, but the bulk of the
project was yet to be finished. By that time some of those project employees whose contracts
of employment expired or were about to expire because of the completion of portions of the
project were offered another employment in the remaining portion of the project. Petitioner
was among those whose contract was about to expire, and since his service performance was
satisfactory, respondent renewed his contract of employment in April 1980, after Petitioner
agreed to the offer. Accordingly, a third contract of employment for a definite period was
executed by and between the Petitioner and the Respondent whereby the Petitioner was
again employed as Driver for 19 months, from May 1, 1980 to November 30, 1981, . . .
This third contract of employment was subsequently extended for a number of times, the last
extension being for a period of 3 months, that is, from October 1, 1985 to December 31, 1985,
...
The last extension, from October 1, 1985 to December 31, 1985 (Annex E) covered by an
"Amendment to the Contract of Employment with a Definite Period," was not extended any
further because Petitioner had no more work to do in the project. This last extension was
confirmed by a notice on November 28, 1985 duly acknowledged by the Petitioner the very
next day, . . .

Sometime in the 2nd week of December 1985, Petitioner applied for "Personnel Clearance"
with Respondent dated December 9, 1985 and acknowledged having received the amount of
P3,796.20 representing conversion to cash of unused leave credits and financial assistance.
Petitioner also released Respondent from all obligations and/or claims, etc. in a "Release,
Waiver and Quitclaim" . . .2
Culled from the records, it appears that on May 20, 1987, petitioner filed before the NLRC, National Capital
Region, Department of Labor and Employment, a Complaint for non-payment of separation pay and overtime
pay. On June 3, 1987, Philnor filed its Position Paper alleging, inter alia, that petitioner was not illegally
terminated since the project for which he was hired was completed; that he was hired under three distinct
contracts of employment, each of which was for a definite period, all within the estimated period of MNEE
Stage 2 Project, covering different phases or areas of the said project; that his work was strictly confined to the
MNEE Stage 2 Project and that he was never assigned to any other project of Philnor; that he did not render
overtime services and that there was no demand or claim for him for such overtime pay; that he signed a
"Release, Waiver and Quitclaim" releasing Philnor from all obligations and claims; and that Philnor's business
is to provide engineering consultancy services, including supervision of construction services, such that it hires
employees according to the requirements of the project manning schedule of a particular contract. 3
On July 2, 1987, petitioner filed an Amended Complaint alleging that he was illegally dismissed and that he was
not paid overtime pay although he was made to render three hours overtime work form Monday to Saturday for
a period of three years.
On July 7, 1987, petitioner filed his Position Paper claiming that he was illegally dismissed since he was a
regular employee entitled to security of tenure; that he was not a project employee since Philnor is not engaged
in the construction business as to be covered by Policy Instructions No. 20; that the contract of employment for
a definite period executed between him and Philnor is against public policy and a clear circumvention of the law
designed merely to evade any benefits or liabilities under the statute; that his position as driver was essential,
necessary and desirable to the conduct of the business of Philnor; that he rendered overtime work until 6:00
p.m. daily except Sundays and holidays and, therefore, he was entitled to overtime pay. 4
In his Reply to Respondent's Position Paper, petitioner claimed that he was a regular employee pursuant to
Article 278(c) of the Labor Code and, thus, he cannot be terminated except for a just cause under Article 280 of
the Code; and that the public respondent's ruling in Quiwa vs. Philnor Consultants and Planners, Inc. 5 is not

applicable to his case since he was an administrative employee working as a company driver, which
position still exists and is essential to the conduct of the business of Philnor even after the completion of
his contract of employment. 6 Petitioner likewise avers that the contract of employment for a definite
period entered into between him and Philnor was a ploy to defeat the intent of Article 280 of the Labor
Code.
On July 28, 1987, Philnor filed its Respondent's Supplemental Position Paper, alleging therein that petitioner
was not a company driver since his job was to drive the employees hired to work at the MNEE Stage 2 Project
to and from the filed office at Sto. Domingo Interchange, Pampanga; that the office hours observed in the
project were from 7:00 a.m. to 4:00 p.m. Mondays through Saturdays; that Philnor adopted the policy of
allowing certain employees, not necessarily the project driver, to bring home project vehicles to afford fast and
free transportation to and from the project field office considering the distance between the project site and the
employees' residence, to avoid project delays and inefficiency due to employee tardiness caused by
transportation problem; that petitioner was allowed to use a project vehicle which he used to pick up and drop
off some ten employees along Epifanio de los Santos Avenue (EDSA), on his way home to Marikina, Metro
Manila; that when he was absent or on leave, another employee living in Metro Manila used the same vehicle
in transporting the same employees; that the time used by petitioner to and from his residence to the project

site from 5:30 a.m. to 7:00 a.m. and from 4:00 p.m. to 6:00 p.m., or about three hours daily, was not overtime
work as he was merely enjoying the benefit and convenience of free transportation provided by Philnor,
otherwise without such vehicle he would have used at least four hours by using public transportation and spent
P12.00 daily fare; that in the case of Quiwa vs. Philnor Consultants and Planners, Inc., supra, the NLRC upheld
Philnor's position that Quiwa was a project employee and he was not entitled to termination pay under Policy
Instructions No. 20 since his employment was coterminous with the completion of the project.
On August 25, 1987, Philnor filed its Respondent's Reply/Comments to Complainant's Rejoinder and Reply,
submitting therewith two letters dated January 5, 1985 and February 6, 1985, signed by MNEE Stage 2 Project
employees, including herein petitioner, where they asked what termination benefits could be given to them as
the MNEE Stage 2 Project was nearing completion, and Philnor's letter-reply dated February 22, 1985
informing them that they are not entitled to termination benefits as they are contractual/project employees.
On August 31, 1989, Labor Arbiter Dominador M. Cruz rendered a decision 7 with the following dispositive

portion:
WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered:
(1) Ordering the respondent company to reinstate the complainant to his former position
without loss of seniority rights and other privileges with full backwages from the time of his
dismissal to his actual reinstatement;
(2) Directing the respondent company to pay the complainant overtime pay for the three
excess hours of work performed during working days from January 1983 to December 1985;
and
(3) Dismissing all other claims for lack of merit.
SO ORDERED.
Acting on Philnor's appeal, the NLRC rendered its assailed decision dated November 19, 1990, setting aside
the labor arbiter's aforequoted decision and dismissing petitioner's complaint.
Hence this petition wherein petitioner charges respondent NLRC with grave abuse of discretion amounting to
lack of jurisdiction for the following reasons:
1. The decision of the labor arbiter, dated August 31, 1989, has already become final and executory;
2. The case of Quiwa vs. Philnor Consultants and Planners, Inc. is not binding nor is it applicable to this case;
3. The petitioner is a regular employee with eight years and five months of continuous services for his
employer, private respondent Philnor;
4. The claims for overtime services, reinstatement and full backwages are valid and meritorious and should
have been sustained; and
5. The decision of the labor arbiter should be reinstated as it is more in accord with the facts, the law and
evidence.

The petition is devoid of merit.

1. Petitioner questions the jurisdiction of respondent NLRC in taking cognizance of the appeal filed by Philnor in
spite of the latter's failure to file a supersedeas bond within ten days from receipt of the labor arbiter's decision,
by reason of which the appeal should be deemed to have been filed out of time. It will be noted, however, that
Philnor was able to file a bond although it was made beyond the 10-day reglementary period.
While it is true that the payment of the supersedeas bond is an essential requirement in the perfection of an
appeal, however, where the fee had been paid although payment was delayed, the broader interests of justice
and the desired objective of resolving controversies on the merits demands that the appeal be given due
course. Besides, it was within the inherent power of the NLRC to have allowed late payment of the bond,
considering that the aforesaid decision of the labor arbiter was received by private respondent on October 3,
1989 and its appeal was duly filed on October 13, 1989. However, said decision did not state the amount
awarded as backwages and overtime pay, hence the amount of the supersedeas bond could not be
determined. It was only in the order of the NLRC of February 16, 1990 that the amount of the supersedeas
bond was specified and which bond, after an extension granted by the NLRC, was timely filed by private
respondent.
Moreover, as provided by Article 221 of the Labor Code, "in any proceeding before the Commission or any of
the Labor Arbiters, the rules of evidence prevailing in Courts of law or equity shall not be controlling and it is the
spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use every
and all reasonable means to ascertain the facts in each case speedily and objectively without regard to
technicalities of law or procedure, all in the interest of due process. 8 Finally, the issue of timeliness of the appeal being an
entirely new and unpleaded matter in the proceedings below it may not now be raised for the first time before this Court.

2. Petitioner postulates that as a regular employee, he is entitled to security of tenure, hence he cannot be
terminated without cause. Private respondent Philnor believes otherwise and asserts that petitioner is merely a
project employee who was terminated upon the completion of the project for which he was employed.
In holding that petitioner is a regular employee, the labor arbiter found that:
. . . There is no question that the complainant was employed as driver in the respondent
company continuously from July 1, 1977 to December 31, 1985 under various contracts of
employment. Similarly, there is no dispute that respondent Philnor Consultant & Planner, Inc.,
as its business name connotes, has been engaged in providing to its client(e)le engineering
consultancy services. The record shows that while the different labor contracts executed by
the parties stipulated definite periods of engaging the services of the complainant, yet the
latter was suffered to continue performing his job upon the expiration of one contract and the
renewal of another. Under these circumstances, the complaint has obtained the status of
regular employee, it appearing that he has worked without fail for almost eight years, a
fraction of six months considered as one whole year, and that his assigned task as driver was
necessary and desirable in the usual trade/business of the respondent employer. Assuming to
be true, as spelled out in the employment contract, that the Employer has no "continuing need
for the services of the Employe(e) beyond the termination date of this contract and that the
Employee's services shall automatically, and without notice, terminate upon completion of the
above specified phase of the project," still we cannot see our way clear why the complainant
was hired and his services engaged contract after contract straight from 1977 to 1985 which,
to our considered view, lends credence to the contention that he worked as regular driver
ferrying early in the morning office personnel to the company main office in Pampanga and
bringing back late in the afternoon to Manila, and driving company executives for inspection of
construction workers to the jobsites. All told, we believe that the complainant, under the

environmental facts obtaining in the case at bar, is a regular employee, the provisions of
written agreement to the
contrary notwithstanding and regardless of the oral understanding of the parties . . . 10
On the other hand, respondent NLRC declared that, as between the uncorroborated and unsupported
assertions of petitioners and those of private respondent which are supported by documents, greater credence
should be given the latter. It further held that:
Complainant was hired in a specific project or undertaking as driver. While such project was
still on-going he was hired several times with his employment period fixed every time his
contract was renewed. At the completion of the specific project or undertaking his employment
contract was not renewed.
We reiterate our ruling in the case of (Quiwa) vs. Philnor Consultants and Planners,
Inc., NLRC RAB III 5-1738-84, it is being applicable in this case, viz.:
. . . While it is true that the activities performed by him were necessary or
desirable in the usual business or trade of the respondent as consultants,
planners, contractor and while it is also true that the duration of his
employment was for a period of about seven years, these circumstances did
not make him a
regular employee in contemplation of Article 281 of (the) Labor Code. . . . 11
Our ruling in Sandoval Shipyards, Inc. vs. National Labor Relations Commission, et al. 12 is applicable to the

case at bar. Thus:

We hold that private respondents were project employees whose work was coterminous with
the project or which they were hired. Project employees, as distinguished from regular or nonproject employees, are mentioned in section 281 of the Labor Code as those "where the
employment has been fixed for a specific project or undertaking the completion or termination
of which has been determined at the time of the engagement of the employee."
Policy Instructions No. 20 of the Secretary of Labor, which was issued to stabilize employeremployee relations in the construction industry, provides:
Project employees are those employed in connection with a particular
construction project. Non-project (regular) employees are those employed by
a construction company without reference to any particular project.
Project employees are not entitled to termination pay if they are terminated
as a result of the completion of the project or any phase thereof in which they
are employed, regardless of the number of projects in which they have been
employed by a particular construction company. Moreover, the company is
not required to obtain clearance from the Secretary of Labor in connection
with such termination.
The petitioner cited three of its own cases wherein the National Labor Relations Commission,
Deputy Minister of Labor and Employment Inciong and the Director of the National Capital
Region held that the layoff of its project employees was lawful. Deputy Minister Inciong in TFU

Case No. 1530, In Re Sandoval Shipyards, Inc. Application for Clearance to Terminate
Employees, rendered the following ruling on February 26, 1979;
We feel that there is merit in the contention of the applicant corporation. To
our mind, the employment of the employees concerned were fixed for a
specific project or undertaking.For the nature of the business the corporation
is engaged into is one which will not allow it to employ workers for an
indefinite period.
It is significant to note that the corporation does not construct vessels for
sale or otherwise which will demand continuous productions of ships and will
need permanent or regular workers. It merely accepts contracts for
shipbuilding or for repair of vessels form third parties and, only, on occasion
when it has work contract of this nature that it hires workers to do the job
which, needless to say, lasts only for less than a year or longer.
The completion of their work or project automatically terminates their
employment, in which case, the employer is, under the law, only obliged to
render a report on the termination of the employment. (139-140, Rollo of
G.R. No. 65689) (Emphasis supplied)
In Cartagenas, et al. vs. Romago Electric Company, Inc., et al., 13 we likewise held that:
As an electrical contractor, the private respondent depends for its business on the contracts it
is able to obtain from real estate developers and builders of buildings. Since its work depends
on the availability of such contracts or "projects," necessarily the duration of the employment's
of this work force is not permanent but co-terminus with the projects to which they are
assigned and from whose payrolls they are paid. It would be extremely burdensome for their
employer who, like them, depends on the availability of projects, if it would have to carry them
as permanent employees and pay them wages even if there are no projects for them to work
on. (Emphasis supplied.)
It must be stressed herein that although petitioner worked with Philnor as a driver for eight years, the fact that
his services were rendered only for a particular project which took that same period of time to complete
categorizes him as a project employee. Petitioner was employed for one specific project.
A non-project employee is different in that the employee is hired for more than one project. A non-project
employee, vis-a-vis a project employee, is best exemplified in the case of Fegurin, et al. vs. National Labor
Relations Commission, et al. 14 wherein four of the petitioners had been working with the company for nine

years, one for eight years, another for six years, the shortest term being three years. In holding that
petitioners are regular employees, this Court therein explained:
Considering the nature of the work of petitioners, that of carpenter, laborer or mason, their
respective jobs would actually be continuous and on-going. When a project to which they are
individually assigned is completed, they would be assigned to the next project or a phase
thereof. In other words, they belonged to a "work pool" from which the company would draw
workers for assignment to other projects at its discretion. They are, therefore, actually "nonproject employees."

From the foregoing, it is clear that petitioner is a project employee considering that he does not belong to a
"work pool" from which the company would draw workers for assignment to other projects at its discretion. It is
likewise apparent from the facts obtaining herein that petitioner was utilized only for one particular project, the
MNEE Stage 2 Project of respondent company. Hence, the termination of herein petitioner is valid by reason of
the completion of the project and the expiration of his employment contract.
3. Anent the claim for overtime compensation, we hold that petitioner is entitled to the same. The fact that he
picks up employees of Philnor at certain specified points along EDSA in going to the project site and drops
them off at the same points on his way back from the field office going home to Marikina, Metro Manila is not
merely incidental to petitioner's job as a driver. On the contrary, said transportation arrangement had been
adopted, not so much for the convenience of the employees, but primarily for the benefit of the employer,
herein private respondent. This fact is inevitably deducible from the Memorandum of respondent company:
The herein Respondent resorted to the above transport arrangement because from its
previous project construction supervision experiences, Respondent found out that project
delays and inefficiencies resulted from employees' tardiness; and that the problem of
tardiness, in turn, was aggravated by transportation problems, which varied in degrees in
proportion to the distance between the project site and the employees' residence. In view of
this lesson from experience, and as a practical, if expensive, solution to employees' tardiness
and its concomitant problems, Respondent adopted the policy of allowing certain employees
not necessarily project drivers to bring home project vehicles, so that employees could
be afforded fast, convenient and free transportation to and from the project field office. . . . 15
Private respondent does not hesitate to admit that it is usually the project driver who is tasked with picking up
or dropping off his fellow employees. Proof thereof is the undisputed fact that when petitioner is absent, another
driver is supposed to replace him and drive the vehicle and likewise pick up and/or drop off the other
employees at the designated points on EDSA. If driving these employees to and from the project site is not
really part of petitioner's job, then there would have been no need to find a replacement driver to fetch these
employees. But since the assigned task of fetching and delivering employees is indispensable and
consequently mandatory, then the time required of and used by petitioner in going from his residence to the
field office and back, that is, from 5:30 a.m. to 7:00 a.m. and from 4:00 p.m. to around 6:00 p.m., which the
labor arbiter rounded off as averaging three hours each working day, should be paid as overtime work.
Quintessentially, petitioner should be given overtime pay for the three excess hours of work performed during
working days from January, 1983 to December, 1985.
WHEREFORE, subject to the modification regarding the award of overtime pay to herein petitioner, the
decision appealed from is AFFIRMED in all other respects.
SO ORDERED.
Melencio-Herrera, Paras and Padilla, JJ., concur.
Nocon, J., took no part.

Footnotes

Republic of the Philippines

SUPREME COURT
Manila

G.R. No. L-31341 March 31, 1976

PHILIPPINE AIR LINES EMPLOYEES ASSOCIATION (PALEA) and PHILIPPINE AIR LINES
SUPERVISORS' ASSOCIATION (PALSA), petitioners,
vs.
PHILIPPINE AIR INES, INC., respondent.
G.R. No. L-31341-43 March 31, 1976
PHILIPPINE AIR LINES, INC., petitioner,
vs.
PHILIPPINE AIR LINES EMPLOYEES' ASSOCIATION, PHILIPPINE AIR LINES SUPERVISORS'
ASSOCIATION, and the COURT OF INDUSTRIAL RELATIONS, respondents.
Siguion Reyna, Montecillo, Belo & Ongsiako for Philippines Air lines, Inc.
Laquihon & Legayada for Philippine Air Lines Supervisors' Association (PALEA).

MAKASIAR, J.:
Before US are consolidated petitions to review the Court of industrial Relations en banc resolution dated
October 9, 1969 in CIR Case No. 43-IPA.
In G.R. No. L-31341 (PALEA vs. PAL), petitioners question the date of effectivity of the adjudicated pay
differentials due to the monthly-salaried employees of Philippine Air Lines, Inc.
In G.R. No. L-31343 (PAL vs. PALEA), petitioner assails the reversal by the Court of Industrial Relations of its
earlier resolution on the method employed by the Philippine Air Lines in computing the basic daily and hourly
rate of its monthly salaried employees.
On February 14, 1963, the Philippine Air Lines Employees' Association (PALEA) and the Philippine Air Lines
Supervisors' Association (PALSA) petitioners in G.R. No. L-31341 and respondents in G.R. No. 31343
commenced an action against the Philippine Air Lines (PAL) in the Court of Industrial Relations, praying that

PAL be ordered to revise its method of computing the basic daily and hourly rate of its monthly salaried
employees, and necessarily, to pay them their accrued sala differentials.
Sought to be revised is PAL's formula in computing wages of its employees:
Monthly salary x 12 365 (No. of calendar = x (Basic dailr rate) days in a year)
x 8 = Basic hourly rate
The unions would like PAL to modify the above formula in this wise:
Monthly salary x 12 No. of actual working = x (Basic daily rate) days
x 8 = Basic hourly rate
On May 23, 1964, the Court of Industrial Relations, through Presiding Judge Jose S. Bautista, issued an order
denying the unions' prayer for a modified wage formula. Pertinent portion of the order reads:
On the issue of rate of pay, PALSA and PALEA seek to change the long standing method in
PAL of computing the basic daily and hourly rate of monthly salaried employees for the
purpose of determining overtime pay, Sunday and legal holiday premium pay, night differential
pay, vacation and sick leave pay, to wit, the monthly salary multiplied by 12 and dividing the
product thereof by 365 and then the quotient by 8. PALEA and PALSA claim that the method
of computing the basic daily and hourly rate of monthly salaried employees of PAL prior to the
implementation of the 40-hour week schedule in PAL should be by dividing the monthly salary
by 26 working days, and after the 40-hour week schedule, by dividing the monthly salary by
20 working days, and then dividing the quotient thereof in each case by 8. From the records,
however, it appears that for may years since 1952, and even previously, PAL has been
consistently and regularly determining the basic and hourly rates of monthly salaried
employees by multiplying the monthly salary by 12 momths and dividing the product by 365
days to arive at the basic daily rate, and dividing the quotient by 8 to compute the basic hourly
rate. There has been no attempt to revise this formula notwithstanding the various
negotiations PAL and with the unions ever since its operations, and it was only on July 18,
1962, when PALSA, for the first time, proposed that it be changed in accordance with what is
now alleged in the petition. This, however, was a mere proposal by PALSA for the adoption of
a new formula; it was not a demand for the application of a formula claimed to be correct
under the law. Under this circumstance, PALSA and PALEA are estopped from questioning the
correctness and propriety of PAL's method of determining the basic hourly and daily rate of
pay of its monthly salaried personnel, and considering the long period of time that elapsed
before they brought their petition, are barred from insisting or demanding a different rate of
pay formula.
xxx xxx xxx
Upon the foregoing, the Court, therefore, declares PAL's method of computing the basic daily
and hourly rate of its monthly salaried employees as legal and proper, and denies the petition
of PALSA and PALEA.
xxx xxx xxx

(pp. 47-48, 49, rec. G.R. No. L-31343).

On May 30, 1964, complaining unions promptly moved for the reconsideration of the above-sais order (p. 51,
rec. G.R. No. L-31343).
On June 9, 1964, the unions filed their memorandum in support of their motion for reconsideration alleging that
the questioned order is (a) contrary to law, and (b) contrary to evidence adduced during the trial (p. 53, ree
G.R. No. L-31343).
The unions attributed error to PAL's wage formula, particularly in the use of 365 days as divisor. The unions
contended that the use of 365 days as divisor would necessarily include off-days which, under the terms of the
collective bargaining agreements entered into between the parties, were not paid days. This is so since for
work done on an off-day, an employee was paid 100% plus 25%, or 100% plus 37- of his regular working
hour rate.
On the issue of prescription, the unions pointed out:
With respect to the period of prescription, it is clear that since the claim arises from the written
contracts or collective bargaining agreements between the petitioner unions and the PAL, the
action thereon prescribes in ten years from the time the right of action accrues, in accordance
with Article 1144 of the New Civil Code. .... (p. 68, rec., G.R. No. L-31343).
On June 26, 1964, the Philippine Air Lines answered point by point the unions' memorandum, in a prompt reply.
On October 9, 1969, the Court of Industrial Relations, through Presiding Judge Arsenio I. Martinez, ordered the
reversal of its decision dated May 34, 1964 and sustained the unions' method of age computation.
The industrial court, however, ordered the computation of pay differentials in accordance with the sustained
method of computation effective only July 1, 1957.
Said the Court of Industrial Relations in this regard:
... In this connection, however, it will be noted as previously stated, that this case was
considered as an incident of Case No. 39-IPA, in which the issues involved were related to the
respondent PAL of the 40-Hour Week Law (Rep. Act 1880) from the date of its effectivity July
1, 1957. ...
This Cout therefore belives that in justice and equity and substantial merits of the case, the
aforesaid pay differentials due to the employees involved herein by the application of the
correct methods of computation of the rate of pay should be paid by the respondent also
beginning July 1, 1957 (p. 117, rec., G.R. No. L-31343).
From the above resolution, both parties appealed to this COURT. The Philippine Air Lines filed its appeal
petition on December 13, 1969, while PALEA filed its petition for review on certiorari on January 3, 1970.
I
For easy comprehension, WE start with the Philippine Air Lines, Inc. versus Philippine Air Lines Employees
Association, Philippine Air Lines Supervisors Association, and the Court of Industrial Relations, G.R. No. L31343.

In this appeal PAL emphasizes three assignments of error, to wit:

1. RESPONDENT CIR ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION IN
HOLDING THAT THE METHOD OF COMPUTATION USED BY PAL IN DETERMINING TIIE
BASIC DAILY OR HOURLY RATE OF ITS MONTLY SALARIED EMPLOYEES WHICH IS:
MONTHLY SALARY x 1 365 (NO. OF CALENDAR DAYS IN YEAR) = x (BASIC DAILY RATE)
x 8 = BASIC HOURLY RATE 8
IS NOT CORRECT, CONSIDERING THAT PAL, A PUBLIC UTILITY WHERE THERE IS
WORK EVERYDAY OF THE WEEK FOR MANY YEARS EVEN BEFORE REPUBLIC ACT
602 AND WITH THE CONSENT AND APPROVAL OF THE EMPLOYEES, CONSISTENT
WITH SECTION 19 OF REPUBLIC ACT 602 PROHIBITING REDUCTION OF WAGES FOR
OFF DAYS-WHICH WAS SUSTAINED BY THIS HONORABLE COURT IN AUTOMOTIVE
PARTS & EQUIPMENT CO., INC. VS. JOSE B. LINGAD,G.R. NO. L- 26406, OCTOBER 31,
1969 HAS BEEN TREATING OFFSITE DAYS, 11 AS SATURDAYS, SUNDAYS,
COMPANY OBSERVED HOLIDAYS OR ANY OTHER DESIGNATED HOLIDAYS AS PAID
DAYS.
2. RESPONDENT CIR ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION IN NOT
FINDING. THAT RESPONDENT UNIONS, BY THEIR LONG PERIOD OF CONSENT,
ACQUIESCENCE, INACTION AND ACCEPTANCE OF BENEFITS THEREUNDER, ARE
ESTOPPED AND BARRED FROM CLAIMING THAT PAL'S FORMULA FOR DETERMINING
THE BASIC DAILY AND HOURLY RATE OF PAY IS INCORRECT.
3. RESPONDENT CIR ERED AND ACTED IN EXCESS OF ITS JURISDICTION IN
SENTENCING PAL TO PAY DIFFERENTIALS FOR OVERTIME WORK, NIGHTWORK,
HOLIDAY AND SUNDAY PAY FROM JULY 1, 1957 CONSIDERING THAT UNDER THE
THREE-YEAR PRESCRIPTIVE PERIOD PROVIDED IN SECTION 7-a OF
COMMONWEALTH ACT NO. 444, AS AMENDED, THE EIGHT-HOUR LABOR LAW,
RESPONDENT UNIONS, ASSUMING THEY HAD ANY CAUSE OF ACTION, COULD
RECOVER ONLY FROM FEBRUARY 14, 1960 UP TO THE PRESENT, SINCE
RESPONDENT UNIONS FILED THEIR ACTION ONLY ON FEBRUARY 14, 1963.
A
PAL's maiden argument has a strong tendency to mislead. In an effort to emphasize that off-days are paid and
therefore should be reckoned with in determing the divisor for computing daily and hourly rate, PAL leans
heavily on what it considers as additional payment of 125% or 137 %, as the case may be, of an employee's
basic hourly rate, given to a worker who worked on his off-days. PAL would like us to believe that the word
"Additional" all but accentuates the existence of a regular basic rate; otherwise, the 125% or 137% shall be in
addition to what?
The industrial court, however, had this to say:
Moreover, it will be noted that before September 4, 1961, a monthly salaried employee of PAL
had to work 304 days only in a year,a nd after said date, he had to work only 258 days in
ayear, to be entitled to his equivalent yearly salary. When he worked on his off-day, he was
paid accordingly (125% or 137%), indicating that his off-days were not with pay. It seems

illogical for said employe to be paid 125% or 137 % of his basic daily rate, if such off-days
are already wtih pay, as indicated by the company (p. 107, rec., G.R. No. L-31343, emphasis
supplied).
WE agree.
There should hardly be any doubt that off-days are not paid days, Precisely, off-days are rest days for the
worker. He is not required to work on such days. This finds support not only in the basic principle in labor that
the basis of remuneration or compensation is actual service rendered, but in the ever pervading labor spirit
aimed at humanizing the conditions of hie working man.
Since during his off-days an employee is not compelled to work he cannot, conversely, demand for his
corresponding pay. If, however, a worker works on his off-day, our welfare laws duly reward him with a premium
higher than what he would receive when he works on his regular working day.
Such being the case, the divisor in computing an employee's basic daily rate should be the actual working days
in a yar The number of off-days are not to be counted precisely because on such off-days, an employee is not
required to work.
Simple common sense dictates that should an employee opt not to work which he can legally do on an
off-day, and for such he gets no pay, he would be unduly robbed of a portion of his legitimate pay if and when in
computing his basic daily and hourly rate, such off-day is deemed subsumed by the divisor. For it is elementary
in the fundamental process of division that with a constant dividend, the bigger your divisor is, the smaller our
quotient will be.
It bears emphasis that OUR view above constitutes the rationale behind the landmark ruling, surprisingly, by
the same trial Judge Jose S. Bautista of the Court of Industrial Relations, in National Waterworks and
Sewerage Authority vs. NWSA Consolidated Unions, et al., (G.R. No. L-18938, August 31, 1964, 11 SCRA 766,
793-794), to which decision WE gave OUR affirmance.
PAL maintains that the NAWASA doctrine should not apply to a public utility like PAL which, from the nature of
its operations, requires a whole-year-round, uninterrupted work by personnel. What PAL apparently forgets is
that just like it, NAWASA is also a public utility which likewise requires its workers to work the whole year round.
Moreover, the NAWASA is a government-owned corporation to which PAL is akin, it being a governmentcontrolled corporation.
As will later be stated herein, PAL inked with the representative unions of the employees collective bargaining
agreements wherein it bound itself to duly compensate employer working on their off-days. The same situation
obtained in the NAWASA case, wherein WE held:
And in the collective bargaining agreement entered into between the NAWASA and
respondent unions it was agreed that all existing benefits enjoyed by the employees and
laborers prior to its effectivity shall remain in force and shall form part of the agreement,
among which certainly is the 25% additional compensation for work on Sundays and legal
holidays theretofore enjoyed by said laborers and employees. It may, therefore, be said that
while under Commonwealth Act No. 444 a public utility is not required to pay additional
compensation to its employees and workers for work done on Sundays and legal holidays,
there is, however, no prohibition ofr it to pay such additional compensation if it voluntarily
agrees to do so. The NAWASA committed itself to pay this additional compensation. It must

pay not because of compulsion of law but because of contractual obligation (11 SCRA 766,
776).
The settled NAWASA doctrine should not be disturbed.
B
PAL also vigorously argues that the unions' longstanding silence with respect, and acquiescence, to PAL's
method of computation has placed them in estoppel to impugn the correctness of the questioned wage formula.
PAL furthermore contends that laches has likewise set in precisely because of stich long-standing inaction.
Our jurisprudence on estoppel is, however, to the effect that:
... (I)t is meet to recall that "mere innocent silence will not work estoppel. There must also be
some element of turpitude or neglignece connected with the silence by which another is
misled to his injury" (Civil Code of the philippines by Tolentino, Vol. IV, p. 600) ... [Beronilla vs.
GSISK, G.R. No. L-21723, Nov. 26, 1970, 36 SCRA 44, 46, 55, emphasis supplied].
In the case befor US, it is not denied that PAL's formula of determining daily and hourly rate of pay has been
decided and adopted by it unilaterally without the knowedge and express consent of the employees. It was only
later on that the employees came to know of the formula's irregularity and its being violative of the collective
bargaining agreements previously executed by PAL and the unions. Precisely, PALSA immediately proposed
that PAL and the unions. Precisely, PALSA immediately proposed that PAL use the correct method of
computation, which proposa PAL chose to ignore.
Clearly, therefore, the alleged long-standing silence by the PAL employees is in truth and in fact innocent
silence,which cannot place a party in estoppel.
The rationale for this is not difficult to see. The doctrine of estoppel had its origin in equity. As such, its
applicability depends, to a large extent, on the circumstances surrounding a particular case. Where, therefore,
the neglect or omission alleged to haveplaced a party in estoppel cannot be invoked. This was the essence of
OUR ruling in the case of Mirasol vs. Municipality of Tabaco (43 Phil. 610, 614). And this, in quintessence, was
the compelling reason why in Lodovica vs. Court of Appeals (L-29678, July 18, 1975, 65 SCRA 154, 158), WE
held that a party who had no knowledge of or gave no consent to a transaction may not be estopped by it.
Furthermore, jurisprudence likewise fortifies the position that in the interest of public policy, estoppel and laches
cannot arrest recover of evertime compensation. The case of Manila Terminal Co. vs. CIR (G.R. NO. L-9265,
April 29, 1957, 91 Phil. 625), is squarely in point. In this case We intoned.
The principle of estoppel and laches cannot well be invoked agains the Association. In the first
place, it would be contrary to the spirit of the Eight-Hour Labor Law, under which, as already
seen, the laborers cannot waive their right to extra compensation. In the second place, the law
principally obligates the employer to observe it, as much so that it punishes the employer for
its employer for its violation and leaves the employee or laborer is in such a disadvantageous
position as to be naturally reluctant or even apprehensive in asserting any claim which may
cause the employher to devise a way for exercising his right to terminate the employment.
If the principle of estoppel and laches is to be applied, it may bring about a situation, whereby
theemployee or laborer, who cannot expressly renounce their right to extra compensation
under the Eight-Hour Labor Law, may be compelled to accomplish the same thing by mere

silence or lapse of time, thereby frustrating the purpose of the law by indirection (91 Phil. 625,
633, emphasis supplied).
In another count, the unilateral adoption by PAL of an irregular wage formula being an act against public policy,
the doctrine of estoppel cannot give validity to the same (Auyong Hian vs. Court of Tax Appeals, 59 SCRA 110,
112).
II
G.R. No. L-31341 is an appeal from that portion of the en banc resolution of the Court of Industrial Relations
dated October 9, 1969 in case 43-IPA making the payment of the adjudicated pay differentials effective only
from July 1, 1957.
In their lone assignment of error, February 14, 1953, or ten (10) years from the date of the filing of their original
complaint; because the claim for pay differentials is based on written contracts i.e., the collective bargaining
agreements between PAL and the employees' representative uniuons and under Article 1144(1) of the Civil
Code, actions based on written contracts prescribe in ten (10) years.
PAL, on the other hand, maintains that the employees' claim for pay differential is"an action to enforce a cause
of action under the Eight-Hour Labor Law (CA No. 444, as amended): (p. 592, rec., G.R. No. L-31341). As
such, the applicable provision is Section 7-a of CA No. 4444, which reads:
Sec. 7-a. Any action to enforce any cause of action under this Act shall be commenced within
three years after the cause of action accrued, otherwise such action shall be forever barred;
provided, however, that actions already commenced before the effecitve date of this Act shall
not be affected by the period herein prescribed (As amended by Rep. Act No. 1993, approved
June 22, 1957, emphasis supplied).
Moreover, PAL argues that even assuming that the issue calls for the application of Article 1144(1) of the New
Civil Code, a general law, still in case of conflict, Commonwealth ACt No. 444, as amended, should prevail
because the latter is a special law.
WE believe that the present case calls for the application of the Civil Code provisions on the prescriptive period
in the filing of actions based on written contracts. The rason should be fairly obvious. Petitioners' claim
fundamentally involves the strict compliance by PAL of the pvosions on wage computation embodied in the
collective bargaining agreements inked between it and the employees representative unions. These collective
bargaining agreements were: the PAS-PALEA collective bargaining agreement of 1952-53; the PAL-PALEA
collective bargaining agreement of 1956-59; the PAL-PALEA collective bargaining agreement of 1959-61 (with
Article VI as supplement); the PAL-PALEA agreement of September 4, 1961; the PAL-ACAP collective
bargaining agreement of 1952-54; the PAL-ACAP collective bargaining agreement of September 6, 1955; the
PAL-ACAP collective bargaining agreement of 1959-61; the PAL-PALSA collective bargaining agreement of
1959-62; and the supplementary PAL-PALSA collective bargaining agreement (pp. 54-55, rec., G.R. No. L31343).
The three-year prescribed period fixed in the Eight-Hour Labor Law (CA No. 444, as amended) will apply, if the
claim for differentials for overtime work is solely based on said law, and not on a collective bargaining
agreement or any other contract. In the instant cases, the claim for overtime compensation is not so much
because of Commonwealth Act No. 444, as amended, but because the claim is a demandable right of the
employees, by reason of the above-mentioned collective bargaining agreements. That is precisely why
petitioners did not make any reference as to the computation for overtime work under the Eight-Hour Labor

Law (Secs. 3 and 4, CA No. 444), and instead inissited that work computation provided in the collective
bargaining agreements between the parties be observed. Since the claim for pay differentials is principally
anchored on the written contracts between the litigants, the ten-year prescriptive period between the litigants,
the ten-year prescriptive period provided by Art. 1144(1) of the New Civil Code should govern. (General
Insurance and Surety Corp. vs. Republic, L-13873, January 31, 1963, 7 SCRA 4; Heirs of the Deceased Juan
Sindiong vs. Committee on Burnt Areas and Improvements of Cebu, L-15975, April 30, 1964, 10 SCRA 715;
Conde vs. Cuenca and Malaga, L-9405, July 31, 1956; Veluz vs. Veluz, L-23261, July 31, 1968, 24 SCRA 559).
Finally, granting arguendo that there is doubt as to what labor legislation to apply to the grievances of the
employees in the cases at bar, it is OUR view that that legislation which would enhance the plight of the
workers should be followed, consonant with the express pronouncement of the New Civil Code that:
In case of doubt, all labor legislation and labor contracts should be construed in favor of the
safety and decent living of the laborer (Article 1702).
WHEREFORE, THE APPEALED RESOLUTION IS HEREBY AFFIRMED, WITH THE MODIFICATION THAT
PAY DIFFERENTIALS BE PAID EFFECTIVE FEBRUARY 14, 1953. WITH COSTS AGAINST PHILIPPINE AIR
LINES, INC. IN BOTH CASES.
Teehankee (Chairman), Esguerra, Muoz Palma and Martin, JJ., concur.

FIRST DIVISION
[G.R. No. 142824. December 19, 2001]

INTERPHIL LABORATORIES EMPLOYEES UNION-FFW, ENRICO

GONZALES
and
MA.
THERESA
MONTEJO,petitioners, vs. INTERPHIL LABORATORIES, INC., AND
HONORABLE LEONARDO A. QUISUMBING, SECRETARY OF
LABOR AND EMPLOYMENT, respondents.
DECISION
KAPUNAN, J.:

Assailed in this petition for review on certiorari are the decision, promulgated on 29
December 1999, and the resolution, promulgated on 05 April 2000, of the Court of Appeals in
CA-G.R. SP No. 50978.
Culled from the questioned decision, the facts of the case are as follows:
Interphil Laboratories Employees Union-FFW is the sole and exclusive bargaining agent of
the rank-and-file employees of Interphil Laboratories, Inc., a company engaged in the business of
manufacturing and packaging pharmaceutical products. They had a Collective Bargaining
Agreement (CBA) effective from 01 August 1990 to 31 July 1993.
Prior to the expiration of the CBA or sometime in February 1993, Allesandro G. Salazar,
Vice-President-Human Resources Department of respondent company, was approached by
Nestor Ocampo, the union president, and Hernando Clemente, a union director. The two union
officers inquired about the stand of the company regarding the duration of the CBA which was
set to expire in a few months. Salazar told the union officers that the matter could be best
discussed during the formal negotiations which would start soon.
[1]

In March 1993, Ocampo and Clemente again approached Salazar. They inquired once more
about the CBA status and received the same reply from Salazar.In April 1993, Ocampo requested
for a meeting to discuss the duration and effectivity of the CBA. Salazar acceded and a meeting
was held on 15 April 1993 where the union officers asked whether Salazar would be amenable to
make the new CBA effective for two (2) years, starting 01 August 1993. Salazar, however,
declared that it would still be premature to discuss the matter and that the company could not
make a decision at the moment. The very next day, or on 16 April 1993, all the rank-and-file
employees of the company refused to follow their regular two-shift work schedule of from 6:00
a.m. to 6:00 p.m., and from 6:00 p.m. to 6:00 a.m. At 2:00 p.m. and 2:00 a.m., respectively, the
employees stopped working and left their workplace without sealing the containers and
securing the raw materials they were working on. When Salazar inquired about the reason for
their refusal to follow their normal work schedule, the employees told him to "ask the union

officers." To minimize the damage the overtime boycott was causing the company, Salazar
immediately asked for a meeting with the union officers. In the meeting, Enrico Gonzales, a
union director, told Salazar that the employees would only return to their normal work schedule
if the company would agree to their demands as to the effectivity and duration of the new
CBA. Salazar again told the union officers that the matter could be better discussed during the
formal renegotiations of the CBA. Since the union was apparently unsatisfied with the answer of
the company, the overtime boycott continued. In addition, the employees started to engage in a
work slowdown campaign during the time they were working, thus substantially delaying the
production of the company.[2]
On 14 May 1993, petitioner union submitted with respondent company its CBA proposal,
and the latter filed its counter-proposal.
On 03 September 1993, respondent company filed with the National Labor Relations
Commission (NLRC) a petition to declare illegal petitioner unions overtime boycott and work
slowdown which, according to respondent company, amounted to illegal strike. The case,
docketed NLRC-NCR Case No. 00-09-05529-93, was assigned to Labor Arbiter Manuel R.
Caday.
On 22 October 1993, respondent company filed with the National Conciliation and
Mediation Board (NCMB) an urgent request for preventive mediation aimed to help the parties
in their CBA negotiations.[3] The parties, however, failed to arrive at an agreement and on 15
November 1993, respondent company filed with Office of the Secretary of Labor and
Employment a petition for assumption of jurisdiction.
On 24 January 1994, petitioner union filed with the NCMB a Notice of Strike citing unfair
labor practice allegedly committed by respondent company. On 12 February 1994, the union
staged a strike.
On 14 February 1994, Secretary of Labor Nieves Confesor issued an assumption
order[4] over the labor dispute. On 02 March 1994, Secretary Confesor issued an order directing
respondent company to immediately accept all striking workers, including the fifty-three (53)
terminated union officers, shop stewards and union members back to work under the same terms
and conditions prevailing prior to the strike, and to pay all the unpaid accrued year end benefits
of its employees in 1993.[5] On the other hand, petitioner union was directed to strictly
and immediately comply with the return to work orders issued by (the) Office x x x. [6] The same
order pronounced that (a)ll pending cases which are direct offshoots of the instant labor dispute
are hereby subsumed herewith.[7]
In the interim, the case before Labor Arbiter Caday continued. On 16 March 1994, petitioner
union filed an Urgent Manifestation and Motion to Consolidate the Instant Case and to Suspend

Proceedings seeking the consolidation of the case with the labor dispute pending before the
Secretary of Labor. Despite objection by respondent company, Labor Arbiter Caday held in
abeyance the proceedings before him. However, on 06 June 1994, Acting Labor Secretary Jose S.
Brillantes, after finding that the issues raised would require a formal hearing and the presentation
of evidentiary matters, directed the Labor Arbiters Caday and M. Sol del Rosario to proceed with
the hearing of the cases before them and to thereafter submit their report and recommendation to
his office.
On 05 September 1995, Labor Arbiter Caday submitted his recommendation to the then
Secretary of Labor Leonardo A. Quisumbing.[8] Then Secretary Quisumbing approved and
adopted the report in his Order, dated 13 August 1997, hence:

WHEREFORE, finding the said Report of Labor Arbiter Manuel R. Caday to be

supported by substantial evidence, this Office hereby RESOLVES to APPROVE and
ADOPT the same as the decision in this case, and judgment is hereby rendered:
(1) Declaring the overtime boycott and work slowdown as illegal strike;
(2) Declaring the respondent union officers namely:
Nestor Ocampo - President
Carmelo Santos - Vice-President
Marites Montejo - Treasurer/Board Member
Rico Gonzales - Auditor
Rod Abuan - Director
Segundino Flores - Director
Hernando Clemente - Director
who spearheaded and led the overtime boycott and work slowdown, to have lost
their employment status; and
(3) Finding the respondents guilty of unfair labor practice for violating the
then existing CBA which prohibits the union or any employee during the
existence of the CBA from staging a strike or engaging in slowdown or

interruption of work and ordering them to cease and desist from further
committing the aforesaid illegal acts.
Petitioner union moved for the reconsideration of the order but its motion was denied. The
union went to the Court of Appeals via a petition for certiorari. In the now questioned decision
promulgated on 29 December 1999, the appellate court dismissed the petition. The unions
motion for reconsideration was likewise denied.
Hence, the present recourse where petitioner alleged:

THE HONORABLE FIFTH DIVISION OF THE COURT OF APPEALS, LIKE THE

HONORABLE PUBLIC RESPONDENT IN THE PROCEEDINGS BELOW,
COMMITTED GRAVE ABUSE OF DISCRETION, AMOUNTING TO LACK
AND/OR EXCESS OF JURISDICTION WHEN IT COMPLETELY
DISREGARDED PAROL EVIDENCE RULE IN THE EVALUATION AND
APPRECIATION OF EVIDENCE PROFERRED BY THE PARTIES.
THE HONORABLE FIFTH DIVISION OF THE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION, AMOUNTING TO LACK
AND/OR EXCESS OF JURISDICTION, WHEN IT DID NOT DECLARE PRIVATE
RESPONDENTS ACT OF EXTENDING SUBSTANTIAL SEPARATION
PACKAGE TO ALMOST ALL INVOLVED OFFICERS OF PETITIONER UNION,
DURING THE PENDENCY OF THE CASE, AS TANTAMOUNT TO
CONDONATION, IF INDEED, THERE WAS ANY MISDEED COMMITTED.
THE HONORABLE FIFTH DIVISION OF THE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION, AMOUNTING TO LACK
AND/OR EXCESS OF JURISDICTION WHEN IT HELD THAT THE SECRETARY
OF LABOR AND EMPLOYMENT HAS JURISDICTION OVER A CASE (A
PETITION TO DECLARE STRIKE ILLEGAL) WHICH HAD LONG BEEN FILED
AND PENDING BEFORE THE LABOR ARBITER.[9]
We sustain the questioned decision.
On the matter of the authority and jurisdiction of the Secretary of Labor and Employment to
rule on the illegal strike committed by petitioner union, it is undisputed that the petition to
declare the strike illegal before Labor Arbiter Caday was filed long before the Secretary of Labor
and Employment issued the assumption order on 14 February 1994. However, it cannot be
denied that the issues of overtime boycott and work slowdown amounting to illegal strike before

Labor Arbiter Caday are intertwined with the labor dispute before the Labor Secretary. In fact, on
16 March 1994, petitioner union even asked Labor Arbiter Caday to suspend the proceedings
before him and consolidate the same with the case before the Secretary of Labor. When Acting
Labor Secretary Brillantes ordered Labor Arbiter Caday to continue with the hearing of the
illegal strike case, the parties acceded and participated in the proceedings, knowing fully well
that there was also a directive for Labor Arbiter Caday to thereafter submit his report and
recommendation to the Secretary. As the appellate court pointed out, the subsequent participation
of petitioner union in the continuation of the hearing was in effect an affirmation of the
jurisdiction of the Secretary of Labor.
The appellate court also correctly held that the question of the Secretary of Labor and
Employments jurisdiction over labor-related disputes was already settled in International
Pharmaceutical, Inc. vs. Hon. Secretary of Labor and Associated Labor Union (ALU) [10] where
the Court declared:

In the present case, the Secretary was explicitly granted by Article 263(g) of the Labor
Code the authority to assume jurisdiction over a labor dispute causing or likely to
cause a strike or lockout in an industry indispensable to the national interest, and
decide the same accordingly. Necessarily, this authority to assume jurisdiction over
the said labor dispute must include and extend to all questions and controversies
arising therefrom, including cases over which the labor arbiter has exclusive
jurisdiction.
Moreover, Article 217 of the Labor Code is not without, but contemplates, exceptions
thereto. This is evident from the opening proviso therein reading (e)xcept as otherwise
provided under this Code x x x. Plainly, Article 263(g) of the Labor Code was meant
to make both the Secretary (or the various regional directors) and the labor arbiters
share jurisdiction, subject to certain conditions. Otherwise, the Secretary would not be
able to effectively and efficiently dispose of the primary dispute. To hold the contrary
may even lead to the absurd and undesirable result wherein the Secretary and the labor
arbiter concerned may have diametrically opposed rulings. As we have said, (i)t is
fundamental that a statute is to be read in a manner that would breathe life into it,
rather than defeat it.
In fine, the issuance of the assailed orders is within the province of the Secretary as
authorized by Article 263(g) of the Labor Code and Article 217(a) and (5) of the same
Code, taken conjointly and rationally construed to subserve the objective of the
jurisdiction vested in the Secretary.[11]

Anent the alleged misappreciation of the evidence proffered by the parties, it is axiomatic
that the factual findings of the Labor Arbiter, when sufficiently supported by the evidence on
record, must be accorded due respect by the Supreme Court. [12] Here, the report and
recommendation of Labor Arbiter Caday was not only adopted by then Secretary of Labor
Quisumbing but it was likewise affirmed by the Court of Appeals. We see no reason to depart
from their findings.
Petitioner union maintained that the Labor Arbiter and the appellate court disregarded the
parol evidence rule[13] when they upheld the allegation of respondent company that the work
schedule of its employees was from 6:00 a.m. to 6:00 p.m. and from 6:00 p.m. to 6:00
a.m. According to petitioner union, the provisions of their CBA on working hours clearly stated
that the normal working hours were from 7:30 a.m. to 4:30 p.m. [14] Petitioner union underscored
that the regular work hours for the company was only eight (8) hours. It further contended that
the Labor Arbiter as well as the Court of Appeal should not have admitted any other evidence
contrary to what was stated in the CBA.
The reliance on the parol evidence rule is misplaced. In labor cases pending before the
Commission or the Labor Arbiter, the rules of evidence prevailing in courts of law or equity are
not controlling.[15] Rules of procedure and evidence are not applied in a very rigid and technical
sense in labor cases.[16] Hence, the Labor Arbiter is not precluded from accepting and evaluating
evidence other than, and even contrary to, what is stated in, the CBA.
In any event, the parties stipulated:

Section 1. Regular Working Hours - A normal workday shall consist of not more than
eight (8) hours. The regular working hours for the Company shall be from 7:30 A.M.
to 4:30 P.M. The schedule of shift work shall be maintained; however the company
may change the prevailing work time at its discretion, should such change be
necessary in the operations of the Company. All employees shall observe such rules as
have been laid down by the company for the purpose of effecting control over
working hours.[17]
It is evident from the foregoing provision that the working hours may be changed, at the
discretion of the company, should such change be necessary for its operations, and that the
employees shall observe such rules as have been laid down by the company. In the case before
us, Labor Arbiter Caday found that respondent company had to adopt a continuous 24-hour work
daily schedule by reason of the nature of its business and the demands of its clients. It was
established that the employees adhered to the said work schedule since 1988. The employees are
deemed to have waived the eight-hour schedule since they followed, without any question or
complaint, the two-shift schedule while their CBA was still in force and even prior thereto. The

two-shift schedule effectively changed the working hours stipulated in the CBA. As the
employees assented by practice to this arrangement, they cannot now be heard to claim that the
overtime boycott is justified because they were not obliged to work beyond eight hours.
As Labor Arbiter Caday elucidated in his report:
Respondents' attempt to deny the existence of such regular overtime schedule is belied by their
own awareness of the existence of the regular overtime schedule of 6:00 A.M. to 6:00 P.M. and
6:00 P.M. to 6:00 A.M. of the following day that has been going on since 1988. Proof of this is
the case undisputedly filed by the union for and in behalf of its members, wherein it is claimed
that the company has not been computing correctly the night premium and overtime pay for
work rendered between 2:00 A.M. and 6:00 A.M. of the 6:00 P.M. to 6:00 A.M. shift. (tsn pp. 910, testimony of Alessandro G. Salazar during hearing on August 9, 1994). In fact, the union
Vice-President Carmelo C. Santos, demanded that the company make a recomputation of
the overtime records of the employees from 1987 (Exh. "P"). Even their own witness, union
Director Enrico C. Gonzales, testified that when in 1992 he was still a Quality Control Inspector
at the Sucat Plant of the company, his schedule was sometime at 6:00 A.M. to 6:00 P.M.,
sometime at 6:00 A.M. to 2:00 P.M., at 2:00 P.M. to 10:00 P.M. and sometime at 6:00 P.M. to
6:00 A.M., and when on the 6 to 6 shifts, he received the commensurate pay (t.s.n. pp. 7-9,
hearing of January 10, 1994). Likewise, while in the overtime permits, dated March 1, 6, 8, 9 to
12, 1993, which were passed around daily for the employees to sign, his name appeared but
without his signatures, he however had rendered overtime during those dates and was paid
because unlike in other departments, it has become a habit to them to sign the overtime schedule
weekly (t.s.n. pp. 26-31, hearing of January 10, 1994). The awareness of the respondent union,
its officers and members about the existence of the regular overtime schedule of 6:00 A.M. to
6:00 P.M. and 6:00 P.M. to 6:00 A.M. of the following day will be further shown in the
discussion of the second issue.[18]

As to the second issue of whether or not the respondents have engaged in "overtime
boycott" and "work slowdown" from April 16, 1993 up to March 7, 1994, both
amounting to illegal strike, the evidence presented is equally crystal clear that the
"overtime boycott" and "work slowdown" committed by the respondents amounted to
illegal strike.
As undisputably testified to by Mr. Alessandro G. Salazar, the company's VicePresident-Human Resources Department, sometime in February, 1993, he was
approached by the union President Nestor Ocampo and Union Director Hernando
Clemente who asked him as to what was the stand of the company regarding the
duration of the CBA between the company and which was set to expire on July 31,
1993. He answered that the matter could be best discussed during the formal

renegotiations which anyway was to start soon. This query was followed up sometime
in March, 1993, and his answer was the same. In early April, 1993, the union
president requested for a meeting to discuss the duration and effectivity of the
CBA. Acceding to the request, a meeting was held on April 15, 1993 wherein the
union officers asked him if he would agree to make the new CBA effective on August
1, 1993 and the term thereof to be valid for only two (2) years. When he answered that
it was still premature to discuss the matter, the very next day, April 16, 1993, all the
rank and file employees of the company refused to follow their regular two-shift work
schedule of 6:00 A.M. to 6:00 P.M. and 6:00 P.M. to 6:00 A.M., when after the 8hours work, they abruptly stopped working at 2:00 P.M. and 2:00 A.M., respectively,
leaving their place of work without sealing the containers and securing the raw
materials they were working on. When he saw the workers leaving before the end of
their shift, he asked them why and their reply was "asked (sic) the union
officers." Alarmed by the overtime boycott and the damage it was causing the
company, he requested for a meeting with the union officers. In the meeting, he asked
them why the regular work schedule was not being followed by the employees, and
union Director Enrico Gonzales, with the support of the other union officers, told him
that if management would agree to a two-year duration for the new CBA and an
effectivity date of August 1, 1993, all employees will return to the normal work
schedule of two 12-hour shifts. When answered that the management could not decide
on the matter at the moment and to have it discussed and agreed upon during the
formal renegotiations, the overtime boycott continued and the employees at the same
time employed a work slowdown campaign during working hours, causing
considerable delay in the production and complaints from the clients/customers (Exh.
"O", Affidavit of Alessandro G. Salazar which formed part of his direct
testimony). This testimonial narrations of Salazar was, as earlier said, undisputed
because the respondents' counsel waived his cross examination (t.s.n. p. 15, hearing
on August 9, 1994).
Aside from the foregoing undisputed testimonies of Salazar, the testimonies of other
Department Managers pointing to the union officers as the instigators of the overtime
boycott and work slowdown, the testimony of Epifanio Salumbides (Exh. "Y") a
union member at the time the concerted activities of the respondents took place, is
quoted hereunder:

2. Noon Pebrero 1993, ipinatawag ng Presidente ng Unyon na si Nestor Ocampo ang

lahat ng taga-maintenance ng bawat departamento upang dumalo sa isang miting. Sa
miting na iyon, sinabi ni Rod Abuan, na isang Direktor ng Unyon, na mayroon
ilalabas na memo ang Unyon na nag-uutos sa mga empleyado ng Kompanya na magimbento ng sari-saring dahilan para lang hindi sila makapagtrabaho
ng "overtime". Sinabihan rin ako ni Tessie Montejo na siya namang Treasurer ng
Unyon na 'Manny, huwag ka na lang pumasok sa Biyernes para hindi ka masabihan ng
magtrabaho ng Sabado at Linggo' na siya namang araw ng "overtime" ko. x x x
3. Nakalipas ang dalawaang buwan at noong unang bahagi ng Abril 1993, miniting
kami ng Shop Stewards namin na sina Ariel Abenoja, Dany Tansiongco at Vicky
Baron. Sinabihan kami na huwag ng mag-ovetime pag nagbigay ng senyas ang Unyon
ng "showtime."
4. Noong umaga ng ika-15 ng Abril 1993, nagsabi na si Danny Tansiongco ng
"showtime". Dahil dito wala ng empleyadong nag-overtime at sabay-sabay silang
umalis, maliban sa akin. Ako ay pumasok rin noong Abril 17 at 18, 1993 na Sabado at
Linggo.
5. Noong ika-19 ng Abril 1993, ako ay ipinatawag ni Ariel Abenoja Shop Steward, sa
opisina ng Unyon. Nadatnan ko doon ang halos lahat ng opisyales ng Unyon na sina:
Nestor Ocampo ----- Presidente
Carmelo Santos ----- Bise-Presidente
Nanding Clemente -- Director
Tess Montejo------- Chief Steward
Segundo Flores ------ Director
Enrico Gonzales ----- Auditor
Boy Alcantara ------- Shop Steward
Rod Abuan ----------- Director

at marami pang iba na hindi ko na maala-ala. Pagpasok ko, ako'y pinaligiran ng mga
opisyales ng Unyon. Tinanong ako ni Rod Aguan kung bakit ako "nag-ovetime"
gayong "Binigyan ka na namin ng instruction na huwag pumasok, pinilit mo pa ring
pumasok." "Management ka ba o Unyonista." Sinagot ko na ako ay
Unyonista.Tinanong niya muli kung bakit ako pumasok. Sinabi ko na wala akong
maibigay na dahilan para lang hindi pumasok at "mag-overtime." Pagkatapos nito, ako
ay pinagmumura ng mga opisyales ng Unyon kaya't ako ay madaliang umalis.
x x x"
Likewise, the respondents' denial of having a hand in the work slowdown since there
was no change in the performance and work efficiency for the year 1993 as compared
to the previous year was even rebuffed by their witness M. Theresa Montejo, a
Quality Control Analyst. For on cross-examination, she (Montejo) admitted that she
could not answer how she was able to prepare the productivity reports from May 1993
to February 1994 because from April 1993 up to April 1994, she was on union
leave. As such, the productivity reports she had earlier shown was not prepared by her
since she had no personal knowledge of the reports (t.s.n. pp. 32-35, hearing of
February 27, 1995). Aside from this admission, the comparison made by the
respondents was of no moment, because the higher production for the years previous
to 1993 was reached when the employees regularly rendered overtime work. But
undeniably, overtime boycott and work slowdown from April 16, 1993 up to March 7,
1994 had resulted not only in financial losses to the company but also damaged its
business reputation.
Evidently, from all the foregoing, respondents' unjustified unilateral alteration of the
24-hour work schedule thru their concerted activities of "overtime boycott" and "work
slowdown" from April 16, 1993 up to March 7, 1994, to force the petitioner company
to accede to their unreasonable demands, can be classified as a strike on an
installment basis, as correctly called by petitioner company. xxx[19]
It is thus undisputed that members of the union by their own volition decided not to render
overtime services in April 1993.[20] Petitioner union even admitted this in its Memorandum, dated
12 April 1999, filed with the Court of Appeals, as well as in the petition before this Court, which
both stated that "(s)sometime in April 1993, members of herein petitioner, on their own volition
and in keeping with the regular working hours in the Company x x x decided not to render
overtime".[21]Such admission confirmed the allegation of respondent company that petitioner
engaged in overtime boycott and work slowdown which, to use the words of Labor Arbiter

Caday, was taken as a means to coerce respondent company to yield to its unreasonable
demands.
More importantly, the overtime boycott or work slowdown by the employees constituted a
violation of their CBA, which prohibits the union or employee, during the existence of the CBA,
to stage a strike or engage in slowdown or interruption of work. [22] In Ilaw at Buklod ng
Manggagawa vs. NLRC,[23] this Court ruled:

x x x (T)he concerted activity in question would still be illicit because contrary to the
workers explicit contractual commitment that there shall be no strikes, walkouts,
stoppage or slowdown of work, boycotts, secondary boycotts, refusal to handle any
merchandise, picketing, sit-down strikes of any kind, sympathetic or general strikes,
or any other interference with any of the operations of the COMPANY during the term
of xxx (their collective bargaining) agreement.
What has just been said makes unnecessary resolution of SMCs argument that the workers
concerted refusal to adhere to the work schedule in force for the last several years, is
a slowdown, an inherently illegal activity essentially illegal even in the absence of a no-strike
clause in a collective bargaining contract, or statute or rule. The Court is in substantial agreement
with the petitioners concept of a slowdown as a strike on the installment plan; as a willful
reduction in the rate of work by concerted action of workers for the purpose of restricting the
output of the employer, in relation to a labor dispute; as an activity by which workers, without a
complete stoppage of work, retard production or their performance of duties and functions to
compel management to grant their demands. The Court also agrees that such a slowdown is
generally condemned as inherently illicit and unjustifiable, because while the employees
continue to work and remain at their positions and accept the wages paid to them, they at the
same time select what part of their allotted tasks they care to perform of their own volition or
refuse openly or secretly, to the employers damage, to do other work; in other words, they work
on their own terms. x x x.[24]
Finally, the Court cannot agree with the proposition that respondent company, in extending
substantial separation package to some officers of petitioner union during the pendency of this
case, in effect, condoned the illegal acts they committed.
Respondent company correctly postured that at the time these union officers obtained their
separation benefits, they were still considered employees of the company. Hence, the company
was merely complying with its legal obligations. [25] Respondent company could have withheld
these benefits pending the final resolution of this case. Yet, considering perhaps the financial
hardships experienced by its employees and the economic situation prevailing, respondent

company chose to let its employees avail of their separation benefits. The Court views the
gesture of respondent company as an act of generosity for which it should not be punished.
WHEREFORE, the petition is DENIED DUE COURSE and the 29 December 1999
decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Pardo, and Ynares-Santiago, JJ., concur.
Puno, J., on official leave.

THIRD DIVISION
MERCEDITA ACUA, MYRNA G.R. No. 159832
RAMONES,
and
JULIET
MENDEZ,
Present:
Petitioners,
QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
- versus TINGA, and
VELASCO, JR., JJ.
HON. COURT OF APPEALS Promulgated:
and JOIN
INTERNATIONAL
CORPORATION and/or
May 5, 2006
ELIZABETH ALAON,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
QUISUMBING, J.:

This petition seeks the review and reversal of the Court of

Appeals Decision[1] dated January 27, 2003, in CA-G.R. SP No. 70724,
entitled Join International Corporation and/or Elizabeth Alaon v. National Labor
Relations Commission (Third Division), Mercedita Acua, Juliet Mendez, and
Myrna Ramones, setting aside the resolutions of the NLRC and dismissing the
complaint of petitioners.

Petitioners are Filipino overseas workers deployed by private respondent

Join International Corporation (JIC), a licensed recruitment agency, to its principal,
3D Pre-Color Plastic, Inc., (3D) in Taiwan, Republic of China, under a uniformlyworded employment contract for a period of two years. Herein private respondent
Elizabeth Alaon is the president of Join International Corporation.
Sometime in September 1999, petitioners filed with private respondents
applications for employment abroad. They submitted their passports, NBI
clearances, medical clearances and other requirements and each paid a placement
fee of P14,850, evidenced by official receipts[2] issued by private respondents.
After their papers were processed, petitioners claimed they signed a
uniformly-worded employment contract[3] with private respondents which
stipulated that they were to work as machine operators with a monthly salary of
NT$15,840.00, exclusive of overtime, for a period of two years.
On December 9, 1999, with 18 other contract workers they left
for Taiwan. Upon arriving at the job site, a factory owned by 3D, they were made
to sign another contract which stated that their salary was only NT$11,840.00.
[4]
They were likewise informed that the dormitory which would serve as their
living quarters was still under construction. They were requested to temporarily
bear with the inconvenience but were assured that their dormitory would be
completed in a short time.[5]
Petitioners alleged that they were brought to a small room with a cement
floor so dirty and smelling with foul odor (sic). Forty women were jampacked in
the room and each person was given a pillow. Since the ladies comfort room was
out of order, they had to ask permission to use the mens comfort room.

[6]

Petitioners claim they were made to work twelve hours a day, from 8:00
p.m. to8:00 a.m.
The petitioners averred that on December 16, 1999, due to unbearable
working conditions, they were constrained to inform management that they were
leaving. They booked a flight home, at their own expense. Before they left, they
were made to sign a written waiver.[7] In addition, petitioners were not paid any
salary for work rendered on December 11-15, 1999.[8]
Immediately upon arrival in the Philippines, petitioners went to private
respondents office, narrated what happened, and demanded the return of their
placement fees and plane fare. Private respondents refused.
On December 28, 1999, private respondents offered a settlement. Petitioner
Mendez received P15,080.[9] The next day, petitioners Acua and Ramones went
back and received P13,640[10] and P16,200,[11] respectively. They claim they signed
a waiver,otherwise they would not be refunded.[12]
On January 14, 2000, petitioners Acua and Mendez invoking Republic Act
No. 8042,[13] filed a complaint for illegal dismissal and non-payment/underpayment
of salaries or wages, overtime pay, refund of transportation fare, payment of
salaries/wages for 3 months, moral and exemplary damages, and refund of
placement fee before the National Labor Relations Commission
(NLRC).Petitioner Ramones filed her complaint on January 20, 2000.
The Labor Arbiter ruled in favor of petitioners, declaring that Myrna
Ramones, Juliet Mendez and Mercedita Acua did not resign voluntarily from their
jobs. Thus, private respondents were ordered to pay jointly and severally, in
Philippine Peso, at the rate of exchange prevailing at the time of payment, the
following:
1. MERCEDITA ACUA
a. Unexpired Portion
b. Salary for 4 days
c. Overtime pay for 4 hrs. in
4 days

NT$95,000.00
2,436.92
1,523.07

NT$98,960.00

PHP45,000.00
d. Refund of placement fee
13,640.00
(Less: Amount received per Quitclaim)
e. Moral damages
f. Exemplary damages

31,360.00
25,000.00
40,000.00

2. JULIET C. MENDEZ
a. Unexpired Portion
b. Salary for 4 days
c. Overtime pay for 4 hrs. in
4 days

NT$95,000.00
2,436.92
1,523.07

NT$98,960.00

PHP45,000.00
d. Refund of placement fee
(Less: Amount received per Quitclaim)
15,080.00[14]
e. Moral damages
f. Exemplary damages

3. MYRNA R. RAMONES
a. Unexpired Portion
b. Salary for 4 days
c. Overtime pay for 4 hrs. in
4 days

29,920.00
25,000.00
40,000.00

NT$95,000.00
2,436.92
1,523.07

NT$98,960.00

PHP45,000.00
d. Refund of placement fee
16,200.00
(Less: Amount received per Quitclaim)
e. Moral damages
f. Exemplary damages

28,800.00
25,000.00
40,000.00[15]

The Labor Arbiter likewise ordered the payment of attorneys fees equivalent
to ten percent (10%) of the award which totaled NT$296,880.00
and P285,080.00 The other claims were dismissed for lack of merit.
Private respondents thereafter appealed the decision to the National Labor
Relations Commission. The NLRC ruled that the inclusion of Alaon as party
respondent in this case had no basis since respondent JIC, being a juridical person,
has a legal personality, separate and distinct from its officers. [16] It partially granted
the appeal and ordered that the amounts of P15,080,P13,640 and P16,200 received
under the quitclaim by Mendez, Acua and Ramones, respectively, be deducted
from their respective awards. They were awarded attorneys fees equivalent to ten
percent (10%) of their awarded labor-standards claims for unpaid wages and
overtime pays. No moral and exemplary damages and placement fees were
awarded.[17] Private respondents motion for partial reconsideration was denied.
On appeal, the Court of Appeals ruled for private respondents. It set aside
the resolutions dated February 26, 2002 andDecember 10, 2001 of the NLRC and
dismissed the complaint of petitioners.[18]

In their petition before us, petitioners raise the following issues:

I
WHETHER OR NOT PUBLIC RESPONDENT COURT OF APPEALS
ERRED AND/OR GRAVELY ABUSED ITS DISCRETION,
AMOUNTING TO LACK OF JURISDICTION, IN TAKING
COGNIZANCE OF THE PETITION FOR CERTIORARI FILED BY
THE PRIVATE RESPONDENTS, DESPITE THE FACT THAT THE
NLRCS RESOLUTION OF DECEMBER 10, 2001 HAD ALREADY
BECOME FINAL AND EXECUTORY, PRIVATE RESPONDENTS
MOTION FOR PARTIAL RECONSIDERATION WITH THE NLRC
HAVING BEEN FILED OUT OF TIME
II
ALTERNATIVELY, WHETHER OR NOT PUBLIC RESPONDENT
COURT OF APPEALS ERRED IN SETTING ASIDE THE
RESOLUTIONS OF THE NLRC, AND IN DISMISSING THE
COMPLAINT OF THE PETITIONERS.[19]

Prefatorily, petitioners aver that private respondents Verification and

Certification of the Petition for Certiorari stated that the copy of the resolution of
the NLRC dated December 10, 2001 was received on January 4, 2002 and its
partial motion for reconsideration filed on January 29, 2002, or 15 days beyond
the reglementary period. However, a perusal of the Partial Motion for
Reconsideration[20] filed by private respondents show that the NLRC Resolution
dated December 10, 2001 was in fact received by private respondents on January
24, 2002 and not on January 4, 2002. Hence, the appeal was properly filed within
the 10-day reglementary period.
In this petition the issue left for resolution is whether petitioners were
illegally dismissed under Rep. Act No. 8042, thus entitling them to benefits plus
damages.
The Labor Arbiter and the NLRC found that petitioners admitted they
resigned from their jobs without force, coercion, intimidation and pressure from
private respondents principal abroad.[21]

According to the Labor Arbiter, while it may be true that petitioners were
not coerced into giving up their jobs, the deplorable, oppressive and sub-human
working conditions drove petitioners to resign. In effect, according to the Labor
Arbiter, the petitioners did not voluntarily resign.[22]
The NLRC also ruled that there was constructive dismissal since working
under said conditions was unbearable.[23]
As we have held previously, constructive dismissal covers the involuntary
resignation resorted to when continued employment becomes impossible,
unreasonable or unlikely; when there is a demotion in rank or a diminution in pay;
or when a clear discrimination, insensibility or disdain by an employer becomes
unbearable to an employee.[24]
In this case, the appellate court found that petitioners did not deny that the
accommodations were not as homely as expected.In the petitioners memorandum,
they admitted that they were told by the principal, upon their arrival, that the
dormitory was still under construction and were requested to bear with the
temporary inconvenience and the dormitory would soon be finished. We likewise
note that petitioners did not refute private respondents assertion that they had
deployed approximately sixty other workers to their principal, and to the best of
their knowledge, no other worker assigned to the same principal has resigned,
much less, filed a case for illegal dismissal.[25]
To our mind these cited circumstances do not reflect malice by private
respondents nor do they show the principals intention to subject petitioners to
unhealthy accommodations. Under these facts, we cannot rule that there was
constructive dismissal.
Private respondents also claim that petitioners were not entitled to overtime
pay, since they had offered no proof that they actually rendered overtime
work. Petitioners, on the other hand, say that they could not show any documentary
proof since their employment records were all in the custody of the principal
employer. It was sufficient, they claim, that they alleged the same with
particularity.
On this matter, we rule for the petitioners. The claim for overtime pay
should not have been disallowed because of the failure of the petitioners to
substantiate them.[26] The claim of overseas workers against foreign employers

could not be subjected to same rules of evidence and procedure easily obtained by
complainants whose employers are locally based.[27] While normally we would
require the presentation of payrolls, daily time records and similar documents
before allowing claims for overtime pay, in this case, that would be requiring the
near-impossible.
To our mind, it is private respondents who could have obtained the records
of their principal to refute petitioners claim for overtime pay. By their failure to do
so, private respondents waived their defense and in effect admitted the allegations
of the petitioners.
It is a time-honored rule that in controversies between a worker and his
employer, doubts reasonably arising from the evidence,or in the interpretation of
agreements and writing should be resolved in the workers favor.[28] The policy is to
extend the applicability of the decree to a greater number of employees who can
avail of the benefits under the law, which is in consonance with the avowed policy
of the State to give maximum aid and protection to labor.[29] Accordingly, we rule
that private respondents are solidarily liable with the foreign principal for the
overtime pay claims of petitioners.
On the award of moral and exemplary damages, we hold that such award
lacks legal basis. Moral and exemplary damages are recoverable only where the
dismissal of an employee was attended by bad faith or fraud, or constituted an act
oppressive to labor, or was done in a manner contrary to morals, good customs or
public policy.[30] The person claiming moral damages must prove the existence of
bad faith by clear and convincing evidence, for the law always presumes good
faith.[31] Petitioners allege they suffered humiliation, sleepless nights and mental
anguish, thinking how they would pay the money they borrowed for their
placement fees.[32]Even so, they failed to prove bad faith, fraud or ill motive on the
part of private respondents.[33] Moral damages cannot be awarded.Without the
award of moral damages, there can be no award of exemplary
damages, nor attorneys fees.[34]
Quitclaims executed by the employees are commonly frowned upon as
contrary to public policy and ineffective to bar claims for the full measure of the
workers legal rights, considering the economic disadvantage of the employee and
the inevitable pressure upon him by financial necessity.[35] Nonetheless, the socalled economic difficulties and financial crises allegedly confronting the
employee is not an acceptable ground to annul the compromise agreement [36] unless

it is accompanied by a gross disparity between the actual claim and the amount of
the settlement.[37]
A perusal of the records reveals that petitioners were not in any way
deceived, coerced or intimidated into signing a quitclaim waiver in the amounts
of P13,640, P15,080 and P16,200 respectively. Nor was there a disparity between
the amount of the quitclaim and the amount actually due the petitioners.
Conformably then the petitioners are entitled to the following amounts in
Philippine Peso at the rate of exchange prevailing at the time of payment:
1. MERCEDITA ACUA
a. Salary for 4 days
b. Overtime pay for 4 hours in 4 days

2. JULIET C. MENDEZ
a. Salary for 4 days
b. Overtime pay for 4 hours in 4 days
3. MYRNA R. RAMONES
a. Salary for 4 days
b. Overtime pay for 4 hours in 4 days

NT $ 2,436.92
1,523.07
NT $ 3,959.99

NT $ 2,436.92
1,523.07
NT $ 3,959.99
NT $ 2,436.92
1,523.07
NT $ 3,959.99

According to the Bangko Sentral Treasury Department, the prevailing

exchange rates on December 1999 was NT$1 toP1.268805. Hence, after
conversion to Philippine pesos, the amount of the quitclaim paid to petitioners was
actually higher than the amount due them.
WHEREFORE, the petition is DISMISSED, without prejudice to the filing
of illegal recruitment complaint against the respondents pursuant to Section 6(i)
of The Migrant Workers and Overseas Filipino Act of 1995 (Rep. Act No. 8042).
SO ORDERED.

LEONARDO A. QUISUMBING
Associate Justice

EN BANC

[G.R. No. 112546. March 13, 1996]

NORTH DAVAO MINING CORPORATION and ASSET PRIVATIZATION

TRUST, petitioners,
vs. NATIONAL
LABOR
RELATIONS
COMMISSION, LABOR ARBITER ANTONIO M. VILLANUEVA and
WILFREDO GUILLEMA, respondents.
DECISION
PANGANIBAN, J.:

Is a company which is forced by huge business losses to close its business, legally
required to pay separation benefits to its employees at the time of its closure in an
amount equivalent to the separation pay paid to those who were separated when the
company was still a going concern? This is the main question brought before this Court
in this petition for certiorari under Rule 65 of the Revised Rules of Court, which seeks to
reverse and set aside the Resolutions dated July 29, 1993 and September 27, 1993 of
the National Labor Relations Commision (NLRC) in NLRC-CA No. M-001395-93.
[1]

[3]

[2]

The Resolution dated July 29, 1993 affirmed in tow the decision of the Labor Arbiter
in RAB-1 1-08-00672-92 and RAB- 11-08-00713-92 ordering petitioners to pay the
complainants therein certain monetary claims.
The Resolution dated September 27, 1993 denied the motion for reconsideration of
the said July 29, 1993 Resolution.
The Facts
Petitioner North Davao Mining Corporation (North Davao) was incorporated in 1974
as a 100% privately-owned company. Later, the Philippine National Bank (PNB) became
part owner thereof as a result of a conversion into equity of a portion of loans obtained
by North Davao from said bank. On June 30, 1986, PNB transferred all its loans to and
equity in North Davao in favor of the national government which, by virtue of
Proclamation No. 50 dated December 8, 1986, later turned them over to petitioner Asset
Privatization Trust (APT). As of December 31, 1990 the national government held 81.8%
of the common stock and 100% of the preferred stock of said company.
[4]

Respondent Wilfredo Guillema is one among several employees of North Davao

who were separated by reason of the companys closure on May 31, 1992, and who
were the complainants in the cases before the respondent labor arbiter.
On May 31, 1992, petitioner North Davao completely ceased operations due to
serious business reverses. From 1988 until its closure in 1992, North Davao suffered
net losses averaging three billion pesos (P3,000,000,000.00) per year, for each of the
five years prior to its closure.All told, as of December 31, 1991, or five months prior to
its closure, its total liabilities had exceeded its assets by 20.392 billion pesos, as shown
by its financial statements audited by the Commission on Audit. When it ceased
operations, its remaining employees were separated and given the equivalent of 12.5
days pay for every year of service, computed on their basic monthly pay, in addition to
the commutation to cash of their unused vacation and sick leaves. However, it appears
that, during the life of the petitioner corporation, from the beginning of its operations in
1981 until its closure in 1992, it had been giving separation pay equivalent to thirty (30)
days pay for every year of service.Moreover, inasmuch as the region where North
Davao operated was plagued by insurgency and other peace and order problems, the
employees had to collect their salaries at a bank in Tagum, Davao del Norte, some 58
kilometers from their workplace and about 2 hours travel time by public transportation;
this arrangement lasted from 1981 up to 1990.
Subsequently, a complaint was filed with respondent labor arbiter by respondent
Wilfredo Guillema and 271 other seperated employees for: (1) additional separation pay
of 17.5 days for every year of service; (2) back wages equivalent to two days a month;
(3) transportation allowance; (4) hazard pay; (5) housing allowance; (6) food allowance;
(7) post-employment medical clearance; and (8) future medical allowance, all of which
amounted to P58,022,878.31 as computed by private respondent.
[5]

On May 6, 1993, respondent Labor Arbiter rendered a decision ordering petitioner

North Davao to pay the complainants the following:

(a) Additional separation pay of 17.5 days for every year of service;
(b) Backwages equivalent to two (2) days a month times the number of years of
service but not to exceed three (3) years;
(c) Transportation allowance at P80 a month times the number of years of service but
not to exceed three (3) years.
The benefits awarded by respondent Labor Arbiter amounted to
P10,240,517.75. Attorneys fees equivalent to ten percent (10%) thereof were also
granted.
[6]

On appeal, respondent NLRC affirmed the decision in toto. Petitioner North Davaos
motion for reconsideration was likewise denied. Hence, this petition.
The Parties Submissions and the Issues
In affirming the Labor Arbiters decision, respondent NLRC ruled that since (North
Davao) has been paying its employees separation pay equivalent to thirty (30) days pay
for every year of service, knowing fully well that the law provides for a lesser separation
pay, then such company policy has ripened into an obligation, and therefore, depriving
now the herein private respondent and others similarly situated of the same benefits
would be discriminatory. Quoting from Businessday Information Systems and Services.
Inc. (BISSI) vs. NLRC. it said that petitioners may not pay separation benefits
unequally for such discrimination breeds resentment and ill-will among those who have
been treated less generously than others. It also cited Abella vs. NLRC, as authority for
saying that Art. 283 of the Labor Code protects workers in case of the closure of the
establishment.
[7]

[8]

[9]

To justify the award of two days a month in backwages and P80 per month of
transportation allowance, respondent Commission ruled:

As to the appellants claim that complainants-appeallees time spent in collecting their

wages at Tagum, Davao is not compensable allegedly because it was on official time
can not be given credence. No iota of evidence has been presented to back up said
contention. The same is true with appellants assertion that the claim for transportation
expenses is without basis since they were incurred by the complainants. Appellants
should have submitted the payrolls to prove that complainants-appellees were not the
ones who personally collected their wages and/or the bus/jeep trip tickets or vouchers
to show that the complainants-appellees were provided with free transportation as
claimed.

Petitioner, through the Government Corporate Counsel, raised the following

grounds for the allowance of the petition:

1. The NLRC acted with grave abuse of discretion in affirming without legal basis the
award of additional separation pay to private respondents who were separated due to
serious business losses on the part of petitioner.
2. The NLRC acted with grave abuse of discretion in affirming without sufficient
factual basis the award of backwages and transportation expenses to private
respondents.
3. There is no appeal, nor any plain, speedy and adequate remedy in the ordinary
course of the law.
and the following issues:

1. Whether or not an employer whose business operations ceased due to serious

business losses or financial reverses is obliged to pay separation pay to its employees
separated by reason of such closure.
2. Whether or not time spent in collecting wages in a place other than the place of
employment is compensable notwithstanding that the same is done during official
time.
3. Whether or not private respondents are entitled to transportation expenses in the
absence of evidence that these expenses were incurred.
The First Issue: Separation Pay
To resolve this issue, it is necessary to revisit the provision of law adverted to by the
parties in their submissions, namely Art. 283 of the Labor Code, which reads as follows:

Art. 283. 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 under-taking 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 () 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. (italics supplied)
The underscored portion of Art. 283 governs the grant of seperation benefits in case
of closures or cessation of operation of business establishments NOT due to serious
business losses or financial reverses x x x. Where, however, the closure was due to
business losses - as in the instant case, in which the aggregate losses amounted to
over P20 billion - the Labor Code does not impose any obligation upon the employer to
pay separation benefits, for obvious reasons. There is no need to belabor this
point. Even the public respondents, in their Comment filed by the Solicitor General,
impliedly concede this point.
[10]

However, respondents tenaciously insist on the award of separation pay, anchoring

their claim solely on petitioner North Davaos long-standing policy of giving separation
pay benefits equivalent to 30- days pay, which policy had been in force in the years prior
to its closure. Respondents contend that, by denying the same separation benefits to
private respondent and the others similarly situated, petitioners discriminated against
them. They rely on this Courts ruling in Businessday Information Systems and Services,
Inc. (BISSI) vs. NLRC, (supra).In said case, petitioner BISSI, after experiencing financial
reverses, decided as a retrenchment measure to lay-off some employees on May 16,
1988 and gave them separation pay equivalent to one-half () month pay for every year
of service. BISSI retained some employees in an attempt to rehabilitate its business as
a trading company. However, barely two and a half months later, these remaining
employees were likewise discharged because the company decided to cease business
operations altogether. Unlike the earlier terminated employees, the second batch
received separation pay equivalent to a full months salary for every year of service, plus
a mid-year bonus. This Court ruled that there was impermissible discrimination against
the private respondents in the payment of their separation benefits. The law requires an
employer to extend equal treatment to its employees. It may not, in the guise of
exercising management prerogatives, grant greater benefits to some and less to others.
xxx
In resolving the present case, it bears keeping in mind at the outset that the factual
circumstances of BISSI are quite different from the current case. The Court noted that
BISSI continued to suffer losses even after the retrenchment of the first batch of
employees; clearly, business did not improve despite such drastic measure. That
notwithstanding, when BISSI finally shut down, it could well afford to (and actually did)
pay off its remaining employees with MORE separation benefits as compared with those
earlier laid off; obviously, then, there was no reason for BISSI to skimp on separation
pay for the first batch of discharged employees. That it was able to pay one-month
separation benefit for employees at the time of closure of its business meant that it must
have been also in a position to pay the same amount to those who were separated prior
to closure. That it did not do so was a wrongful exercise of management

prerogatives. That is why the Court correctly faulted it with impermissible discrimination.
Clearly, it exercised its management prerogatives contrary to general principles of fair
play and justice.
In the instant case however, the companys practice of giving one months pay for
every year of service could no longer be continued precisely because the company
could not afford it anymore. It was forced to close down on account of accumulated
losses of over P20 billion. This could not be said of BISSI. In the case of North Davao, it
gave 30-days separation pay to its employees when it was still a going concern even if it
was already losing heavily. As a going concern, its cash flow could still have sustained
the payment of such separation benefits. But when a business enterprise completely
ceases operations, i.e., upon its death as a going business concern, its vital lifeblood
-its cashflow - literally dries up.Therefore, the fact that less separation benefits were
granted when the company finally met its business death cannot be characterized as
discrimination. Such action was dictated not by a discriminatory management option but
by its complete inability to continue its business life due to accumulated losses. Indeed,
one cannot squeeze blood out of a dry stone. Nor water out of parched land.
As already stated, Art. 283 of the Labor Code does not obligate an employer to pay
separation benefits when the closure is due to losses. In the case before us, the basis
for the claim of the additional separation benefit of 17.5 days is alleged discrimination,
i.e., unequal treatment of employees, which is proscribed as an unfair labor practice by
Art. 248 (e) of said Code. Under the facts and circumstances of the present case, the
grant of a lesser amount of separation pay to private respondent was done, not by
reason of discrimination, but rather, out of sheer financial bankruptcy - a fact that is not
controlled by management prerogatives. Stated differently, the total cessation of
operation due to mind-boggling losses was a supervening fact that prevented the
company from continuing to grant the more generous amount of separation pay. The
fact that North Davao at the point of its forced closure voluntarily paid any separation
benefits at all - although not required by law - and 12.5-days worth at that, should have
elicited admiration instead of condemnation. But to require it to continue being generous
when it is no longer in a position to do so would certainly be unduly oppressive, unfair
and most revolting to the conscience. As this Court held in Manila Trading & Supply Co.
vs. Zulueta, and reiterated in San Miguel Corporation vs. NLRC and later, in Allied
Banking Corporation vs. Castro, (t)he law, in protecting the rights of the laborer,
authorizes neither oppression nor self-destruction of the employer.
[11]

[12]

[13]

At this juncture, we note that the Solicitor General in his Comment challenges the
petitioners assertion that North Davao, having closed down, no longer has the means to
pay for the benefits. The Solicitor General stresses that North Davao was among the
assets transferred by PNB to the national government, and that by virtue of
Proclamation No. 50 dated December 8, 1986, the APT was constituted trustee of this
government asset. He then concludes that (i)t would, therefore, be incongruous to
declare that the National Government, which should always be presumed to be solvent,
could not pay now private respondents money claims. Such argumentation is
completely misplaced. Even if the national government owned or controlled 81.8% of
the common stock and 100% of the preferred stock of North Davao, it remains only a
stockholder thereof, and under existing laws and prevailing jurisprudence, a stockholder

as a rule is not directly, individually and/or personally liable for the indebtedness of the
corporation. The obligation of North Davao cannot be considered the obligation of the
national government, hence, whether the latter be solvent or not is not material to the
instant case. The respondents have not shown that this case constitutes one of the
instances where the corporate veil may be pierced. From another angle, the national
government is not the employer of private respondent and his co-complainants, so there
is no reason to expect any kind of bailout by the national government under existing law
and jurisprudence.
[14]

The Second and Third Issues:

Back Wages and Transportation Allowance
Anent the award of back wages and transportation allowance, the issues raised in
connection therewith are factual, the determination of which is best left to the
respondent NLRC. It is well settled that this Court is bound by the findings of fact of the
NLRC, so long as said findings are supported by substantial evidence.
[15]

As the Solicitor General pointed out in his comment:

It is undisputed that because of security reasons, from the time of its operations,
petitioner NDMC maintained its policy of paying its workers at a bank in Tagum,
Davao del Norte, which usually took the workers about two and a half (2 1/2) hours of
travel from the place of work and such travel time is not official.
Records also show that on February 12,1992, when an inspection was conducted by
the Department of Labor and Employment at the premises of petitioner NDMC at
Amacan, Maco, Davao del Norte, it was found out that petitioners had violated labor
standards law, one of which is the place of payment of wages (p.109, Vol. 1, Record).
Section 4, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code
provides that:

Section 4. Place of payment. - (a) As a general rule, the place of payment shall be at or
near the place of undertaking. Payment in a place other than the workplace shall be
permissible only under the following circumstances:
(1) When payment cannot be effected at or near the place of work by reason of the
deterioration of peace and order conditions, or by reason of actual or impending
emergencies caused by fire, flood, epidemic or other calamity rendering payment
thereat impossible;
(2) When the employer provides free transportation to the employees back and
forth; and

(3) Under any analogous circumstances; provided that the time spent by the
employees in collecting their wages shall be considered as compensable hours
worked.
(b) xxx xxx xxx.
(Italics supplied)
Accordingly, in his Order dated April 14, 1992 (p. 109, Vol. 1, Record), the Regional
Director, Regional Office No. XI, Department of Labor and Employment, Davao City,
ordered petitioner NDMC, among others, as follows:

WHEREFORE, x x x. Respondent is further ordered to pay its workers salaries at the

plantsite at Amacan, New Leyte, Maco, Davao del Norte or whenever not possible,
through the bank in Tagum, Davao del Norte as already been practiced subject,
however to the provisions of Section 4 of Rule VIII, Book III of the rules
implementing the Labor Code as amended.
Thus, public respondent Labor Arbiter Antonio M. Villanueva correctly held that:

From the evidence on record, we find that the hours spent by complainants in
collecting salaries at a bank in Tagum, Davao del Norte shall be considered
compensable hours worked. Considering further the distance between Amacan, Maco
to Tagum which is 2 hours by travel and the risks in commuting all the time in
collecting complainants salaries, would justify the granting of backwages equivalent
to two (2) days in a month as prayed for.
Corollary to the above findings, and for equitable reasons, we likewise hold
respondents liable for the transportation expenses incurred by complainants at P40.00
round trip fare during pay days.
(p. 10, Decision; p. 207, Vol. 1, Record)
On the contrary, it will be petitioners burden or duty to present evidence of
compliance of the law on labor standards, rather than for private respondents to prove
that they were not paid/provided by petitioners of their backwages and transportation
expenses.
Other than the bare denials of petitioners, the above findings stands uncontradicted.
Indeed we are not at liberty to set aside findings of facts of the NLRC, absent any
capriciousness, arbitrariness, or abuse or complete lack of basis. In Maya Farms
Employees Organizations vs. NLRC, we held:
[16]

This Court has consistently ruled that findings of fact of administrative agencies and
quasi-judicial bodies which have acquired expertise because their jurisdiction is
confined to specific matters are generally accorded not only respect but even finality
and are binding upon this Court unless there is a showing of grave abuse of discretion,
or where it is clearly shown that they were arrived at arbitrarily or in disregard of the
evidence on record.
WHEREFORE, judgment is hereby rendered MODIFYING the assailed Resolution
by SETTING ASIDE and deleting the award for additional separation pay of 17.5 days
for every year of service, and AFFIRMING it in all other aspects. No costs.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug,
Kapunan, Mendoza, Francisco, and Hermosisima, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 121004 January 28, 1998

ROMEO LAGATIC, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CITYLAND DEVELOPMENT CORPORATION, STEPHEN
ROXAS, JESUS GO, GRACE LIUSON, and ANDREW LIUSON, respondents.

ROMERO, J.:
Petitioner seeks, in this petition for certiorari under Rule 65, the reversal of the resolution of the National Labor
Relations Commission dated May 12, 1995, affirming the February 17, 1994, decision of Labor Arbiter Ricardo
C. Nora finding that petitioner had been validly dismissed by private respondent Cityland Development
Corporation (hereafter referred to as Cityland) and that petitioner was not entitled to separation pay, premium
pay and overtime pay.
The facts of the case are as follows:
Petitioner Romeo Lagatic was employed in May 1986 by Cityland, first as a probationary sales agent, and later
on as a marketing specialist. He was tasked with soliciting sales for the company, with the corresponding duties

of accepting call-ins, referrals, and making client calls and cold calls. Cold calls refer to the practice of
prospecting for clients through the telephone directory. Cityland, believing that the same is an effective and
cost-efficient method of finding clients, requires all its marketing specialists to make cold calls. The number of
cold calls depends on the sales generated by each: more sales mean less cold calls. Likewise, in order to
assess cold calls made by the sales staff, as well as to determine the results thereof, Cityland requires the
submission of daily progress reports on the same.
On October 22, 1991, Cityland issued a written reprimand to petitioner for his failure to submit cold call reports
for September 10, October 1 and 10, 1991. This notwithstanding, petitioner again failed to submit cold call
reports for September 2, 5, 8, 10, 11, 12, 15, 17, 18, 19, 20, 22, and 28, as well as for October 6, 8, 9, 10, 12,
13 and 14, 1992. Petitioner was required to explain his inaction, with a warning that further non-compliance
would result in his termination from the company. In a reply dated October 18, 1992, petitioner claimed that the
same was an honest omission brought about by his concentration on other aspects of his job. Cityland found
said excuse inadequate and, on November 9, 1992, suspended him for three days, with a similar warning.
Notwithstanding the aforesaid suspension and warning, petitioner again failed to submit cold call reports for
February 5, 6, 8, 10 and 12, 1993. He was verbally reminded to submit the same and was even given up to
February 17, 1993 to do so. Instead of complying with said directive, petitioner, on February 16, 1993, wrote a
note, "TO HELL WITH COLD CALLS! WHO CARES?" and exhibited the same to his co-employees. To worsen
matters, he left the same lying on his desk where everyone could see it.
On February 23, 1993, petitioner received a memorandum requiring him to explain why Cityland should not
make good its previous warning for his failure to submit cold call reports, as well as for issuing the written
statement aforementioned. On February 24, 1993, he sent a letter-reply alleging that his failure to submit cold
call reports should trot be deemed as gross insubordination. He denied any knowledge of the damaging
statement, "TO HELL WITH COLD CALLS!"
Finding petitioner guilty of gross insubordination, Cityland served a notice of dismissal upon him on February
26, 1993. Aggrieved by such dismissal, petitioner filed a complaint against Cityland for illegal dismissal, illegal
deduction, underpayment, overtime and rest day pay, damages and attorney's fees. The labor arbiter dismissed
the petition for lack of merit. On appeal, the same was affirmed by the NLRC; hence the present recourse.
Petitioner raises the following issues:
1. WHETHER OR NOT RESPONDENT NLRC GRAVELY ABUSED ITS
DISCRETION 1N NOT FINDING THAT PETITIONER WAS ILLEGALLY
DISMISSED;
2. WHETHER OR NOT RESPONDENT NLRC GRAVELY ABUSED ITS
DISCRETION IN RULING THAT PETITIONER IS NOT ENTITLED TO
SALARY DIFFERENTIALS, BACKWAGES, SEPARATION PAY, OVERTIME
PAY, REST DAY PAY, UNPAID COMMISSIONS, MORAL AND EXEMPLARY
DAMAGES AND ATTORNEY'S FEES.
The petition lacks merit.
To constitute a valid dismissal from employment, two requisites must be met, namely: (1) the employee must
be afforded due process, and (2) the dismissal must be for a valid cause. 1 In the case at bar, petitioner

contends that his termination was illegal on both substantive and procedural aspects. It is his submission
that the failure to submit a few cold calls does not qualify as willful disobedience, as, in his experience,
cold calls are one of the least effective means of soliciting sales. He thus asserts that a couple of cold call
reports need not be accorded such tremendous significance as to warrant his dismissal for failure to
submit them on time.
These arguments are specious. Petitioner loses sight of the fact that "(e)xcept as provided for, or limited by,
special laws, an employer is free to regulate, according to his discretion and judgment, all aspects of

employment."2 Employers may, thus, make reasonable rules and regulations for the government of their

employees, and when employees, with knowledge of an established rule, enter the service, the rule
becomes a part of the contract of employment. 3 It is also generally recognized that company policies and
regulations, unless shown to be grossly oppressive or contrary to law, are generally valid and binding on
the parties and must be complied with. 4 "Corollarily, an employee may be validly dismissed for violation of
a reasonable company rule or regulation adopted for the conduct of the company business. An employer
cannot rationally be expected to retain the employment of a person whose . . . lack of regard for his
employer's rules . . . has so plainly and completely been bared." 5 Petitioner's continued infraction of
company policy requiring cold call reports, as evidenced by the 28 instances of non-submission of
aforesaid reports, justifies his dismissal. He cannot be allowed to arrogate unto himself the privilege of
setting company policy on the effectivity of solicitation methods. To do so would be to sanction oppression
and the self-destruction of the employer.
Moreover, petitioner made it worse for himself when he wrote the statement, "TO HELL WITH COLD CALLS!
WHO CARES?" When required to explain, he merely denied ally knowledge of the same. Cityland, on the other
hand, submitted the affidavits of his co-employees attesting to his authorship of the same. Petitioner's only
defense is denial. The rule, however, is that denial, if unsubstantiated by clear and convincing evidence, is
negative and self-serving evidence which has no weight in law. 6 More telling, petitioner, while making much

capital out of his lack of opportunity to confront the affiants, never, in all of his pleadings, categorically
denied writing the same. He only denied knowledge of the allegation that he issued such a statement.
Based on the foregoing, we find petitioner guilty of willful disobedience. Willful disobedience requires the
concurrence of at least two requisites: the employee's assailed conduct must have been willful or intentional,
the willfulness being characterized by a wrongful and perverse attitude; and the order violated must have been
reasonable, lawful, made known to the employee and must pertain to the duties which he had been engaged to
discharge. 7
Petitioner's failure to comply with Cityland's policy of requiring cold call reports is clearly willful, given the 28
instances of his failure to do so, despite a previous reprimand and suspension. More than that, his written
statement shows his open defiance and disobedience to lawful rules and regulations of the company. Likewise,
said company policy of requiring cold calls and the concomitant reports thereon is clearly reasonable and
lawful, sufficiently known to petitioner, and in connection with the duties which he had been engaged to
discharge. There is, thus, just cause for his dismissal.
On the procedural aspect, petitioner claims that he was denied due process. Well settled is the dictum that the
twin requirements of notice and hearing constitute the elements of due process in the dismissal of employees.
Thus, the employer must furnish the employee with two written notices before the termination of employment
can be effected. The first apprises the employee of the particular acts or omissions for which his dismissal is
sought; the second informs him of the employer's decision to dismiss him. 8
In the case at bar, petitioner was notified of the charges against him in a memorandum dated February 19,
1993, which he received on February 23, 1993. He submitted a letter-reply thereto on February 24, 1993,
wherein he asked that his failure to submit cold call reports be not interpreted as gross insubordination. 9 He

was given notice of his termination on February 26, 1993. This chronology of events clearly show that
petitioner was served with the required written notices.
Nonetheless, petitioner contends that he has not been given the benefit of an effective hearing. He alleges that
he was not adequately informed of the results of the investigation conducted by the company, nor was he able
to confront the affiants who attested to his writing the statement, "TO HELL WITH COLD CALLS!" While we
have held that in dismissing employees, the employee must be afforded ample opportunity to be heard, "ample
opportunity" connoting every kind of assistance that management must afford the employee to enable him to
prepare adequately for his defense, 10 it is also true that the requirement of a hearing is complied with as

long as there was an opportunity to be heard, and not necessarily that an actual hearing be
conducted. 11 Petitioner had an opportunity to be heard as he submitted a letter-reply to the charge. He,
however, adduced no other evidence on his behalf. In fact, he admitted his failure to submit cold call
reports, praying that the same be not considered as gross insubordination. As held by this Court

in Bernardo vs. NLRC, 12 there is no necessity for a formal hearing where an employee admits
responsibility for an alleged misconduct. As to the written statement, "TO HELL WITH COLD CALLS!,"
petitioner merely denied knowledge of the same. He failed to submit controverting evidence thereon
although the memorandum of February 19, 1993, clearly charged that he had shown said statement to
several sales personnel. Denials are weak forms of defenses, particularly when they are not substantiated
by clear and convincing evidence. Given the foregoing, we hold that petitioner's constitutional right to due
process has not been violated.
As regards the second issue, petitioner contends that he is entitled to amounts illegally deducted from his
commissions, to unpaid overtime, rest day and holiday premiums, to moral and exemplary damages, as well as
attorney's fees and costs.
Petitioner anchors his claim for illegal deductions of commissions on Cityland's formula for determining
commissions, viz:
COMMISSIONS = Credits Earned (CE) less CUMULATIVE NEGATIVE
(CN) less AMOUNTS RECEIVED (AR)
= (CE - CN) - AR where CE = Monthly Sales Volume x
Commission Rate (CR)
AR = Monthly Compensation/.75
CR = 4.5%
Under said formula, an increase in salary would entail an increase in AR, thus diminishing the amount of
commissions that petitioner would receive. Petitioner construes the same as violative of the non-diminution of
benefits clause embodied in the wage orders applicable to petitioner. Inasmuch as Cityland has paid petitioner
commissions based on a higher AR each time there has been a wage increase, the difference between the
original AR and the subsequent ARs have been viewed by petitioner as illegal deductions, to wit:

Wage
Order

Date of
Effectivity

Amount of
Increase

Corresponding
Increase in
Quota (AR)

Duration Up
To 2/26/93

Total

RA 6640

1/1/88

P265.75

P 353.33

62 mos.

P 2 1,906.46

RA 6727

7/1/89

780.75

1,040.00

44 mos.

45,760.00

NCR 01

11/1/90

785.75

1,046.67

28 mos.

29,306.76

NCR 01-A

Grand Total

P 96,973.22 13

Petitioner even goes as far as to claim that with the use of Cityland's formula, he is indebted to the company in
the amount of P1,410.00, illustrated as follows:

Petitioner' s Basic Salary = P 4,230.00

= 4,230.00/.75
A.R. = 5,640.00
Petitioner's Basic Salary AR = P 1,410.00
While it is true that an increase in salary would cause an increase in AR, with the same being deducted from
credits earned, thus lessening his commissions, the fact remains that petitioner still receives his basic salary
without deductions. Petitioner's argument that he is indebted to respondent by P1,410.00 is fallacious as his
basic salary remains the same and he continues to receive the same, regardless of his collections. The failure
to attain a CE equivalent to the AR of P5,640.00 only means that the difference would be credited to his CN for
the next month. Clearly, the purpose of the same is to encourage sales personnel to accelerate their sales in
order for them to earn commissions.
Additionally, there is no law which requires employers to pay commissions, and when they do so, as stated in
the letter-opinion of the Department of Labor and Employment dated February 19, 1993, "there is no law which
prescribes a method for computing commissions. The determination of the amount of commissions is the result
of collective bargaining negotiations, individual employment contracts or established employer
practice." 14 Since the formula for the computation of commissions was presented to and accepted by

petitioner, such prescribed formula is in order. As to the allegation that said formula diminishes the
benefits being received by petitioner whenever there is a wage increase, it must be noted that his
commissions are not meant to be in a fixed amount. In fact, there was no assurance that he would receive
any commission at all. Non-diminution of benefits, as applied here, merely means that the company may
not remove the privilege of sales personnel to earn a commission, not that they are entitled to a fixed
amount thereof.
With respect to petitioner's claims for overtime pay, rest day pay and holiday premiums, Cityland maintains that
Saturday and Sunday call-ins were voluntary activities on the part of sales personnel who wanted to realize
more sales and thereby earn more commissions. It is their contention that sales personnel were clamoring for
the "privilege" to attend Saturday and Sunday call-ins, as well as to entertain walk-in clients at project sites
during weekends, that Cityland had to stagger the schedule of sales employees to give everyone a chance to
do so. But simultaneously, Cityland claims that the same were optional because call-ins and walk-ins were not
scheduled every weekend. If there really were a clamor on the part of sales staff to "voluntarily" work on
weekends, so much so that Cityland needed to schedule them, how come no call-ins or walk-ins were
scheduled on some weekends?
In addition to the above, the labor arbiter and the NLRC sanctioned respondent's practice of offsetting rest day
or holiday work with equivalent time on regular workdays on the ground that the same is authorized by
Department Order 21, Series of 1990. As correctly pointed out by petitioner, said D.O. was misapplied in this
case. The D.O. involves the shortening of the workweek from six days to five days but with prolonged hours on
those five days. Under this scheme, non-payment of overtime premiums was allowed in exchange for longer
weekends for employees. In the instant case, petitioner's workweek was never compressed. Instead, he claims
payment for work over and above his normal 5 1/2 days of work in a week. Applying by analogy the principle
that overtime cannot be offset by undertime, to allow off-setting would prejudice the worker. He would be
deprived of the additional pay for the rest day work he has rendered and which is utilized to offset his
equivalent time off on regular workdays. To allow Cityland to do so would be to circumvent the law on payment
of premiums for rest day and holiday work.
Notwithstanding the foregoing discussion, petitioner failed to show his entitlement to overtime and rest day pay
due, to the lack of sufficient evidence as to the number of days and hours when he rendered overtime and rest
day work. Entitlement to overtime pay must first be established by proof that said overtime work was actually
performed, before an employee may avail of said benefit. 15 To support his allegations, petitioner submitted in

evidence minutes of meetings wherein he was assigned to work on weekends and holidays at Cityland's
housing projects. Suffice it to say that said minutes do not prove that petitioner actually worked on said

dates. It is a basic rule in evidence that each party must prove his affirmative allegations. 16 This petitioner
failed to do. He explains his failure to submit more concrete evidence as being due to the decision
rendered by the labor arbiter without resolving his motion for the production and inspection of documents
in the control of Cityland. Petitioner conveniently forgets that on January 27, 1994, he agreed to submit
the case for decision based on the records available to the labor arbiter. This amounted to an
abandonment of above-said motion, which was then pending resolution.
Lastly, with the finding that petitioner's dismissal was for a just and valid cause, his claims for moral and
exemplary damages, as well as attorney's fees, must fail.
WHEREFORE, premises considered, the assailed Resolution is AFFIRMED and this petition is hereby
DISMISSED for lack of merit. Costs against petitioner.
SO ORDERED.
Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-65482 December 1, 1987
JOSE RIZAL COLLEGE, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND NATIONAL ALLIANCE OF TEACHERS/OFFICE
WORKERS,respondents.

PARAS, J.:
This is a petition for certiorari with prayer for the issuance of a writ of preliminary injunction, seeking the
annulment of the decision of the National Labor Relations Commission * in NLRC Case No. RB-IV 23037-78 (Case No.

R4-1-1081-71) entitled "National Alliance of Teachers and Office Workers and Juan E. Estacio, Jaime Medina, et al. vs. Jose Rizal College"
modifying the decision of the Labor Arbiter as follows:

WHEREFORE, in view of the foregoing considerations, the decision appealed from is

MODIFIED, in the sense that teaching personnel paid by the hour are hereby declared to be
entitled to holiday pay.
SO ORDERED.
The factual background of this case which is undisputed is as follows:
Petitioner is a non-stock, non-profit educational institution duly organized and existing under the laws of the
Philippines. It has three groups of employees categorized as follows: (a) personnel on monthly basis, who
receive their monthly salary uniformly throughout the year, irrespective of the actual number of working days in
a month without deduction for holidays; (b) personnel on daily basis who are paid on actual days worked and
they receive unworked holiday pay and (c) collegiate faculty who are paid on the basis of student contract hour.
Before the start of the semester they sign contracts with the college undertaking to meet their classes as per
schedule.
Unable to receive their corresponding holiday pay, as claimed, from 1975 to 1977, private respondent National
Alliance of Teachers and Office Workers (NATOW) in behalf of the faculty and personnel of Jose Rizal College
filed with the Ministry of Labor a complaint against the college for said alleged non-payment of holiday pay,
docketed as Case No. R04-10-81-72. Due to the failure of the parties to settle their differences on conciliation,
the case was certified for compulsory arbitration where it was docketed as RB-IV-23037-78 (Rollo, pp. 155156).
After the parties had submitted their respective position papers, the Labor Arbiter

** rendered a decision on February 5,

1979, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:

1. The faculty and personnel of the respondent Jose Rizal College who are paid their salary
by the month uniformly in a school year, irrespective of the number of working days in a
month, without deduction for holidays, are presumed to be already paid the 10 paid legal
holidays and are no longer entitled to separate payment for the said regular holidays;
2. The personnel of the respondent Jose Rizal College who are paid their wages daily are
entitled to be paid the 10 unworked regular holidays according to the pertinent provisions of
the Rules and Regulations Implementing the Labor Code;
3. Collegiate faculty of the respondent Jose Rizal College who by contract are paid
compensation per student contract hour are not entitled to unworked regular holiday pay
considering that these regular holidays have been excluded in the programming of the student
contact hours. (Rollo. pp. 26-27)
On appeal, respondent National Labor Relations Commission in a decision promulgated on June 2, 1982,
modified the decision appealed from, in the sense that teaching personnel paid by the hour are declared to be
entitled to holiday pay (Rollo. p. 33).
Hence, this petition.

The sole issue in this case is whether or not the school faculty who according to their contracts are paid per
lecture hour are entitled to unworked holiday pay.
Labor Arbiter Julio Andres, Jr. found that faculty and personnel employed by petitioner who are paid their
salaries monthly, are uniformly paid throughout the school year regardless of working days, hence their holiday
pay are included therein while the daily paid employees are renumerated for work performed during holidays
per affidavit of petitioner's treasurer (Rollo, pp. 72-73).
There appears to be no problem therefore as to the first two classes or categories of petitioner's workers.
The problem, however, lies with its faculty members, who are paid on an hourly basis, for while the Labor
Arbiter sustains the view that said instructors and professors are not entitled to holiday pay, his decision was
modified by the National Labor Relations Commission holding the contrary. Otherwise stated, on appeal the
NLRC ruled that teaching personnel paid by the hour are declared to be entitled to holiday pay.
Petitioner maintains the position among others, that it is not covered by Book V of the Labor Code on Labor
Relations considering that it is a non- profit institution and that its hourly paid faculty members are paid on a
"contract" basis because they are required to hold classes for a particular number of hours. In the programming
of these student contract hours, legal holidays are excluded and labelled in the schedule as "no class day. " On
the other hand, if a regular week day is declared a holiday, the school calendar is extended to compensate for
that day. Thus petitioner argues that the advent of any of the legal holidays within the semester will not affect
the faculty's salary because this day is not included in their schedule while the calendar is extended to
compensate for special holidays. Thus the programmed number of lecture hours is not diminished (Rollo, pp.
157- 158).
The Solicitor General on the other hand, argues that under Article 94 of the Labor Code (P.D. No. 442 as
amended), holiday pay applies to all employees except those in retail and service establishments. To deprive
therefore employees paid at an hourly rate of unworked holiday pay is contrary to the policy considerations
underlying such presidential enactment, and its precursor, the Blue Sunday Law (Republic Act No. 946) apart
from the constitutional mandate to grant greater rights to labor (Constitution, Article II, Section 9). (Reno, pp.
76-77).
In addition, respondent National Labor Relations Commission in its decision promulgated on June 2, 1982,
ruled that the purpose of a holiday pay is obvious; that is to prevent diminution of the monthly income of the
workers on account of work interruptions. In other words, although the worker is forced to take a rest, he earns
what he should earn. That is his holiday pay. It is no excuse therefore that the school calendar is extended
whenever holidays occur, because such happens only in cases of special holidays (Rollo, p. 32).
Subject holiday pay is provided for in the Labor Code (Presidential Decree No. 442, as amended), which reads:
Art. 94. Right to holiday pay (a) Every worker shall be paid his regular daily wage during
regular holidays, except in retail and service establishments regularly employing less than ten
(10) workers;
(b) The employer may require an employee to work on any holiday but such employee shall
be paid a compensation equivalent to twice his regular rate; ... "
and in the Implementing Rules and Regulations, Rule IV, Book III, which reads:

SEC. 8. Holiday pay of certain employees. (a) Private school teachers, including faculty
members of colleges and universities, may not be paid for the regular holidays during
semestral vacations. They shall, however, be paid for the regular holidays during Christmas
vacations. ...
Under the foregoing provisions, apparently, the petitioner, although a non-profit institution is under obligation to
give pay even on unworked regular holidays to hourly paid faculty members subject to the terms and conditions
provided for therein.
We believe that the aforementioned implementing rule is not justified by the provisions of the law which after all
is silent with respect to faculty members paid by the hour who because of their teaching contracts are obliged
to work and consent to be paid only for work actually done (except when an emergency or a fortuitous event or
a national need calls for the declaration of special holidays). Regular holidays specified as such by law are
known to both school and faculty members as no class days;" certainly the latter do not expect payment for
said unworked days, and this was clearly in their minds when they entered into the teaching contracts.
On the other hand, both the law and the Implementing Rules governing holiday pay are silent as to payment on
Special Public Holidays.
It is readily apparent that the declared purpose of the holiday pay which is the prevention of diminution of the
monthly income of the employees on account of work interruptions is defeated when a regular class day is
cancelled on account of a special public holiday and class hours are held on another working day to make up
for time lost in the school calendar. Otherwise stated, the faculty member, although forced to take a rest, does
not earn what he should earn on that day. Be it noted that when a special public holiday is declared, the faculty
member paid by the hour is deprived of expected income, and it does not matter that the school calendar is
extended in view of the days or hours lost, for their income that could be earned from other sources is lost
during the extended days. Similarly, when classes are called off or shortened on account of typhoons, floods,
rallies, and the like, these faculty members must likewise be paid, whether or not extensions are ordered.
Petitioner alleges that it was deprived of due process as it was not notified of the appeal made to the NLRC
against the decision of the labor arbiter.
The Court has already set forth what is now known as the "cardinal primary" requirements of due process in
administrative proceedings, to wit: "(1) the right to a hearing which includes the right to present one's case and
submit evidence in support thereof; (2) the tribunal must consider the evidence presented; (3) the decision
must have something to support itself; (4) the evidence must be substantial, and substantial evidence means
such evidence as a reasonable mind might accept as adequate to support a conclusion; (5) the decision must
be based on the evidence presented at the hearing, or at least contained in the record and disclosed to the
parties affected; (6) the tribunal or body of any of its judges must act on its or his own independent
consideration of the law and facts of the controversy, and not simply accept the views of a subordinate; (7) the
board or body should in all controversial questions, render its decisions in such manner that the parties to the
proceeding can know the various issues involved, and the reason for the decision rendered. " (Doruelo vs.
Commission on Elections, 133 SCRA 382 [1984]).
The records show petitioner JRC was amply heard and represented in the instant proceedings. It submitted its
position paper before the Labor Arbiter and the NLRC and even filed a motion for reconsideration of the
decision of the latter, as well as an "Urgent Motion for Hearing En Banc" (Rollo, p. 175). Thus, petitioner's claim
of lack of due process is unfounded.

PREMISES CONSIDERED, the decision of respondent National Labor Relations Commission is hereby set
aside, and a new one is hereby RENDERED:
(a) exempting petitioner from paying hourly paid faculty members their pay for regular holidays, whether the
same be during the regular semesters of the school year or during semestral, Christmas, or Holy Week
vacations;
(b) but ordering petitioner to pay said faculty members their regular hourly rate on days declared as special
holidays or for some reason classes are called off or shortened for the hours they are supposed to have taught,
whether extensions of class days be ordered or not; in case of extensions said faculty members shall likewise
be paid their hourly rates should they teach during said extensions.
SO ORDERED.
Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-52415 October 23, 1984
INSULAR BANK OF ASIA AND AMERICA EMPLOYEES' UNION (IBAAEU), petitioner,
vs.
HON. AMADO G. INCIONG, Deputy Minister, Ministry of Labor and INSULAR BANK OF ASIA AND
AMERICA,respondents.
Sisenando R. Villaluz, Jr. for petitioner.
Abdulmaid Kiram Muin colloborating counsel for petitioner.
The Solicitor General Caparas, Tabios, Ilagan Alcantara & Gatmaytan Law Office and Sycip, Salazar, Feliciano
& Hernandez Law Office for respondents.

MAKASIAR, J.:

+.wph!1

This is a petition for certiorari to set aside the order dated November 10, 1979, of respondent Deputy Minister
of Labor, Amado G. Inciong, in NLRC case No. RB-IV-1561-76 entitled "Insular Bank of Asia and America
Employees' Union (complainant-appellee), vs. Insular Bank of Asia and America" (respondent-appellant), the
dispositive portion of which reads as follows:
t.hqw

xxx xxx xxx

ALL THE FOREGOING CONSIDERED, let the appealed Resolution en banc of the National
Labor Relations Commission dated 20 June 1978 be, as it is hereby, set aside and a new
judgment. promulgated dismissing the instant case for lack of merit (p. 109 rec.).
The antecedent facts culled from the records are as follows:
On June 20, 1975, petitioner filed a complaint against the respondent bank for the payment of holiday pay
before the then Department of Labor, National Labor Relations Commission, Regional Office No. IV in Manila.
Conciliation having failed, and upon the request of both parties, the case was certified for arbitration on July 7,
1975 (p. 18, NLRC rec.
On August 25, 1975, Labor Arbiter Ricarte T. Soriano rendered a decision in the above-entitled case, granting
petitioner's complaint for payment of holiday pay. Pertinent portions of the decision read:
t.hqw

xxx xxx xxx

The records disclosed that employees of respondent bank were not paid their wages on
unworked regular holidays as mandated by the Code, particularly Article 208, to wit:
t.hqw

Art. 208. Right to holiday pay.

(a) Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than 10
workers.
(b) The term "holiday" as used in this chapter, shall include: New Year's Day,
Maundy Thursday, Good Friday, the ninth of April the first of May, the twelfth
of June, the fourth of July, the thirtieth of November, the twenty-fifth and the
thirtieth of December and the day designated by law for holding a general
election.
xxx xxx xxx
This conclusion is deduced from the fact that the daily rate of pay of the bank employees was
computed in the past with the unworked regular holidays as excluded for purposes of
determining the deductible amount for absences incurred Thus, if the employer uses the
factor 303 days as a divisor in determining the daily rate of monthly paid employee, this gives
rise to a presumption that the monthly rate does not include payments for unworked regular
holidays. The use of the factor 303 indicates the number of ordinary working days in a year
(which normally has 365 calendar days), excluding the 52 Sundays and the 10 regular
holidays. The use of 251 as a factor (365 calendar days less 52 Saturdays, 52 Sundays, and
10 regular holidays) gives rise likewise to the same presumption that the unworked Saturdays,
Sundays and regular holidays are unpaid. This being the case, it is not amiss to state with
certainty that the instant claim for wages on regular unworked holidays is found to be tenable
and meritorious.
WHEREFORE, judgment is hereby rendered:
(a) xxx xxxx xxx
(b) Ordering respondent to pay wages to all its employees for all regular h(olidays since
November 1, 1974 (pp. 97-99, rec., underscoring supplied).
Respondent bank did not appeal from the said decision. Instead, it complied with the order of Arbiter Ricarte T.
Soriano by paying their holiday pay up to and including January, 1976.
On December 16, 1975, Presidential Decree No. 850 was promulgated amending, among others, the
provisions of the Labor Code on the right to holiday pay to read as follows:
t.hqw

Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wages during
regular holidays, except in retail and service establishments regularly employing less than ten
(10) workers;
(b) The employer may require an employee to work on any holiday but such employee shall
be paid a compensation equivalent to twice his regular rate and
(c) As used in this Article, "holiday" includes New Year's Day, Maundy Thursday, Good Friday,
the ninth of April, the first of May, the twelfth of June, the fourth of July, the thirtieth of

November, the twenty-fifth and the thirtieth of December, and the day designated by law for
holding a general election.
Accordingly, on February 16, 1976, by authority of Article 5 of the same Code, the Department of Labor (now
Ministry of Labor) promulgated the rules and regulations for the implementation of holidays with pay. The
controversial section thereof reads:
t.hqw

Sec. 2. Status of employees paid by the month. Employees who are uniformly paid by the
month, irrespective of the number of working days therein, with a salary of not less than the
statutory or established minimum wage shall be presumed to be paid for all days in the month
whether worked or not.
For this purpose, the monthly minimum wage shall not be less than the statutory minimum
wage multiplied by 365 days divided by twelve" (italics supplied).
On April 23, 1976, Policy Instruction No. 9 was issued by the then Secretary of Labor (now Minister)
interpreting the above-quoted rule, pertinent portions of which read:
t.hqw

xxx xxx xxx

The ten (10) paid legal holidays law, to start with, is intended to benefit principally daily
employees. In the case of monthly, only those whose monthly salary did not yet include
payment for the ten (10) paid legal holidays are entitled to the benefit.
Under the rules implementing P.D. 850, this policy has been fully clarified to eliminate
controversies on the entitlement of monthly paid employees, The new determining rule is
this: If the monthly paid employee is receiving not less than P240, the maximum monthly
minimum wage, and his monthly pay is uniform from January to December, he is presumed to
be already paid the ten (10) paid legal holidays. However, if deductions are made from his
monthly salary on account of holidays in months where they occur, then he is still entitled to
the ten (10) paid legal holidays. ..." (emphasis supplied).
Respondent bank, by reason of the ruling laid down by the aforecited rule implementing Article 94 of the Labor
Code and by Policy Instruction No. 9, stopped the payment of holiday pay to an its employees.
On August 30, 1976, petitioner filed a motion for a writ of execution to enforce the arbiter's decision of August
25, 1975, whereby the respondent bank was ordered to pay its employees their daily wage for the unworked
regular holidays.
On September 10, 1975, respondent bank filed an opposition to the motion for a writ of execution alleging,
among others, that: (a) its refusal to pay the corresponding unworked holiday pay in accordance with the award
of Labor Arbiter Ricarte T. Soriano dated August 25, 1975, is based on and justified by Policy Instruction No. 9
which interpreted the rules implementing P. D. 850; and (b) that the said award is already repealed by P.D. 850
which took effect on December 16, 1975, and by said Policy Instruction No. 9 of the Department of Labor,
considering that its monthly paid employees are not receiving less than P240.00 and their monthly pay is
uniform from January to December, and that no deductions are made from the monthly salaries of its
employees on account of holidays in months where they occur (pp. 64-65, NLRC rec.).
On October 18, 1976, Labor Arbiter Ricarte T. Soriano, instead of issuing a writ of execution, issued an order
enjoining the respondent bank to continue paying its employees their regular holiday pay on the following

grounds: (a) that the judgment is already final and the findings which is found in the body of the decision as well
as the dispositive portion thereof is res judicata or is the law of the case between the parties; and (b) that since
the decision had been partially implemented by the respondent bank, appeal from the said decision is no longer
available (pp. 100-103, rec.).
On November 17, 1976, respondent bank appealed from the above-cited order of Labor Arbiter Soriano to the
National Labor Relations Commission, reiterating therein its contentions averred in its opposition to the motion
for writ of execution. Respondent bank further alleged for the first time that the questioned order is not
supported by evidence insofar as it finds that respondent bank discontinued payment of holiday pay beginning
January, 1976 (p. 84, NLRC rec.).
On June 20, 1978, the National Labor Relations Commission promulgated its resolution en banc dismissing
respondent bank's appeal, the dispositive portion of which reads as follows:
t.hqw

In view of the foregoing, we hereby resolve to dismiss, as we hereby dismiss, respondent's

appeal; to set aside Labor Arbiter Ricarte T. Soriano's order of 18 October 1976 and, as
prayed for by complainant, to order the issuance of the proper writ of execution (p. 244, NLRC
rec.).
Copies of the above resolution were served on the petitioner only on February 9, 1979 or almost eight. (8)
months after it was promulgated, while copies were served on the respondent bank on February 13, 1979.
On February 21, 1979, respondent bank filed with the Office of the Minister of Labor a motion for
reconsideration/appeal with urgent prayer to stay execution, alleging therein the following: (a) that there
is prima facie evidence of grave abuse of discretion, amounting to lack of jurisdiction on the part of the National
Labor Relations Commission, in dismissing the respondent's appeal on pure technicalities without passing
upon the merits of the appeal and (b) that the resolution appealed from is contrary to the law and jurisprudence
(pp. 260-274, NLRC rec.).
On March 19, 1979, petitioner filed its opposition to the respondent bank's appeal and alleged the following
grounds: (a) that the office of the Minister of Labor has no jurisdiction to entertain the instant appeal pursuant to
the provisions of P. D. 1391; (b) that the labor arbiter's decision being final, executory and unappealable,
execution is a matter of right for the petitioner; and (c) that the decision of the labor arbiter dated August 25,
1975 is supported by the law and the evidence in the case (p. 364, NLRC rec.).
On July 30, 1979, petitioner filed a second motion for execution pending appeal, praying that a writ of execution
be issued by the National Labor Relations Commission pending appeal of the case with the Office of the
Minister of Labor. Respondent bank filed its opposition thereto on August 8, 1979.
On August 13, 1979, the National Labor Relations Commission issued an order which states:

t.hqw

The Chief, Research and Information Division of this Commission is hereby directed to
designate a Socio-Economic Analyst to compute the holiday pay of the employees of the
Insular Bank of Asia and America from April 1976 to the present, in accordance with the
Decision of the Labor Arbiter dated August 25, 1975" (p. 80, rec.).
On November 10, 1979, the Office of the Minister of Labor, through Deputy Minister Amado G. Inciong, issued
an order, the dispositive portion of which states:
t.hqw

ALL THE FOREGOING CONSIDERED, let the appealed Resolution en banc of the National
Labor Relations Commission dated 20 June 1978 be, as it is hereby, set aside and a new
judgment promulgated dismissing the instant case for lack of merit (p. 436, NLRC rec.).
Hence, this petition for certiorari charging public respondent Amado G. Inciong with abuse of discretion
amounting to lack or excess of jurisdiction.
The issue in this case is: whether or not the decision of a Labor Arbiter awarding payment of regular holiday
pay can still be set aside on appeal by the Deputy Minister of Labor even though it has already become final
and had been partially executed, the finality of which was affirmed by the National Labor Relations Commission
sitting en banc, on the basis of an Implementing Rule and Policy Instruction promulgated by the Ministry of
Labor long after the said decision had become final and executory.
WE find for the petitioner.
I
WE agree with the petitioner's contention that Section 2, Rule IV, Book III of the implementing rules and Policy
Instruction No. 9 issued by the then Secretary of Labor are null and void since in the guise of clarifying the
Labor Code's provisions on holiday pay, they in effect amended them by enlarging the scope of their exclusion
(p. 1 1, rec.).
Article 94 of the Labor Code, as amended by P.D. 850, provides:

t.hqw

Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during
regular holidays, except in retail and service establishments regularly employing less than ten
(10) workers. ...
The coverage and scope of exclusion of the Labor Code's holiday pay provisions is spelled out under Article 82
thereof which reads:
t.hqw

Art. 82. Coverage. The provision of this Title shall apply to employees in all establishments
and undertakings, whether for profit or not, but not to government employees, managerial
employees, field personnel members of the family of the employer who are dependent on him
for support domestic helpers, persons in the personal service of another, and workers who are
paid by results as determined by the Secretary of Labor in appropriate regulations.
... (emphasis supplied).
From the above-cited provisions, it is clear that monthly paid employees are not excluded from the benefits of
holiday pay. However, the implementing rules on holiday pay promulgated by the then Secretary of Labor
excludes monthly paid employees from the said benefits by inserting, under Rule IV, Book Ill of the
implementing rules, Section 2, which provides that: "employees who are uniformly paid by the month,
irrespective of the number of working days therein, with a salary of not less than the statutory or established
minimum wage shall be presumed to be paid for all days in the month whether worked or not. "
Public respondent maintains that "(T)he rules implementing P. D. 850 and Policy Instruction No. 9 were issued
to clarify the policy in the implementation of the ten (10) paid legal holidays. As interpreted, 'unworked' legal
holidays are deemed paid insofar as monthly paid employees are concerned if (a) they are receiving not less
than the statutory minimum wage, (b) their monthly pay is uniform from January to December, and (c) no

deduction is made from their monthly salary on account of holidays in months where they occur. As explained
in Policy Instruction No, 9, 'The ten (10) paid legal holidays law, to start with, is intended to benefit principally
daily paid employees. In case of monthly, only those whose monthly salary did not yet include payment for the
ten (10) paid legal holidays are entitled to the benefit' " (pp. 340-341, rec.). This contention is untenable.
It is elementary in the rules of statutory construction that when the language of the law is clear and unequivocal
the law must be taken to mean exactly what it says. In the case at bar, the provisions of the Labor Code on the
entitlement to the benefits of holiday pay are clear and explicit - it provides for both the coverage of and
exclusion from the benefits. In Policy Instruction No. 9, the then Secretary of Labor went as far as to
categorically state that the benefit is principally intended for daily paid employees, when the law clearly states
that every worker shall be paid their regular holiday pay. This is a flagrant violation of the mandatory directive of
Article 4 of the Labor Code, which states that "All doubts in the implementation and interpretation of the
provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor."
Moreover, it shall always be presumed that the legislature intended to enact a valid and permanent statute
which would have the most beneficial effect that its language permits (Orlosky vs. Haskell, 155 A. 112.)
Obviously, the Secretary (Minister) of Labor had exceeded his statutory authority granted by Article 5 of the
Labor Code authorizing him to promulgate the necessary implementing rules and regulations.
Public respondent vehemently argues that the intent and spirit of the holiday pay law, as expressed by the
Secretary of Labor in the case of Chartered Bank Employees Association v. The Chartered Bank (NLRC Case
No. RB-1789-75, March 24, 1976), is to correct the disadvantages inherent in the daily compensation system of
employment holiday pay is primarily intended to benefit the daily paid workers whose employment and
income are circumscribed by the principle of "no work, no pay." This argument may sound meritorious; but, until
the provisions of the Labor Code on holiday pay is amended by another law, monthly paid employees are
definitely included in the benefits of regular holiday pay. As earlier stated, the presumption is always in favor of
law, negatively put, the Labor Code is always strictly construed against management.
While it is true that the contemporaneous construction placed upon a statute by executive officers whose duty
is to enforce it should be given great weight by the courts, still if such construction is so erroneous, as in the
instant case, the same must be declared as null and void. It is the role of the Judiciary to refine and, when
necessary, correct constitutional (and/or statutory) interpretation, in the context of the interactions of the three
branches of the government, almost always in situations where some agency of the State has engaged in
action that stems ultimately from some legitimate area of governmental power (The Supreme Court in Modern
Role, C. B. Swisher 1958, p. 36).
Thus. in the case of Philippine Apparel Workers Union vs. National Labor Relations Commission (106 SCRA
444, July 31, 1981) where the Secretary of Labor enlarged the scope of exemption from the coverage of a
Presidential Decree granting increase in emergency allowance, this Court ruled that:
t.hqw

... the Secretary of Labor has exceeded his authority when he included paragraph (k) in
Section 1 of the Rules implementing P. D. 1 1 23.
xxx xxx xxx
Clearly, the inclusion of paragraph k contravenes the statutory authority granted to the
Secretary of Labor, and the same is therefore void, as ruled by this Court in a long line of
cases . . . ..
t.hqw

The recognition of the power of administrative officials to promulgate rules in

the administration of the statute, necessarily limited to what is provided for in
the legislative enactment, may be found in the early case of United States
vs. Barrios decided in 1908. Then came in a 1914 decision, United States vs.
Tupasi Molina (29 Phil. 119) delineation of the scope of such competence.
Thus: "Of course the regulations adopted under legislative authority by a
particular department must be in harmony with the provisions of the law, and
for the sole purpose of carrying into effect its general provisions. By such
regulations, of course, the law itself cannot be extended. So long, however,
as the regulations relate solely to carrying into effect the provisions of the
law, they are valid." In 1936, in People vs. Santos, this Court expressed its
disapproval of an administrative order that would amount to an excess of the
regulatory power vested in an administrative official We reaffirmed such a
doctrine in a 1951 decision, where we again made clear that where an
administrative order betrays inconsistency or repugnancy to the provisions of
the Act, 'the mandate of the Act must prevail and must be followed. Justice
Barrera, speaking for the Court in Victorias Milling inc. vs. Social Security
Commission, citing Parker as well as Davis did tersely sum up the matter
thus: "A rule is binding on the Courts so long as the procedure fixed for its
promulgation is followed and its scope is within the statutory authority
granted by the legislature, even if the courts are not in agreement with the
policy stated therein or its innate wisdom. ... On the other hand,
administrative interpretation of the law is at best merely advisory, for it is the
courts that finally determine chat the law means."
"It cannot be otherwise as the Constitution limits the authority of the
President, in whom all executive power resides, to take care that the laws be
faithfully executed. No lesser administrative executive office or agency then
can, contrary to the express language of the Constitution assert for itself a
more extensive prerogative. Necessarily, it is bound to observe the
constitutional mandate. There must be strict compliance with the legislative
enactment. Its terms must be followed the statute requires adherence to, not
departure from its provisions. No deviation is allowable. In the terse
language of the present Chief Justice, an administrative agency "cannot
amend an act of Congress." Respondents can be sustained, therefore, only if
it could be shown that the rules and regulations promulgated by them were in
accordance with what the Veterans Bill of Rights provides" (Phil. Apparel
Workers Union vs. National Labor Relations Commission, supra, 463, 464,
citing Teozon vs. Members of the Board of Administrators, PVA 33 SCRA
585; see also Santos vs. Hon. Estenzo, et al, 109 Phil. 419; Hilado vs.
Collector of Internal Revenue, 100 Phil. 295; Sy Man vs. Jacinto & Fabros,
93 Phil. 1093; Olsen & Co., Inc. vs. Aldanese and Trinidad, 43 Phil. 259).
This ruling of the Court was recently reiterated in the case of American Wire & Cable Workers Union (TUPAS)
vs. The National Labor Relations Commission and American Wire & Cable Co., Inc., G.R. No. 53337,
promulgated on June 29, 1984.
In view of the foregoing, Section 2, Rule IV, Book III of the Rules to implement the Labor Code and Policy
instruction No. 9 issued by the then Secretary of Labor must be declared null and void. Accordingly, public
respondent Deputy Minister of Labor Amado G. Inciong had no basis at all to deny the members of petitioner
union their regular holiday pay as directed by the Labor Code.

II
It is not disputed that the decision of Labor Arbiter Ricarte T. Soriano dated August 25, 1975, had already
become final, and was, in fact, partially executed by the respondent bank.
However, public respondent maintains that on the authority of De Luna vs. Kayanan, 61 SCRA 49, November
13, 1974, he can annul the final decision of Labor Arbiter Soriano since the ensuing promulgation of the
integrated implementing rules of the Labor Code pursuant to P.D. 850 on February 16, 1976, and the issuance
of Policy Instruction No. 9 on April 23, 1976 by the then Secretary of Labor are facts and circumstances that
transpired subsequent to the promulgation of the decision of the labor arbiter, which renders the execution of
the said decision impossible and unjust on the part of herein respondent bank (pp. 342-343, rec.).
This contention is untenable.
To start with, unlike the instant case, the case of De Luna relied upon by the public respondent is not a labor
case wherein the express mandate of the Constitution on the protection to labor is applied. Thus Article 4 of the
Labor Code provides that, "All doubts in the implementation and interpretation of the provisions of this Code,
including its implementing rules and regulations, shall be resolved in favor of labor and Article 1702 of the Civil
Code provides that, " In case of doubt, all labor legislation and all labor contracts shall be construed in favor of
the safety and decent living for the laborer.
Consequently, contrary to public respondent's allegations, it is patently unjust to deprive the members of
petitioner union of their vested right acquired by virtue of a final judgment on the basis of a labor statute
promulgated following the acquisition of the "right".
On the question of whether or not a law or statute can annul or modify a judicial order issued prior to its
promulgation, this Court, through Associate Justice Claro M. Recto, said:
t.hqw

xxx xxx xxx

We are decidedly of the opinion that they did not. Said order, being unappealable, became
final on the date of its issuance and the parties who acquired rights thereunder cannot be
deprived thereof by a constitutional provision enacted or promulgated subsequent
thereto. Neither the Constitution nor the statutes, except penal laws favorable to the accused,
have retroactive effect in the sense of annulling or modifying vested rights, or altering
contractual obligations" (China Ins. & Surety Co. vs. Judge of First Instance of Manila, 63 Phil.
324, emphasis supplied).
In the case of In re: Cunanan, et al., 19 Phil. 585, March 18, 1954, this Court said: "... when a court renders a
decision or promulgates a resolution or order on the basis of and in accordance with a certain law or rule then
in force, the subsequent amendment or even repeal of said law or rule may not affect the final decision, order,
or resolution already promulgated, in the sense of revoking or rendering it void and of no effect." Thus, the
amendatory rule (Rule IV, Book III of the Rules to Implement the Labor Code) cannot be given retroactive effect
as to modify final judgments. Not even a law can validly annul final decisions (In re: Cunanan, et al., Ibid).
Furthermore, the facts of the case relied upon by the public respondent are not analogous to that of the case at
bar. The case of De Luna speaks of final and executory judgment, while iii the instant case, the final judgment
is partially executed. just as the court is ousted of its jurisdiction to annul or modify a judgment the moment it
becomes final, the court also loses its jurisdiction to annul or modify a writ of execution upon its service or
execution; for, otherwise, we will have a situation wherein a final and executed judgment can still be annulled or

modified by the court upon mere motion of a panty This would certainly result in endless litigations thereby
rendering inutile the rule of law.
Respondent bank counters with the argument that its partial compliance was involuntary because it did so
under pain of levy and execution of its assets (p. 138, rec.). WE find no merit in this argument. Respondent
bank clearly manifested its voluntariness in complying with the decision of the labor arbiter by not appealing to
the National Labor Relations Commission as provided for under the Labor Code under Article 223. A party who
waives his right to appeal is deemed to have accepted the judgment, adverse or not, as correct, especially if
such party readily acquiesced in the judgment by starting to execute said judgment even before a writ of
execution was issued, as in this case. Under these circumstances, to permit a party to appeal from the said
partially executed final judgment would make a mockery of the doctrine of finality of judgments long enshrined
in this jurisdiction.
Section I of Rule 39 of the Revised Rules of Court provides that "... execution shall issue as a matter of right
upon the expiration of the period to appeal ... or if no appeal has been duly perfected." This rule applies to
decisions or orders of labor arbiters who are exercising quasi-judicial functions since "... the rule of execution of
judgments under the rules should govern all kinds of execution of judgment, unless it is otherwise provided in
other laws" Sagucio vs. Bulos 5 SCRA 803) and Article 223 of the Labor Code provides that "... decisions,
awards, or orders of the Labor Arbiter or compulsory arbitrators are final and executory unless appealed to the
Commission by any or both of the parties within ten (10) days from receipt of such awards, orders, or decisions.
..."
Thus, under the aforecited rule, the lapse of the appeal period deprives the courts of jurisdiction to alter the
final judgment and the judgment becomes final ipso jure (Vega vs. WCC, 89 SCRA 143, citing Cruz vs. WCC, 2
PHILAJUR 436, 440, January 31, 1978; see also Soliven vs. WCC, 77 SCRA 621; Carrero vs. WCC and
Regala vs. WCC, decided jointly, 77 SCRA 297; Vitug vs. Republic, 75 SCRA 436; Ramos vs. Republic, 69
SCRA 576).
In Galvez vs. Philippine Long Distance Telephone Co., 3 SCRA 422, 423, October 31, 1961, where the lower
court modified a final order, this Court ruled thus:
t.hqw

xxx xxx xxx

The lower court was thus aware of the fact that it was thereby altering or modifying its order of
January 8, 1959. Regardless of the excellence of the motive for acting as it did, we are
constrained to hold however, that the lower court had no authorities to make said alteration or
modification. ...
xxx xxx xxx
The equitable considerations that led the lower court to take the action complained of cannot
offset the dem ands of public policy and public interest which are also responsive to the
tenets of equity requiring that an issues passed upon in decisions or final orders that have
become executory, be deemed conclusively disposed of and definitely closed for, otherwise,
there would be no end to litigations, thus setting at naught the main role of courts of justice,
which is to assist in the enforcement of the rule of law and the maintenance of peace and
order, by settling justiciable controversies with finality.
xxx xxx xxx

In the recent case of Gabaya vs. Mendoza, 113 SCRA 405, 406, March 30, 1982, this Court said:

t.hqw

xxx xxx xxx

In Marasigan vs. Ronquillo (94 Phil. 237), it was categorically stated that the rule is absolute
that after a judgment becomes final by the expiration of the period provided by the rules within
which it so becomes, no further amendment or correction can be made by the court except for
clerical errors or mistakes. And such final judgment is conclusive not only as to every matter
which was offered and received to sustain or defeat the claim or demand but as to any other
admissible matter which must have been offered for that purpose (L-7044, 96 Phil. 526). In the
earlier case of Contreras and Ginco vs. Felix and China Banking Corp., Inc. (44 O.G. 4306), it
was stated that the rule must be adhered to regardless of any possible injustice in a particular
case for (W)e have to subordinate the equity of a particular situation to the over-mastering
need of certainty and immutability of judicial pronouncements
xxx xxx xxx
III
The despotic manner by which public respondent Amado G. Inciong divested the members of the petitioner
union of their rights acquired by virtue of a final judgment is tantamount to a deprivation of property without due
process of law Public respondent completely ignored the rights of the petitioner union's members in dismissing
their complaint since he knew for a fact that the judgment of the labor arbiter had long become final and was
even partially executed by the respondent bank.
A final judgment vests in the prevailing party a right recognized and protected by law under the due process
clause of the Constitution (China Ins. & Surety Co. vs. Judge of First Instance of Manila, 63 Phil. 324). A final
judgment is "a vested interest which it is right and equitable that the government should recognize and protect,
and of which the individual could no. be deprived arbitrarily without injustice" (Rookledge v. Garwood, 65 N.W.
2d 785, 791).
lt is by this guiding principle that the due process clause is interpreted. Thus, in the pithy language of then
Justice, later Chief Justice, Concepcion "... acts of Congress, as well as those of the Executive, can deny due
process only under pain of nullity, and judicial proceedings suffering from the same flaw are subject to the
same sanction, any statutory provision to the contrary notwithstanding (Vda. de Cuaycong vs. Vda. de
Sengbengco 110 Phil. 118, emphasis supplied), And "(I)t has been likewise established that a violation of a
constitutional right divested the court of jurisdiction; and as a consequence its judgment is null and void and
confers no rights" (Phil. Blooming Mills Employees Organization vs. Phil. Blooming Mills Co., Inc., 51 SCRA
211, June 5, 1973).
Tested by and pitted against this broad concept of the constitutional guarantee of due process, the action of
public respondent Amado G. Inciong is a clear example of deprivation of property without due process of law
and constituted grave abuse of discretion, amounting to lack or excess of jurisdiction in issuing the order dated
November 10, 1979.
WHEREFORE, THE PETITION IS HEREBY GRANTED, THE ORDER OF PUBLIC RESPONDENT IS SET
ASIDE, AND THE DECISION OF LABOR ARBITER RICARTE T. SORIANO DATED AUGUST 25, 1975, IS
HEREBY REINSTATED.
COSTS AGAINST PRIVATE RESPONDENT INSULAR BANK OF ASIA AND AMERICA

SO ORDERED.

1wph1.t

Guerrero, Escolin and Cuevas, JJ., concur.

Aquino and Abad Santos, JJ., concur in the result.
Concepcion Jr., J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-75038 August 23, 1993

ELIAS VILLUGA, RENATO ABISTADO, JILL MENDOZA, ANDRES ABAD, BENJAMIN BRIZUELA,
NORLITO LADIA, MARCELO AGUILAN, DAVID ORO, NELIA BRIZUELA, FLORA ESCOBIDO, JUSTILITA
CABANIG, and DOMINGO SAGUIT, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION) and BROAD STREET TAILORING
and/or RODOLFO ZAPANTA, respondents.
Balguma, Macasaet & Associates for petitioners.
Teresita Gandionco Oledan for private respondents.

NOCON, J.:
A basic factor underlying the exercise of rights and the filing of claims for benefits under the Labor Code and
other presidential issuances or labor legislations is the status and nature of one's employment. Whether an
employer-employee relationship exist and whether such employment is managerial in character or that of a
rank and file employee are primordial considerations before extending labor benefits. Thus, petitioners in this
case seek a definitive ruling on the status and nature of their employment with Broad Street Tailoring and pray
for the nullification of the resolution dated May 12, 1986 of the National Labor Relations Commissions in NLRC
Case No. RB-IV- 21558-78-T affirming the decision of Labor Arbiter Ernilo V. Pealosa dated May 28, 1979,
which held eleven of them as independent contractors and the remaining one as employee but of managerial
rank.
The facts of the case shows that petitioner Elias Villuga was employed as cutter in the tailoring shop owned by
private respondent Rodolfo Zapanta and known as Broad Street Tailoring located at Shaw Boulevard,
Mandaluyong, Metro Manila. As cutter, he was paid a fixed monthly salary of P840.00 and a monthly
transportation allowance of P40.00. In addition to his work as cutter, Villuga was assigned the chore of
distributing work to the shop's tailors or sewers when both the shop's manager and assistant manager would
be absent. He saw to it that their work conformed with the pattern he had prepared and if not, he had them
redone, repaired or resewn.
The other petitioners were either ironers, repairmen and sewers. They were paid a fixed amount for every item
ironed, repaired or sewn, regardless of the time consumed in accomplishing the task. Petitioners did not fill up
any time record since they did not observe regular or fixed hours of work. They were allowed to perform their
work at home especially when the volume of work, which depended on the number of job orders, could no
longer be coped up with.

From February 17 to 22, 1978, petitioner Villuga failed to report for work allegedly due to illness. For not
properly notifying his employer, he was considered to have abandoned his work.
In a complaint dated March 27, 1978, filed with the Regional Office of the Department of Labor, Villuga claimed
that he was refused admittance when he reported for work after his absence, allegedly due to his active
participation in the union organized by private respondent's tailors. He further claimed that he was not paid
overtime pay, holiday pay, premium pay for work done on rest days and holidays, service incentive leave pay
and 13th month pay.
Petitioners Renato Abistado, Jill Mendoza, Benjamin Brizuela and David Oro also claimed that they were
dismissed from their employment because they joined the Philippine Social Security Labor Union (PSSLU).
Petitioners Andres Abad, Norlito Ladia, Marcelo Aguilan, Nelia Brizuela, Flora Escobido, Justilita Cabaneg and
Domingo Saguit claimed that they stopped working because private respondents gave them few pieces of work
to do after learning of their membership with PSSLU. All the petitioners laid claims under the different labor
standard laws which private respondent allegedly violated.
On May 28, 1979, Labor Arbiter Ernilo V. Pealosa rendered a decision ordering the dismissal of the complaint
for unfair labor practices, illegal dismissal and other money claims except petitioner Villuga's claim for 13th
month pay for the years 1976, 1977 and 1980. The dispositive portion of the decision states as follows:
WHEREFORE, premises considered, the respondent Broad Street Tailoring and/or Rodolfo
Zapanta are hereby ordered to pay complainant Elias Villuga the sum of ONE THOUSAND
TWO HUNDRED FORTY-EIGHT PESOS AND SIXTY-SIX CENTAVOS (P1,248.66)
representing his 13th month pay for the years 1976, 1977 and 1978. His other claims in this
case are hereby denied for lack of merit.
The complaint insofar as the other eleven (11) complainants are concerned should be, as it is
hereby dismissed for want of jurisdiction. 1
On appeal, the National Labor Relations Commission affirmed the questioned decision in a resolution dated
May 12, 1986, the dispositive portion of which states as follows:
WHEREFORE, premises considered, the decision appealed from is, as it is hereby
AFFIRMED, and the appeal dismissed. 2
Presiding Commissioner Guillermo C. Medina merely concurred in the result while Commissioner Gabriel M.
Gatchalian rendered a dissenting opinion which states as follows:
I am for upholding employer-employee relationship as argued by the complainants before the
Labor Arbiter and on appeal. The further fact that the proposed decision recognizes
complainant's status as piece-rate worker all the more crystallizes employer-employee
relationship the benefits prayed for must be granted. 3
Hence, petitioners filed this instant certiorari case on the following grounds:
1. That the respondent National Labor Relations Commission abused its discretion when it
ruled that petitioner/complainant, Elias Villuga falls within the category of a managerial
employee;

2. . . . when it ruled that the herein petitioners were not dismissed by reason of their union
activities;
3. . . . when it ruled that petitioners Andres Abad, Benjamin Brizuela, Norlito Ladia, Marcelo
Aguilan, David Oro, Nelia Brizuela, Flora Escobido, Justilita Cabaneg and Domingo Saguit
were not employees of private respondents but were contractors.
4. . . . when it ruled that petitioner Elias Villuga is not entitled to overtime pay and services for
Sundays and Legal Holidays; and
5. . . . when it failed to grant petitioners their respective claims under the provisions of P.D.
Nos. 925, 1123 and 851. 4
Under Rule 1, Section 2(c), Book III of the Implementing Rules of Labor Code, to be a member of a managerial
staff, the following elements must concur or co-exist, to wit: (1) that his primary duty consists of the
performance of work directly related to management policies; (2) that he customarily and regularly exercises
discretion and independent judgment in the performance of his functions; (3) that he regularly and directly
assists in the management of the establishment; and (4) that he does not devote his twenty per cent of his time
to work other than those described above.
Applying the above criteria to petitioner Elias Villuga's case, it is undisputed that his primary work or duty is to
cut or prepare patterns for items to be sewn, not to lay down or implement any of the management policies, as
there is a manager and an assistant manager who perform said functions. It is true that in the absence of the
manager the assistant manager, he distributes and assigns work to employees but such duty, though involving
discretion, is occasional and not regular or customary. He had also the authority to order the repair or resewing
of defective item but such authority is part and parcel of his function as cutter to see to it that the items cut are
sewn correctly lest the defective nature of the workmanship be attributed to his "poor cutting." Elias Villuga
does not participate in policy-making. Rather, the functions of his position involve execution of approved and
established policies. InFranklin Baker Company of the Philippines v. Trajano, 5 it was held that employees

who do not participate in policy-making but are given ready policies to execute and standard practices to
observe are not managerial employees. The test of "supervisory or managerial status" depends on
whether a person possesses authority that is not merely routinary or clerical in nature but one that
requires use of independent judgment. In other words, the functions of the position are not managerial in
nature if they only execute approved and established policies leaving little or no discretion at all whether
to implement said policies or not. 6
Consequently, the exclusion of Villuga from the benefits claimed under Article 87 (overtime pay and premium
pay for holiday and rest day work), Article 94, (holiday pay), and Article 95 (service incentive leave pay) of the
Labor Code, on the ground that he is a managerial employee is unwarranted. He is definitely a rank and file
employee hired to perform the work of the cutter and not hired to perform supervisory or managerial functions.
The fact that he is uniformly paid by the month does not exclude him from the benefits of holiday pay as held in
the case ofInsular Bank of America Employees Union v. Inciong. 7 He should therefore be paid in addition to

the 13th month pay, his overtime pay, holiday pay, premium pay for holiday and rest day, and service
incentive leave pay.
As to the dismissal of the charge for unfair labor practices of private respondent consisting of termination of
employment of petitioners and acts of discrimination against members of the labor union, the respondent
Commission correctly held the absence of evidence that Mr. Zapanta was aware of petitioners' alleged union
membership on February 22, 1978 as the notice of union existence in the establishment with proposal for
recognition and collective bargaining negotiation was received by management only an March 3, 1978. Indeed,

self-serving allegations without concrete proof that the private respondent knew of their membership in the
union and accordingly reacted against their membership do not suffice.
Nor is private respondent's claim that petitioner Villuga abandoned his work acceptable. For abandonment to
constitute a valid cause for dismissal, there must be a deliberate and unjustified refusal of the employee to
resume his employment. Mere absence is not sufficient, it must be accompanied by overt acts unerringly
pointing to the fact that the employee simply does not want to work anymore. 8 At any rate, dismissal of an

employee due to his prolonged absence without leave by reason of illness duly established by the
presentation of a medical certificate is not justified. 9 In the case at bar, however, considering that
petitioner Villuga absented himself for four (4) days without leave and without submitting a medical
certificate to support his claim of illness, the imposition of a sanction is justified, but surely, not dismissal,
in the light of the fact that this is petitioner's first offense. In lieu of reinstatement, petitioner Villuga should
be paid separation pay where reinstatement can no longer be effected in view of the long passage of time
or because of the realities of the situation. 10 But petitioner should not be granted backwages in addition to
reinstatement as the same is not just and equitable under the circumstances considering that he was not
entirely free from blame. 11
As to the other eleven petitioners, there is no clear showing that they were dismissed because the
circumstances surrounding their dismissal were not even alleged. However, we disagree with the finding of
respondent Commission that the eleven petitioners are independent contractors.
For an employer-employee relationship to exist, the following elements are generally considered: "(1) the
selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal and (4) the power to control the employee's conduct."

12

Noting that the herein petitioners were oftentimes allowed to perform their work at home and were paid wages
on a piece-rate basis, the respondent Commission apparently found the second and fourth elements lacking
and ruled that "there is no employer-employee relationship, for it is clear that respondents are interested only in
the result and not in the means and manner and how the result is obtained."
Respondent Commission is in error. The mere fact that petitioners were paid on a piece-rate basis is no
argument that herein petitioners were not employees. The term "wage" has been broadly defined in Article 97
of the Labor Code as remuneration or earnings, capable of being expressed in terms of money whether fixed or
ascertained on a time, task, piece or commission
basis. . . ." The facts of this case indicate that payment by the piece is just a method of compensation and does
not define the essence of the
relation. 13 The petitioners were allowed to perform their work at home does not likewise imply absence of

control and supervision. The control test calls merely for the existence of a right to control the manner of
doing the work, not the actual exercise of the right. 14
In determining whether the relationship is that of employer and employee or one of an independent contractor,
"each case must be determined on its own facts and all the features of the relationship are to be
considered." 15Considering that petitioners who are either sewers, repairmen or ironer, have been in the

employ of private respondent as early as 1972 or at the latest in 1976, faithfully rendering services which
are desirable or necessary for the business of private respondent, and observing management's
approved standards set for their respective lines of work as well as the customers' specifications,
petitioners should be considered employees, not independent contractors.

Independent contractors are those who exercise independent employment, contracting to do a piece of work
according to their own methods and without being subjected to control of their employer except as to the result
of their work. By the nature of the different phases of work in a tailoring shop where the customers'
specifications must be followed to the letter, it is inconceivable that the workers therein would not be subjected
to control.
In Rosario Brothers, Inc. v. Ople, 16 this Court ruled that tailors and similar workers hired in the tailoring

department, although paid weekly wages on piece work basis, are employees not independent
contractors. Accordingly, as regular employees, paid on a piece-rate basis, petitioners are not entitled to
overtime pay, holiday pay, premium pay for holiday/rest day and service incentive leave pay. Their claim
for separation pay should also be defined for lack of evidence that they were in fact dismissed by private
respondent. They should be paid, however, their 13th month pay under P.D. 851, since they are
employees not independent contractors.
WHEREFORE, in view of the foregoing reasons, the assailed decision of respondent National Labor Relations
Commission is hereby MODIFIED by awarding
(a) in favor of petitioner Villuga, overtime pay, holiday pay, premium pay for holiday and rest day, service
incentive leave pay and separation pay, in addition to his 13th month pay; and
(b) in favor of the rest of the petitioners, their respective 13th month pay.
The case is hereby REMANDED to the National Labor Relations Commission for the computation of the claims
herein-above mentioned.
SO ORDERED.
Narvasa C.J., Padilla, Regalado and Puno, JJ., concur.