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1. SECOND DIVISION [G.R. No. 114698. July 3, 1995.] WELLINGTON INVESTMENT AND MANUFACTURING CORPORATION, petitioner, vs. CRESENCIANO B. TRAJANO, Under-Secretary of Labor and Employment, ELMER ABADILLA, and 34 others, respondents. Felipe P. Fuentes, Jr. for petitioner. The Solicitor General for respondents. SYLLABUS 1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; WAGES; RIGHT TO HOLIDAY PAY. Every worker should, according to the Labor Code, "be paid his regular daily wage during regular holidays, except in retail and service establishments regularly employing less than ten (10) workers"; this, of course, even if the worker does no work on these holidays. The regular holidays 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 of December, and the day designated by law for holding a general election (or national referendum or plebiscite). 2. ID.; ID.; ID.; COMPUTATION OF MONTHLY MINIMUM WAGE. Employees who are uniformly paid by the month, "the monthly minimum wage shall not be less than the statutory minimum wage multiplied by 365 days divided by twelve." This monthly salary shall serve as compensation "for all days in the month whether worked or not," and "irrespective of the number of working days therein." In other words, whether the month is of thirty (30) or thirtyone (31) days' duration, or +twenty-eight (28) or twenty-nine (29) (as in February), the employee is entitled to receive the entire monthly salary. So, too, in the event of the declaration of any special holiday, or any fortuitous cause precluding work on any particular day or days (such as transportation strikes, riots, or typhoons or other natural calamities), the employee is entitled to the salary for the entire month and the employer has no right to deduct the proportionate amount corresponding to the days when no work was done. The monthly compensation is evidently intended precisely to avoid computations and adjustments resulting from the contingencies just mentioned which are routinely made in the case of workers paid on daily basis. 3. ID.; ID.; ID.; ID.; WHEN REGULAR HOLIDAY FALLS ON A SUNDAY. The basic issue raised in this case is "whether or not a monthly-paid employee receiving a fixed monthly compensation, is entitled to an additional pay aside from his usual holiday pay, whenever a regular holiday falls on a Sunday. The monthly salary in Wellington which is based on the so-called "314 factor" accounts for all 365 days of a year; with the exception only of 51 Sundays. The respondents' theory that there was "an increase of three (3) working days resulting from regular holidays falling on Sundays"; hence Wellington "should pay for 317 days, instead of 315 days" would make each of the year in question (1988, 1989, 1990), a year of 368 days. Pursuant to this theory, no employer opting to pay his employees by the month

would have any definite basis to determine the number of days in a year for which compensation should be given to his work force. There is no provision of law requiring any employer to make such adjustments in the monthly salary rate set by him to take account of legal holidays falling on Sundays in a given year, or, contrary to the legal provisions bearing on the point, otherwise to reckon a year at more than 365 days. 4. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; GRAVE ABUSE OF DISCRETION COMMITTED BY IMPOSING AN OBLIGATION WHERE NONE INTENDED. Respondent's argument assumes that there are some "labor standards provisions of the Code and the other labor legislations" imposing on employers the obligation to give additional compensation to their monthly-paid employees in the event that a legal holiday should fall on a Sunday in a particular month with which compliance may be commanded by the Regional Director when the existence of said provisions is precisely the matter to be established. In promulgating the orders complained of the public respondents have attempted to legislate, or interpret legal provisions in such a manner as to create obligations where none are intended. They have acted without authority, or at the very least, with grave abuse of their discretion. Their acts must be nullified and set aside. DECISION NARVASA, C.J p: The basic issue raised by petitioner in this case is, as its counsel puts it, "whether or not a monthly-paid employee, receiving a fixed monthly compensation, is entitled to an additional pay aside from his usual holiday pay, whenever a regular holiday falls on a Sunday." The case arose from a routine inspection conducted by a labor Enforcement Officer on August 6, 1991 of the Wellington Flour Mills, an establishment owned and operated by petitioner Wellington Investment and Manufacturing Corporation (hereafter, simply Wellington). The officer thereafter drew up a report, a copy of which was "explained to and received by" Wellington's personnel manager, in which he set forth his finding of "(n)on-payment of regular holidays falling on a Sunday for monthly-paid employees." 1 Wellington sought reconsideration of the Labor Inspector's report, by letter dated August 10, 1991. It argued that "the monthly salary of the company's monthly-salaried employees already includes holiday pay for all regular holidays . . . (and hence) there is no legal basis for the finding of alleged non-payment of regular holidays falling on a Sunday." 2 It expounded on this thesis in a position paper subsequently submitted to the Regional Director, asserting that it pays its monthly-paid employees a fixed monthly compensation "using the 314 factor which undeniably covers and already includes payment for all the working days in a month as well as all the 10 unworked regular holidays within a year." 3 Wellington's arguments failed to persuade the Regional Director who, in an Order issued on July 28, 1992, ruled that "when a regular holiday falls on a Sunday, an extra or additional working day is created and the employer has the obligation to pay the employees for the extra day except last Sunday of August since the payment for the said holiday is already included in the 314 factor," and accordingly directed Wellington to pay its employees compensation corresponding to four (4) extra working days. 4

Wellington timely filed a motion for reconsideration of this Order of August 10, 1992, pointing out that it was in effect being compelled to "shell out an additional pay for an alleged extra working day" despite its complete payment of all compensation lawfully due its workers, using the 314 factor. 5 Its motion was treated as an appeal and was acted on by respondent Undersecretary. By Order dated September 22, the latter affirmed the challenged order of the Regional Director, holding that "the divisor being used by the respondent (Wellington) does not reliably reflect the actual working days in a year," and consequently commanded Wellington to pay its employees the "six additional working days resulting from regular holidays falling on Sundays in 1988, 1989 and 1990." 6 Again, Wellington moved for reconsideration, 7 and again was rebuffed. 8 Wellington then instituted the special civil action of certiorari at bar in an attempt to nullify the orders above mentioned. By Resolution dated July 4, 1994, this Court authorized the issuance of a temporary restraining order enjoining the respondents from enforcing the questioned orders. 9 Every worker should, according to the Labor Code, 10 "be paid his regular daily wage during regular holidays, except in retail and service establishments regularly employing less than ten (10) workers;" this, of course, even if the worker does no work on these holidays. The regular holidays 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 of December, and the day designed by law for holding a general election (or national referendum or plebiscite). 11 Particularly as regards employees "who are uniformly paid by the month, "the monthly minimum wage shall not be less than the statutory minimum wage multiplied by 365 days divided by twelve." 12 This monthly salary shall serve as compensation "for all days in the month whether worked or not," and "irrespective of the number of working days therein." 13 In other words, whether the month is of thirty (30) or thirty-one (31) days' duration, or twenty-eight (28) or twenty-nine (29) (as in February), the employee is entitled to receive the entire monthly salary. So, too, in the event of the declaration of any special holiday, or any fortuitous cause precluding work on any particular day or days (such as transportation strikes, riots, or typhoons or other natural calamities), the employee is entitled to the salary for the entire month and the employer has no right to deduct the proportionate amount corresponding to the days when no work was done. The monthly compensation is evidently intended precisely to avoid computations and adjustments resulting from the contingencies just mentioned which are routinely made in the case of workers paid on daily basis. cdphil In Wellington's case, there seems to be no question that at the time of the inspection conducted by the Labor Enforcement Officer on August 6, 1991, it was and had been paying its employees "a salary of not less than the statutory or established minimum wage," and that the monthly salary thus paid was "not . . . less than the statutory minimum wage multiplied by 365 days divided by twelve," supra. There is, in other words, no issue that to this extent, Wellington complied with the minimum norm laid down by law. Apparently the monthly salary was fixed by Wellington to provide for compensation for every working day of the year including the holidays specified by law and excluding only Sundays.

In fixing the salary, Wellington used what it calls the "314 factor;" that is to say, it simply deducted 51 Sundays from the 365 days normally comprising a year and used the difference, 314, as basis for determining the monthly salary. The monthly salary thus fixed actually covers payment for 314 days of the year, including regular and special holidays, as well as days when no work is done by reason of fortuitous cause, as above specified, or causes not attributable to the employees. The Labor Officer was conducted the routine inspection of Wellington discovered that in certain years, two or three regular holidays had fallen on Sundays. He reasoned that this had precluded the enjoyment by the employees of a non-working day, and the employees had consequently had to work an additional day for that month. This ratiocination received the approval of his Regional Director who opined 14 that "when a regular holiday falls on a Sunday, an extra or additional working day is created and the employer has the obligation to pay its employees for the extra day except the last Sunday of August since the payment for the said holiday is already included in the 314 factor." 15 This ingenuous theory was adopted and further explained by respondent Labor Undersecretary, to whom the matter was appealed, as follows: 16 " . . . By using said (314) factor, the respondent (Wellington) assumes that all the regular holidays fell on ordinary days and never on a Sunday. Thus, the respondent failed to consider the circumstance that whenever a regular holiday coincides with a Sunday, an additional working day is created and left unpaid. In other words, while the said divisor may be utilized as proof evidencing payment of 302 working days, 2 special days and the ten regular holidays in a calendar year, the same does not cover or include payment of additional working days created as a result of some regular holidays falling on Sundays." He pointed out that in 1988 there was "an increase of three (3) working days resulting from regular holidays falling on Sundays;" hence Wellington "should pay for 317 days, instead of 314 days." By the same process of ratiocination, respondent Undersecretary theorized that there should be additional payment by Wellington to its monthly-paid employees for "an increment of three (3) working days" for 1989 and again, for 1990. What he is saying is that in those years, Wellington should have used the "317 factor," not the "314 factor." The theory loses sight of the fact that the monthly salary in Wellington which is based on the so-called "314 factor" accounts for all 365 days of a year; i.e., Wellington's "314 factor" leaves no day unaccounted for; it is paying for all the days of a year with the exception only of 51 Sundays. The respondents' theory would make each of the years in question (1988, 1989, 1990), a year of 368 days. Pursuant to this theory, no employer opting to pay his employees by the month would have any definite basis to determine the number of days in a year for which compensation should be given to his work force. He would have to ascertain the number of times legal holidays would fall on Sundays in all the years of the expected or extrapolated lifetime of his business. Alternatively, he would be compelled to make adjustments in his employees' monthly salaries every year, depending on the number of times that a legal holiday fell on a Sunday.

There is no provision of law requiring any employer to make such adjustments in the monthly salary rate set by him to take account of legal holidays falling on Sundays in a given year, or, contrary to the legal provisions bearing on the point, otherwise to reckon a year at more than 365 days. As earlier mentioned, what the law requires of employers opting to pay by the month is to assure that "the monthly minimum wage shall not be less than the statutory minimum wage multiplied by 365 days divided by twelve," 17 and to pay that salary "for all days in the month whether worked or not," and "irrespective of the number of working days therein." 18 That salary is due and payable regardless of the declaration of any special holiday in the entire country or a particular place therein, or any fortuitous cause precluding work on any particular day or days (such as transportation strikes, riots or typhoons or other natural calamities), or cause not imputable to the worker. And as also earlier pointed out, the legal provisions governing monthly compensation are evidently intended precisely to avoid recomputations and alterations in salary on account of the contingencies just mentioned, which, by the way, are routinely made between employer and employees when the wages are paid on daily basis. The public respondents argue that their challenged conclusions and dispositions may be justified by Section 2, Rule X, Book III of the Implementing Rules, giving the Regional Director power 19 ". . . to order and administer (in cases where employer-employee relations still exist), after due notice and hearing, compliance with the labor standards provisions of the Code and the other labor legislations based on the findings of their Regulations Officers or Industrial Safety Engineers (Labor Standard and Welfare Officers) and made in the course of inspection, and to issue writs of execution to the appropriate authority for the enforcement of his order, in line with the provisions of Article 128 in relation to Articles 289 and 290 of the Labor Code, as amended. . . . " The respondents beg the question. Their argument assumes that there are some "labor standards provisions of the Code and the other labor legislations" imposing on employers the obligation to give additional compensation to their monthly-paid employees in the event that a legal holiday should fall on a Sunday in a particular month with which compliance may be commanded by the Regional Director when the existence of said provisions is precisely the matter to be established. In promulgating the orders complained of the public respondents have attempted to legislate, or interpret legal provisions in such a manner as to create obligations where none are intended. They have acted without authority, or at the very least, with grave abuse of their discretion. Their acts must be nullified and set aside. prLL WHEREFORE, the orders complained of, namely: that of the respondent Undersecretary dated September 22, 1993, and that of the Regional Director dated July 30, 1992, are NULLIFIED AND SET ASIDE, and the proceeding against petitioner DISMISSED. SO ORDERED. Regalado, Puno and Mendoza, JJ., concur.

2. THIRD DIVISION [G.R. No. 144664. March 15, 2004.] ASIAN TRANSMISSION CORPORATION, petitioner, vs. The Hon. COURT OF APPEALS, Thirteenth Division, HON. FROILAN M. BACUNGAN as Voluntary Arbitrator, KISHIN A. LALWANI, Union, Union representative to the Panel Arbitrators; BISIG NG ASIAN TRANSMISSION LABOR UNION (BATLU); HON. BIENVENIDO T. LAGUESMA in his capacity as Secretary of Labor and Employment; and DIRECTOR CHITA G. CILINDRO in her capacity as Director of Bureau of Working Conditions, respondents. DECISION CARPIO-MORALES, J p: Petitioner, Asian Transmission Corporation, seeks via petition for certiorari under Rule 65 of the 1995 Rules of Civil Procedure the nullification of the March 28, 2000 Decision 1 of the Court of Appeals denying its petition to annul 1) the March 11, 1993 "Explanatory Bulletin" 2 of the Department of Labor and Employment (DOLE) entitled "Workers' Entitlement to Holiday Pay on April 9, 1993, Araw ng Kagitingan and Good Friday", which bulletin the DOLE reproduced on January 23, 1998, 2) the July 31, 1998 Decision 3 of the Panel of Voluntary Arbitrators ruling that the said explanatory bulletin applied as well to April 9, 1998, and 3) the September 18, 1998 4 Resolution of the Panel of Voluntary Arbitration denying its Motion for Reconsideration. TASCEc The following facts, as found by the Court of Appeals, are undisputed: The Department of Labor and Employment (DOLE), through Undersecretary Cresenciano B. Trajano, issued an Explanatory Bulletin dated March 11, 1993 wherein it clarified, inter alia, that employees are entitled to 200% of their basic wage on April 9, 1993, whether unworked, which[,] apart from being Good Friday [and, therefore, a legal holiday], is also Araw ng Kagitingan [which is also a legal holiday]. The bulletin reads: "On the correct payment of holiday compensation on April 9, 1993 which apart from being Good Friday is also Araw ng Kagitingan, i.e., two regular holidays falling on the same day, this Department is of the view that the covered employees are entitled to at least two hundred percent (200%) of their basic wage even if said holiday is unworked. The first 100% represents the payment of holiday pay on April 9, 1993 as Good Friday and the second 100% is the payment of holiday pay for the same date as Araw ng Kagitingan.

Said bulletin was reproduced on January 23, 1998, when April 9, 1998 was both Maundy Thursday and Araw ng Kagitingan . . . Despite the explanatory bulletin, petitioner [Asian Transmission Corporation] opted to pay its daily paid employees only 100% of their basic pay on April 9, 1998. Respondent Bisig ng Asian Transmission Labor Union (BATLU) protested. In accordance with Step 6 of the grievance procedure of the Collective Bargaining Agreement (CBA) existing between petitioner and BATLU, the controversy was submitted for voluntary arbitration. . . . On July 31, 1998, the Office of the Voluntary Arbitrator rendered a decision directing petitioner to pay its covered employees "200% and not just 100% of their regular daily wages for the unworked April 9, 1998 which covers two regular holidays, namely, Araw ng Kagitingan and Maundy Thursday." (Emphasis and underscoring supplied) Subject of interpretation in the case at bar is Article 94 of the Labor Code 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 (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 thirtieth of December and the day designated by law for holding a general election, which was amended by Executive Order No. 203 issued on June 30, 1987, such that the regular holidays are now: 1. 2. 3. 4. New Year's Day January 1

Maundy Thursday Movable Date Good Friday Movable Date Araw ng Kagitingan April 9

(Bataan and Corregidor Day) 5. 6. 7. 8. 9. 10. Labor Day May 1

Independence Day June 12 National Heroes Day Bonifacio Day Christmas Day Rizal Day Last Sunday of August

November 30 December 25

December 30

In deciding in favor of the Bisig ng Asian Transmission Labor Union (BATLU), the Voluntary Arbitrator held that Article 94 of the Labor Code provides for holiday pay for every regular holiday, the computation of which is determined by a legal formula which is not changed by the fact that there are two holidays falling on one day, like on April 9, 1998 when it was Araw ng Kagitingan and at the same time was Maundy Thursday; and that that the law, as amended, enumerates ten regular holidays for every year should not be interpreted as authorizing a reduction to nine the number of paid regular holidays "just because April 9 (Araw ng Kagitingan) in certain years, like 1993 and 1998, is also Holy Friday or Maundy Thursday." SDTaHc In the assailed decision, the Court of Appeals upheld the findings of the Voluntary Arbitrator, holding that the Collective Bargaining Agreement (CBA) between petitioner and BATLU, the law governing the relations between them, clearly recognizes their intent to consider Araw ng Kagitingan and Maundy Thursday, on whatever date they may fall in any calendar year, as paid legal holidays during the effectivity of the CBA and that "[t]here is no condition, qualification or exception for any variance from the clear intent that all holidays shall be compensated." 5 The Court of Appeals further held that "in the absence of an explicit provision in law which provides for [a] reduction of holiday pay if two holidays happen to fall on the same day, any doubt in the interpretation and implementation of the Labor Code provisions on holiday pay must be resolved in favor of labor." By the present petition, petitioners raise the following issues: I WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN ERRONEOUSLY INTERPRETING THE TERMS OF THE COLLECTIVE BARGAINING AGREEMENT BETWEEN THE PARTIES AND SUBSTITUTING ITS OWN JUDGMENT IN PLACE OF THE AGREEMENTS MADE BY THE PARTIES THEMSELVES II WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT ANY DOUBTS ABOUT THE VALIDITY OF THE POLICIES ENUNCIATED IN THE EXPLANATORY BULLETIN WAS LAID TO REST BY THE REISSUANCE OF THE SAID EXPLANATORY BULLETIN III WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN UPHOLDING THE VALIDITY OF THE EXPLANATORY BULLETIN EVEN WHILE ADMITTING THAT THE SAID BULLETIN WAS NOT AN EXAMPLE OF A JUDICIAL, QUASI-JUDICIAL, OR ONE OF THE RULES AND REGULATIONS THAT [Department of Labor and Employment] DOLE MAY PROMULGATE IV WHETHER OR NOT THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) BY ISSUING EXPLANATORY BULLETIN DATED MARCH 11, 1993, IN THE GUISE OF

PROVIDING GUIDELINES ON ART. 94 OF THE LABOR CODE, COMMITTED GRAVE ABUSE OF DISCRETION, AS IT LEGISLATED AND INTERPRETED LEGAL PROVISIONS IN SUCH A MANNER AS TO CREATE OBLIGATIONS WHERE NONE ARE INTENDED BY THE LAW V WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN SUSTAINING THE SECRETARY OF THE DEPARTMENT OF LABOR IN REITERATING ITS EXPLANATORY BULLETIN DATED MARCH 11, 1993 AND IN ORDERING THAT THE SAME POLICY OBTAINED FOR APRIL 9, 1998 DESPITE THE RULINGS OF THE SUPREME COURT TO THE CONTRARY VI WHETHER OR NOT RESPONDENTS' ACTS WILL DEPRIVE PETITIONER OF PROPERTY WITHOUT DUE PROCESS BY THE "EXPLANATORY BULLETIN" AS WELL AS EQUAL PROTECTION OF LAWS The petition is devoid of merit. At the outset, it bears noting that instead of assailing the Court of Appeals Decision by petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, petitioner lodged the present petition for certiorari under Rule 65. [S]ince the Court of Appeals had jurisdiction over the petition under Rule 65, any alleged errors committed by it in the exercise of its jurisdiction would be errors of judgment which are reviewable by timely appeal and not by a special civil action of certiorari. If the aggrieved party fails to do so within the reglementary period, and the decision accordingly becomes final and executory, he cannot avail himself of the writ of certiorari, his predicament being the effect of his deliberate inaction. The appeal from a final disposition of the Court of Appeals is a petition for review under Rule 45 and not a special civil action under Rule 65 of the Rules of Court, now Rule 45 and Rule 65, respectively, of the 1997 Rules of Civil Procedure. Rule 45 is clear that the decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless of the nature of the action or proceeding involved, may be appealed to this Court by filing a petition for review, which would be but a continuation of the appellate process over the original case. Under Rule 45 the reglementary period to appeal is fifteen (15) days from notice of judgment or denial of motion for reconsideration. xxx xxx xxx

For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must show that he has no plain, speedy and adequate remedy in the ordinary course of law against its perceived grievance. A remedy is considered "plain, speedy and adequate" if it will promptly relieve the petitioner from the injurious effects of the judgment and the acts of the lower court or agency. In this case, appeal was not only available but also a speedy and adequate remedy. 6 The records of the case show that following petitioner's receipt on August 18, 2000 of a copy of the August 10, 2000 Resolution of the Court of Appeals denying its Motion for

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Reconsideration, it filed the present petition for certiorari on September 15, 2000, at which time the Court of Appeals decision had become final and executory, the 15-day period to appeal it under Rule 45 having expire Technicality aside, this Court finds no ground to disturb the assailed decision. Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that the State shall afford protection to labor. 7 Its purpose is not merely "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." 8 It is also intended to enable the worker to participate in the national celebrations held during the days identified as with great historical and cultural significance. Independence Day (June 12), Araw ng Kagitingan (April 9), National Heroes Day (last Sunday of August), Bonifacio Day (November 30) and Rizal Day (December 30) were declared national holidays to afford Filipinos with a recurring opportunity to commemorate the heroism of the Filipino people, promote national identity, and deepen the spirit of patriotism. Labor Day (May 1) is a day traditionally reserved to celebrate the contributions of the working class to the development of the nation, while the religious holidays designated in Executive Order No. 203 allow the worker to celebrate his faith with his family. As reflected above, Art. 94 of the Labor Code, as amended, affords a worker the enjoyment of ten paid regular holidays. 9 The provision is mandatory, 10 regardless of whether an employee is paid on a monthly or daily basis. 11 Unlike a bonus, which is a management prerogative, 12 holiday pay is a statutory benefit demandable under the law. Since a worker is entitled to the enjoyment of ten paid regular holidays, the fact that two holidays fall on the same date should not operate to reduce to nine the ten holiday pay benefits a worker is entitled to receive. aTcHIC It is elementary, under 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. 13 In the case at bar, there is nothing in the law which provides or indicates that the entitlement to ten days of holiday pay shall be reduced to nine when two holidays fall on the same day. Petitioner's assertion that Wellington v. Trajano 14 has "overruled" the DOLE March 11, 1993 Explanatory Bulletin does not lie. In Wellington, the issue was whether monthly-paid employees are entitled to an additional day's pay if a holiday falls on a Sunday. This Court, in answering the issue in the negative, observed that in fixing the monthly salary of its employees, Wellington took into account "every working day of the year including the holidays specified by law and excluding only Sunday." In the instant case, the issue is whether dailypaid employees are entitled to be paid for two regular holidays which fall on the same day. 15 In any event, Art. 4 of the Labor Code provides that all doubts in the implementation and interpretation of its provisions, including its implementing rules and regulations, shall be resolved in favor of labor. For the working man's welfare should be the primordial and paramount consideration. 16 Moreover, Sec. 11, Rule IV, Book III of the Omnibus Rules to Implement the Labor Code provides that "Nothing in the law or the rules shall justify an employer in withdrawing or

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reducing any benefits, supplements or payments for unworked regular holidays as provided in existing individual or collective agreement or employer practice or policy." 17 From the pertinent provisions of the CBA entered into by the parties, petitioner had obligated itself to pay for the legal holidays as required by law. Thus, the 1997-1998 CBA incorporates the following provision: ARTICLE XIV PAID LEGAL HOLIDAYS The following legal holidays shall be paid by the COMPANY as required by law: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. New Year's Day (January 1st) Holy Thursday (moveable) Good Friday (moveable) Araw ng Kagitingan (April 9th) Labor Day (May 1st) Independence Day (June 12th) Bonifacio Day [November 30] Christmas Day (December 25th) Rizal Day (December 30th) General Election designated by law, if declared public non-working holiday National Heroes Day (Last Sunday of August)

Only an employee who works on the day immediately preceding or after a regular holiday shall be entitled to the holiday pay. A paid legal holiday occurring during the scheduled vacation leave will result in holiday payment in addition to normal vacation pay but will not entitle the employee to another vacation leave. Under similar circumstances, the COMPANY will give a day's wage for November 1st and December 31st whenever declared a holiday. When required to work on said days, the employee will be paid according to Art. VI, Sec. 3B hereof. 18 WHEREFORE, the petition is hereby DISMISSED. SDIaHE SO ORDERED.

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3. FIRST DIVISION [G.R. No. 107225. June 2, 1995.] ARCHILLES MANUFACTURING CORPORATION, ALBERTO YU AND ADRIAN YU, Petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, GERONIMO MANUEL, ARNULFO DIAZ, JAIME CARUNUNGAN AND BENJAMIN RINDON, respondents. SYLLABUS 1. LABOR AND SOCIAL LEGISLATION; REINSTATEMENT; REQUIRES WRIT OF EXECUTION FOR ENFORCEMENT THEREOF PENDING APPEAL. Whether a writ of execution is still necessary to enforce the Labor Arbiter's order of immediate reinstatement even when pending appeal, we agree with petitioners that it is necessary. The third paragraph of Art. 223 of the Labor Code provides In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall be immediately executory, even pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of the bond by the employer shall not stay the execution for reinstatement provided herein. We have fully explained the legal basis for this conclusion in Maranaw Hotel Resort Corporation (Century Park Sheraton Manila) v. NLRC and Gina G. Castro (G. R. No. 110027, 16 November 1994) thus It must be stressed, however, that although the reinstatement aspect of the decision is immediately executory, it does not follow that it is self-executory. There must be a writ of execution which may be issued motu proprio or on motion of an interested party (Article 224 of the Labor Code). The second paragraph of Section 1, Rule XVIII of the New Rules of Procedure of the NLRC also provides: The Labor Arbiter, POEA Administrator, or the Regional Director, or his duly authorized hearing officer of origin shall, motu proprio or upon motion of any interested party, issue a writ of execution on a judgment only within five (5) years from the date it becomes final and executory. . . . . No motion for execution shall be entertained nor a writ be issued unless the Labor Arbiter is in possession of the records of the case which shall include an entry of judgment. In the absence . . . of an order for the issuance of a writ of execution on the reinstatement aspect of the decision of the Labor Arbiter, the petitioner was under no legal obligation to admit back to work the private respondent under the terms and conditions prevailing prior to her dismissal or, at the petitioner's option, to merely reinstate her in the payroll. An option is a right of election to exercise a privilege, and the option in Article 223 of the Labor Code is exclusively granted to the employer. The event that gives rise for its exercise is not the reinstatement decree of the Labor Arbiter, but the writ for its execution commanding the employer to reinstate the employee, while the final act which compels the employer to exercise the option is the service upon it of the writ of execution when, instead of admitting the employee back to his work, the employer chooses to reinstate the employee in the payroll only. If the employer does not exercise this option, it must forthwith admit the employee back to work, otherwise it may be punished for contempt. 2. ID.; THIRTEENTH MONTH PAY; WHEN AVAILABLE; RULE. On the issue of the propriety of the award of a 13th month pay, paragraph 6 of the Revised Guidelines on the

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Implementation of the 13th Month Pay Law (P. D. 851) provides that "(a)n employee who has resigned or whose services were terminated at any time before the payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time he worked during the year, reckoned from the time he started working during the calendar year up to the time of his resignation or termination from the service . . . . The payment of the 13th month pay may be demanded by the employee upon the cessation of employer-employee relationship. This is consistent with the principle of equity that as the employer can require the employee to clear himself of all liabilities and property accountability, so can the employee demand the payment of all benefits due him upon the termination of the relationship." Furthermore, Sec. 4 of the original Implementing Rules of P. D. 851 mandates employers to pay their employees to pay their employees a 13th month pay not later than the 24th of December every year provided that they have worked for at least one (1) month during a calendar year. In effect, this statutory benefit is automatically vested in the employee who has at least worked for one month during the calendar year. As correctly stated by the Solicitor General, such benefit may not be lost or forfeited even in the event of the employee's subsequent dismissal for cause without violating his property rights. 3. ID.; ATTORNEY'S FEES; CAN ONLY BE ASSESSED IN CASES OF UNLAWFUL WITHHOLDING OF WAGES; CASE AT BAR. The disputed attorney's fees can only be assessed in cases of unlawful withholding of wages. It cannot be said that petitioners were guilty of unlawfully withholding private respondent's salaries since, as earlier discussed, the occasion never arose for them to exercise that option under Art. 223 of the Labor Code. Clearly, the award of attorney's fees is baseless. RESOLUTION BELLOSILLO, J p: There are three issues to be resolve in this special action for certiorari under Rule 65 of the Revised Rules of Court, namely: (a) whether a writ of execution is still necessary to enforce the Labor Arbiter's order of immediate reinstatement pending appeal; (b) whether dismissal for cause results in the forfeiture of the employee's right to a 13th month pay; and, (c) whether the award of attorney's fees is proper in the instants case. Archilles Manufacturing Corporation (ARCHILLES for brevity), Alberto Yu and Adrian Yu are the petitioners, the latter two (2) being the Chairman and the Vice-President of ARCHILLES, respectively. Private respondents Geronimo Manuel, Arnulfo Diaz, Jaime Carunungan and Benjamin Rindon were employed by ARCHILLES as laborers in its steel factory located in Barangay Pandayan, Meycauayan, Bulacan, each receiving a daily wage of P96.00. 1 ARCHILLES was maintaining a bunkhouse in the work area which served as resting place for its workers including private respondents. In 1988 a mauling incident nearly took place involving a relative of an employee. As a result ARCHILLES prohibited its workers from bringing any member of their family to the bunkhouse. But despite this prohibition, private respondents continued to bring their respective families to the bunkhouse, causing annoyance and discomfort to the other workers. 2 This was brought to the attention of ARCHILLES.

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On 11 May 1990 the management ordered private respondents to remove their families from the bunkhouse and to explain their violation of the company rule. Private respondents removed their families from the premises but failed to report to the management as required; instead, they absented themselves from 14 to 18 May 1990. Consequently, on 18 May 1990, ARCHILLES terminated their employment for abandonment and for violation of the company rule regarding the use of the bunkhouse. 3 Private respondents filed a complainant for illegal dismissal. On 10 July 1991 the Labor Arbiter found the dismissal of private respondents illegal and ordered their reinstatement as well as the payment to them of backwages, proportionate 13th month pay for the year 1990 and attorney's fees. 4 ARCHILLES appealed. On 10 September 1991 private respondents filed with public respondent National Labor Relations Commission a motion for the issuance of a writ of execution for their immediate reinstatement, pending appeal, either physically or in the company payroll. On 19 September 1991 ARCHILLES opposed the motion. Since no action was taken by NLRC on the motion of 10 September 1991, private respondents filed a similar motion on 15 July 1992. Both motions however have remained unresolved. On 11 August 1992 NLRC vacated and set aside the decision of the Labor Arbiter and ruled that the dismissal of private respondents was valid since they wilfully disobeyed a lawful order of their employer requiring them to explain their infraction of a company rule. In the disputed part of its decision, however NLRC ordered ARCHILLES to pay private respondents their "withheld" salaries from 19 September 1991 when its filed its opposition to the motion for issuance of a writ execution until the promulgation of the NLRC Decision (11 August 1992) on the ground that the order of reinstatement of the Labor Arbiter was immediately executory, even pending appeal. And since ARCHILLES in its position alleged that actual reinstatement was no longer possible as it would affect the peace and order situation in the steel factory, clearly, ARCHILLES had opted for payroll reinstatement of private respondents. NLRC also ordered ARCHILLES to pay their proportionate 13th month pay for 1990 and P12, 315.30 representing 10% of the total judgments award of P123,513.00 as attorney's fees. 5 Their motion for partial reconsideration having been denied by public respondent in its resolution of 8 September 1992, petitioners filed the instant petition praying that the questioned NLRC decision of 11 August 1992 as well as its resolution of 8 September 1992 be partially annulled in connection with the award of "withheld" salaries, proportionate 13th month pay and attorney's fees. As regards the first issue, i.e., whether a writ of execution is still necessary to enforce the Labor Arbiter's order of immediate reinstatement even when pending appeal, we agree with petitioners that it is necessary. The third paragraph of Art. 223 of the Labor Code provides In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall be immediately executory, even pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer,

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merely reinstated in the payroll. The posting of the bond by the employer shall not stay the execution for reinstatement provided herein. We have fully explained the legal basis for this conclusion in Maranaw Hotel Resort Corporation (Century Park Sheraton Manila) v. NLRC and Gina G. Castro 6 thus It must be stressed, however, that although the reinstatement aspect of the decision is immediately executory, it does not follow that it is self-executory. There must be a writ of execution which may be issued motu proprio or on motion of an interested party. Article 224 of the Labor Code provides: Art. 224. Execution of decisions, orders or awards. (a) The Secretary of Labor and Employment or any Regional Director, the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu proprio or on motion of any interested party, issue a writ of execution on a judgment within five (5) years from the date it becomes final and executory . . . The second paragraph of Section 1, Rule XVIII of the New Rules of Procedure of the NLRC also provides: The Labor Arbiter, POEA Administrator, or the Regional Director, or his duly authorized hearing officer of origin shall, motu proprio or upon motion of any interested party, issue a writ of execution on a judgment only within five (5) years from the date it becomes final and executory. . . . No motion for execution shall be entertained nor a writ be issued unless the Labor Arbiter is in possession of the records of the case which shall include an entry of judgment.In the absence . . . of an order for the issuance of a writ of execution on the reinstatement aspect of the decision of the Labor Arbiter, the petitioner was under no legal obligation to admit back to work the private respondent under the terms and conditions prevailing prior to her dismissal or, at the petitioner's option, to merely reinstate her in the payroll. An option is a right of election to exercise a privilege, and the option in Article 223 of the Labor Code is exclusively granted to the employer. The event that gives rise for its exercise is not the reinstatement decree of the Labor Arbiter, but the writ for its execution commanding the employer to reinstate the employee, while the final act which compels the employer to exercise the option is the service upon it of the writ of execution when, instead of admitting the employee back to his work, the employer chooses to reinstate the employee in the payroll only. If the employer does not exercise this option, it must forthwith admit the employee back to work, otherwise it may be punished for contempt. In the case at bench, there was no occasion for petitioners to exercise their option under Art. 223 of the Labor Code in connection with the reinstatement aspect of the decision of the Labor Arbiter. The motions of private respondents for the issuance of a writ of execution were not acted upon by NLRC. It was not shown that respondents exerted efforts to have their motions resolved. They are deemed to have abandoned their motions for execution pending appeal. They cannot now ask that the writ of execution be issued since their dismissal was found to be for cause. On the second issue, which refers to the propriety of the award of a 13th month pay, paragraph 6 of the Revised Guidelines on the Implementation of the 13th Month Pay Law (P. D. 851) provides that "(a)n employee who has resigned or whose services were terminated at

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any time before the payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time he worked during the year, reckoned from the time he started working during the calendar year up to the time of his resignation or termination from the service. . . . The payment of the 13th month pay may be demanded by the employee upon the cessation of employer-employee relationship. This is consistent with the principle of equity that as the employer can require the employee to clear himself of all liabilities and property accountability, so can the employee demand the payment of all benefits due him upon the termination of the relationship." Furthermore, Sec. 4 of the original Implementing Rules of P. D. 851 mandates employers to pay their employees to pay their employees a 13th month pay not later than the 24th of December every year provided that they have worked for at least one (1) month during a calendar year. In effect, this statutory benefit is automatically vested in the employee who has at least worked for one month during the calendar year. As correctly stated by the Solicitor General, such benefit may not be lost or forfeited even in the event of the employee's subsequent dismissal for cause without violating his property rights. With respect to the third issue, the disputed attorney's fees can only be assessed in cases of unlawful withholding of wages. 7 It cannot be said that petitioners were guilty of unlawfully withholding private respondent's salaries since, as earlier discussed, the occasion never arose for them to exercise that option under Art. 223 of the Labor Code. Clearly, the award of attorney's fees is baseless. WHEREFORE, the instant petition is partly granted. The challenged Decision of the National Labor Relations Commission dated 11 August 1992 is MODIFIED by deleting that portion ordering petitioners to pay private respondents their salaries from 19 September 1991 to 20 September 1992 as well as that portion awarding 10% of the total judgment award as attorney's fees for lack of legal and factual basis. In other respects, the Decision is AFFIRMED. SO ORDERED. Padilla, Davide, Jr. and Kapunan, JJ., concur.

4. 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 collaborating counsel for petitioner. The Solicitor General, Caparas, Tabios, Ilagan, Alcantara & Gatmaytan Law Office and Sycip, Salazar, Feliciano & Hernandez Law Office for respondents. SYLLABUS

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1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; IMPLEMENTING RULES AND POLICY INSTRUCTION ISSUED BY THEN SECRETARY OF LABOR CLARIFYING LABOR CODE'S PROVISIONS NULL AND VOID; REASON. 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. 11, rec.). From Articles 82 and 94 of the Labor Code, 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 III 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." 2. ID.; ID.; PROVISION OF LABOR CODE ON ENTITLEMENT TO BENEFITS OF HOLIDAY PAY RESOLVED IN FAVOR OF LABOR. 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 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 a flagrant violation of the mandatory directive of Article 4 of the Labor Code, which states that "All doubts in the implementation 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). 3. ID.; ID.; HOLIDAY PAY LAW; STRICTLY CONSTRUED AGAINST MANAGEMENT. 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 vs. 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 or 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. 4. STATUTORY CONSTRUCTION; POWER OF JUDICIARY TO CORRECT CONTEMPORANEOUS CONSTRUCTION PLACED UPON A STATUTE BY EXECUTIVE OFFICERS. 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

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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). 5. ID.; ID.; DE LUNA CASE NOT A LABOR CASE AND IS APPLICABLE TO CASE AT BAR. 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 doubts, 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: 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. In 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 in 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 where in a final and executed judgment can still be annulled or modified by the court upon mere motion of a party. This would certainly result in endless litigations thereby rendering inutile the rule of law. 6. REMEDIAL LAW; JUDGMENTS; DECISIONS OR ORDERS OF LABOR ARBITER GOVERNED BY RULES OF COURT ON FINALITY AND EXECUTION OF JUDGMENT; CASE AT BAR. 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

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from the said partially executed final judgment would make a mockery of the doctrine of finality of judgments long enshrined in this jurisdiction. Section 1 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). 7. CONSTITUTIONAL LAW; BILL OF RIGHTS; DUE PROCESS OF LAW; DEPRIVATION OF PROPERTY WITHOUT DUE PROCESS OF LAW COMMITTED BY PUBLIC RESPONDENT IN CASE AT BAR AGAINST UNION MEMBERS. 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 not be deprived arbitrarily without injustice." (Rockledge vs. Garwood, 65 N.W. 2d 785, 791) It 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 tire contrary notwithstanding." (Vda. de Cuaycong vs. Vda. de Sengbengco, 110 Phil. 118, italics supplied) And "(I)t has been likewise established that a violation of a constitutional right divests 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. 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:

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"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: 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: '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 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 4 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) ...

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"(b) Ordering respondent to pay wages to all its employees for all regular holidays since November 1, 1974" (pp. 97-99, rec., emphasis 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: "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: "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 e 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" (emphasis 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: "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).

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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 all 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. 6465, 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: "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

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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: "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: "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. 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. 11, rec.). Article 94 of the Labor Code, as amended by P.D. 850, provides:

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"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: "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. "xxx xxx xxx" (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 III 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. 340341, 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.).

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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: cdll ". . . the Secretary of Labor has-exceeded his authority when he included paragraph (k) in Section 1 of the Rules implementing P.D. 1123. "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. .... "'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

26

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 what 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.

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.

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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: "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 obligation. (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 in 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 party. 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

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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 1 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: cdrep "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 authority to make said alteration or modification. . . . . "The equitable considerations that led the lower court to take the action complained of cannot offset the demands of public policy and public interest - which are also responsive to the tenets of equity requiring that all 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. In the recent case of Gabaya vs. Mendoza, 113 SCRA 405, 406, March 30, 1982, this Court said: "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

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in a particular case for '(W)e have to subordinate the equity of a particular situation to the overmastering need of certainty and immutability of judicial pronouncements.'. 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 not be deprived arbitrarily without injustice" (Rookledge v. Gariwood, 65 N.W. 2d 785, 791). It 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, italics supplied). And "(I)t has been likewise established that a violation of a constitutional right divests 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). LLpr 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.

5. FIRST DIVISION [G.R. No. 111515. July 14, 1995.] JACKSON BUILDING CONDOMINIUM CORPORATION and/or RAZUL REQUESTO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and FERDINAND GUMOGDA, respondents. Jonathan M . Polines for petitioner. The Solicitor General for public respondent.

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SYLLABUS 1. LABOR AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT; GROUNDS FOR DISMISSAL; ABANDONMENT; REQUISITES THEREOF; NOT ESTABLISHED IN CASE AT BAR. For abandonment to be a valid ground for dismissal, two requisites must be compresent: the intention by an employee to abandon coupled with an overt act from which it may be inferred that the employee had no more intention to resume his work. In the instant case, the said requisites are not present. As found by the Labor Arbiter, private respondent's physician advised him to rest for 30 days before reporting back for work in order to recuperate. Private respondent heeded this advise and even exceeded the number of days recommended by his doctor for his recuperation. In fact, he reported back for work 50 days after his recuperation. This would clearly show that private respondent was ready to assume his responsibilities considering that he had fully recovered from the operation. Furthermore, the filing of a complaint for illegal dismissal by private respondent is inconsistent with the allegation of petitioners that he had abandoned his job. Surely, an employee's posture will be illogical if he abandons his work and then immediately filed an action for his reinstatement. 2. ID.; ID.; PRINCIPLE OF "A FAIR DAY'S WORK FOR A FAIR DAY'S PAY"; NOT APPLICABLE IN CASE AT BAR; RIGHTS OF ILLEGALLY DISMISSED EMPLOYEES. Petitioner also urged that private respondent is not entitled to any remuneration during the period that he did not report for work under the principle of "a fair day's work for a fair day's pay." The law on the matter refutes this legal challenge of petitioners. Section 31 of R.A. No. 6715 which amended Article 279 of the Labor Code of the Philippines provides that "an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full back wages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement." The award of back wages of NLRC to private respondent was predicated on the ground that he was illegally dismissed and not on his failure to report for work. 3. ID.; ID.; PRESIDENTIAL DECREE NO. 851 AS AMENDED BY MEMORANDUM ORDER NO 28; COVERAGE THEREOF; APPLICABLE IN CASE AT BAR. Private respondent is likewise entitled to the thirteenth-month pay. Presidential Decree No. 851, as amended by Memorandum Order No. 28, provides that employees are entitled to the thirteenth-month pay benefit regardless of their designation and irrespective of the method by which their wages are paid. 4. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACTS OF ADMINISTRATIVE AGENCIES; RESPECTED. This Court does not disturb the findings of fact of administrative agencies when supported by substantial evidence. RESOLUTION QUIASON, J p: This is a petition for certiorari under Rule 65 of the Revised Rule of Court to set aside the Decision of National Labor Relations Commission (NLRC), which affirmed the Decision of the Labor Arbiter dated October 30, 1992. The latter decision ordered petitioners to reinstate

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private respondent and to pay him back wages, differential pay, thirteenth-month pay and service-incentive leave pay for 1991. I On November 22, 1989, private respondent was employed as a janitor by petitioner with a monthly salary of P2,340.00 or a daily wage of P90.00. On November 15, 1992, private respondent filed a 45-day leave of absence from November 15, 1991 to December 29, 1991 to undergo an appendectomy, which would necessitate complete bed rest for about thirty days from the date of operation as shown by his medical certificate (Annex "C-1", Rollo, p. 28). This was granted by petitioner. On January 3, 1992, private respondent informed petitioner Razul Requesto, president of petitioner corporation, that he was physically fit to assume his work. However, petitioners refused to accept him back contending that he had abandoned his work. On March 24, 1992, private respondent filed with the Labor Arbiter a complaint against petitioners for illegal dismissal, underpayment of wages and non-payment of thirteenthmonth pay and service-incentive leave pay (Annex "C", Rollo, pp. 20-26). On July 12, 1992, petitioners submitted their position paper wherein they alleged that private respondent was not dismissed but was merely advised to rest for health reasons until he could procure a medical certificate attesting that he was fit to work. They further alleged that private respondent failed to return to his workplace or to submit the required medical certificate. On October 30, 1992, the Labor Arbiter rendered a decision in favor of private respondent. Petitioners then appealed to NLRC, alleging that the Labor Arbiter committed grave abuse of discretion. However, NLRC affirmed in toto the decision of the Labor Arbiter. A subsequent motion for reconsideration was denied. The issues for consideration of this Court are whether private respondent abandoned his work and whether petitioners are liable for the payment of private respondent's back wages, differential pay, thirteenth-month pay and service-incentive leave pay for 1991. Petitioners contend that private respondent was still weak when he reported back for work and they had to ask him to secure a medical clearance. They claim that he failed to submit one or to report for work; hence they considered him as having abandoned his work. Petitioners raise questions of fact which have already been passed upon by the Labor Arbiter and NLRC. This Court does not disturb the findings of fact of administrative agencies when supported by substantial evidence (Wyeth-Suaco Laboratories, Inc. vs. National Labor Relations Commission, 219 SCRA 356 [1993]). LLjur For abandonment to be a valid ground for dismissal, two requisites must be compresent: the intention by an employee to abandon coupled with an overt act from which it may be inferred that the employee had no more intention to resume his work (People's Security, Inc. v. National Labor Relations Commission, 226 SCRA 146 [1993]).

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In the instant case, the said requisites are not present. As found by the Labor Arbiter, private respondent's physician advised him to rest for 30 days before reporting back for work in order to recuperate. Private respondent heeded his advise and even exceeded the number of days recommended by his doctor for his recuperation. In fact, he reported back for work 50 days after his operation. This would clearly show that private respondent was ready to assume his responsibilities considering that he had fully recovered from the operation. Furthermore, the filing of a complaint for illegal dismissal by private respondent is inconsistent with the allegation of petitioners that he had abandoned his job. Surely, an employee's posture will be illogical if he abandons his work and then immediately files an action for his reinstatement (Remerco Garments Manufacturing v. Minister of Labor and Employment, 135 SCRA 167 [1985]). Petitioners also urged that private respondent is not entitled to any remuneration during the period that he did not report for work under the principle of "a fair day's work for a fair day's pay." The law on the matter refutes this legal challenge of petitioners. Section 31 of R.A. No. 6715 which amended Article 279 of the Labor Code of the Philippines provides that "an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full back wages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement." The award of back wages by NLRC to private respondent was predicated on the ground that he was illegally dismissed and not on his failure to report for work (Llosa-Tan v. Silahis International Hotel, 181 SCRA 738 [1990]). LLpr Private respondent is likewise entitled to the thirteenth-month pay. Presidential Decree No. 851, as amended by Memorandum Order No. 28, provides that employees are entitled to the thirteenth-month pay benefit regardless of their designation and irrespective of the method by which their wages are paid. WHEREFORE, the Court Resolved to DISMISS the petition.

6. 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. Azcuna Yorac Sarmiento Arroyo & Chua Law Offices for petitioner. The Solicitor General for public respondent.

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Bernas Law Office for private respondent. SYNOPSIS Private respondent International School, Inc. is a domestic educational institution established primarily for dependents of foreign diplomatic personnel and other temporary residents. It hires both foreign and local teachers as members of its faculty classifying them as foreign-hires and local-hires. It grants foreign-hires certain benefits as housing, transportation, shipping costs, taxes and home leave travel allowance which are not accorded to local-hires. Foreignhires are also paid a salary rate of twenty-five percent (25%) more than the local-hires. The school justified the difference on two "significant economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation factor" and (b) limited tenure. When negotiations for a new collective bargaining agreement were held in June 1995, petitioner International School Alliance of Educators (ISAE) as a legitimate labor union and the collective bargaining representative of all the faculty members 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. The Department of Labor and Employment (DOLE) assumed jurisdiction over the dispute. It subsequently issued an Order resolving the issues in favor of the school. The motion for reconsideration of ISAE was also denied. Hence, this petition. The Court ruled that the point-of-hire classification employed by respondent School to justify the distinction in the salary rates of foreign-hires and local-hires was an invalid classification. There is no reasonable distinction between the services rendered by foreign-hires and localhires. The practice of the School of according higher salaries to foreign-hires contravenes public policy and, certainly, does not deserve the sympathy of the Court. The Court agreed, however, that foreign-hires do not belong to the same bargaining unit as the local-hires. 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. 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 showed 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 justified 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. The orders of the Secretary of Labor were reversed and set aside insofar as they upheld the practice of respondent School of according foreign-hires higher salaries than local-hires. IDcHCS SYLLABUS 1. POLITICAL LAW; CONSTITUTIONAL LAW; PUBLIC POLICY ABHORS INEQUALITY AND DISCRIMINATION. That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws reflect the policy against these evils. The Constitution in

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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 this duties, [to] act with justice, give everyone his due, and observe honesty and good faith." 2. INTERNATIONAL LAW; SPRINGS FROM GENERAL PRINCIPLES OF LAW WHICH PROSCRIBE DISCRIMINATION. International law, which springs from general principles of law, likewise proscribes discrimination. General principles of law include principles of equity, i.e., the general principles of fairness and justice, based on the test of what is reasonable. The Universal Declaration of Human Rights, the International Covenant on Economic, Social, and Cultural Rights, the International Convention on the Elimination of All Forms of Racial Discrimination, the Convention against Discrimination in Education, the Convention (No. 111) Concerning Discrimination in Respect of Employment and Occupation 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. 3. POLITICAL LAW; CONSTITUTIONAL LAW; SOCIAL JUSTICE AND HUMAN RIGHTS; LABOR; HUMANE CONDITIONS OF WORK INCLUDES THE MANNER BY WHICH EMPLOYERS TREAT THEIR EMPLOYEES. The Constitution 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. 4. LABOR AND SOCIAL LEGISLATION; LABOR CODE; THE STATE SHALL ENSURE EQUAL WORK OPPORTUNITIES REGARDLESS OF SEX, RACE OR CREED. The Constitution also directs the State to promote "equality of employment opportunities for all." Similarly, the Labor Code 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. 5. ID.; ID.; PROHIBITS DISCRIMINATION IN TERMS OF WAGES. Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for example, prohibits and penalizes 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. 6. INTERNATIONAL LAW; INTERNATIONAL COVENANT ON ECONOMIC, SOCIAL AND CULTURAL RIGHTS; INSTITUTIONALIZED THE LONG HONORED LEGAL TRUISM OF "EQUAL PAY FOR EQUAL WORK." [T]he International Covenant on Economic, Social, and Cultural Rights, 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

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pay for equal work; . . . . 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. 7. LABOR AND SOCIAL LEGISLATION; LABOR CODE; CONDITIONS OF EMPLOYMENT; EQUAL WORK FOR EQUAL PAY; APPLIED IN CASE AT BAR. 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. 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. HIaTCc 8. ID.; ID.; ID.; SALARY; DEFINED. "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, 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. 9. ID.; ID.; ID.; ID.; "DISLOCATION FACTOR" AND FOREIGN HIRES' LIMITED TENURE CANNOT SERVE AS VALID BASES FOR DISTINCTION IN SALARY RATES. While we recognize the need of the School to attract foreign-hires, salaries should not be used as an enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires and they ought to be paid the same salaries as the latter. For the same reason, the "dislocation factor" and the foreign-hires' limited tenure also cannot serve as valid bases for the distinction in salary rates. The dislocation factor and limited tenure affecting foreign-hires are adequately compensated by certain benefits accorded them which are not enjoyed by local-hires, such as housing, transportation, shipping costs, taxes and home leave travel allowances. 10. ID.; ID.; THE STATE HAS THE RIGHT AND DUTY TO REGULATE THE RELATIONS BETWEEN LABOR AND CAPITAL. The Constitution enjoins the State to "protect the rights of workers and promote their welfare," "to afford labor full protection." The State, therefore, has the right and duty to regulate the relations between labor and capital. 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. Should such contracts contain stipulations that are contrary to public policy, courts will not hesitate to strike down these stipulations.

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11. ID.; ID.; CONDITIONS OF EMPLOYMENT; POINT-OF-HIRE CLASSIFICATION TO JUSTIFY THE DISTINCTION IN THE SALARY RATES OF FOREIGN-HIRES AND LOCAL-HIRES IS AN INVALID CLASSIFICATION. [W]e 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 foreignhires 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. 12. ID.; ID.; LABOR RELATIONS; COLLECTIVE BARGAINING UNIT; ELUCIDATED. 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." 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. 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. cADEHI 13. ID.; ID.; ID.; ID.; FOREIGN-HIRES SHOULD NOT BELONG TO THE SAME BARGAINING UNIT AS LOCAL-HIRES. We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires. . . . 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. DECISION KAPUNAN, J p: Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent School, mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their colleagues in other schools is, of course, beside the point. The point is that employees should be given equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a principle that rests on fundamental notions of justice. That is the principle we uphold today. Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree 732, is a domestic educational institution established primarily for dependents of foreign diplomatic personnel and other temporary residents. 1 To enable the School to

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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. b. c. What is one's domicile? Where is one's home economy? 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. llcd 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: A foreign-hire would necessarily have to uproot himself from his home country, leave his family and friends, and take the risk of deviating from a promising career path all for the purpose of pursuing his profession as an educator, but this time in a foreign land. The new foreign hire is faced with economic realities: decent abode for oneself and/or for one's family, effective means of transportation, allowance for the education of one's children, adequate insurance against illness and death, and of course the primary benefit of a basic salary/retirement compensation. Because of a limited tenure, the foreign hire is confronted again with the same economic reality after his term: that he will eventually and inevitably return to his home country where he will have to confront the uncertainty of obtaining suitable employment after a long period in a foreign land. The compensation scheme is simply the School's adaptive measure to remain competitive on an international level in terms of attracting competent professionals in the field of international education. 3 When negotiations for a new collective bargaining agreement were held on June 1995, petitioner International School Alliance of Educators, "a legitimate labor union and the collective bargaining representative of all faculty members" 4 of the School, contested the

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difference in salary rates between foreign and local-hires. This issue, as well as the question of whether foreign-hires should be included in the appropriate bargaining unit, eventually caused a deadlock between the parties. On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and Mediation Board to bring the parties to a compromise prompted the Department of Labor and Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting Secretary, Cresenciano B. Trajano, issued an Order resolving the parity and representation issues in favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied petitioner's motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in this Court. Petitioner claims that the point-of-hire classification employed by the School is discriminatory to Filipinos and that the grant of higher salaries to foreign-hires constitutes racial discrimination. The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all, with nationalities other than Filipino, who have been hired locally and classified as local hires. 5 The Acting Secretary of Labor found that these non-Filipino local-hires received the same benefits as the Filipino local-hires: 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 application in the present case. The international character of the School requires the hiring of foreign personnel to deal with different nationalities and different cultures, among the student population. We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired personnel which system is universally recognized. We agree that certain amenities have to be provided to these people in order to entice them to render their services in the Philippines and in the process remain competitive in the international market. Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike the local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits would also require parity in other terms and conditions of employment which include the employment contract. cda 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:

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The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS) salary schedule. The 25% differential is reflective of the agreed value of system displacement and contracted status of the OSRS as differentiated from the tenured status of Locally Recruited Staff (LRS). To our mind, these provisions demonstrate the parties' recognition of the difference in the status of two types of employees, hence, the difference in their salaries. The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an established principle of constitutional law that the guarantee of equal protection of the laws is not violated by legislation or private covenants based on reasonable classification. A classification is reasonable if it is based on substantial distinctions and apply to all members of the same class. Verily, there is a substantial distinction between foreign hires and local hires, the former enjoying only a limited tenure, having no amenities of their own in the Philippines and have to be given a good compensation package in order to attract them to join the teaching faculty of the School. 7 We cannot agree. That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws reflect the policy against these evils. The Constitution 8 in the Article on Social Justice and Human Rights exhorts Congress to "give highest priority to the enactment of measures that protect and enhance the right of all people to human dignity, reduce social, economic, and political inequalities." The very broad Article 19 of the Civil Code requires every person, "in the exercise of his rights and in the performance of his duties, [to] act with justice, give everyone his due, and observe honesty and good faith." 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

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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 favorable 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:

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"salary" means a recompense or consideration made to a person for his pains or industry in another man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for services rendered. (Emphasis supplied.) While we recognize the need of the School to attract foreign-hires, salaries should not be used as an enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires and they ought to be paid the same salaries as the latter. For the same reason, the "dislocation factor" and the foreign-hires' limited tenure also cannot serve as valid bases for the distinction in salary rates. The dislocation factor and limited tenure affecting foreignhires 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 localhires. The practice of the School of according higher salaries to foreign-hires contravenes public policy and, certainly, does not deserve the sympathy of this Court. We agree, however, that foreign-hires do not belong to the same bargaining unit as the localhires. LLjur 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,

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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 foreignhires 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., is on official leave. Ynares-Santiago, J., is on leave.

7. EN BANC [G.R. No. 110068. February 15, 1995.] PHILIPPINE DUPLICATORS, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE DUPLICATORS EMPLOYEES UNION-TUPAS, respondents. SYLLABUS 1. LABOR AND SOCIAL LEGISLATION; LABOR STANDARDS; 13TH MONTH PAY; "BASIC SALARY"; SALES COMMISSION; WHEN DEEMED INCLUDED THEREIN; RULE; CASE AT BAR. The Third Division in Duplicators found that: "In the instant case, there is no question that the sales commission earned by the salesmen who make or close a sale of duplicating machines distributed by petitioner corporation, constitute part of the compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the 'wage' or salary of petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or guaranteed wage; the greater part of the salesmen's wages or salaries being composed of the sales or incentive commissions earned on actual sales closed by them. No doubt this particular salary structure was intended for the benefit of the petitioner corporation, on the apparent assumption that thereby its salesmen would be moved to greater enterprise and diligence and close more sales in the expectation of increasing their sales commissions. This, however, does not detract from the character of such commissions as part of the salary or wage paid to each of its salesmen for rendering services to petitioner corporation." In other words, the sales commissions received for every duplicating machine sold constituted part of the basic compensation of remuneration of the salesmen of Philippine Duplicators for doing their job. The portion of the salary structure representing commissions simply comprised an automatic increment to the monetary value initially assigned to each unit of work rendered by a salesman. Especially significant here also is the fact that the fixed or guaranteed portion of the wages paid to the Philippine Duplicators' salesmen represented only 15%-30% of an

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employee's total earnings in a year. Considering the above circumstances, the Third Division held, correctly, that the sales commissions were an integral part of the basic salary structure of Philippine Duplicators' employees-salesmen. These commissions are not overtime payments, nor profit-sharing payments nor any other fringe benefit. Thus, the salesmen's commissions, comprising a pre-determined percent of the selling price of the goods sold by each salesman, were properly included in the term "basic salary" for purposes of computing their 13th month pay. 2. ID.; ID.; ID.; ID.; ID.; DISTINGUISHED FROM PRODUCTIVITY BONUS. In Boie-Takeda, the so-called commissions "paid to or received by medical representatives of Boie Takeda Chemicals or by the rank-and-file employees of Philippine Fuji Xerox Co.," were excluded from the term "basic salary" because these were paid to the medical representatives and rank-andfile employees as "productivity bonuses." The Second Division characterized these payments as additional monetary benefits not properly included in the term "basic salary" in computing their 13th month pay. We note that productivity bonuses are generally tied to the productivity, or capacity for revenue production, of a corporation; such bonuses closely resemble profit-sharing payments and have no clear direct or necessary relation to the amount of work actually done by each individual employee. More generally, a bonus is an amount granted and paid ex gratia to the employee; its payment constitutes an act of enlightened generosity and self-interest on the part of the employer, rather than as a demandable or enforceable obligation. In Philippine Education Co., Inc. (PECO) v. Court of Industrial Relations, (92 Phil 381 [1952]) the Court explained the nature of a bonus in the following general terms: "As a rule, a bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer's business and made possible the realization of profits. "It is an act of generosity of the employer for which the employee ought to be thankful and grateful. It is also granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits. . .. From the legal point of view, a bonus is not a demandable and enforceable obligation. It is so when it is made part of the wage or salary or compensation. In such a case the latter would be a fixed amount and the former would be a contingent one dependent upon the realization of profits. . .." We recognize that both productivity bonuses and sales commissions may have an incentive effect. But there is reason to distinguish one from the other here. Productivity bonuses are generally tied to the productivity or profit generation of the employer corporation. Productivity bonuses are not directly dependent on the extent an individual employee exerts himself. A productivity bonus is something extra for which no specific additional services are rendered by any particular employee and hence not legally demandable, absent a contractual undertaking to pay it. Sales commissions, on the other hand, such as those paid in Duplicators, are intimately related to or directly proportional to the extent or energy of an employee's endeavors. Commissions are paid upon the specific results achieved by a salesman-employee. It is a percentage of the sales closed by a salesman and operates as an integral part of such salesman's basic pay. 3. ID.; ID.; ID.; ID.; ID.; BONUSES; CONCEPT. In Atok-Big Wedge Mining Co., Inc. v. AtokBig Wedge Mutual Benefit Association, (92 Phil. 754 [1953]) the Court amplified: ". . .. Whether or not [a] bonus forms part of wages depends upon the circumstances or conditions for its payment. If it is an additional compensation which the employer promised and agreed to give

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without any conditions imposed for its payment, such as success of business or greater production or output, then it is part of the wage. But if it is paid only if profits are realized or a certain amount of productivity achieved, it cannot be considered part of wages. . .. It is also paid on the basis of actual or actual work accomplished. If the desired goal of production is not obtained, or the amount of actual work accomplished, the bonus does not accrue. . . .." More recently, the non-demandable character of a bonus was stressed by the Court in Traders Royal Bank v. National Labor Relations Commission: "A bonus is a 'gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right' (Aragon v. Cebu Portland Cement Co., 61 O.G. 4567). 'It is something given in addition to what is ordinarily received by or strictly due the recipient.' The granting of a bonus is basically a management prerogative which cannot be forced upon the employer 'who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee's basic salaries or wages . . .' (Kamaya Point Hotel v. NLRC, 177 SCRA 160 [1989])." If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow that such productivity bonus, when given, should not be deemed to fall within the "basic salary" of employees when the time comes to compute their 13th month pay. 4. ID.; ID.; ID.; ID.; ID.; CASE AT BAR DISTINGUISHED FROM BOIE-TAKEDA CASE. It is also important to note that the purported "commissions" paid by the Boie-Takeda Company to its medical representatives could not have been "sales commissions" in the same sense that Philippine Duplicators paid its salesmen sales commissions. Medical representatives are not salesmen; they do not affect any sale of any article at all. In common commercial practice, in the Philippines and elsewhere, of which we take judicial notice, medical representatives are employees engaged in the promotion of pharmaceutical products or medical devices manufactured by their employer. They promote such products by visiting identified physicians and inform such physicians, orally and with the aid of printed brochures, of the existence and chemical composition and virtues of particular products of their company. They commonly leave medical samples with each physician visited; but those samples are not "sold" to the physician and the physician is, as a matter of professional ethics, prohibited from selling such samples to their patients. Thus, the additional payments made to Boie-Takeda's medical representatives were not in fact sales commissions but rather partook of the nature of profitsharing bonuses. 5. ID.; ID.; ID.; ID.; ID.; SCOPE. The doctrine set out in the decision of the Second Division is, accordingly, that additional payments made to employees, to the extent they partake of the nature of profit-sharing payments, are properly excluded from the ambit of the term "basic salary" for purposes of computing the 13th month pay due to employees. Such additional payments are not "commissions" within the meaning of the second paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th Month Pay. The Supplementary Rules and Regulations Implementing P.D. No. 851 subsequently issued by former Labor Minister Ople sought to clarify the scope of items excluded in the computation of the 13th month pay; viz. "Sec. 4. Overtime pay, earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th month pay." We observe that the third item excluded from the term "basic salary" is case in open ended and apparently circular terms: "other remunerations which are not part of the basic salary." However, what particular types of earnings and remuneration are or are not properly included or integrated in the basic

45

salary are questions to be resolved on a case to case basis, in the light of the specific and detailed facts of each case. In principle, where these earnings and remuneration are closely akin to fringe benefits, overtime pay or profit-sharing payments, they are properly excluded in computing the 13th month pay. However, sales commissions which are effectively an integral portion of the basic salary structure of an employee shall be included in determining his 13th month pay. RESOLUTION FELICIANO, J p: On 11 November 1993, this Court, through its Third Division, rendered a decision dismissing the Petition for Certiorari filed by petitioner Philippine Duplicators, Inc. (Duplicators) in G.R. No. 110068. The Court upheld the decision of public respondent National Labor Relations Commission (NLRC), which affirmed the order of Labor Arbiter Felipe T. Garduque II directing petitioner to pay 13th month pay to private respondent employees computed on the basis of their fixed wages plus sales commissions. The Third Division also denied with finality on 15 December 1993 the Motion for Reconsideration filed (on 12 December 1993) by petitioner. On 17 January 1994, petitioner Duplicators filed (a) a Motion for Leave to Admit Second Motion for Reconsideration and (b) a Second Motion for Reconsideration. This time, petitioner invoked the decision handed down to this Court, through its Second Division, on 10 December 1993 in the two (2) consolidated cases of Boie-Takeda Chemicals, Inc., vs. Hon. Dionisio de la Serna and Philippine Fuji Xerox Corp. vs. Hon. Cresenciano B. Trajano, in G.R. Nos. 92174 and 102552, respectively. In its decision, the Second Division inter alia declared null and void the second paragraph of Section 5(a) 1 of the Revised Guidelines issued by then Secretary Labor Drilon. Petitioner submits that the decision in the Duplicators case should now be considered as having been abandoned or reversed by the Boie-Takeda decision, considering that the latter went "directly opposite and contrary to" the conclusion reached in the former. Petitioner prays that the decision rendered in Duplicators be set aside and another be entered directing the dismissal of the money claims of private respondent Philippine Duplicators' Employees' Union. In view of the nature of the issues raised, the Third Division of this Court referred the petitioner's Second Motion for Reconsideration, and its Motion for Leave to Admit the Second Motion for Reconsideration, to the Court en banc en consulta. The Court en banc, after preliminary deliberation, and in order to settle the condition of the relevant case law, accepted G.R. No. 110068 as a banc case. Deliberating upon the arguments contained in petitioner's Second Motion for Reconsideration, as well as its Motion for Leave to Admit the Second Motion for Reconsideration, and after review of the doctrines embodied, respectively, in Duplicators and Boie-Takeda, we consider that these Motion must fail. The decision rendered in Boie-Takeda cannot serve as a precedent under the doctrine of stare decisis. The Boie-Takeda decision was promulgated a month after this Court, (through its Third Division), had rendered the decision in the instant case. Also, the petitioner's (first) Motion for Reconsideration of the decision dated 10 November 1993 had already been denied, with

46

finality, on 15 December 1993, i.e., before the Boie-Takeda decision became final on 5 January 1994. Preliminarily, we note that petitioner Duplicators did not put in issue the validity of the Revised Guidelines on the Implementation of the 13th Month Pay Law, issued on November 16, 1987, by then Labor Secretary Franklin M. Drilon, either in its Petition for Certiorari or in its (First) Motion for Reconsideration. In fact, petitioner's counsel relied upon these Guidelines and asserted their validity in opposing the decision rendered by public respondent NLRC. Any attempted change in petitioner's theory, at this late stage of the proceedings, cannot be allowed. prcd More importantly, we do not agree with petitioner that the decision in Boie-Takeda is "directly opposite or contrary to" the decision in the present (Philippine Duplicators). To the contrary, the doctrines enunciated in these two (2) cases in fact co-exist one with the other. The two (2) cases present quite different factual situations (although the same word "commissions" was used or invoked) the legal characterizations of which must accordingly differ. The Third Division in Duplicators found that: "In the instant case, there is no question that the sales commission earned by the salesmen who make or close a sale of duplicating machines distributed by petitioner corporation, constitute part of the compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the 'wage' or salary of petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or guaranteed wage; the greater part of the salesmen's wages or salaries being composed of the sales or incentive commissions earned on actual sales closed by them. No doubt this particular salary structure was intended for the benefit of the petitioner corporation, on the apparent assumption that thereby its salesmen should be moved to greater enterprise and diligence and close more sales in the expectation of increasing their sales commissions. This, however, does not detract from the character of such commissions as part of the salary or wage paid to each of its salesmen corporation." In other words, the sales commissions received for every duplicating machine sold constituted part of the basic compensation or remuneration of the salesmen of Philippine Duplicators for doing their job. The portion of the salary structure representing commissions simply comprised an automatic increment to the monetary value initially assigned to each unit of work rendered by a salesman. Especially significant here also is the fact that the fixed or guaranteed portion of the wages paid to the Philippine Duplicators' salesmen represented only 15%-30% of an employee's total earnings in a year. We note the following facts on record: Salesmen's Total Earnings and 13th Month Pay For the Year 1986 2 Name of Salesman Total Amount Paid Earnings Monthly Fixed

as 13th Month Pay Wages x 12 3 P16,200.00 14,184.00

Baylon, Benedicto P76,610.30 P1,350.00 Bautista, Salvador 90,780.85 1,182.00

47

Brito. Tomas Bunagan, Jorge Canilan, Rogelio Dasig, Jeordan

64,382.75 89,287.75 74,678.17 54,625.16

1,238.00 1,266.00 1,350.00 1,378.00

14,856.00 15,192.00 16,200.00 16,536.00 15,192.00 15,864.00 16,872.00

Centeno, Melecio, Jr. De los Santos, Ricardo del Mundo, Wilfredo Garcia, Delfin

51,854.15 73,551.30

1,266.00 1,322.00

108,230.35 1,406.00 1,294.00

93,753.75

15,528.00 15,192.00

Navarro, Ma. Teresa Ochosa, Rolano

98,618.71

1,266.00

66,275.65

1,406.00

16,872.00 16,872.00

Quisumbing, Teofilo Rubina, Emma Salazar, Celso

101,065.75 1,406.00 1,266.00 1,238.00

42,209.73 64,643.65

15,192.00 14,856.00 16,200.00 14,856.00 17,208.00 17,208.00

Sopelario, Ludivico 52, 622.27 1,350.00 Tan, Leynard 30,127.50 1,238.00

Talampas, Pedro 146,510.25 1,434.00 Villarin, Constacio 41,888.10 Carrasco, Cicero 20,201.20 1,434.00 403.75 *

Punzalan, Reynaldo

24,351.89

1,266.00

15,192.00

Poblador, Alberto 25,516.75 Cruz, Danilo 32,950.45 Baltazar, Carlito

323.00 *

323.00 * 323.00 *

15,681.35

Considering the above circumstances, the Third Division held, correctly, that the sales commissions were an integral part of the basic salary structure of Philippine Duplicators' employees-salesmen. These commissions are not overtime payments, nor profit-sharing payments nor any other fringe benefit. Thus, the salesmen's commissions, comprising a predetermined percent of the selling price of the goods sold by each salesman, were properly included in the term "basic salary" for purposes of computing their 13th month pay. In Boie-Takeda, the so-called commissions "paid to or received by medical representatives of Boie-Takeda Chemicals or by the rank and file employees of Philippine Fuji Xerox Co., " were excluded from the term "basic salary" because these were paid to the medical representatives and rank-and-file employees as "productivity bonuses." 4 The Second Division characterized these payments as additional monetary benefits not properly included in the term "basic

48

salary" in computing their 13th month pay. We note that productivity bonuses are generally tied to the productivity, or capacity for revenue production, of a corporation; such bonuses closely resemble profit-sharing payments and have no clear direct or necessary relation to the amount of work actually done by each individual employee. More generally, a bonus is an amount granted and paid ex gratia to the employee; its payment constitutes an act of enlightened generosity and self-interest on the part of the employer, rather than as a demandable or enforceable obligation. In Philippine Education Co., Inc. (PECO) v. Court of Industrial Relations, 5 the Court explained the nature of a bonus in the following general terms: "As a rule, a bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is an act of generosity of the employer for which the employee ought to be thankful and grateful. It is also granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits. . . . . From the legal point of view, a bonus is not a demandable and enforceable obligation. It is so when it is made part of the wage or salary or compensation. In such a case the latter would be a fixed amount and the former would be a contingent one dependent upon the realization of profits. . . . ." 6 (Emphasis supplied) In Atok-Big Wedge Mining Co., Inc. v. Atok-Big Wedge Mutual Benefit Association, 7 the Court amplified: ". . . .Whether or not [a] bonus forms part of wages depends upon the circumstances or conditions for its payment. If it is an additional compensation which the employer promised and agreed to give without any conditions imposed for its payment, such as success of business or greater production or output, then it is part of the wage. But if it is paid only if profits are realized or a certain amount of productivity achieved, it cannot be considered part of wages. . . . . It is also paid on the basis of actual or actual work accomplished. If the desired goal of production is not obtained, or the amount of actual work accomplished, the bonus does not accrue. . . . ." 8 (Emphasis supplied) More recently, the non-demandable character of a bonus was stressed by the Court in Traders Royal Bank v. National Labor Relations Commission: 9 "A bonus is a 'gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right' (Aragon v. Cebu Portland Cement Co., 61 O.G. 4567). 'It is something given in addition to what is ordinarily received by a strictly due the recipient.' The granting of a bonus is basically a management prerogative which cannot be forced upon the employer 'who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee's basic salaries or wages . . .' (Kamaya Point Hotel v. NLRC, 177 SCRA 160 [1989])." 10 (Emphasis supplied) If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow that such productivity bonus, when given, should not be deemed to fall within the "basic salary" of employees when the time comes to compute their 13th month pay.

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It is also important to note that the purported "commissions" paid by the Boie-Takeda Company to its medical representatives could not have been "sales commissions" in the same sense that Philippine Duplicators paid its salesmen sales commissions. Medical representatives are not salesmen; they do not effect any sale of any article at all. In common commercial practice, in the Philippines and elsewhere, of which we take judicial notice, medical representatives are employees engaged in the promotion of pharmaceutical products or medical devices manufactured by their employer. They promote such products by visiting identified physicians and inform such physicians, orally and with the aid of printed brochures, of the existence and chemical composition and virtues of particular products of their company. They commonly leave medical samples with each physician visited; but those samples are not "sold" to the physician and the physician is, as a matter of professional ethics, prohibited from selling such samples to their patients. Thus, the additional payments made to Boie-Takeda's medical representatives were not in fact sales commissions but rather partook of the nature of profit-sharing bonuses. The doctrine set out in the decision of the Second Division is, accordingly, that additional payments made to employees, to the extent they partake of the nature of profit-sharing payments, are properly excluded from the ambit of the term "basic salary" for purposes of computing the 13th month pay due to the employees. Such additional payments are not "commissions" within the meaning of the second paragraph of Section 5 (a) of the Revised Guidelines Implementing 13th Month Pay. The Supplementary Rules and Regulations Implementing P.D. No. 851 subsequently issued by former Labor Minister Ople sought to clarify the scope of items excluded in the computation of the 13th month pay." "Sec. 4. Overtime pay, earnings and other remunerations which are not part of the basic salary not be included in the computation of the 13th month pay." We observe that the third item excluded from the term "basic salary" is cast in open ended and apparently circular terms: "other remunerations which are not part of the basic salary." However, what particular types of earnings and remuneration are or are not properly included or integrated in the basic salary are questions to be resolved on a case to case basis, in the light of the specific and detailed facts of each case. In principle, where these earnings and remuneration are closely akin to fringe benefits, overtime pay or profit-sharing payments, they are properly excluded in computing the 13th month pay. However, sales commissions which are effectively an integral portion of the basic salary structure of an employee, shall be included in determining his 13th month pay. We recognize that both productivity bonuses and sales commissions may have an incentive effect. But there is reason to distinguish one from the other here. Productivity bonuses are generally tied to the productivity or profit generation of the employer corporation. Productivity bonuses are not directly dependent on the extent an individual employee exerts himself. A productivity bonus is something extra for which no specific additional services are rendered by any particular employee and hence not legally demandable, absent a contractual undertaking to pay it. Sales commissions, on the other hand, such as those paid in Duplicators, are intimately related to or directly proportional to the extent or energy of an employee's

50

endeavors. Commissions are paid upon the specific results achieved by a salesman-employee. It is a percentage of the sales closed by a salesman and operates as an integral part of such salesman's basic pay. Cdpr Finally, the statement of the Second Division in Boie-Takeda declaring null and void the second paragraph of Section 5(a) of the Revised Guidelines Implementing the 13th Month Pay issued by former Labor Secretary Drilon, is properly understood as holding that the second paragraph provides no legal basis for including within the term "commission" there used additional payments to employees which are, as a matter of fact, in the nature of profit-sharing payments or bonuses. If and to the extent that such second paragraph is so interpreted and applied, it must be regarded as invalid as having been issued in excess of the statutory authority of the Secretary of Labor. That same second paragraph, however, correctly recognizes that commissions, like those paid in Duplicators, may constitute part of the basic salary structure of salesmen and hence should be included in determining the 13th month pay; to this extent, the second paragraph is and remains valid. ACCORDINGLY, the Motions for (a) Leave to File a Second Motion for Reconsideration and the (b) aforesaid Second Reconsideration are DENIED for lack of merit. No further pleadings will be entertained. Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan, Mendoza and Francisco, JJ., concur. 8. THIRD DIVISION [G.R. No. 121927. April 22, 1998.] ANTONIO W. IRAN (doing business under the name and style of Tones Iran Enterprises), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), GODOFREDO O. PETRALBA, MORENO CADALSO, PEPITO TECSON, APOLINARIO GOTHONG GEMINA, JESUS BANDILAO, EDWIN MARTIN, CELSO LABIAGA, DIOSDADO GONZALGO, FERNANDO M. COLINA, respondent. E.B. Ramos & Associates for petitioner. Pepita Jane E. Petralba for private respondents. SYNOPSIS Private respondents were hired as drivers/salesmen and truck helpers by petitioner who was engaged in softdrinks merchandising and distribution and who received commissions as part of their compensation. In 1991, petitioner instructed private respondents to report for work everyday and to settle their accountabilities when cash shortages were discovered. They were not told that their dismissals were being sought. Private respondents who failed to report to work and were dismissed on ground of abandonment filed complaints for illegal dismissal, and claimed, among others, underpayment of wages and 13th month pay. The Labor Arbiter ruled that private respondents were validly terminated, that petitioner did not comply with the minimum wage requirements, and failed to pay private respondents their 13th month pay.

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Both parties appealed. Petitioner submitted vouchers showing private respondents received amounts covering a ten-day period as part of their 13th month pay. The NLRC affirmed the validity of private respondents' dismissal, but found that the procedural requirements for dismissing employees were not complied with. It denied petitioner's claim that commissions be included in determining compliance with the minimum wage requirement. Hence, this recourse. HTIEaS Pursuant to Article 97 (f) of the Labor Code commissions earned by private respondents in selling softdrinks constitute part of the compensation or remuneration paid to drivers/salesmen and truck helpers, hence, must be considered part of the wages paid them. Absence of the first notice informing the employees that their dismissal is being sought makes the termination of private respondents defective, for which petitioner must be sanctioned for his non-compliance with the requirements of or for failure to observe due process. The twin requirements of notice and hearing constitute the essential elements of due process, and neither of these elements can be disregarded without running a foul of the constitutional guarantee. Time and again, we have allowed evidence to be submitted on appeal, emphasizing that, in labor cases, technical rules of evidence are not binding. Therefore, vouchers evidencing payments of 13th month pay which were submitted only on appeal should have been taken into account by the NLRC. An employer who pays less than 1/12th of the employees basic salary as their 13th month pay is only required to pay the difference. AISHcD SYLLABUS 1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; EMPLOYMENT; WAGES; COMMISSIONS, PART OF WAGES. Article 97(f) of the Labor Code defining wage explicitly includes commissions as part of wages. While commissions are, indeed, incentives or forms of encouragement to inspire employees to put a little more industry on the jobs particularly assigned to them, still these commissions are direct remunerations for services rendered. In fact, commissions have been defined as the recompense, compensation or reward of an agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit to the principal. The nature of the work of a salesman and the reason for such type of remuneration for services rendered demonstrate clearly that commissions are part of a salesman's wage or salary. Thus, the commissions earned by private respondents in selling softdrinks constitute part of the compensation or remuneration paid to drivers/salesmen and truck helpers for serving as such, and hence, must be considered part of the wages paid them. 2. ID.; ID.; ID.; ID.; PRACTICE OF GRANTING OF COMMISSION ONLY AFTER AN EMPLOYEE HAS EARNED THE MINIMUM WAGE, OF JUDICIAL NOTICE. The NLRC asserts that the inclusion of commissions in the computation of wages would negate the practice of granting commissions only after an employee has earned the minimum wage or over. While such a practice does exist, the universality and prevalence of such a practice is questionable at best. In truth, this Court has taken judicial notice of the fact that some salesmen do not receive any basic salary but depend entirely on commissions and allowances or commissions alone, although an employer-employee relationship exists. Undoubtedly, this salary structure is

52

intended for the benefit of the corporation establishing such, on the apparent assumption that thereby its salesmen would be moved to greater enterprise and diligence and close more sales in the expectation of increasing their sales commissions. This, however, does not detract from the character of such commissions as part of the salary or wage paid to each of its salesmen for rendering services to the corporation. HIACEa 3. ID.; ID.; ID; ID.; NO LAW MANDATING THAT IT BE PAID ONLY AFTER THE MINIMUM WAGE HAS BEEN PAID. Likewise, there is no law mandating that commissions be paid only after the minimum wage has been paid to the employee. Verily, the establishment of a minimum wage only sets a floor below which an employee's remuneration cannot fall, not that commissions are excluded from wages in determining compliance with the minimum wage law. This conclusion is bolstered by Philippine Agricultural Commercial and Industrial Workers Union vs. NLRC, (247 SCRA 256 [1995]) where this Court acknowledged that drivers and conductors who are compensated purely on a commission basis are automatically entitled to the basic minimum pay mandated by law should said commissions be less than their basic minimum for eight hours work. It can, thus, be inferred that were said commissions equal to or even exceed the minimum wage, the employer need not pay, in addition, the basic minimum pay prescribed by law. It follows then that commissions are included in determining compliance with minimum wage requirements. 4. ID.; ID.; ID.; DISMISSAL; TWIN REQUIREMENTS OF DUE PROCESS. With regard to the second issue, it is settled that in terminating employees, the employer must furnish the worker with two written notices before the latter can be legally terminated: (a) a notice which apprises the employee of the particular acts or omissions for which his dismissal is sought, and (b) the subsequent notice which informs the employee of the employer's decision to dismiss him. (Emphasis ours) The twin requirements of notice and hearing constitute the essential elements of due process and neither of these elements can be disregarded without running afoul of the constitutional guarantee. Not being mere technicalities but the very essence of due process, to which every employee is entitled so as to ensure that the employer's prerogative to dismiss is not exercised arbitrarily, these requisites must be complied with strictly. cSDHEC 5. ID.; ID.; ID.; ID.; ID.; NOT COMPLIED WITH IN CASE AT BAR. As above-stated, the first notice should inform the employee that his dismissal is being sought. Its absence in the present case makes the termination of private respondents defective, for which petitioner must be sanctioned for his non-compliance with the requirements of or for failure to observe due process. 6. ID.; ID.; ID.; ID.; ID.; IN CASE OF ABANDONMENT, NOTICE SHOULD BE SENT TO THE WORKER'S LAST KNOWN ADDRESS. Section 2 of Book V, Rule XIV of the Omnibus Rules Implementing the Labor Code requires that in cases of abandonment of work, notice should be sent to the worker's last known address. If indeed private respondents had abandoned their jobs, it was incumbent upon petitioner to comply with this requirement. 7. ID.; ID.; ID.; ID.; ID.; ID.; P5,000.00 AWARDED AS NOMINAL DAMAGES. This, petitioner failed to do, entitling respondents to nominal damages in the amount of P5,000.00

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each, in accordance with recent jurisprudence, to vindicate or recognize their right to procedural due process which was violated by petitioner. TaDCEc 8. ID.; ID.; RULES LIBERALLY CONSTRUED; SUBMISSION OF ADDITIONAL EVIDENCE ALLOWED ON APPEAL. While it is true that the vouchers evidencing payments of 13th month pay were submitted only on appeal, it would have been more in keeping with the directive of Article 221 of the Labor Code for the NLRC to have taken the same into account. Time and again, we have allowed evidence to be submitted on appeal, emphasizing that, in labor cases, technical rules of evidence are not binding. Labor officials should use every and all reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure. The foregoing notwithstanding, the vouchers presented by petitioner covers only a particular year. It does not cover amounts for other years claimed by private respondents. It cannot be presumed that the same amounts were given on said years. Hence, petitioner is entitled to credit only the amounts paid for the particular year covered by said vouchers. 9. ID.; ID.; EMPLOYMENT; 13TH MONTH PAY; AN EMPLOYER WHO PAYS LESS THAN 1/12TH OF THE EMPLOYEE'S BASIC PAY IS REQUIRED TO PAY THE DIFFERENCE. It must also be borne in mind that the intent of P.D. No. 851 is the granting of additional income in the form of 13th month pay to employees not as yet receiving the same and not that a double burden should be imposed on the employer who is already paying his employees a 13th month pay or its equivalent. An employer who pays less than 1/12th of the employees basic salary as their 13th month pay is only required to pay the difference. aTCADc DECISION ROMERO, J p: Whether or not commissions are included in determining compliance with the minimum wage requirement is the principal issue presented in this petition. cdrep Petitioner Antonio Iran is engaged in softdrinks merchandising and distribution in Mandaue City, Cebu, employing truck drivers who double as salesmen, truck helpers, and non-field personnel in pursuit thereof. Petitioner hired private respondents Godofredo Petralba, Moreno Cadalso, Celso Labiaga and Fernando Colina as drivers/salesmen while private respondents Pepito Tecson, Apolinario Gimena, Jesus Bandilao, Edwin Martin and Diosdado Gonzalgo were hired as truck helpers. Drivers/salesmen drove petitioner's delivery trucks and promoted, sold and delivered softdrinks to various outlets in Mandaue City. The truck helpers assisted in the delivery of softdrinks to the different outlets covered by the driver/salesmen. As part of their compensation, the driver/salesmen and truck helpers of petitioner received commissions per case of softdrinks sold at the following rates: SALESMEN: Ten Centavos (P0.10) per case of Regular softdrinks. Twelve Centavos (P0.12) per case of Family Size softdrinks. TRUCK HELPERS:

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Eight Centavos (P0.08) per case of Regular softdrinks. Ten Centavos (P0.10) per case of Family Size softdrinks. Sometime in June 1991, petitioner, while conducting an audit of his operations, discovered cash shortages and irregularities allegedly committed by private respondents. Pending the investigation of irregularities and settlement of the cash shortages, petitioner required private respondents to report for work everyday. They were not allowed, however, to go on their respective routes. A few days thereafter, despite aforesaid order, private respondents stopped reporting for work, prompting petitioner to conclude that the former had abandoned their employment. Consequently, petitioner terminated their services. He also filed on November 7, 1991, a complaint for estafa against private respondents. On the other hand, private respondents, on December 5, 1991, filed complaints against petitioner for illegal dismissal, illegal deduction, underpayment of wages, premium pay for holiday and rest day, holiday pay, service incentive leave pay, 13th month pay, allowances, separation pay, recovery of cash bond, damages and attorney's fees. Said complaints were consolidated and docketed as Rab VII-12-1791-91, RAB VII-12-1825-91 and RAB VII-12-182691, and assigned to Labor Arbiter Ernesto F. Carreon. cdrep The labor arbiter found that petitioner had validly terminated private respondents, there being just cause for the latter's dismissal. Nevertheless, he also ruled that petitioner had not complied with minimum wage requirements in compensating private respondents, and had failed to pay private respondents their 13th month pay. The labor arbiter, thus, rendered a decision on February 18, 1993, the dispositive portion of which reads: "WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Antonio W. Iran to pay the complainants the following: 1. 2. 3. 4. 5. 6. 7. 8. Celso Labiaga P10,033.10 1,250.00

Godofredo Petralba Fernando Colina Moreno Cadalso

11,753.10 11,753.10 7,159.04

Diosdado Gonzalgo

Apolinario Gimena 8,312.24 Jesus Bandilao Pepito Tecson 74,116.63 14,729.50 9,126.55

Attorney's Fees (10%) of the gross award 7,411.66

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GRAND TOTAL AWARD P81,528.29 ======== The other claims are dismissed for lack of merit. SO ORDERED." 1 Both parties seasonably appealed to the NLRC, with petitioner contesting the labor arbiter's refusal to include the commissions he paid to private respondents in determining compliance with the minimum wage requirement. He also presented, for the first time on appeal, vouchers denominated as 13th month pay signed by private respondents, as proof that petitioner had already paid the latter their 13th month pay. Private respondents, on the other hand, contested the findings of the labor arbiter holding that they had not been illegally dismissed, as well as mathematical errors in computing Jesus Bandilao's wage differentials. The NLRC, in its decision of December 21, 1994, affirmed the validity of private respondent's dismissal, but found that said dismissal did not comply with the procedural requirements for dismissing employees. Furthermore, it corrected the labor arbiter's award of wage differentials to Jesus Bandilao. The dispositive portion of said decision reads: cdrep "WHEREFORE, premises considered, the decision is hereby MODIFIED in that complainant Jesus Bandilao's computation for wage differential is corrected from P154.00 to P4,550.00. In addition to all the monetary claim (sic) originally awarded by the Labor Arbiter a quo, P1,000.00 is hereby granted to each complainants (sic) as indemnity fee for failure of respondents to observe procedural due process. SO ORDERED." 2 Petitioner's motion for reconsideration of said decision was denied on July 31, 1995, prompting him to elevate this case to this Court, raising the following issues: 1. THE HONORABLE COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION AND CONTRARY TO LAW AND JURISPRUDENCE IN AFFIRMING THE DECISION OF THE LABOR ARBITER A QUO EXCLUDING THE COMMISSIONS RECEIVED BY THE PRIVATE RESPONDENTS IN COMPUTING THEIR WAGES; 2. THE HONORABLE COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION IN FINDING PETITIONER GUILTY OF PROCEDURAL LAPSES IN TERMINATING PRIVATE RESPONDENTS AND IN AWARDING EACH OF THE LATTER P1,000.00 AS INDEMNITY FEE; 3. THE HONORABLE COMMISSION GRAVELY ERRED IN NOT CREDITING THE ADVANCE AMOUNT RECEIVED BY THE PRIVATE RESPONDENTS AS PART OF THEIR 13TH MONTH PAY. The petition is impressed with merit. The NLRC, in denying petitioner's claim that commissions be included in determining compliance with the minimum wage ratiocinated thus: "Respondent (petitioner herein) insist assiduously that the commission should be included in the computation of actual wages per agreement. We will not fall prey to this fallacious argument. An employee should receive the minimum wage as mandated by law and that the

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attainment of the minimum wage should not be dependent on the commission earned by an employee. A commission is an incentive for an employee to work harder for a better production that will benefit both the employer and the employee. To include the commission in the computation of wage in order to comply with labor standard laws is to negate the practice that a commission is granted after an employee has already earned the minimum wage or even beyond it." 3 This holding is unsupported by law and jurisprudence. Article 97(f) of the Labor Code defines wage as follows: Art. 97(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. (Emphasis supplied) xxx xxx xxx."

This definition explicitly includes commissions as part of wages. While commissions are, indeed, incentives or forms of encouragement to inspire employees to put a little more industry on the jobs particularly assigned to them, still these commissions are direct remunerations for services rendered. In fact, commissions have been defined as the recompense, compensation or reward of an agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit to the principal. The nature of the work of a salesman and the reason for such type of remuneration for services rendered demonstrate clearly that commissions are part of a salesman's wage or salary. 4 Thus, the commissions earned by private respondents in selling softdrinks constitute part of the compensation or remuneration paid to drivers/salesmen and truck helpers for serving as such, and hence, must be considered part of the wages paid them. The NLRC asserts that the inclusion of commissions in the computation of wages would negate the practice of granting commissions only after an employee has earned the minimum wage or over. While such a practice does exist, the universality and prevalence of such a practice is questionable at best. In truth, this Court has taken judicial notice of the fact that some salesmen do not receive any basic salary but depend entirely on commissions and allowances or commissions alone, although an employer-employee relationship exists. 5 Undoubtedly, this salary structure is intended for the benefit of the corporation establishing such, on the apparent assumption that thereby its salesmen would be moved to greater enterprise and diligence and close more sales in the expectation of increasing their sales commissions. This, however, does not detract from the character of such commissions as part of the salary or wage paid to each of its salesmen for rendering services to the corporation. 6 Likewise, there is no law mandating that commissions be paid only after the minimum wage has been paid to the employee. Verily, the establishment of a minimum wage only sets a floor

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below which an employee's remuneration cannot fall, not that commissions are excluded from wages in determining compliance with the minimum wage law. This conclusion is bolstered by Philippine Agricultural Commercial and Industrial Workers Union vs. NLRC, 7 where this Court acknowledged that drivers and conductors who are compensated purely on a commission basis are automatically entitled to the basic minimum pay mandated by law should said commissions be less than their basic minimum for eight hours work. It can, thus, be inferred that were said commissions equal to or even exceed the minimum wage, the employer need not pay, in addition, the basic minimum pay prescribed by law. It follows then that commissions are included in determining compliance with minimum wage requirements. With regard to the second issue, it is settled that in terminating employees, the employer must furnish the worker with two written notices before the latter can be legally terminated: (a) a notice which apprises the employee of the particular acts or omissions for which his dismissal is sought, and (b) the subsequent notice which informs the employee of the employer's decision to dismiss him. 8 (Emphasis ours) Petitioner asseverates that no procedural lapses were committed by him in terminating private respondents. In his own words: ". . . when irregularities were discovered, that is, when the misappropriation of several thousands of pesos was found out, the petitioner instructed private respondents to report back for work and settle their accountabilities but the latter never reported for work. This instruction by the petitioner to report back for work and settle their accountabilities served as notices to private respondents for the latter to explain or account for the missing funds held in trust by them before they disappeared." 9

Petitioner considers this return-to-work order as equivalent to the first notice apprising the employee of the particular acts or omissions for which his dismissal is sought. But by petitioner's own admission, private respondents were never told in said notice that their dismissal was being sought, only that they should settle their accountabilities. In petitioner's incriminating words: "It should be emphasized here that at the time the misappropriation was discovered and subsequently thereafter, the petitioner's first concern was not effecting the dismissal of private respondents but the recovery of the misappropriated funds thus the latter were advised to report back to work." 10 As above-stated, the first notice should inform the employee that his dismissal is being sought. Its absence in the present case makes the termination of private respondents defective, for which petitioner must be sanctioned for his non-compliance with the requirements of or for failure to observe due process. 11 The twin requirements of notice and hearing constitute the essential elements of due process, and neither of these elements can be disregarded without running afoul of the constitutional guarantee. Not being mere technicalities but the very essence of due process, to which every employee is entitled so as to ensure that the employer's prerogative to dismiss is not exercised arbitrarily, 12 these requisites must be complied with strictly.

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Petitioner makes much capital of private respondents' failure to report to work, construing the same as abandonment which thus authorized the latter's dismissal. As correctly pointed out by the NLRC, to which the Solicitor General agreed, Section 2 of Book V, Rule XIV of the Omnibus Rules Implementing the Labor Code requires that in cases of abandonment of work, notice should be sent to the worker's last known address. If indeed private respondents had abandoned their jobs, it was incumbent upon petitioner to comply with this requirement. This, petitioner failed to do, entitling respondents to nominal damages in the amount of P5,000.00 each, in accordance with recent jurisprudence, 13 to vindicate or recognize their right to procedural due process which was violated by petitioner. Lastly, petitioner argues that the NLRC gravely erred when it disregarded the vouchers presented by the former as proof of his payment of 13th month pay to private respondents. While admitting that said vouchers covered only a ten-day period, petitioner argues that the same should be credited as amounts received by private respondents as part of their 13th month pay, Section 3(e) of the Rules and Regulations Implementing P.D. No. 851 providing that the employer shall pay the difference when he pays less than 1/12th of the employee's basic salary. 14 While it is true that the vouchers evidencing payments of 13th month pay were submitted only on appeal, it would have been more in keeping with the directive of Article 221 15 of the Labor Code for the NLRC to have taken the same into account. 16 Time and again, we have allowed evidence to be submitted on appeal, emphasizing that, in labor cases, technical rules of evidence are not binding. 17 Labor officials should use every and all reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure. 18 It must also be borne in mind that the intent of P.D. No. 851 is the granting of additional income in the form of 13th month pay to employees not as yet receiving the same and not that a double burden should be imposed on the employer who is already paying his employees a 13th month pay or its equivalent. 19 An employer who pays less than 1/12th of the employees basic salary as their 13th month pay is only required to pay the difference. 20 The foregoing notwithstanding, the vouchers presented by petitioner covers only a particular year. It does not cover amounts for other years claimed by private respondents. It cannot be presumed that the same amounts were given on said years. Hence, petitioner is entitled to credit only the amounts paid for the particular year covered by said vouchers. WHEREFORE, in view of the foregoing, the decision of the NLRC dated July 31, 1995, insofar as it excludes the commissions received by private respondents in the determination of petitioner's compliance with the minimum wage law, as well as its exclusion of the particular amounts received by private respondents as part of their 13th month pay is REVERSED and SET ASIDE. This case is REMANDED to the Labor Arbiter for a recomputation of the alleged deficiencies. For non-observance of procedural due process in effecting the dismissal of private respondents, said decision is MODIFIED by increasing the award of nominal damages to private respondents from P1,000.00 to P5,000.00 each. No costs. SO ORDERED. cdrep

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Narvasa, C .J ., Kapunan and Purisima, JJ ., concur.

9. THIRD DIVISION [G.R. No. 116008. July 11, 1995.] METRO TRANSIT ORGANIZATION, INC., petitioner, vs. THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, Second Division; EDNA BONTO-PEREZ, Presiding Commissioner; DOMINGO H. ZAPANTA, Commissioner; ROGELIO I. RAYAZA, Commissioner; and THE SUPERVISORY EMPLOYEES ASSOCIATION OF METRO (SEAM), respondents. SYLLABUS 1. LABOR AND SOCIAL LEGISLATION; WAGES; BONUS; DEFINED. A "bonus" is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is something given in addition to what is ordinarily received by or strictly due to the recipient. (Traders Royal Bank v. National Labor Relations Commission, 189 SCRA 274 (1990) and Luzon Stevedoring Corp v. Court of Industrial Relations, 15 SCRA 660 [1965]). cdasia 2. ID.; ID.; ID.; RULE; WHEN DEMANDABLE The general rule is that a bonus is a gratuity or an act of liberality which the recipient has no right to demand as a matter of right. A bonus, however, is a demandable or enforceable obligation when it is made part of the wage or salary or compensation of the employee. Whether or not a bonus forms part of wages depends upon the circumstances and conditions for its payment. If it is additional compensation which the employer promised and agreed to give without any conditions imposed for its payment, such as success of business or greater production or output, then it is part of the wage. But if it is paid only if profits are realized or if a certain level of productivity is achieved, it can not be considered part of the wage. Where it is not payable to all but only to some employees and only when their labor becomes more efficient or more productive, it is only an inducement for efficiency, a prize therefor, not a part of the wage 3. ID.; ID.; WAGE DISTORTION CONCEPT; PRINCIPLES APPLIED. It is helpful to recall the general principles laid down in National Federation of Labor v. National Labor Relations Commission, 234 SCRA 311 (1994) where the Court discussed at some length the relatively obscure concept of wage distortion. Those principles may be summarily stated in the following manner: (a) The concept of wage distortion assumes an existing grouping or classification of employees which establishes distinctions among such employees on some relevant or legitimate basis. This classification is reflected in a differing wage rate for each of the existing classes of employees. (b) Wage distortions have often been the result of government-decreed increases in minimum wages. There are, however, other causes of wage distortions, like the merger of two (2) companies (with differing classifications of employees and different wage rates) where the surviving company absorbs all the employees of the dissolved corporation. (In the present Metro case, as already noted, the wage distortion arose because the effectivity dates of wage increases given to each of the two (2) classes of employees (rank-and-file and

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supervisory) had not been synchronized in their respective CBAs.) (c) Should a wage distortion exist, there is no legal requirement that, in the rectification of that distortion by re-adjustment of the wage rates of the differing classes of employees, the gap which had previously or historically existed be restored in precisely the same amount. In other words, correction of a wage distortion may be done by re-establishing a substantial or significant gap (as distinguished from the historical gap) between the wage rates of the differing classes of employees. (d) The re-establishment of a significant difference in wage rates may be the result of resort to grievance procedures or collective bargaining negotiations. 4. ID.; ID.; ID.; CORRECTION THROUGH COLLECTIVE BARGAINING NEGOTIATIONS. In National Federation of Labor v. National Labor Relations Commission, 234 SCRA 311 (1994) the Court rejected the argument of the NLRC that wage increases resulting from collective bargaining negotiations should not be regarded as constituting compliance with the direction to correct wage distortions arising from the effectivity of Wage Orders. In National Federation of Labor, the Court, after quoting the following excerpt from Apex Mining Company, Inc. v. National Labor Relations Commission, 206 SCRA 497 (1992): "It is important to note that the creditability provisions of Wage Orders Nos. 5 and 6 (as well as the parallel provisions in Wage Orders Nos. 2, 3 and 4) are grounded in an important public policy. That public policy may be seen to be the encouragement of employers to grant wage and allowance increases to their employees higher than the minimum rates of increases prescribed by statute or administrative regulation. To obliterate the creditability provisions in Wage Orders through interpretation or otherwise, and to compel employers simply to add legislated increases in salaries or allowances without regard to what is already being paid, would be to penalize employers who grant their workers more than the statutorily prescribed minimum rates of increases. Clearly, this would be counter-productive so far as securing the interests of labor is concerned. The creditability provisions in the Wage Orders prevent the penalizing of employers who are industry leaders and who do not wait for statutorily prescribed increases in salary or allowances and pay their workers more than what the law or regulations require." (234 SCRA at 322-323) said: "We believe that the same public policy requires recognition and validation, as it were, of wage increases given by employers either unilaterally or as a result of collective bargaining negotiations, in the effort to correct wage distortions." (234 SCRA at 323). cdtai DECISION FELICIANO, J p: In this Petition for Certiorari, petitioner Metro Transit Organization, Inc. ("Metro") asks us to set aside the Decision and Resolution of the National Labor Relations Commissions ("NLRC") dated 30 March and 22 June 1994 respectively in NLRC-NCR-CA No. 000042-92 ordering it to pay its supervisory employees amounts representing (i) a demanded wage increase based on company practice and (ii) a correction or adjustment of an underpayment of an annual wage increase granted in the collective bargaining agreement (CBA) between Metro and herein private respondent Supervisory Employees Association of Metro ("SEAM"). Petitioner Metro is the operator and manager of the Light Railway Transit System in Metro Manila. It employs close to 1,000 rank-and-file and over 200 supervisory employees. Private

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respondent SEAM is a union composed of supervisory employees of petitioner Metro. In May 1989, SEAM was certified as the sole bargaining agent for the supervisory employees of Metro. On 1 December 1989, the first collective bargaining agreement between petitioner Metro and private respondent SEAM took effect. 1 Prior to December 1989, Metro had a CBA only with its rank-and-file employees. During the period when no CBA governed the terms and conditions of employment between Metro and its supervisory employees, whenever rank-and-file employees were paid a statutorily mandated salary increase, supervisory employees were, as a matter of practice, also paid the same amount plus P50.00. cdt On 17 April 1989, Metro paid its rank-and-file employees a salary increase of P500.00 per month in accordance with the terms of their CBA. 2 Metro, however, did not extend a corresponding salary increase to its supervisory employees. On 1 December 1989, Metro, in compliance with its CBA with SEAM, paid its supervisory employees a salary increase of P800.00 per month. On 17 April 1990, Metro paid its rank-and-file and supervisory employees a P600.00 monthly increase. The payment thus made to rank-and-file employees was in compliance with the second year salary increase provided in their CBA. On the other hand, the P600.00 per month paid to supervisory employees was advanced from their second year salary increase, provided in their CBA, of P1,000.00 per month effective 1 December 1990. On 1 December 1990, Metro paid its supervisory employees the remaining balance of P400.00 per month in addition to the P600.00 a month it had earlier started to pay. aisadc The third year salary increases due rank-and-file and supervisory employees were paid on 17 April and 1 December 1991, respectively, as scheduled in their corresponding CBAs. On 24 March 1992, private respondent SEAM filed a Notice of Strike before the National Conciliation and Mediation Board ("NCMB") charging petitioner Metro with (a) discrimination in terms of wages; (b) underpayment of salary increase per CBA for 1990 and/or adjustment of salaries for correction of disparity/inequity in pay with rank-and-file employees and (c) harassment and demotion of union officers. Conciliation and mediation efforts before the NCMB failed. On 23 June 1992, acting on a petition filed by Metro, the Secretary of Labor assumed jurisdiction over the labor dispute and certified the same to public respondent NLRC for compulsory arbitration. cdta On 30 March 1994, the NLRC rendered its decision the dispositive portion of which reads: "WHEREFORE, the company is hereby ordered to pay the amount of P550.00 per month wage increase effective April 17, 1989 and onwards to each supervisory employee and likewise pay the sum of P600.00 per month representing underpayment in the correction of inequities in pay or underpayment of CBA wage increase effective December 1, 1990 and onwards." The charge of harassment and demotion was dismissed for "lack of basis." cdasia On 22 June 1994, NLRC denied the motion for reconsideration filed by Metro.

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The instant Petition for Certiorari was filed on 14 July 1994 accompanied by a prayer for issuance of a temporary restraining order to enjoin public respondents from enforcing their award. On 31 August 1994, the Court, after an oral hearing, issued a Resolution encouraging petitioner Metro and private respondent SEAM to vigorously and earnestly exercise their best efforts to reach an amicable and mutually acceptable settlement of their claims and counterclaims. In the meantime, the disputants were to maintain the status quo, in particular, private respondent SEAM and public respondent NLRC were to refrain from seeking and granting, respectively, the issuance of a writ of execution is respect of the decision of the NLRC. cdtai On 29 and 30 September 1994, petitioner Metro and private respondent SEAM respectively informed the Court that their efforts amicably to settle their dispute had failed. Cognizant of (a) the huge disparity between the financial capability of Metro and the amount awarded to SEAM, 3 (b) the essential public services being rendered by the parties and (c) in the interest of avoiding any disruption of these basic services, the Court reiterated its Order of 31 August 1994 enjoining respondents SEAM and the NLRC from seeking and granting a writ of execution until further orders from this Court. The principal issues, to the mind of the Court, are: (a) whether or not a wage distortion existed in respect of the salaries of the rank-and-file and supervisory employees of petitioner Metro; and (b) assuming a wage distortion existed, whether or not it has been corrected by petitioner Metro in accordance with law. 4 Private respondent SEAM vigorously asserts that an already existing wage distortion in respect of the salaries of rank-and-file and supervisory employees was aggravated when Metro, on 17 April 1989, paid its rank-and-file employees their CBA-stipulated P500.00 increase but did not grant a corresponding increase (and a premium) to its supervisory employees. Furthermore, the advance by Metro of the P600.00 on 17 April 1990 only "artificially" reduced the existing distortion. The advance was, according to SEAM, extended merely to give the appearance of a reduction of the existing distortion in pay between the rank-and-file and supervisory employees. On 1 December 1990, when supervisory employees were paid the balance of P400.00 the distortion existing prior to 17 April 1990 was reinstated. Finally, SEAM claims, on top of the salary increases granted to supervisory employees by their CBA, they should be paid the increase corresponding to the P500.00 increase given rank-and-file employees not only for 1989 but also onwards. cdt Upon the other hand, petitioner Metro firmly maintains that its practice of giving higher increases to supervisory employees whenever rank-and-file employees were given increases, should not be regarded as compulsory. The grant of a corresponding increase to supervisory employees is a prerogative or discretionary act of generosity by management considering there is no law or company policy mandating it. Moreover, SEAM is estopped, Metro asserts, from claiming such an increase. Despite its awareness of the P500.00 increase paid to rank-and file employees (pursuant to their CBA) on 17 April 1989, SEAM did not negotiate in SEAM's own CBA for the retroactive payment or pushing forward the effectivity date of its first increase of P800.00 to 17 April 1989. Finally, the demanded P550.00 wage increase should be

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deemed, according to Metro, included in the P800.00 salary increase paid supervisory employees on 1 December 1989. In respect of the issue of underpayment, petitioner Metro denies that it underpaid its supervisory employees. Metro maintains (a) that the first increase of P800.00 effective 1 December 1989 as provided in its CBA with SEAM is higher than the P500.00 increase paid its rank-and-file employees; (b) that assuming arguendo a distortion in pay still existed, the same was corrected when the majority of the supervisory employees, in a referendum, voted to accept the advance payment of P600.00 out of the scheduled CBA increase of P1,000.00 effective 1 December 1990; (c) it was actually SEAM who had proposed the advanced payment of P600.00 from their scheduled second year increase of P1,000.00; (d) SEAM had further agreed that, come 1 December 1990, only the balance of P400.00 would have to be paid to supervisory employees; and (e) payment by Metro of the balance of P400.00 on 1 December 1990 was merely its compliance with the scheduled second year increase aligned with Metro's subsequent agreement with SEAM to advance the effectivity date of the first P600.00. In its Comment, the Office of the Solicitor General argues, rather cursorily, that public respondent NLRC did not commit any grave abuse of discretion and that its findings of fact must be accorded respect and finality. cdrep I In respect of the issue of existence of a wage distortion, the Court finds and so holds that a wage distortion did occur when the salaries of rank-and-file employees were increased by P500.00 per month on 17 April 1989 as stipulated in their CBA and no corresponding increase was paid to the supervisory employees. This fact was admitted by Atty. Virgilio C. Abejo, counsel for petitioner Metro, during the oral hearing and Metro is bound by that admission. 5 In addition, Atty. Abejo explained that his client, as a matter of practice, granted its supervisory employees a salary increase (and a premium) whenever it paid its rank-and-file employees a salary increase. 6 The defense of management prerogative or discretion invoked by petitioner Metro in asserting that it is not obligated to grant supervisory employees a salary increase whenever rank-andfile employee are granted an increase is, in this case, unavailing. cdta Basically, Metro's argument is that such increase was merely a bonus given to supervisory employees. A "bonus" is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is something given in addition to what is ordinarily received by or strictly due to the recipient. 7 The general rule is that a bonus is a gratuity or an act of liberality which the recipient has no right to demand as a matter of right. 8 A bonus, however, is a demandable or enforceable obligation when it is made part of the wage or salary or compensation of the employee. 9 Whether or not a bonus forms part of wages depends upon the circumstances and conditions for its payment. If it is additional compensation which the employer promised and agreed to give without any conditions imposed for its payment, such as success of business or greater production or output, then it is part of the wage. But if it is paid only if profits are realized or if

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a certain level of productivity is achieved, it can not be considered part of the wage. Where it is not payable to all but only to some employees and only when their labor becomes more efficient or more productive, it is only an inducement for efficiency, a prize therefor, not a part of the wage. 10 In the case at bar, the increase of P550.00 sought by private respondent SEAM was neither an inducement nor was it contingent on (a) the success of the business of petitioner Metro; or (b) the increased production or work output of the company or (c) the realization of profits. The demand for this increase was based on a company practice, admitted by Metro, of granting a salary increase (and a premium) to supervisory employees whenever rank-and-file employees were granted a salary increase. That those increases were precisely designed to correct or minimize the wage distortion effects of increases given to rank-and-file employees (under their CBA or under Wage Orders), highlights the fact that those increases were part of the wage structure of supervisory employees. The demanded increase therefore is not a bonus that is generally not demandable as a matter of right. The demanded increase, in this instance, is an enforceable obligation so far as the supervisory employees of Metro are concerned. cdasia We conclude that the supervisory employees, who then (i.e., on 17 April 1989) had, unlike the rank-and-file employees, no CBA governing the terms and conditions of their employment, had the right to rely on the company practice of unilaterally correcting the wage distortion effects of a salary increase given to the rank-and-file employees, by giving the supervisory employees a corresponding salary increase plus a premium. For reasons, however, shortly to be stated in the disposition of the second issue, we hold that the P550.00 increase is demandable by SEAM only in respect of the period beginning 17 April 1989 and ending on 30 November 1989. It is true enough that, in the present case, the wage distortion to be corrected by the award of P550.00 increase for supervisory employees beginning 17 April 1989, was due to the time gap between the effectivity date (17 April 1989) of the increase of P550.00 per month given to rank-and-file employees under their CBA and the effectivity date (1 December 1989) of the P800.00 increase given to supervisory employees under their own CBA. It is also true that had the P800.00 increase to supervisory employees been made retroactive to 17 April 1989 by an appropriate synchronizing provision in the Metro-SEAM CBA, no wage distortion would have arisen. The fact, however, remains that Metro and SEAM did not agree upon much remedy in their CBA and that the CBA increase given to rank-and-file employees did produce a distortion effect by obliterating or drastically reducing the previous gap between the salary rates of rankand-file and supervisory employees. The point to be stressed is that considering the prior practice to be stressed is that considering the prior practice of petitioner Metro, its supervisory employees had the right to expect rectification of that distortion. II We turn to the issue of whether the wage distortion referred to above was effectively rectified by petitioner Metro in accordance with law. cdtai This issue arises because, as already noted, the NLRC in its 30 March 1994 Decision decreed that Metro shall pay the "P550.00 per month wage increase effective April 17, 1989 and

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onwards" and similarly ordered the payment of P600.00 per month which it found to have been underpaid "effective December 1, 1990 and onwards." It is helpful to recall the general principles laid down in National Federation of Labor v. National Labor Relations Commission, 11 where the Court discussed at some length the relatively obscure concept of wage distortion. Those principles may be summarily stated in the following manner: (a) The concept of wage distortion assumes an existing grouping or classification of employees which establishes distinctions among such employees on some relevant or legitimate basis. This classification is reflected in a differing wage rate for each of the existing classes of employees. cdt (b) Wage distortions have often been the result of government-decreed increases in minimum wages. There are, however, other causes of wage distortions, like the merger of two (2) companies (with differing classifications of employees and different wage rates) where the surviving company absorbs all the employees of the dissolved corporation. [In the present Metro case, as already noted, the wage distortion arose because the effectivity dates of wage increases given to each of the two (2) classes of employees (rank-and-file and supervisory) had not been synchronized in their respective CBAs.) (c) Should a wage distortion exist, there is no legal requirement that, in the rectification of that distortion by re-adjustment of the wage rates of the differing classes of employees, the gap which had previously or historically existed be restored in precisely the same amount. In other words, correction of a wage distortion may be done by re-establishing a substantial or significant gap (as distinguished from the historical gap) between the wage rates of the differing classes of employees. (d) The re-establishment of a significant difference in wage rates may be the result of resort to grievance procedures or collective bargaining negotiations. aisadc In the present case, the Court must confront the task of determining whether the CBA forged by Metro and SEAM had, along with the award of P550.00 per month from 17 April 1989 to 1 December 1989, referred to in Part I above, adequately corrected the wage distortion. After careful examination of the provisions of the CBA between Metro and SEAM, in particular the provisions relating to anniversary salary increases every 1 December beginning 1989 to 1991, we believe and so hold that together with the increase of P550.00 referred to in Part I above, those provisions will have adequately rectified the wage distortion which arose in respect of rank-and-file and supervisory employees. The CBA of supervisory employees granted them an aggregate monthly increase of P2,800.00 over three (3) years: cdta Table I CBA Effectivity Amount Increase Date Year I 1 December 1989 P 800.00 Year II 1 December 1990 P1,000.00

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Year III 1 December 1991 P1,000.00 Upon the other hand, the CBA of the rank-and-file employees granted them monthly increases totalling P1,850.00 also over three (3) years: Table II CBA Effectivity Amount Increase Date Year I 17 April 1989 P500.00 Year II 17 April 1990 P600.00 Year III 17 April 1991 P750.00 After all the above listed salary increases had become effective, the last being on 1 December 1991, supervisory employees as a group were receiving P950.00 more per month than rankand-file employees as a group. Adding to this figure the amount of P550.00 per month which we in Part I (supra) have held petitioner Metro must pay, the increase in pay of supervisory employees would be P1,500.00 more per month than the increases in pay of rank-and-file employees: cdasia Table III CBA Effectivity Increase Wage Increase Wage Increase Supervisory (PHP) Gap

Date Rank and File

Employees Employees (PHP) (PHP) Year I 04-17-89 500.00 550.00 12 50.00 850.00

12-01-89 Year II 04-17-90

0.00 800.00

600.00

600.00 13 850.00 1250.00

12-01-90 Year II 04-17-91 12-01-91

0.00 400.00 750.00

0.00 500.00 1500.00

0.00 1000.00

We consider the difference of P1,500.00 per month a significant differential that clearly distinguishes, on the basis of pay scales, a rank-and-file employee from a supervisory employee. Applying the above increases to the actual salaries being received by rank-and-file and supervisory employees of Metro, we find that indeed the distortion caused by the CBAstipulated wage increase granted rank-and-file employees on 17 April 1989 was rectified by 1 December 1991. cdtai The record before us does not include the actual amounts of the rank-and-file and supervisory employees' salaries. In its position paper before the NCMB, however, private respondent SEAM stated: "The highest salary of some rank-and-file employees at present (before adding the CBA increase) is P4,790.00 which is higher that some supervisors with [a] salary of P3,980.00." 14

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Taking the above SEAM figures and adding to them the respective CBA-stipulated increases to the salary of the highest paid rank-and-file employee and to the lowest paid supervisory employee, plus the P550.00 in wage already held due to all supervisory employees as of 17 April 1989, we find that the salary of the lowest paid supervisory employee was, by 1 December 1991, P690.00 more than the salary of the highest paid rank-and-file employee: cdt Table IV CBA Effectivity Increase Wage of Wage of GAP

Date Rank and File Employees (PHP) (PHP) 4,790.00

Supervisory (PHP) Employees

3,980.00

(810.00) 15 (760.00) 17 40.00 40.00 440.00 (310.00) 19

Year I 04-17-89 12-01-89 Year II 04-17-90 12-01-90 Year III

5,290.00 5,290.00 5,890.00 5,890.00

4,530.00 16 5,330.00 5,930.00 18 6,330.00

04-17-91

6,640.00

6,330.00

12-01-91

6,640.00

7,330.00

690.00

The difference in monthly wage scales of P690.00 clearly and substantially distinguishes, on the basis of pay, a rank-and-file employee from a supervisory employee. 20 Since the above computation utilizes the salaries of highest paid rank-and-file employee and the lowest paid supervisory employee, figures supplied by SEAM, the differential of P690.00 represents merely the minimum difference or gap that was restored or established once implementation of the salary increases due to supervisory employees was completed on 1 December 1991. That differential would, of course, be significantly greater for average rank-and-file employees receiving a salary less than P4,790.00 and for average supervisory employees receiving a salary greater than P3,980.00. We turn to the related issue of whether the first year salary increase of P800.00 per month given to supervisory employees under their CBA covered or took the place of the P550.00 increase we ruled is due them in Part I (supra) by virtue of the previous unilateral practice of Metro. cdasia Metro maintains that the P800.00 monthly salary increase paid to supervisory employees starting on 1 December 1989, should be deemed to cover or include the P550.00 in wage increase demanded by SEAM and held by us to be due to SEAM from 17 April 1989 to 1 December 1989. In other words, Metro argues that the wage distortion should be regarded as cured by the CBA-mandated increase of P800.00 starting 1 December 1989. We note that the CBA of Metro and SEAM did not contain any provision stipulating that the P550.00 monthly increase would be credited against the P800.00 increase. There was no

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crediting provision apparently because the P550.00 monthly increase had not been provided for in the CBA with SEAM. Even so, we agree with petitioner Metro's position. The issue of whether increases in wages essential for correcting wage distortions may be credited against CBA-mandated increases, is not an issue of first impression. In National Federation of Labor v. National Labor Relations Commission, 21 the Court rejected the argument of the NLRC that wage increases resulting from collective bargaining negotiations should not be regarded as constituting compliance with the direction to correct wage distortions arising from the effectivity of Wage Orders. In National Federation of labor, the Court, after quoting the following excerpt from Apex mining Company, Inc. v. National labor Relations Commission. 22 "It is important to note that the creditability provisions of Wage Orders Nos. 5 and 6 (as well as the parallel provisions in Wage Orders Nos. 2, 3 and 4) are grounded in an important public policy. That public policy may be seen to be the encouragement of employers to grant wage and allowance increases to their employees higher than the minimum rates of increases prescribed by statute or administrative regulation. To obliterate the creditability provisions in Wage Orders through interpretation or otherwise, and to compel employers simply to add legislated increases in salaries or allowances without regard to what is already being paid, would be to penalize employers who grant their workers more than the statutorily prescribed minimum rates of increases. Clearly, this would be counter-productive so far as securing the interests of labor is concerned. The creditability provisions in the Wage Orders prevent the penalizing of employers who are industry leaders and who do not wait for statutorily prescribed increases in salary or allowances and pay their workers more than what the law or regulations require." 23 (Emphasis partly in the original and partly supplied) cdta said: "We believe that the same public policy requires recognition and validation, as it were, of wage increases given by employers either unilaterally or as a result of collective bargaining negotiations, in the effort to correct wage distortions." 24 (Emphasis supplied) In the instant case, the CBA-stipulated increase of P800.00 a month was intended as the countervailing increase for supervisory employees, the rank-and-file employees having already received their own increase approximately eight (8) months earlier. In other words, the wage distortion in the present case arose not because of a government-decreed increase in minimum wages or because Metro simply refused to treat its supervisory employees. differently from its rank-and-file workers, but rather because of a failure to synchronize the CBA-stipulated increases for rank-and-file and for supervisory employees. Moreover, as more than once pointed out above, the P800.00 monthly increase given to supervisory employees should be taken in conjunction with the P550.00 month increase already awarded to supervisory employees under Part I above. When these are taken together, the wage distortion which occurred on 17 April 1989 was completely and permanently corrected. There is no legal basis for requiring Metro to pay not only the P800.00 month increase, but also, on top thereof, the P550.00 monthly increase to supervisory employees, after 1 December 1989 and forever after. From the foregoing, we conclude that beginning 1 December 1989, by the grant of the award of P550.00 to supervisory employees in Part I (supra) and by the operation of the Metro-SEAM

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CBA, the wage distortion which occurred on 17 April 1989 had been corrected. By 1 December 1991, a substantial gap or differential had been re-established between the salaries of the rank-and-file and supervisory employees of petitioner Metro. It was, therefore, grievous abuse of discretion for the NLRC to disregard such rectification and to rule that petitioner Metro was liable to its supervisory employees for P550.00 monthly increase beyond 1 December 1989 and "onwards." That distortion, as already pointed out, lasted only from 17 April 1989 up to 30 November 1989, since the following day, 1 December 1989, the CBA of Metro and SEAM went into effect. Similarly, we believe that the NLRC committed a grave abuse of discretion in requiring Metro to pay the sum of P600.00 per month from 1 December 1990 and onwards, i.e., forever after. It will be recalled that Metro, upon request of SEAM, had agreed that of the P1,000.00 monthly increase originally scheduled to be effective under the CBA on 1 December 1990, P600.00 would take effect instead on 17 April 1990. Metro agreed to do so precisely to remedy the distortion that would otherwise have resulted (see Tables III and IV, supra) and so, starting 17 April 1990, supervisory employees received a monthly increase of P600.00; and starting 1 December 1990, they started receiving an additional P400.00 or the total stipulated CBA increase of P1,000.00 per month. aisadc Again, for the same reasons set out earlier, we consider that these additional payments of P600.00 per month to supervisory employees from 17 April 1990 up to 1 December 1990 should be deemed included in the P1,000.00 monthly increase effective from 1 December 1990 and onwards. Compelling Metro to pay, starting 1 December 1990, not only the P1,000.00 per month increase stipulated in the CBA but also an additional P600.00 per month, amounts to allowing unjust enrichment of supervisory employees at the expense of their employer Metro. Finally, the Court is aware of the existence of a job evaluation study prepared by Resources Consultants International, aimed at re-examining the wage structure of rank-and-file and supervisory employees of Metro. 25 The decision we promulgate today is without prejudice to higher wages which rank-and-file and supervisory employees may be receiving by virtue of implementation of such report. LLphil Accordingly, for all the foregoing, the petition for Certiorari is hereby GRANTED DUE COURSE, and the Decision and Resolution of the NLRC dated 30 March and 22 June 1994, respectively, in NLRC-NCR-CA No. 000042-92 are hereby SET ASIDE. In place thereof, another Decision is hereby RENDERED requiring petitioner Metro Transit Organization, Inc. to pay to each of its supervisory employees the amount of Five Hundred Fifty Pesos (P550.00) for each month or fraction of a month, embraced within the period from 17 April 1989 to 1 December 1989, plus legal interest (six percent [6%] per annum) thereon computed from the various dates in 1989 when such amount should have been paid during the aforementioned period. This Decision shall be without prejudice to any increase of wages already being enjoyed by supervisory employees at the time of promulgation hereof. cdta No pronouncement as to costs. SO ORDERED.

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Romero, Melo, Vitug and Francisco, JJ., concur.

10. SECOND DIVISION [G.R. No. 111744. September 8, 1995.] LOURDES G. MARCOS, ALEJANDRO T. ANDRADA, BALTAZARA J. LOPEZ and VILMA L. CRUZ, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and INSULAR LIFE ASSURANCE CO., LTD., respondents. Emilio S. Teng for petitioners. The Solicitor General for respondents. SYLLABUS 1. LABOR AND SOCIAL LEGISLATION; QUITCLAIM; CANNOT BAR AN EMPLOYEE FROM DEMANDING BENEFITS TO WHICH HE IS LEGALLY ENTITLED. Under prevailing jurisprudence, the fact that an employee has signed a satisfaction receipt for his claims does not necessarily result in the waiver thereof. The law does not consider as valid any agreement whereby a worker agrees to receive less compensation than what he is entitled to recover. A deed of release or quitclaim cannot bar an employee from demanding benefits to which he is legally entitled. Llibris 2. ID.; ID.; ID.; REASON THEREFOR. We have heretofore explained that the reason why quitclaims are commonly frowned upon as contrary to public policy, and why they are held to be ineffective to bar claims for the full measure of the workers' legal rights, is the fact that the employer and the employee obviously do not stand on the same footing. The employer drove the employee to the wall. The latter must have to get hold of money. Because, out of a job, he had to face the harsh necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence, not of choice. One thing sure, however, is that petitioners did not relent on their claim. They pressed it. They are deemed not have waived any of their rights. Renuntiatio non praesumitur. 3. ID.; ID.; DOES NOT ESTOP EMPLOYEES FROM PURSUING THEIR CLAIMS ARISING FROM UNFAIR LABOR PRACTICE OF THE EMPLOYER. We have more trenchantly declared that quitclaims and/or complete releases executed by the employees do not estop them from pursuing their claims arising from unfair labor practices of the employer. The basic reason for this is that such quitclaims and/or complete releases are against public policy and, therefore, null and void. The acceptance of termination does not divest a laborer of the right to prosecute his employer for unfair labor practice acts. While there may be possible exceptions to this holding, we do not perceive any in the case at bar. 4. ID.; ID.; ELEMENT OF VOLUNTARINESS, NEGATED BY THE FACT THAT EMPLOYEES EXPRESSLY STATED THEREIN THEIR CLAIMS FOR THE SERVICE AWARDS. In the instant case,

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it is an undisputed fact that when petitioners signed the instrument of release and quitclaim, they made a written manifestation reserving their right to demand the payment of their service awards. The element of total voluntariness in executing that instrument is negated by the fact that they expressly stated therein their claim for the service awards, a manifestation equivalent to a protest and a disavowal of any waiver thereof. As earlier stated, petitioners even sought the opinion of the Department of Labor and Employment to determine where and how they stood in the controversy. This act only shows their adamant desire to obtain their service awards and to underscore their disagreement with the "Release and Quitclaim" they were virtually forced to sign in order to receive their separation pay. cdtai 5. ID.; SERVICE AWARDS; WHEN AVAILABLE; CASE AT BAR. We are in accord with the findings of the labor arbiter that petitioners are indeed entitled to receive service awards and other benefits, thus: "Since each of the complainants have rendered services to respondent in multiple(s) of five years prior to their separation from employment, respondent should be paid their service awards for 1990. We are not impressed with the contention of the respondent that service award is a bonus and therefore is an act of gratuity which the complainants have no right to demand. Service awards are governed by respondent's employee's manual and (are) therefore contractual in nature. On the matter of anniversary and performance bonuses, it is not disputed that it is respondent's practice to give an anniversary bonus every five years from its incorporation; that pursuant to this practice, respondent declared an anniversary bonus for its 80th Anniversary in 1990; that per terms of this declaration, only the employees of respondent as of 15 November 1990 will be given the bonus; and that complainants were separated from respondent only 25 days before the respondent's anniversary. On the other hand, it is also (not) disputed that respondent regularly gives performance bonuses; that for its commendable performance in 1990, respondent declared a performance bonus; that per terms of this declaration, only permanent employees of respondent as of March 30, 1991 will be given this bonus; and that complainants were employees of respondents for the first 10 months of 1990. We cannot see any cogent reason why an anniversary bonus which respondent gives only once in every five years were given to all employees of respondent as of 15 November 1990 (pro rata even to probationary employees; Annex 9) and not to complainants who have rendered service to respondent for most of the five year cycle. This is also true in the case of performance bonus which were given to permanent employees of respondent as of 30 March 1991 and not to employees who have been connected with respondent for most of 1990 but were separated prior to 30 March 1991. We believe that the prerogative of the employer to determine who among its employees shall be entitled to receive bonuses which are, as a matter of practice, given periodically cannot be exercised arbitrarily. The grant of service awards in favor of petitioners is more importantly underscored in the precedent case of Insular Life Assurance Co., Ltd., et al. vs. NLRC, et al. (G.R. No. L74191, December 21, 1987, 156 SCRA 740) where this Court ruled that "as to the service award differentials claimed by some respondent union members, the company policy shall likewise prevail, the same being based on the employment contracts or collective bargaining agreements between the parties. As the petitioners had explained, pursuant to their policies on the matter, the service award differential is given at the end of the year to an employee who has completed years of service divisible by 5." cdll

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6. ID.; BONUS; CONSTRUED. A bonus is not a gift or gratuity, but is paid for some services or consideration and is in addition to what would ordinarily be given. The term "bonus" as used in employment contracts, also conveys an idea of something which is gratuitous, or which may be claimed to be gratuitous, over and above the prescribed wage which the employer agrees to pay. 7. ID.; ID.; ONCE ACCEPTED CANNOT BE WITHDRAWN. While there is a conflict of opinion as to the validity of an agreement to pay additional sums for the performance of that which the promisee is already under obligation to perform, so as to give the latter the right to enforce such promise after performance, the authorities hold that if one enters into a contract of employment under an agreement that he shall be paid a certain salary by the week or some other stated period and, in addition, a bonus, in case he serves for a specified length of time, there is no reason for refusing to enforce the promise to pay the bonus, if the employee has served during the stipulated time, on the ground that it was a promise of a mere gratuity. This is true if the contract contemplates a continuance of the employment for a definite term, and the promise of the bonus is made at the time the contract is entered into. If no time is fixed for the duration of the contract of employment, but the employee enters upon or continues in service under an offer of a bonus if he remains therein for a certain time, his service, in case he remains for the required time, constitutes an acceptance of the offer of the employer to pay the bonus and, after that acceptance, the offer cannot be withdrawn, but can be enforced by the employee. The weight of authority in American jurisprudence, with which we are persuaded to agree, is that after the acceptance of a promise by an employer to pay the bonus, the same cannot be withdrawn, but may be enforced by the employee. However, in the case at bar, equity demands that the performance and anniversary bonuses should be prorated to the number of months that petitioners actually served respondent company in the year 1990. This observation should be taken into account in the computation of the amounts to be awarded to petitioners. aisadc DECISION REGALADO, J p: This petition for certiorari seeks the nullification of the decision 1 of the National Labor Relations Commission (NLRC) promulgated on May 31, 1992 in NLRC NCR CA No. 004120-92, and its resolution dated August 27, 1993 denying petitioner's motion for reconsideration thereof. The said decision set aside on appeal, the decision of Labor Arbiter Alex Arcadio Lopez ordering private respondent to pay petitioners their service awards, anniversary bonus and prorated performance bonus in the amount of P144,579.00 and 10% attorney's fees in the amount of P14,457.90. 2 cdta First, the undisputed facts. Petitioners were regular employees of private respondent Insular Life Assurance Co., Ltd., but they were dismissed on November 1, 1990 when their positions were declared redundant. A special redundancy benefit was paid to them, which included payment of accrued vacation leave and fifty percent (50%) of unused current sick leave; special redundancy benefit, equivalent to three (3) months salary for every year of service; and additional cash benefits, in lieu of other benefits provided by the company or required by law. 3

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Before the termination of their services, petitioner Marcos had been in the employ of private respondent for more than twenty (20) years, from August 26, 1970; petitioner Andrada, more than twenty-five (25) years, from July 26, 1965; petitioner Lopez, exactly thirty (30) years, from October 31, 1960; and petitioner Cruz, more than twenty (20) years, from March 1, 1970. 4 cdasia Petitioners, particularly Baltazara J. Lopez, sent a letter dated October 23, 1990 to respondent company questioning the redundancy package. She claimed that they should receive their respective service awards and other prorated bonuses which they had earned at the time they were dismissed. In addition, Lopez argued that "the cash service awards have already been budgeted in a fund distinct and apart from redundancy fund." 5 Thereafter, private respondent required petitioners to execute a "Release and Quitclaim, 6 and petitioners complied but with a written protest reiterating their previous demand that they were nonetheless entitled to receive their service awards. On March 21, 1991, petitioners inquired from the Legal Service of the Department of Labor and Employment 7 whether respondent corporation could legally refuse the payment of their service awards as mandated in their Employee's Manual. cdtai About three months later the labor department issued its opinion, with pertinent authorities, responding to petitioners' query as follows: xxx xxx xxx

This Department believes that your query presents several issues. These shall be addressed point by point, thus: First, the Department deems the service award to be part of the benefits of the employees of Insular Life. Company policies and practices are fertile sources of employee's rights. These must be applied uniformly as interpretation cannot vary from one employee to another. . . . cdt xxx xxx xxx

While it may be argued that the above-cited case applies only to retirement benefits, we find solace in the cases of Liberation Steamship Co., Inc. vs. CIR and National Development Company vs. Unlicensed Crew Members of Three Dons vessels (23 SCRA 1105) where the Supreme Court held that a gratuity or bonus, by reason of its long and regular concession indicating company practice, may become regarded as part of regular compensation and thus demandable. xxx xxx xxx

Second, the award is earned at the pertinent anniversary date. At this time, entitlement to the award becomes vested. The anniversary date is the only crucial determining factor. Since the award accrues on that date, it is of no moment that the entitled employee is separated from service (for whatever cause) before the awards are physically handed out. xxx xxx xxx

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Third, even if the award has not accrued as when an employee is separated from service because of redundancy before the applicable 5th year anniversary, the material benefits of the award must be given, prorated, by Insular Life. This is especially true (in) redundancy, wherein he/she had no control. aisadc xxx xxx xxx

Fourth, the fact that you were required to sign "Release and Quitclaim" does not affect your right to the material benefits of the service award. . . . 8 Meanwhile, in the same year, private respondent celebrated its 80th anniversary wherein the management approved the grant of an anniversary bonus equivalent to one (1) month salary only to permanent and probationary employees as of November 15, 1990. 9 On March 26, 1991, respondent company announced the grant of performance bonus to both rank and file employees and supervisory specialist grade and managerial staff equivalent to two (2) months salary and 2.75 basic salary, respectively, as of December 30, 1990. The performance bonus, however, would be given only to permanent employees as of March 30, 1991. 10 cdta Despite the aforequoted opinion of the Department of Labor and Employment, private respondent refused to pay petitioners' service awards. This prompted the latter to file a consolidated complaint, which was assigned to NLRC Labor Arbiter Lopez, for payment of their service awards, including performance and anniversary bonuses. In their complaint, petitioners contended that they are likewise entitled to the performance and anniversary bonuses because, at the time the performance bonus was announced to be given, they were only short of two (2) months service to be entitled to the full amount thereof as they had already served the company for ten (10) months prior to the declaration of the grant of said benefit. Also, they lacked only fifteen (15) days to be entitled to the full amount of the anniversary bonus when it was announced to be given to employees as of November 15, 1990. In a decision dated October 8, 1992, the labor arbiter ordered respondent company to pay petitioners their service awards, anniversary bonuses and prorated performance bonuses, including ten percent (10%) thereof as attorney's fees. cdasia Respondent company appealed to public respondent NLRC claiming grave abuse of discretion committed by the labor arbiter in holding it liable to pay said service award, performance and anniversary bonuses, and in not finding that petitioners were estopped from claiming the same as said benefits had already been given to them. In setting aside the decision of the labor arbiter, respondent NLRC upheld the validity of the quitclaim document executed by petitioners. For this conclusion, it rationalized that "(c)ertainly, before complainants signed the quitclaim and release, they are aware of the nature of such document. In fact, they never assailed the genuineness and due execution of the same. Hence, we can safely say that they were not placed under duress or were compelled by means of force to sign the document." 11

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Furthermore, the NLRC held that "(n)either was there any unwritten agreement between complainants and respondent upon separation, which entitled the former to other remuneration or benefits. On the contrary, they voluntarily accepted the redundancy benefit package, otherwise, they would not have been separated from employment." 12 cdtai Hence, this petition wherein it is postulated that the basic issue is whether or not respondent NLRC committed reversible error or grave abuse of discretion in affirming the validity of the "Release and Quitclaim" and, consequently, that petitioners are not entitled to payment of service awards and other bonuses. 13 The Solicitor General, public respondent NLRC and private respondent company duly filed their respective comments. 14 In their petition, petitioners stress that they have actually devoted much, if not all, of their employable life with private respondent; that given their length of service, their loyalty to the latter is easily demonstrable; and that the same length of service had rendered slim, if not eliminated, their chances of getting employed somewhere else." 15 On the other hand, respondent company reiterates its basic contention that the consideration for the settlement of petitioners' claim is credible and reasonable, more than satisfies the legal requirement therefor, and that petitioners, in executing the release and quitclaim, did so voluntarily and with full knowledge of the consequences thereof. 16 The petition being meritorious, we find for petitioners. cdll Under prevailing jurisprudence, the fact that an employee has signed a satisfaction receipt for his claims does not necessarily result in the waiver thereof. The law does not consider as valid any agreement whereby a worker agrees to receive less compensation than what he is entitled to recover. A deed of release or quitclaim cannot bar an employee from demanding benefits to which he is legally entitled. 17 We have heretofore explained that the reason why quitclaims are commonly frowned upon as contrary to public policy, and why they are held to be ineffective to bar claims for the full measure of the workers' legal rights, is the fact that the employer and the employee obviously do not stand on the same footing. The employer drove the employee to the wall. The latter must have to get hold of money. Because, out of a job, he had to face the harsh necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence, not of choice. One thing sure, however, is that petitioners did not relent on their claim. They pressed it. They are deemed not have waived any of their rights. Renuntiatio non praesumitur. 18 aisadc Along this line, we have more trenchantly declared that quitclaims and/or complete releases executed by the employees do not estop them from pursuing their claims arising from unfair labor practices of the employer. The basic reason for this is that such quitclaims and/or complete releases are against public policy and, therefore, null and void. The acceptance of termination does not divest a laborer of the right to prosecute his employer for unfair labor practice acts. 19 While there may be possible exceptions to this holding, we do not perceive any in the case at bar. Furthermore, in the instant case, it is an undisputed fact that when petitioners signed the instrument of release and quitclaim, they made a written manifestation reserving their right to

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demand the payment of their service awards. 20 The element of total voluntariness in executing that instrument is negated by the fact that they expressly stated therein their claim for the service awards, a manifestation equivalent to a protest and a disavowal of any waiver thereof. As earlier stated, petitioners even sought the opinion of the Department of Labor and Employment to determine where and how they stood in the controversy. This act only shows their adamant desire to obtain their service awards and to underscore their disagreement with the "Release and Quitclaim" they were virtually forced to sign in order to receive their separation pay. We have pointed out in Veloso, et al. vs. Department of Labor and Employment, et al., 21 that: cdta While rights may be waived, the same must not be contrary to law, public order, public policy, morals or good customs or prejudicial to a third person with a right recognized by law. Article 6 of the Civil Code renders a quitclaim agreement void ab initio where the quitclaim obligates the workers concerned to forego their benefits while at the same time exempting the employer from any liability that it may choose to reject. This runs counter to Art. 22 of the Civil Code which provides that no one shall be unjustly enriched at the expense of another. We agree with the further observations of the Solicitor General who, in recommending the setting aside of the decision of respondent NLRC, called attention to the fact that "contrary to private respondent's contention, the 'additional' redundancy package does not and could not have covered the payment of the service awards, performance and anniversary bonuses since the private respondent company has initially maintained the position that petitioners are not legally entitled to the same. . . . Surprisingly, in a sudden turnabout, private respondent now claims . . . that the subject awards and bonuses are integrated in the redundancy package. It is evident, therefore, that private respondent has not truly consolidated the payment of the subject awards and bonuses in the redundancy package paid to the petitioners." 22 cdasia We are likewise in accord with the findings of the labor arbiter that petitioners are indeed entitled to receive service awards and other benefits, thus: Since each of the complainants have rendered services to respondent in multiple(s) of five years prior to their separation from employment, respondent should be paid their service awards for 1990. We are not impressed with the contention of the respondent that service award is a bonus and therefore is an act of gratuity which the complainants have no right to demand. Service awards are governed by respondent's employee's manual and (are) therefore contractual in nature. cdtai On the matter of anniversary and performance bonuses, it is not disputed that it is respondent's practice to give an anniversary bonus every five years from its incorporation; that pursuant to this practice, respondent declared an anniversary bonus for its 80th Anniversary in 1990; that per terms of this declaration, only the employees of respondent as of 15 November 1990 will be given the bonus; and that complainants were separated from

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respondent only 25 days before the respondent's anniversary. On the other hand, it is also (not) disputed that respondent regularly gives performance bonuses; that for its commendable performance in 1990, respondent declared a performance bonus; that per terms of this declaration, only permanent employees of respondent as of March 30, 1991 will be given this bonus; and that complainants were employees of respondents for the first 10 months of 1990. We cannot see any cogent reason why an anniversary bonus which respondent gives only once in every five years were given to all employees of respondent as of 15 November 1990 (pro rata even to probationary employees; Annex 9) and not to complainants who have rendered service to respondent for most of the five year cycle. This is also true in the case of performance bonus which were given to permanent employees of respondent as of 30 March 1991 and not to employees who have been connected with respondent for most of 1990 but were separated prior to 30 March 1991. We believe that the prerogative of the employer to determine who among its employees shall be entitled to receive bonuses which are, as a matter of practice, given periodically cannot be exercised arbitrarily. 23 (Emphases and corrections in parentheses supplied.) cdt The grant of service awards in favor of petitioners is more importantly underscored in the precedent case of Insular Life Assurance Co., Ltd., et al. vs. NLRC, et al. 24 where this Court ruled that "as to the service award differentials claimed by some respondent union members, the company policy shall likewise prevail, the same being based on the employment contracts or collective bargaining agreements between the parties. As the petitioners had explained, pursuant to their policies on the matter, the service award differential is given at the end of the year to an employee who has completed years of service divisible by 5." A bonus is not a gift or gratuity, but is paid for some services or consideration and is in addition to what would ordinarily be given. 25 The term "bonus" as used in employment contracts, also conveys an idea of something which is gratuitous, or which may be claimed to be gratuitous, over and above the prescribed wage which the employer agrees to pay. While there is a conflict of opinion as to the validity of an agreement to pay additional sums for the performance of that which the promisee is already under obligation to perform, so as to give the latter the right to enforce such promise after performance, the authorities hold that if one enters into a contract of employment under an agreement that he shall be paid a certain salary by the week or some other stated period and, in addition, a bonus, in case he serves for a specified length of time, there is no reason for refusing to enforce the promise to pay the bonus, if the employee has served during the stipulated time, on the ground that it was a promise of a mere gratuity. cdasia This is true if the contract contemplates a continuance of the employment for a definite term, and the promise of the bonus is made at the time the contract is entered into. If no time is fixed for the duration of the contract of employment, but the employee enters upon or continues in service under an offer of a bonus if he remains therein for a certain time, his service, in case he remains for the required time, constitutes an acceptance of the offer of the employer to pay the bonus and, after that acceptance, the offer cannot be withdrawn, but can be enforced by the employee. 26

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The weight of authority in American jurisprudence, with which we are persuaded to agree, is that after the acceptance of a promise by an employer to pay the bonus, the same cannot be withdrawn, but may be enforced by the employee. 27 However, in the case at bar, equity demands that the performance and anniversary bonuses should be prorated to the number of months that petitioners actually served respondent company in the year 1990. This observation should be taken into account in the computation of the amounts to be awarded to petitioners. WHEREFORE, the assailed decision and resolution of respondent National Labor Relations Commissions are hereby SET ASIDE and the decision of Labor Arbiter Alex Arcadio Lopez is REINSTATED. cdtai SO ORDERED. Narvasa, C.J., Puno, Mendoza, and Francisco, JJ., concur.

11. FIRST DIVISION [G.R. No. 114250. April 5, 1995.] DOMINICO C. CONGSON, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, NOE BARGO, ROGER HIMENO, RAYMUNDO BADAGOS, PATRICIO SALVADOR, SR., NEHIL BARGO, JOEL MENDOZA, and EMMANUEL CALIXIHAN, respondents. Garcia & Jacobo Law Office for petitioner. The Solicitor General for respondent. SYLLABUS 1. LABOR AND SOCIAL LEGISLATION; WAGES; FORMS OF PAYMENT; LEGAL TENDER; EXCEPTION; CASE AT BAR. Petitioners practice of paying the private respondents the minimum wage by means of legal tender combined with tuna liver and intestines runs counter to the abovecited provision of the Labor Code. The fact that said method of paying the minimum wage was not only agreed upon by both parties in the employment agreement but even expressly requested by private respondents, does not shield petitioner. Article 102 of the Labor Code is clear. Wages shall be paid only by means of legal tender. The only instance when an employer is permitted to pay wages in forms other than legal tender, that is, by checks or money order, is when the circumstances prescribed in the second paragraph of Article 102 are present. 2. ID.; REINSTATEMENT; REFUSAL TO REINSTATE SHOWS THAT A STRAINED RELATIONSHIP EXISTS BETWEEN EMPLOYER AND EMPLOYEES. A careful scrutiny of the records of the case at bench, readily discloses the existence of strained relationship between the petitioner and private respondents. Petitioner consistently refused to re-admit private respondents in his establishment. Petitioner even replaced private respondents with a new set of workers to perform the tasks of private respondents. Moreover, although petitioner ostensibly argued in

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his supplemental motion for reconsideration that reinstatement should have been the proper remedy in the case at bench on his premise that the existence of strained relationship was not adequately established, yet petitioner never sincerely intended to effect the actual reinstatement of private respondents. For if petitioner were to pursue further the entire logic of his argument, the prayer in his supplemental motion for reconsideration should have contained not just the mere deletion of the award of separation pay, but precisely, the reinstatement of private respondents. Quite obviously then, notwithstanding petitioners argument for reinstatement, he was only interested in the deletion of the award of separation pay to private respondents. DECISION PADILLA, J p: Petitioner Dominico C. Congson seeks the nullification of the decision rendered by the National Labor Relations Commission in Case No. NLRC CA M-000681-92 1 dated 28 May 1993 and its resolution dated 28 January 1994, denying petitioner's motion for reconsideration. In the challenged decision * , the NLRC affirmed in toto Labor Arbiter Arturo Aponesto's decision dated 27 September 1991, holding thus: "WHEREFORE, the appealed decision is hereby AFFIRMED IN TOTO and the instant appeal is DISMISSED for lack of merit. SO ORDERED." 2 Petitioner is the registered owner of Southern Fishing Industry. Private respondents were hired on various dates 3 by petitioner as regular piece-rate workers. They were uniformly paid at a rate of P1.00 per tuna weighing thirty (30) to eighty (80) kilos per movement, that is from the fishing boats down to petitioner's storage plant at a load/unload cycle of work until the tuna catch reached its final shipment/destination. They did the work of unloading tuna from fishing boats to truck haulers; unloading them again at petitioner's cold storage plant for filing, storing, cleaning, and maintenance; and finally loading the processed tuna for shipment. They worked seven (7) days a week. During the first week of June 1990, petitioner notified his workers of his proposal to reduce the rate-per-tuna movement due to the scarcity of tuna. Private respondents resisted petitioner's proposed rate reduction. When they reported for work the next day, they were informed that they had been replaced by a new set of workers. When they requested for a dialogue with the management, they were instructed to wait for further notice. They waited for the notice of dialogue for a full week but in vain. On 15 June 1990, private respondents filed a case against petitioner before the NLRC SubRegional Arbitration Branch No. XI in General Santos City, docketed as Case No. RAB-11-0650165-90 for underpayment of wages (non-compliance with Rep. Act Nos. 6640 and 6727) and non-payment of overtime pay, 13th month pay, holiday pay, rest day pay, and five (5)-day service incentive leave pay; and for constructive dismissal. With respect to their monetary claims, private respondents charged petitioner with violation of the minimum wage law,

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alleging that with petitioner's rates and the scarcity of tuna catches, private respondents' average monthly earnings each did not exceed ONE THOUSAND PESOS (P1,000.00). Accusing petitioner of constructive dismissal, private respondents claimed that petitioner refused to give them work assignments and replaced them with new workers when they showed resistance to the petitioner's proposed reduction of the rate-per-tuna movement. On 2 July 1990, private respondents filed another case against petitioner, docketed as Case No. RAB-11-07-50179-90 containing an additional claim for separation pay should their complaint for constructive dismissal be upheld. The two (2) cases were consolidated. Conciliation conferences were scheduled. On 24 July 1990, however, Labor Arbiter Aponesto directed the parties to submit their respective position papers within twenty (20) days from receipt of the directive, since no amicable settlement was reached in conciliation between the parties. On 22 August 1990, private respondents filed their position paper reiterating the charges in their complaint for constructive dismissal, attaching thereto a Bill of Particulars containing the computations of their monetary claims. Petitioner, instead of filing his position paper, sought, through counsel, an extension of time within which to file his position paper. On 20 September 1991, petitioner filed his position paper wherein he claimed that the only issue for resolution was private respondents' monetary claims, and that there was no constructive dismissal. Petitioner further argued that private respondents were not dismissed but rather, they abandoned their work after learning of petitioner's proposal to reduce tuna movement rates because of the scarcity of tuna, and that, it took private respondents one (1) month to return to work, but they could no longer be accommodated as petitioner had already hired their replacements after private respondents failed to heed petitioner's repeated demands for them to return to work. Upon said premises, petitioner contended that private respondents were not entitled to separation pay. On 27 September 1991, Labor Arbiter Aponesto rendered a decision, with the following disposition: "WHEREFORE, finding that complainants Noe Bargo, Roger Himeno, Raymundo Badagos, Patricio Salvador, Sr., Nehil Bargo, Joel Mendoza and Emmanuel Calixihan were (constructively) dismissed from employment without just or unauthorized cause, hence illegal, respondents Southern Fishing Industry and Mr. Dominico Congson are hereby directed to pay, jointly and severally, their respective separation pay and monetary claims for salary differentials, 13th month pay and service incentive leave pay, as computed above, in the total sum of FIVE HUNDRED TWO THOUSAND EIGHT HUNDRED SIXTY FIVE (P502,865.00) PESOS. The claims for overtime pay, holiday pay and rest day pay are, however, dismissed for lack of factual basis and for reasons aforecited. SO ORDERED." 4 In holding petitioner guilty of constructive dismissal, Labor Arbiter Aponesto made the following findings:

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"After a careful evaluation of the foregoing facts, proofs, evidence, arguments and counterarguments adduced by the parties we find that complainants were summarily dismissed from employment on the first week of June, 1990, when respondent Dominico Congson arbitrarily replaced them with another group of laborers to do the work of complainants. This was brought about by their reluctance or resistance to accept a new lower rate proposed by respondent the day before. The advise to 'wait for further notice' was indeed a confirmation that complainants were dismissed as underscored by the fact that such notice never came even until this date. Having been constructively and illegally dismissed complainants are therefore entitled to their prayer for separation pay. Their length of service 10 years and 6 years, respectively (supra), which respondent dismally failed to controvert or refute, shall be the basis of our computation, thus: 1. 2. 3. 4. 5. 6. 7. N. Bargo (P2,670 x 10) P26,700 26,700 26,700

R. Himeno (P2,670 x 10) R. Badayos (P2,670 x 10) P. Salvador, Jr.

(P2,670 x 6) 16,020 26,700

Nehil Bargo (P2,670 x 10)

J. Mendoza (P2,670 x 6) 16,020 E. Calixihan (P2,670 x 6) 16,020 _______ Total P154,860 5

Except for private respondents' claim for overtime pay, holiday pay, and rest day pay which were dismissed, Labor Arbiter Aponesto granted the monetary claims of private respondents, in this wise: We likewise grant the monetary claims of complainants for wage differentials, 13th month pay and service incentive leave pay payment of or exemption from which respondents failed to show. Hence, given the 3-year period covered by their monetary claims, i.e. from June, 1987 to June, 1990 the monetary awards due complainants are as follows: Name Wage 13th SIL Diff'l Mo. Pay Noe Bargo 42,120 R. Himeno 42,120 R. Badagos 42,120 P. Salvador 42,120 N. Bargo 42,120 6,510 1,085 P49,715.00 6,510 1,085 49,715.00 6,510 1,085 49,715.00 6,510 1,085 49,715.00 6,510 1,085 49,715.00 6,510 1,085 49,715.00 Total

J. Mendoza 42,120

82

Calixihan

42,120

6,510 1,085 49,715.00 ___________

Total P348,005.00 xxx xxx xxx

"Pertaining to salary differentials respondent failed to adduce any evidence or document at all to show that under their peculiar arrangements complainants were receiving compensation at par or above the then existing minimum wage; this, despite more than sufficient time afforded. Consequently, we have no other alternative but to give credence to complainants' assertion that their average income (each) did not exceed P1,000.00 a month (Annex "B", complainants' position paper), thus the differentials. 6 On the other hand, Labor Arbiter Aponesto made short shrift of petitioner's defense by ruling that: "We cannot give credence to the allegations or defenses put up by respondents: As stated, one of the principal claims of complainants is the payment of their separation pay which was specifically prayed by complainants when they filed the second case on July 2, 1990; this claim is likewise included in their Bill of Particulars (Annex "C", complainants' position paper). We cannot sustain respondents' theory of abandonment. Record shows that shortly after complainants were constructively dismissed on the first week of June, 1990 they immediately filed the instant case for constructive dismissal on June 15, 1990. There is also no showing of a deliberate refusal on their part to resume work. Moreover, respondents dismally failed to substantiate their general allegation that 'repeated demands' were made upon complainants to return to work." 7 On appeal by petitioner, respondent NLRC found petitioner guilty of illegal dismissal. Holding that petitioner failed to substantiate his contention that private respondents abandoned their work, respondent NLRC ruled that petitioner replaced private respondents with a new set of workers without just cause and the required notice and hearing. Respondent NLRC therefore affirmed Labor Arbiter Aponesto's findings and monetary awards. Petitioner's motion for reconsideration and supplemental motion for reconsideration were denied for lack of merit in the challenged resolution dated 28 January 1994. Hence, the present recourse by petitioner. Petitioner imputes grave abuse of discretion to respondent NLRC in completely disregarding his motion for reconsideration and supplemental motion for reconsideration. He contends that said motions for reconsideration raised substantial issues which respondent NLRC failed to consider and resolve. Petitioner's motion for reconsideration and supplemental motion for reconsideration raised only two (2) issues: a) the accuracy of Labor Arbiter Aponesto's computations in arriving at the monetary awards representing salary differentials; and b) the propriety or correctness of Labor Arbiter Aponesto's grant of separation pay to private respondents.

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Petitioner takes issue with the manner Labor Arbiter Aponesto computed private respondents' wage differentials. In his supplemental motion for reconsideration, petitioner argued, thus: "In the Decision rendered, the Arbiter awarded wage differential on the premise that complainants monthly average income is only P1,000.00 as alleged in their position paper. This is erroneous. Here is why: Herein complainants were employed by respondents on a load-unload cycle of hauling 'bariles' from the fishing boats to the truck hauler of the respondents; then from the truck hauler down to the cold storage; the herein complainants were paid P1.00 per movement; that is, from the fishing boat to the cold storage, the herein complainants actually received the amount of P2.00, one (1) peso per movement; that there are two (2) movements from the fishing boat to the cold storage, hence complainants are actually receiving P2.00 per piece of tuna. The Arbiter must have been on the impression that there is only one (1) movement from the fishing boat to the cold storage. This is erroneous. That finally, when the tuna is ready for export, the same is to be transferred from the cold storage to the ocean going vessel berthed at respondents wharf at Talisay, General Santos City, this time herein complainants are paid P3.00 per piece of tuna from the cold storage to the ocean going vessel as shown in the herewith attached Annexes. In fine, all in all, there are three (3) movements from the time the tuna is unloaded from the fishing boat to the fish car then to the cold storage; and, finally from the cold storage to the vessel. In addition to the amount of P1.00 per 'bariles' per movement herein complainants get the intestines and liver of the tuna as part of their salary. That for every tuna delivered, herein complainants extract at least three (3) kilos of intestines and liver. That the minimum prevailing price of tuna intestine and liver in 1986 to 1990 range from P15.00 to P20.00/kilo. The value of the tuna intestine and liver should be computed in arriving at the daily wage of herein complainants because the very essence of the agreement between complainants and respondent is: complainants shall be paid only P1.00 per tuna per movement BUT the intestines and liver of the tuna delivered shall go to the herein complainants. It should be noted that tuna intestines and liver are easily disposed of in any public market. Complainants themselves would not have agreed and would not have served respondent that long period of time if they are only paid P1.00 per tuna movement. What they are after, in truth and in fact is the tuna intestines and liver which they can easily convert into cash." 8 Quite clearly, petitioner admits that the P1.00-per-tuna movement is the actual wage rate applied to private respondents as expressly agreed upon by both parties. Petitioner further admits that private respondents, per their request, were entitled to retrieve the tuna intestines and liver as part of their compensation. Finally, petitioner does not refute Labor Arbiter Aponesto when the latter fixed private respondents' individual monthly wage at P2,670 computed at the mandatory daily wage of P89.00. However, it is the contention of petitioner that notwithstanding the fact that private respondents' actual cash wage fell below the minimum wage fixed by law, respondent NLRC should have considered as forming a substantial part of private respondents' total wages the

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cash value of the tuna liver and intestines private respondents were entitled to retrieve. Petitioner therefore argues that the combined value of private respondents' cash wage and the monetary value of the tuna liver and intestines clearly exceeded the minimum wage fixed by law. Petitioner's foregoing arguments do not impress us. The Labor Code expressly provides: "ARTICLE 102. Forms of Payment. No employer shall pay the wages of an employee by means of promissory notes, vouchers, coupons, tokens, tickets, chits, or any object other than legal tender, even when expressly requested by the employee. Payment of wages by check or money order shall be allowed when such manner of payment is customary on the date of effectivity of this Code, or is necessary because as specified in appropriate regulations to be issued by the Secretary of Labor or as stipulated in a collective bargaining agreement." (Emphasis supplied) Undoubtedly, petitioner's practice of paying the private respondents the minimum wage by means of legal tender combined with tuna liver and intestines runs counter to the abovecited provision of the Labor Code. The fact that said method of paying the minimum wage was not only agreed upon by both parties in the employment agreement but even expressly requested by private respondents, does not shield petitioner. Article 102 of the Labor Code is clear. Wages shall be paid only by means of legal tender. The only instance when an employer is permitted to pay wages in forms other than legal tender, that is, by checks or money order, is when the circumstances prescribed in the second paragraph of Article 102 are present. We therefore find no grave abuse of discretion on the part of respondent NLRC in upholding Labor Arbiter Aponesto's award of salary differentials. With respect to the issue concerning the propriety or correctness of the grant of separation pay to private respondents, petitioner contends that, assuming arguendo that Labor Arbiter Aponesto's findings were proper as to private respondents' illegal dismissal, his decision did not state the reason why instead of reinstatement, separation pay has to be awarded to private respondents. Petitioner submits that under existing laws and jurisprudence, whenever there is a finding of illegal dismissal, the available and logical remedy is reinstatement. As a permissible exception to the general rule, separation pay may be awarded to the employee in lieu of reinstatement, by reason of strained relationship between the employer and employee. Since there was no finding or even allegation of strained relationship between petitioner and private respondents, respondent NLRC should have deleted, according to petitioner, the award of separation pay in Labor Arbiter Aponesto's decision. We find petitioner's ratiocination on the impropriety of the award of separation pay to private respondents to be specious. Petitioner seeks to defeat the award of separation pay, in lieu of reinstatement, on the pretext that inasmuch as the existence of strained relationship as a permissible exception to an axiomatic order of reinstatement in cases of illegal dismissal was not adequately established, Labor Arbiter Aponesto should not have entertained at all private respondents' claim for separation pay.

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A careful scrutiny of the records of the case at bench, however, readily discloses the existence of strained relationship between the petitioner and private respondents. Firstly, petitioner consistently refused to re-admit private respondents in his establishment. Petitioner even replaced private respondents with a new set of workers to perform the tasks of private respondents. Moreover, although petitioner ostensibly argued in his supplemental motion for reconsideration that reinstatement should have been the proper remedy in the case at bench on his premise that the existence of strained relationship was not adequately established, yet petitioner never sincerely intended to effect the actual reinstatement of private respondents. For if petitioner were to pursue further the entire logic of his argument, the prayer in his supplemental motion for reconsideration should have contained not just the mere deletion of the award of separation pay, but precisely, the reinstatement of private respondents. Quite obviously then, notwithstanding petitioner's argument for reinstatement, he was only interested in the deletion of the award of separation pay to private respondents. In the case of Felix Esmalin vs. National Labor Relations Commission (3rd Division) and CARE Philippines, 9 we held that strained relationship is fairly established if the records of the case showed consistent refusal of the employer to accept the dismissed employee, to wit: "From the records of the case, it can be discerned that reinstatement is no longer viable in view of the strained relations between petitioner-employee (Felix Esmalin) and private respondent-employer (CARE Philippines). This is very evident from the vehement and consistent stand of CARE Philippines in refusing to accept back petitioner Esmalin. Instead, petitioner should be awarded separation pay as an alternative for reinstatement." And secondly, private respondents themselves, from the very start, had already indicated their aversion to their continued employment in petitioner's establishment. The very filing of their second case before Labor Arbiter Aponesto (RAB-11-07-90179-90) specifically for separation pay is conclusive of private respondents' intention to sever their working ties with petitioner. In the case of Arturo Lagniton, Sr. vs. National Labor Relations Commission, et al., 10 we ruled that the refusal of the dismissed employee to be re-admitted is constitutive of strained relations, thus: "It appears that relations between the petitioner and the complainants have been so strained that the complainants are no longer willing to be reinstated. As such reinstatement would only exacerbate the animosities that have developed between the parties, the public respondents were correct in ordering instead the grant of separation pay to the dismissed employees in the interest of industrial peace." We therefore find no grave abuse of discretion on the part of respondent NLRC in upholding Labor Arbiter Aponesto's grant of private respondents' prayer for separation pay in lieu of reinstatement. WHEREFORE, premises considered, the petition is hereby DISMISSED. The challenged decision of respondent NLRC dated 28 May 1993 is hereby AFFIRMED. SO ORDERED. Davide, Jr., Bellosillo, Quiason and Kapunan, JJ., concur.

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12. FIRST DIVISION [G.R. No. 118506. April 18, 1997.] NORMA MABEZA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, PETER NG/HOTEL SUPREME, respondents. Tenefrancia Agranzamendez, Liceralde & Associates for petitioner. Romeo M. Rome for private respondent. SYLLABUS 1. LABOR AND SOCIAL LEGISLATION; DISMISSAL; JUST CAUSE, BURDEN OF PROOF. In termination cases the employer bears the burden of proof to show that the dismissal is for just cause, the failure of which would mean that the dismissal is not justified and the employee is entitled to reinstatement. 2. ID.; ID.; ID.; ABANDONMENT; REQUISITES; CASE AT BAR. For abandonment to arise, there must be concurrence of two things: 1) lack of intention to work., and 2) the presence of overt acts signifying the employee's intention not to work. While absence from work for a prolonged period may suggest abandonment in certain instances, mere absence of one or two days would not be enough to sustain such a claim. The over act (absence) ought to unerringly point to the fact that the employee has no intention to return to work, which is patently not the case here. 3. ID.; ID.; ID.; LOSS OF CONFIDENCE; NOT APPLICABLE IN CASE AT BAR. Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank check for terminating their employees. Loss of confidence should ideally apply only to cases involving employees occupying positions to trust and confidence or to those situations where the employee is routinely charged with the care and custody of the employer's money or property. An ordinary chambermaid who has to sign out for linen and other hotel property from the property custodian each day and who has to account for each and every towel or bedsheet utilized by the hotel's guests at the end of her shift would not fall under any of these two classes of employees for which loss of confidence, if ably supported by evidence, would normally apply. Loss of confidence should not be simulated in order to justify what would otherwise be, under the provisions of law an illegal dismissal. "It should not be used as a subterfuge for causes which are illegal, improper and unjustified. It must be genuine, not a mere afterthought to justify, an earlier action taken in bad faith. 4. ID.; EMPLOYERS; UNFAIR LABOR PRACTICES; CASE AT BAR. The pivotal question in any case where unfair labor practice on the part of the employer is alleged is whether or not the employer has exerted pressure, in the form of restraint, interference or coercion, against his employee's right to institute concerted action for better terms and conditions of employment. Without doubt, the act of compelling employees to sign an instrument indicating that the employer observed labor standards provisions of law when he might have not, together with the act of terminating or coercing those who refuse to cooperate with the employer's scheme constitutes unfair labor practice. The first act clearly preempts the right of

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the hotel's workers to seek better terms and conditions of employment through concerted action. We agree with the Solicitor General's observation in his manifestation that "[t]his actuation . . . is analogous to the situation envisaged in paragraph (f) of Article 248 of the Labor Code" which distinctly makes it an unfair labor practice "to dismiss, discharge or otherwise prejudice or discriminate against an employee for having given or being about to give testimony" under the Labor Code. For in not giving positive testimony in favor of her employer, petitioner had reserved not only her right to dispute the claim and proffer evidence in support thereof but also to work for better terms and conditions of employment. 5. ID.; WAGES; SALARY LESS THAN MINIMUM BECAUSE OF OTHER FACILITIES PROVIDED NOT JUSTIFIED. Labor Arbiter Pati accepted hook, line and sinker the private respondent's bare claim that the reason the monetary benefits received by petitioner between 1981 to 1987 were less than minimum wage was because petitioner did not factor in the meals, lodging, electric consumption and water she received during the period in her computations. Granting that meals and lodging were provided and indeed constituted facilities, such facilities could not be deducted without the employer complying first with certain legal requirements. Without satisfying these requirements, the employer simply cannot deduct the value from the employee's wages. 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. Finally, facilities must be charged at fair and reasonable value. These requirements were not met in the instant case. More significantly, the food and lodging, or the electricity and water consumed by the petitioner were not facilities but supplements. A benefit or privilege granted to an employee for the convenience of the employer is not a facility. The criterion in making a distinction between the two not so much lies in the kind (food, lodging) but the purpose. Considering., therefore, that hotel workers are required to work different shifts and are expected to be available at various odd hours. their ready availability is a necessary matter in the operations of a small hotel, such as the private respondent's hotel. 6. ID.; MONEY CLAIMS; PROPER MONETARY AWARD IN CASE AT BAR. Petitioner is entitled to the payment of the deficiency in her wages equivalent to the full wage applicable from May 13, 1988 up to the date of her illegal dismissal. Additionally, petitioner is entitled to payment of service incentive leave pay, emergency cost of living allowance, night differential pay, and 13th month pay for the periods alleged by the petitioner as the private respondent has never been able to adduce proof that petitioner was paid the aforestated benefits. However, the claims covering the period of October 1987 up to the time of filing the case on May 13, 1988 are barred by prescription as P.D. 442 (as amended) and its implementing rules limit all money claims arising out of employer-employee relationship to three (3) years from the time the cause of action accrues. 7. ID.; ILLEGAL DISMISSAL; SEPARATION PAY IN LIEU OF REINSTATEMENT PROPER IN VIEW OF STRAINED RELATIONS BETWEEN THE PARTIES. We depart from the settled rule that an employee who is unjustly dismissed from work normally should be reinstated without loss of seniority rights and other privileges. Owing to the strained relations between petitioner and private respondent, allowing the former to return to her job would only subject her to possible harassment and future embarrassment. In the instant case, separation pay equivalent to one

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month's salary for every year of continuous service with the private respondent would be proper, starting with her job at the Belfront Hotel. 8. ID.; ID.; BACKWAGES. In addition to separation pay, backwages are in order. Pursuant to R.A. 6715 and our decision in Osmalik Bustamante, et al vs. National Labor Relations Commission, petitioner is entitled to full backwages from the time of her illegal dismissal up to the date of promulgation of this decision without qualification or deduction. Also, the dismissal of petitioner without the benefit of notice and hearing prior to her termination violated her constitutional right to due process. Under the circumstances, an award of One Thousand Pesos (P1,000.00) on top of payment of the deficiency in wages and benefits for the period aforestated would be proper. DECISION KAPUNAN, J p: This petition seeking the nullification of a resolution of public respondent National Labor Relations Commission dated April 28, 1994 vividly illustrates why courts should be ever vigilant in the preservation of the constitutionally enshrined rights of the working class. Without the protection accorded by our laws and the tempering of courts, the natural and historical inclination of capital to ride roughshod over the rights of labor would run unabated. cdta The facts of the case at bar, culled from the conflicting versions of petitioner and private respondent, are illustrative. Petitioner Norma Mabeza contends that around the first week of May, 1991, she and her coemployees at the Hotel Supreme in Baguio City were asked by the hotel's management to sign an instrument attesting to the latter's compliance with minimum wage and other labor standard provisions of law. 1 The instrument provides: 2 JOINT AFFIDAVIT We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY, MACARIA JUGUETA, ADELAIDA NONOG, NORMA MABEZA, JONATHAN PICART and JOSE DIZON, all of legal ages (sic), Filipinos and residents of Baguio City, under oath, depose and say: 1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme situated at No. 416 Magsaysay Ave., Baguio City; 2. 3. That the said Hotel is separately operated from the Ivy's Grill and Restaurant; That we are all (8) employees in the hotel and assigned in each respective shifts;

4. That we have no complaints against the management of the Hotel Supreme as we are paid accordingly and that we are treated well. 5. That we are executing this affidavit voluntarily without any force or intimidation and for the purpose of informing the authorities concerned and to dispute the alleged report of the Labor Inspector of the Department of Labor and Employment conducted on the said establishment on February 2, 1991.

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IN WITNESS WHEREOF, we have hereunto set our hands this 7th day of May, 1991 at Baguio City, Philippines.

(Sgd.) (Sgd.) (Sgd.) SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY

(Sgd) (Sgd.) (Sgd.) MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA

(Sgd) (Sgd.) JONATHAN PICARTJOSE DIZON

SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at Baguio City, Philippines. Asst. City Prosecutor Petitioner signed the affidavit but refused to go to the City Prosecutor's Office to swear to the veracity and contents of the affidavit as instructed by management. The affidavit was nevertheless submitted on the same day to the Regional Office of the Department of Labor and Employment in Baguio City. As gleaned from the affidavit, the same was drawn by management for the sole purpose of refuting findings of the Labor Inspector of DOLE (in an inspection of respondent's establishment on February 2, 1991) apparently adverse to the private respondent. 3 After she refused to proceed to the City Prosecutor's Office on the same day the affidavit was submitted to the Cordillera Regional Office of DOLE petitioner avers that she was ordered by the hotel management to turn over the keys to her living quarters and to remove her belongings from the hotel premises. 4 According to her, respondent strongly chided her for refusing to proceed to the City Prosecutor's Office to attest to the affidavit. 5 She thereafter reluctantly filed a leave of absence from her job which was denied by management. When she attempted to return to work on May 10, 1991, the hotel's cashier, Margarita Choy, informed her that she should not report to work and, instead, continue with her unofficial leave of absence. Consequently, on May 13, 1991, three days after her attempt to return to work, petitioner filed a complaint for illegal dismissal before the Arbitration Branch of the National Labor Relations Commission CAR Baguio City. In addition to her complaint for illegal dismissal, she alleged underpayment of wages, non-payment of holiday pay, service incentive leave pay, 13th month pay, night differential and other benefits. The complaint was docketed as NLRC Case No. RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe P. Pati. Responding to the allegations made in support of petitioner's complaint for illegal dismissal, private respondent Peter Ng alleged before Labor Arbiter Pati that petitioner "surreptitiously

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left (her job) without notice to the management" 6 and that she actually abandoned her work. He maintained that there was no basis for the money claims for underpayment and other benefits as these were paid in the form of facilities to petitioner and the hotel's other employees. 7 Pointing to the Affidavit of May 7, 1991, the private respondent asserted that his employees actually have no problems with management. In a supplemental answer submitted eleven (11) months after the original complaint for illegal dismissal was filed, private respondent raised a new ground, loss of confidence, which was supported by a criminal complaint for Qualified Theft he filed before the prosecutor's office of the City of Baguio against petitioner on July 4, 1991. 8 On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing petitioner's complaint on the ground of loss of confidence. His disquisitions in support of his conclusion read as follows: It appears from the evidence of respondent that complainant carted away or stole one (1) blanket, 1 piece bedsheet, 1 piece thermos, 2 pieces towel (Exhibits '9', '9-A,' '9-B,' '9-C' and '10' pages 12-14 TSN, December 1, 1992). cdti In fact, this was the reason why respondent Peter Ng lodged a criminal complaint against complainant for qualified theft and perjury. The fiscal's office finding a prima facie evidence that complainant committed the crime of qualified theft issued a resolution for its filing in court but dismissing the charge of perjury (Exhibit '4' for respondent and Exhibit 'B-7' for complainant). As a consequence, complainant was charged in court for the said crime (Exhibit '5' for respondent and Exhibit 'B-6' for the complainant). With these pieces of evidence, complainant committed serious misconduct against her employer which is one of the just and valid grounds for an employer to terminate an employee (Article 282 of the Labor Code as amended). 9 On April 28, 1994, respondent NLRC promulgated its assailed Resolution 10 affirming the Labor Arbiter's decision. The resolution substantially incorporated the findings of the Labor Arbiter. 11 Unsatisfied, petitioner instituted the instant special civil action for certiorari under Rule 65 of the Rules of Court on the following grounds: 12 1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN ITS FAILURE TO CONSIDER THAT THE ALLEGED LOSS OF CONFIDENCE IS A FALSE CAUSE AND AN AFTERTHOUGHT ON THE PART OF THE RESPONDENT-EMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY, THE DISMISSAL OF THE COMPLAINANT FROM HER EMPLOYMENT; 2. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN ADOPTING THE RULING OF THE LABOR ARBITER THAT THERE WAS NO UNDERPAYMENT OF WAGES AND BENEFITS ON THE BASIS OF EXHIBIT "8" (AN UNDATED SUMMARY OF COMPUTATION PREPARED BY ALLEGEDLY BY RESPONDENT'S EXTERNAL ACCOUNTANT) WHICH IS TOTALLY INADMISSIBLE AS AN EVIDENCE TO PROVE PAYMENT OF WAGES AND BENEFITS; 3. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION

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IN FAILING TO CONSIDER THE EVIDENCE ADDUCED BEFORE THE LABOR ARBITER AS CONSTITUTING UNFAIR LABOR PRACTICE COMMITTED BY THE RESPONDENT. The Solicitor General, in a Manifestation in lieu of Comment dated August 8, 1995 rejects private respondent's principal claims and defenses and urges this Court to set aside the public respondent's assailed resolution. 13 We agree. It is settled that in termination cases the employer bears the burden of proof to show that the dismissal is for just cause, the failure of which would mean that the dismissal is not justified and the employee is entitled to reinstatement. 14 In the case at bar, the private respondent initially claimed that petitioner abandoned her job when she failed to return to work on May 8, 1991. Additionally, in order to strengthen his contention that there existed sufficient cause for the termination of petitioner, he belatedly included a complaint for loss of confidence, supporting this with charges that petitioner had stolen a blanket, a bedsheet and two towels from the hotel. 15 Appended to his last complaint was a suit for qualified theft filed with the Baguio City prosecutor's office. From the evidence on record, it is crystal clear that the circumstances upon which private respondent anchored his claim that petitioner "abandoned" her job were not enough to constitute just cause to sanction the termination of her services under Article 283 of the Labor Code. For abandonment to arise, there must be concurrence of two things: 1) lack of intention to work; 16 and 2) the presence of overt acts signifying the employee's intention not to work. 17 In the instant case, respondent does not dispute the fact that petitioner tried to file a leave of absence when she learned that the hotel management was displeased with her refusal to attest to the affidavit. The fact that she made this attempt clearly indicates not an intention to abandon but an intention to return to work after the period of her leave of absence, had it been granted, shall have expired. Furthermore, while absence from work for a prolonged period may suggest abandonment in certain instances, mere absence of one or two days would not be enough to sustain such a claim. The overt act (absence) ought to unerringly point to the fact that the employee has no intention to return to work, 18 which is patently not the case here. In fact, several days after she had been advised to take an informal leave, petitioner tried to resume working with the hotel, to no avail. It was only after she had been repeatedly rebuffed that she filed a case for illegal dismissal. These acts militate against the private respondent's claim that petitioner abandoned her job. As the Solicitor General in his manifestation observed: Petitioner's absence on that day should not be construed as abandonment of her job. She did not report because the cashier told her not to report anymore, and that private respondent Ng did not want to see her in the hotel premises. But two days later or on the 10th of May, after realizing that she had to clarify her employment status, she again reported for work. However, she was prevented from working by private respondents. 19

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We now come to the second cause raised by private respondent to support his contention that petitioner was validly dismissed from her job. cdll Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank check for terminating their employees. Such a vague, all-encompassing pretext as loss of confidence, if unqualifiedly given the seal of approval by this Court, could readily reduce to barren form the words of the constitutional guarantee of security of tenure. Having this in mind, loss of confidence should ideally apply only to cases involving employees occupying positions of trust and confidence or to those situations where the employee is routinely charged with the care and custody of the employer's money or property. To the first class belong managerial employees, i.e., those vested with the powers or prerogatives to lay down management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or effectively recommend such managerial actions; and to the second class belong cashiers, auditors, property custodians, etc., or those who, in the normal and routine exercise of their functions, regularly handle significant amounts of money or property. Evidently, an ordinary chambermaid who has to sign out for linen and other hotel property from the property custodian each day and who has to account for each and every towel or bedsheet utilized by the hotel's guests at the end of her shift would not fall under any of these two classes of employees for which loss of confidence, if ably supported by evidence, would normally apply. Illustrating this distinction, this Court, in Marina Port Services, Inc. vs. NLRC, 20 has stated that: To be sure, every employee must enjoy some degree of trust and confidence from the employer as that is one reason why he was employed in the first place. One certainly does not employ a person he distrusts. Indeed, even the lowly janitor must enjoy that trust and confidence in some measure if only because he is the one who opens the office in the morning and closes it at night and in this sense is entrusted with the care or protection of the employer's property. The keys he holds are the symbol of that trust and confidence. By the same token, the security guard must also be considered as enjoying the trust and confidence of his employer, whose property he is safeguarding. Like the janitor, he has access to this property. He too, is charged with its care and protection. Notably, however, and like the janitor again, he is entrusted only with the physical task of protecting that property. The employer's trust and confidence in him is limited to that ministerial function. He is not entrusted, in the Labor Arbiter's words, 'with the duties of safekeeping and safeguarding company policies, management instructions, and company secrets such as operation devices.' He is not privy to these confidential matters, which are shared only in the higher echelons of management. It is the persons on such levels who, because they discharge these sensitive duties, may be considered holding positions of trust and confidence. The security guard does not belong in such category. 21 More importantly, we have repeatedly held that loss of confidence should not be simulated in order to justify what would otherwise be, under the provisions of law, an illegal dismissal. "It should not be used as a subterfuge for causes which are illegal, improper and unjustified. It must be genuine, not a mere afterthought to justify an earlier action taken in bad faith." 22

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In the case at bar, the suspicious delay in private respondent's filing of qualified theft charges against petitioner long after the latter exposed the hotel's scheme (to avoid its obligations as employer under the Labor Code) by her act of filing illegal dismissal charges against the private respondent would hardly warrant serious consideration of loss of confidence as a valid ground for dismissal. Notably, the Solicitor General has himself taken a position opposite the public respondent and has observed that: If petitioner had really committed the acts charged against her by private respondents (stealing supplies of respondent hotel), private respondents should have confronted her before dismissing her on that ground. Private respondents did not do so. In fact, private respondent Ng did not raise the matter when petitioner went to see him on May 9, 1991, and handed him her application for leave. It took private respondents 52 days or up to July 4, 1991 before finally deciding to file a criminal complaint against petitioner, in an obvious attempt to build a case against her. The manipulations of private respondents should not be countenanced. 23 Clearly, the efforts to justify petitioner's dismissal on top of the private respondent's scheme of inducing his employees to sign an affidavit absolving him from possible violations of the Labor Code taints with evident bad faith and deliberate malice petitioner's summary termination from employment. Having said this, we turn to the important question of whether or not the dismissal by the private respondent of petitioner constitutes an unfair labor practice. The answer in this case must inevitably be in the affirmative. The pivotal question in any case where unfair labor practice on the part of the employer is alleged is whether or not the employer has exerted pressure, in the form of restraint, interference or coercion, against his employee's right to institute concerted action for better terms and conditions of employment. Without doubt, the act of compelling employees to sign an instrument indicating that the employer observed labor standards provisions of law when he might have not, together with the act of terminating or coercing those who refuse to cooperate with the employer's scheme constitutes unfair labor practice. The first act clearly preempts the right of the hotel's workers to seek better terms and conditions of employment through concerted action. LLphil We agree with the Solicitor General's observation in his manifestation that "[t]his actuation . . . is analogous to the situation envisaged in paragraph (f) of Article 248 of the Labor Code" 24 which distinctly makes it an unfair labor practice "to dismiss, discharge or otherwise prejudice or discriminate against an employee for having given or being about to give testimony" 25 under the Labor Code. For in not giving positive testimony in favor of her employer, petitioner had reserved not only her right to dispute the claim and proffer evidence in support thereof but also to work for better terms and conditions of employment. For refusing to cooperate with the private respondent's scheme, petitioner was obviously held up as an example to all of the hotel's employees, that they could only cause trouble to management at great personal inconvenience. Implicit in the act of petitioner's termination

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and the subsequent filing of charges against her was the warning that they would not only be deprived of their means of livelihood, but also possibly, their personal liberty. This Court does not normally overturn findings and conclusions of quasi-judicial agencies when the same are ably supported by the evidence on record. However, where such conclusions are based on a misperception of facts or where they patently fly in the face of reason and logic, we will not hesitate to set aside those conclusions. Going into the issue of petitioner's money claims, we find one more salient reason in this case to set things right: the labor arbiter's evaluation of the money claims in this case incredibly ignores existing law and jurisprudence on the matter. Its blatant one-sidedness simply raises the suspicion that something more than the facts, the law and jurisprudence may have influenced the decision at the level of the Arbiter. Labor Arbiter Pati accepted hook, line and sinker the private respondent's bare claim that the reason the monetary benefits received by petitioner between 1981 to 1987 were less than minimum wage was because petitioner did not factor in the meals, lodging, electric consumption and water she received during the period in her computations. 26 Granting that meals and lodging were provided and indeed constituted facilities, such facilities could not be deducted without the employer complying first with certain legal requirements. Without satisfying these requirements, the employer simply cannot deduct the value from the employee's wages. 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. Finally, facilities must be charged at fair and reasonable value. 27 These requirements were not met in the instant case. Private respondent "failed to present any company policy or guideline to show that the meal and lodging . . . (are) part of the salary;" 28 he failed to provide proof of the employee's written authorization; and, he failed to show how he arrived at the valuations. 29 Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision were figures furnished by the private respondent's own accountant, without corroborative evidence. On the pretext that records prior to the July 16, 1990 earthquake were lost or destroyed, respondent failed to produce payroll records, receipts and other relevant documents, where he could have, as has been pointed out in the Solicitor General's manifestation, "secured certified copies thereof from the nearest regional office of the Department of Labor, the SSS or the BIR." 30 More significantly, the food and lodging, or the electricity and water consumed by the petitioner were not facilities but supplements. A benefit or privilege granted to an employee for the convenience of the employer is not a facility. The criterion in making a distinction between the two not so much lies in the kind (food, lodging) but the purpose. 31 Considering, therefore, that hotel workers are required to work different shifts and are expected to be available at various odd hours, their ready availability is a necessary matter in the operations of a small hotel, such as the private respondent's hotel. It is therefore evident that petitioner is entitled to the payment of the deficiency in her wages equivalent to the full wage applicable from May 13, 1988 up to the date of her illegal dismissal.

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Additionally, petitioner is entitled to payment of service incentive leave pay, emergency cost of living allowance, night differential pay, and 13th month pay for the periods alleged by the petitioner as the private respondent has never been able to adduce proof that petitioner was paid the aforestated benefits. However, the claims covering the period of October 1987 up to the time of filing the case on May 13, 1988 are barred by prescription as P.D. 442 (as amended) and its implementing rules limit all money claims arising out of employer-employee relationship to three (3) years from the time the cause of action accrues. 32 We depart from the settled rule that an employee who is unjustly dismissed from work normally should be reinstated without loss of seniority rights and other privileges. Owing to the strained relations between petitioner and private respondent, allowing the former to return to her job would only subject her to possible harassment and future embarrassment. In the instant case, separation pay equivalent to one month's salary for every year of continuous service with the private respondent would be proper, starting with her job at the Belfront Hotel. cdphilIn addition to separation pay, backwages are in order. Pursuant to R.A. 6715 and our decision in Osmalik Bustamante, et al. vs. National Labor Relations Commission, 33 petitioner is entitled to full backwages from the time of her illegal dismissal up to the date of promulgation of this decision without qualification or deduction. Finally, in dismissal cases, the law requires that the employer must furnish the employee sought to be terminated from employment with two written notices before the same may be legally effected. The first is a written notice containing a statement of the cause(s) for dismissal; the second is a notice informing the employee of the employer's decision to terminate him stating the basis of the dismissal. During the process leading to the second notice, the employer must give the employee ample opportunity to be heard and defend himself, with the assistance of counsel if he so desires. Given the seriousness of the second cause (qualified theft) of the petitioner's dismissal, it is noteworthy that the private respondent never even bothered to inform petitioner of the charges against her. Neither was petitioner given the opportunity to explain the loss of the articles. It was only almost two months after petitioner had filed a complaint for illegal dismissal, as an afterthought, that the loss was reported to the police and added as a supplemental answer to petitioner's complaint. Clearly, the dismissal of petitioner without the benefit of notice and hearing prior to her termination violated her constitutional right to due process. Under the circumstances, an award of One Thousand Pesos (P1,000.00) on top of payment of the deficiency in wages and benefits for the period aforestated would be proper. WHEREFORE, premises considered, the RESOLUTION of the National Labor Relations Commission dated April 24, 1994 is REVERSED and SET ASIDE, with costs. For clarity, the economic benefits due the petitioner are hereby summarized as follows: 1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the date of petitioner's illegal dismissal; 2) Service incentive leave pay; night differential pay and 13th month pay for the same period;

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3) Separation pay equal to one month's salary for every year of petitioner's continuous service with the private respondent starting with her job at the Belfront Hotel; cdtech 4) Full backwages, without qualification or deduction, from the date of petitioner's illegal dismissal up to the date of promulgation of this decision pursuant to our ruling in Bustamante vs. NLRC. 34 5) P1,000.00.

SO ORDERED. Padilla, Bellosillo and Vitug, JJ ., concur. Hermosisima, Jr., J ., is on leave.

13. THIRD DIVISION [G.R. No. 97175. May 18, 1993.] DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. NLRC and NATIONAL MINES AND ALLIED WORKERS UNION, respondents. Chief Legal Counsel, Development Bank of the Philippines for petitioner. Padilla & Associates Law Office for private respondent. DECISION MELO, J p: Before us is a petition to set aside the NLRC Decision dated November 28, 1990 (Annex "C", p. 41, Rollo), disposing as follows: WHEREFORE, PREMISES CONSIDERED, the appealed decision is hereby set aside and a new judgment is entered, holding the Development Bank of the Philippines liable to the complainants for their separation pay to the extent of the proceed of the foreclosure sale, subject to the liquidation or bankruptcy proceeding that may be instituted against Midland Cement Corporation. (pp. 47-48, Rollo) Herein private respondent labor union filed on January 10, 1986, a complaint, the allegations of which were paraphrased by the NLRC in this wise: cdrep . . . that the individual complainants were all employees of respondent Midland Cement Corporation who were terminated from employment on or about July 30, 1981 by reason of the termination of the business operations of the Construction and Development Corporation of the Philippines (CDCP) now PNCC, which was brought about by the expiration of the lease contract between Midland Cement Corporation and CDCP; that at the time of the separation from the service [of] the individual complainants, the complainant union was the certified sole and exclusive bargaining agent; that as a consequence of said termination, the complainant union filed with the then Ministry of Labor and Employment an opposition to the application

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for clearance to terminate their services filed by CDCP, the lessee of the cement plant owned by Midland Cement Corporation; that on April 27, 1983, the Ministry of Labor and Employment thru then Deputy Minister Vicente Leogardo, Jr., ordered applicant CDCP to pay the 175 affected employees separation pay equivalent to one-half (1/2) month salary for every year of service; that the employees were paid only based on their length of service with CDCP from August 1, 1975 up to July 30, 1981; the said employees were not paid (with) their separation pay when they were employees of respondent Midland Cement Corporation; that later, respondent DBP foreclosed and assumed ownership over the cement plant, including land, buildings, machineries, etc., of Midland Cement Corporation; that the individual complainants are claiming separation benefits covering the period from date of hiring up to July 31, 1975 when CDCP took over the operations of Midland Cement Corporation by virtue of lease contract. (pp. 43-44, Rollo) After hearing, the Labor Arbiter rendered a decision on January 5, 1990 (Annex "A", p. 26, Rollo), finding DBP jointly and severally liable with Midland Cement for the payment of the separation pay, as follows: WHEREFORE, judgment is hereby rendered giving due course to the complaint thereby ordering the respondents DBP and Midland Cement Corporation jointly and severally liable for the separation pay of the affected members of the complainant union. It appearing that as published in the morning dailies lately that the assets of Midland Cement Corporation are now being offered for sale through public bidding by the Asset Privatization Trust, (APT) let copies of this decision be served upon said APT to protect the interest of the herein complainants. (pp. 30-31, Rollo) DBP appealed, contending that its acquisition of the mortgaged assets of Midland through foreclosure sale did not make it the owner of the defunct Midland Cement, and that the doctrine of successor-employer is not applicable in this case, since DBP did not continue the business operations of Midland. The NLRC, while finding merit in DBP's contention, nonetheless held DBP liable since respondent's claim "constitutes a first preference with respect to the proceeds of the foreclosure sale" as provided in Article 110 of the Labor Code: 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 their wages and other monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before claims of the government and other creditors may be paid. (p. 46, Rollo) Following the denial of its motion for reconsideration, DBP filed the instant petition. LibLex DBP correctly points out that its mortgage lien should not be classified as a preferred credit. The issue raised was settled in Republic vs. Peralta (150 SCRA 37 [1987]) and reinforced in DBP vs. NLRC (183 SCRA 328 [1990]) wherein we held that because of its impact on the entire system of credit, Article 110 of the Labor Code cannot be viewed in isolation but must be read in relation to the Civil Code scheme on classification and preference of credits. Thus, 4. A distinction should be made between a preference of credit and a lien. A preference applies only to claims which do not attach to specific properties. A lien creates a charge on a

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particular property. The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in application. It is a method adopted to determine and specify the order in which credits should be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to a first preference in the discharge of the funds of the judgment debtor. In the words of Republic vs. Peralta, supra: "Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees for unpaid wages either upon all of the properties or upon any particular property owned by their employer. Claims for unpaid wages do not therefore fall at all within the category of specially preferred claims established under Articles 2241 and 2242 of the Civil Code, except to the extent that such claims for unpaid wages are already covered by Article 2241, number 6: claims for laborers wages, on the goods manufactured or the work done,' or by Article 2242, number 3: 'claims of laborers and other workers engaged in the construction, reconstruction or repair of buildings, canals and other works, upon said buildings, canals and other works. To the extent that claims for unpaid wages fall outside the scope of Article 2241, number 6 and 2242, number 3, they would come within the ambit of the category of ordinary preferred credits under Article 2244. 6. The DBP anchors its claim on a mortgage credit. A mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted (Article 2176, Civil Code). It creates a real right which is enforceable against the whole world. It is a lien on an identified immovable property, which a preference is not. A recorded mortgage credit is a special preferred credit under Article 2242 (5) of the Civil Code on classification of credits. The preference given by Article 110, when not falling within Article 2241 (6) and Article 2242 (3) of the Civil Code and not attached to any specific property, is an ordinary preferred credit although its impact is to move it from second priority to first priority in the order of preference established by Article 2244 of the Civil Code. (Republic vs. Peralta, supra.) xxx xxx xxx

In fine, the right to preference given to workers under Article 110 of the Labor Code cannot exist in any effective way prior to the time of its presentation in distribution proceedings. It will find application when, in proceedings such as insolvency, such unpaid wages shall be paid in full before the "claims of the Government and other creditors" may be paid. . . . (DBP vs. NLRC, supra; pp. 337-339.) The NLRC, therefore, erred in holding DBP liable "to the extent of the proceeds of the foreclosure sale." And making such liability dependent on a bankruptcy or liquidation proceedings is really beside the point, for these proceedings are relevant only to preferred credits, which is not the situation in the case at bar. To equate DBP's mortgage lien with a preferred credit would be to render inutile the protective mantle of the mortgage in DBP's favor and thus in the process wreak havoc to commercial transactions. cdrep

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WHEREFORE, the petition is GRANTED. The decision of the NLRC dated November 28, 1990 and the Resolution of February 1, 1991 are hereby SET ASIDE, and a new judgment is entered absolving Development Bank of the Philippines of any and all liabilities to private respondent and its members. No special pronouncement is made as to costs. SO ORDERED. Feliciano, Bidin, Davide, Jr. and Romero, JJ ., concur.

14. SECOND DIVISION [G.R. No. 81415. June 6, 1990.] A.N. BOLINAO, JR., JUAN A. AGSALON, JR., ZOSIMO L. CARREON AND REYNOLD P. DANNUG, petitioners, vs. HON. MANUEL S. PADOLINA, PHELPS DODGE (PHILS.) INC., BANK OF AMERICA, AND DEPUTY SHERIFF CARLOS G. MAOG, respondents. A.N. Bolinao, Jr. for petitioners. Mina & Associates for respondents. Agcaoili & Associates for respondent BA. SYLLABUS 1. LABOR LAWS; WORKERS' PREFERENCE IN CASE OF BANKRUPTCY; DECLARATION OF BANKRUPTCY OR JUDICIAL LIQUIDATION; AT PRE-REQUISITE. It is quite clear from the provisions of Article 110 of the Labor Code and Section 10, Rule VIII, Book II of the Revised Rules and Regulations Implementing the Labor Code, that a declaration of bankruptcy or a judicial liquidation must be present before the worker's preference may be enforced. Thus, it was held that Article 110 of the Labor Code and its implementing rule cannot be invoked absent a formal declaration of bankruptcy or a liquidation order (Development Bank of the Philippines v. Labor Arbiter, G.R. Nos. 78261-62, March 8, 1989). (Emphasis supplied). 2. ID.; ID.; ID.; NOT SHOWN IN CASE AT BAR. In the case at bar, there was no showing of any insolvency proceeding or declaration of bankruptcy or judicial liquidation that was being filed by Sabena Mining Corporation. It is only an extra-judicial foreclosure that was being enunciated as when DBP extra-judicially foreclosed the assets of Sabena Mining Corporation. 3. ID.; ID.; NOT APPLICABLE TO EXTRAJUDICIAL PROCEEDING. Conversely, to hold that Article 110 is also applicable in extra-judicial proceedings would be putting the worker in a better position than the State which could only assert its own prior preference in case of a judicial proceeding. Article 110 must not be viewed in isolation and must always be reckoned with the provisions of the Civil Code (DBP v. Labor Arbiter, supra). 4. ID.; ID.; ART. 110 OF THE LABOR CODE MUST BE READ TOGETHER WITH THE CIVIL CODE PROVISIONS ON CONCURRENCE AND PREFERENCE OF CREDIT. Quite recently, the rule

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enunciated in Republic v. Peralta (150 SCRA 37 [1987]) reads: "Article 110 of the Labor Code, in determining the reach of its terms, cannot be viewed in isolation. Rather, Article 110 must be read in relation to the provisions of the Civil Code concerning the classification, concurrence and preference of credits, which provisions find particular application in insolvency proceedings where the claims of all creditors, preferred or non-preferred, may be adjudicated in a binding manner . . ." The reason behind the necessity for a judicial proceeding or a proceeding in rem before the concurrence and preference of credits may be applied is to bind all interested persons whether known to the parties or not. The claims of all credits whether preferred or non preferred, the identification of the preferred ones and the totality of the employer's assets should be brought into the picture. There can then be an authoritative, fair and binding adjudication instead of the piece meal settlement which would result from the questioned decision in this case (DBP v. Labor Arbiter, supra). DECISION PARAS, J p: This is a petition for certiorari with preliminary injunction which seeks to reverse and to set aside the order of the Regional Trial Court of Pasig, Metro Manila, dated January 5, 1988 in Civil Case No. 50936 entitled "Phelps Dodge (Phils.) Inc. v. Sabena Mining Corporation" denying the motion to intervene and dismissing the third party claim filed by herein petitioners. As gathered from the records, the facts of the case are as follows: Petitioners A.N. Bolinao, Jr., Reynold P. Dannug, Juan A. Agsalon, Jr. and Zosimo L. Carreon were all former employees of Sabena Mining Corporation, which had a copper and gold project in operation, located in New Bataan, Davao del Norte. In 1982 and 1983 they were laid off without being recalled (Rollo, Petition, pp. 3-4). cdphil In September, 1983, petitioners filed a formal complaint for collection of unpaid salaries, unused accrued vacation and sick leave benefits, 13th month pay and separation pay before the National Labor Relations Commission (NLRC) against Sabena Mining Corporation and Development Bank of the Philippines docketed as NCR Case No. 9-4178-83 (Rollo, Petition, p. 5). On May 29, 1984, a compromise agreement was entered into by the parties, wherein petitioners were to be paid on a staggered basis the collective amount of P385,583.95 (Rollo, Petition, Annex "A", pp. 22-24). The company faithfully complied with the scheduled payments only up to March, 1985 because it ceased operations effective April 1, 1985. With this development, petitioners moved for the issuance of a writ of execution in June, 1985 (Rollo, Petition, p. 6). In an order dated June 21, 1985, the Labor Arbiter issued a writ of execution against the company to collect the balance of P311,580.14 (Rollo, Annex "B", pp. 25-26). On June 27, 1985 Deputy Sheriff Antonio P. Soriano garnished the remaining amount of P150,279.64 in the savings account of the company at the Development Bank of the Philippines (DBP) (Rollo, Annex "B-1", p. 27). However, the same amount was previously garnished by two creditors of the company; namely, Bank of America and Phelps Dodge (Phils.), Inc. Bank of America

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garnished the amount in April, 1982 in Civil Case No. 45452 (Rollo, Petition, pp. 4-5 while Phelps Dodge garnished the amount in June, 1984 in Civil Case No. 50936 (Rollo, Petition, p. 5). Both cases were filed in different branches of the Regional Trial Court in Pasig (Ibid.). In an order dated September 30, 1987, the respondent court directed the DBP to release to its Deputy Sheriff, herein respondent Carlos G. Maog, the amount of P150,279.64 declaring that the writ of preliminary attachment made by Bank of America thru Deputy Sheriff Norberto Doblado in Civil Case No. 45452 by the Pasig Regional Trial Court cannot prevail over the garnishment pursuant to a writ of execution issued in Civil Case No. 50936 in favor of respondent Phelps Dodge (Phils.) Inc., for failure of Bank of America to prosecute its lien (Rollo, Petition, Annex "C", pp. 29-31). The order came to the attention of the petitioners who then filed a "Motion to Intervene and to Lift Order of September 30, 1987" on October 13, 1987 and a third party claim with the deputy sheriff on October 19, 1987 (Rollo, Annex "D", p. 32-36; Annex "D-1", pp. 38-42). DBP did not interpose any objection to the motion to intervene and the third party claim (Rollo, Annex "E", pp. 44-45). But respondent Phelps Dodge, Phils., Inc. opposed said Motion to Intervene/Third Party Claim, on the ground among others: xxx xxx xxx

b) That the rights of preference and first lien of petitioners, as former employees of Sabena Mining Corporation, as provided for in Art. 110 of the Labor Code and Art. 2244 of the Civil Code, are operative only in insolvency court and in a bankruptcy case; (Rollo, Annex "F", pp. 47-53; Annex "F-1", pp. 54-57). Petitioners filed their reply to the opposition and at the same time filed a motion to resolve the third party claim (Rollo, Annex "G", pp. 58-62; Annex "G-1", pp. 63-67). On January 5, 1988 the respondent court issued an order denying the motion to intervene and dismissing the third party claim, declaring that the garnishment made by its Deputy Sheriff in favor of respondent Phelps Dodge, Phils., Inc. superior to the rights of petitioners (Rollo, Annex "I", pp. 70-77). Hence, the petition. The Second Division of this Court in its resolution dated August 10, 1989, gave due course to the petition (Rollo, Petition, pp. 2-19; Resolution, p. 309). The main thrust in this petition is whether or not petitioners enjoy preferential right or claim over the funds of Sabena Mining Corporation as provided for under the provisions of Article 110 of the New Labor Code, as amended, and Section 10, Rule VIII, Book III of the Implementing Rules and Regulations of the Labor Code. The petitioners contend that under Article 110 and its implementing rules and regulations of the Labor Code, the claims of the laborers for unpaid wages and other monetary benefits due them for services rendered prior to bankruptcy enjoy first preference in the satisfaction of credits against a bankrupt company.

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On the other hand, the respondent maintains that the rights of preference and first lien of petitioners, as former employees of Sabena Mining Corporation, under aforesaid law and rules, are operative only in an insolvency court and in a bankrupt case. The petition is without merit. It is quite clear from the provisions of Article 110 of the Labor Code and Section 10, Rule VIII, Book II of the Revised Rules and Regulations Implementing the Labor Code, that a declaration of bankruptcy or a judicial liquidation must be present before the worker's preference may be enforced. Thus, it was held that Article 110 of the Labor Code and its implementing rule cannot be invoked absent a formal declaration of bankruptcy or a liquidation order (Development Bank of the Philippines v. Labor Arbiter, G.R. Nos. 78261-62, March 8, 1989). (Emphasis supplied) In the case at bar, there was no showing of any insolvency proceeding or declaration of bankruptcy or judicial liquidation that was being filed by Sabena Mining Corporation. It is only an extra-judicial foreclosure that was being enunciated as when DBP extra-judicially foreclosed the assets of Sabena Mining Corporation. Conversely, to hold that Article 110 is also applicable in extra-judicial proceedings would be putting the worker in a better position than the State which could only assert its own prior preference in case of a judicial proceeding. Article 110 must not be viewed in isolation and must always be reckoned with the provisions of the Civil Code (DBP v. Labor Arbiter, supra). Quite recently, the rule enunciated in Republic v. Peralta (150 SCRA 37 [1987]) reads: "Article 110 of the Labor Code, in determining the reach of its terms, cannot be viewed in isolation. Rather, Article 110 must be read in relation to the provisions of the Civil Code concerning the classification, concurrence and preference of credits, which provisions find particular application in insolvency proceedings where the claims of all creditors, preferred or non-preferred, may be adjudicated in a binding manner . . ." The reason behind the necessity for a judicial proceeding or a proceeding in rem before the concurrence and preference of credits may be applied is to bind all interested persons whether known to the parties or not. The claims of all credits whether preferred or non preferred, the identification of the preferred ones and the totality of the employer's assets should be brought into the picture. There can then be an authoritative, fair and binding adjudication instead of the piece meal settlement which would result from the questioned decision in this case 1 (DBP v. Labor Arbiter, supra). PREMISES CONSIDERED, the petition is hereby DISMISSED for lack of merit and the questioned Order dated January 5, 1988 issued by the respondent court is hereby AFFIRMED. SO ORDERED. Melencio-Herrera and Regalado, JJ ., concur. Separate Opinions PADILLA, J ., dissenting:

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I dissent for the same reasons stated in my dissent in DBP vs. NLRC, G.R. Nos. 82763-64,19 March 1990. SARMIENTO, J ., dissenting: I reiterate my dissent in Development Bank of the Philippines vs. National Labor Relations Commission. 1 I also adopt Mr. Justice Teodoro Padilla's dissent therein, insofar as he holds that under Article 110 of the Labor Code, as amended, by Republic Act No. 6715, workers enjoy "absolute preference" 2 as and for unpaid wages and other monetary claims, over and above taxes due to the government and claims of creditors, and subject to no prior declaration of bankruptcy or judicial order of liquidation. I find his opinion to be not only accord with the explicit language of Republic Act No. 6715, but, as I held in my own dissent, consistent with the express decree of the Constitution affording full protection to labor. 3 While I agree that prior to its amendment, Article 110 was couched in arguable terms, 4 that is, a declaration of insolvency was necessary before labor may claim preference. Republic Act No. 6715 has laid the debate to rest. The very language of the Act: SECTION 1. Article 110 of Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the Philippines, is hereby further amended to read as follows: "ART. 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 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." 5 convinces this writer that the Congressional intent was precisely to settle the argument in favor of absolute worker preference. Indeed, to say that the amendment of Article 110 by Republic Act No. 6715 wrought no change, and the Article should be read as it was read prior to amendment: Article 110. Workers 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. 6 is to say that the legislature engaged in an exercise in futility, a proposition I am not prepared to accept. Clearly, the legislative will, in working the amendment, was to change the law it could not have been for any other purpose and I do not believe that the Supreme Court is empowered to override the intent of the lawmakers. Once more, constitutional policy is to give full protection to labor. It also means exactly what it says labor above capital. The Charter is evidently not neutral, it is partial to the workingman. I am afraid that with the holding my brethren will leave in this case, the working class would find itself at the receiving end. So Ordered.

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15. SECOND DIVISION [G.R. No. 111809. May 5, 1997.] MINDANAO TERMINAL AND BROKERAGE SERVICES, INC., petitioner, vs. HON. MA. NIEVES ROLDAN-CONFESOR, in her capacity as Secretary of Labor and Employment, and ASSOCIATED LABOR UNIONS (ALU-TUCP), respondents. Froilan M . Bacungan & Associates for petitioner. Seno, Mendoza and Associates Law Offices for private respondent. SYLLABUS 1. CIVIL LAW; CONTRACTS; EVEN WITHOUT ANY WRITTEN EVIDENCE OF THE COLLECTIVE BARGAINING AGREEMENT MADE BY THE PARTIES, A VALID AGREEMENT EXISTED IN THIS CASE FROM THE MOMENT THE MINDS OF THE PARTIES MEET ON ALL MATTERS THEY SET OUT TO DISCUSS. The fact that no agreement was then signed is of no moment. Art. 253-A refers merely to an "agreement" which, according to Black's Law Dictionary is "a coming together of minds; the coming together in accord of two minds on a given proposition." This is similar to Art. 1305 of the Civil Code's definition of "contract" as "a meeting of minds between two persons." The two terms, "agreement" and "contract," are indeed similar, although the former is broader than the latter because an agreement may not have all the elements of a contract. As in the case of contracts, however, agreements may be oral or written. Hence, even without any written evidence of the Collective Bargaining Agreement made by the parties, a valid agreement existed in this case from the moment the minds of the parties met on all matters they set out to discuss. As Art. 1315 of the Civil Code states: Contracts are perfected by mere consent, and from that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. 2. LABOR AND SOCIAL LEGISLATION; LABOR RELATIONS; STRIKES AND LOCKOUTS; ARBITRAL AWARD; BINDING ON THE PARTIES; CASE AT BAR. The order of the Secretary of Labor may be considered in the nature of an arbitral award, pursuant to Art. 263(g) of the Labor Code, and, therefore, binding on the parties. After all, the Secretary of Labor assumed jurisdiction over the dispute because petitioner asked the Secretary of Labor to do so after the NCMB failed to make the parties come to an agreement. It is also conceded that the industry in which the petitioner is engaged is vital to the national interest. 3. ID.; ID.; ID.; ID.; THE SECRETARY OF LABOR IS DEEMED VESTED WITH PLENARY AND DISCRETIONARY POWERS TO DETERMINE THE EFFECTIVITY OF AN ARBITRAL AWARD. In St. Luke's Medical Center, Inc. vs. Torres, a deadlock also developed during the CBA negotiations between management and the union. The Secretary of Labor assumed jurisdiction and ordered the retroaction of their CBA to the date of expiration of the previous CBA. As in this case, it was alleged that the Secretary of Labor gravely abused his discretion in making his award retroactive. In dismissing this contention, this Court held: Therefore, in the absence of a specific provision of law prohibiting retroactivity of the effectivity of arbitral awards issued by

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the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such as herein involved, public respondent is deemed vested with plenary and discretionary powers to determine the effectivity thereof. This case is controlled by the ruling in that case. 4. ID.; LABOR STANDARDS; CREDITING OF WAGE INCREASES IN CBA AS COMPLIANCE WITH FUTURE MANDATED INCREASES IS THE EXCEPTION RATHER THAN THE RULE; THE GENERAL RULE IS THAT SUCH INCREASES ARE OVER AND ABOVE ANY INCREASES THAT MAY BE GRANTED BY LAW OR WAGE ORDER. With respect to the issue of the creditability of the fourth and fifth year wage increases, the Court takes cognizance of the fact that the question was raised by the Company only when the six-month period was almost over and all that was left to be done by the parties was to sign their agreement. Before that, the Company did not qualify its position. It should have known that crediting of wage increases in the CBA as compliance with future mandated increases is the exception rather than the rule. For the general rule is that such increases are over and above any increase that may be granted by law or wage order. As held in Meycauayan College vs. Drilon: Increments to the laborers' financial gratification, be they in the form of salary increases or changes in the salary scale are aimed at one thing improvement of the economic predicament of the laborers. As such they should be viewed in the light of the State's avowed policy to protect labor. Thus, having entered into an agreement with its employees, an employer may not be allowed to renege on its obligation under a collective bargaining agreement should, at the same time, the law grant the employees the same or better terms and conditions of employment. Employee benefits derived from law are exclusive of benefits arrived at through negotiation and agreement unless otherwise provided by the agreement itself or by law. DECISION MENDOZA, J p: This is a petition for certiorari to set aside the order of respondent Honorable Secretary of Labor and Employment, declaring (1) wage increases granted by petitioner to its employees not creditable as compliance by the company with future mandated wage increases, and (2) the increases to be retroactive, in the case of the fourth year wage increase, to August 1, 1992 to be implemented until July 31, 1993 and, in the case of the fifth year wage increase, to August 1, 1993 to be implemented until the expiration of the CBA on July 31, 1994. casia Petitioner Mindanao Terminal and Brokerage Service, Inc., (hereafter referred to as the Company) and respondent Associated Labor Unions, (hereafter referred to as the Union) entered into a collective bargaining agreement for a period of five (5) years, starting on August 1, 1989 and ending July 31, 1994. On the third year of the CBA on August 1, 1992, the Company and the Union met to renegotiate the provisions of the CBA for the fourth and fifth years. The parties, however, failed to resolve some of their differences, as a result of which a deadlock developed. On November 12, 1992, a formal notice of deadlock was sent to the Company on the following issues: wages, vacation leave, sick leave, hospitalization, optional retirement, 13th month pay and signing bonus. On November 18, 1992, the Company announced a cost-cutting or retrenchment program.

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Charging unfair labor practice and citing the deadlock in the negotiations, the Union filed, on December 3, 1992, a notice of strike with the National Conciliation and Mediation Board (NCMB). On December 18, 1992, as a result of a conference called by the NCMB, the Union and the Company went back to the bargaining table and agreed on the following provisions: a. Wage Increase (Article V, Section 2, CBA) P3.00/day for the fourth year of the CBA and P3.00/day for the fifth Year of the CBA: b. Vacation and Sick Leaves (Article VII, Section 1(c), CBA) 1,100 hours of aggregate service instead of the existing 1,500 hours within a year to be entitled to leave benefits but subject to reversion to the previous CBA if majority of the gangs average eight (8) vessels a month; c. Hospitalization (Article VIII, Section 1, CBA) Maximum aggregate of 1,100 hours instead of the 1,500 hours and up to be entitled to the benefit of P2,500.00 with the lower brackets adjusted accordingly but subject to reversion to the previous CBA if majority of the gangs average eight (8) vessels a month; d. 13th Month Pay (Article XIII, Section 1, CBA) Average of six (6) vessels instead of the existing eight (8) vessels to be entitled to eleven (11) days basic pay but subject to reversion to the previous CBA if majority of the gangs average eight (8) vessels a month, e. f. Signing bonus; and Seniority.

The agreement left only one issue for resolution of the parties, namely, retirement. Even this issue was soon settled as the parties met before the NCMB on January 14, 1993 and then agreed on an improved Optional Retirement Clause by giving the employees the option to retire after rendering eighteen (18) years of service instead of the previous twenty (20) years, and granting the employees retirement benefits equivalent to sixteen (16) days for every year of service. Thus, as the Med-Arbiter noted in the record of the January 14, 1993 conference, "the issues raised by the notice of strike had been settled and said notice is thus terminated." But no sooner had he stated this than the Company claimed that the wage increases which it had agreed to give to the employees should be creditable as compliance with future mandated wage increases. In addition, it maintained that such increases should not be retroactive. Reacting to this development, the Union again filed a Notice of Strike on January 28, 1993, with the NCMB. On March 7, 1993, the Union staged a strike. The NCMB tried to settle the issues of creditability and retroactivity, calling for this purpose a conciliation conference on March 9, 1993. As conciliation proved futile, the Company petitioned respondent Secretary of Labor and Employment (hereafter Secretary of Labor) to assume jurisdiction over the dispute. On March 10, 1993, respondent assumed jurisdiction over the dispute and ordered the parties to submit their respective position papers on the two unresolved issues.

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After submission by the parties of their position papers, the Secretary of Labor issued an Order dated May 14, 1993, ordering the Company and the Union to incorporate into their existing collective bargaining agreement all improvements reached by them in the course of renegotiations. The Secretary of Labor held that the wage increases for the fourth and fifth years of the CBA were not to be credited as compliance with future mandated increases. In addition, the fourth year wage increase was to be retroactive to August 1992 and was to be implemented until July 31, 1993, while the fifth year wage increase was to take effect on August 1, 1993 until the expiration of the CBA. 1 On May 31, 1993, the Company sought reconsideration of the May 14, 1993 order. The motion was denied for lack of merit by the Secretary of Labor in a resolution dated July 7, 1993. Hence, this petition for certiorari, alleging grave abuse of discretion on the part of respondent Secretary of Labor. The petitioner contends that respondent erred in making the fourth year wage increase retroactive to August 1, 1992. It denies the power of the Secretary of Labor to decree retroaction of the wage increases, as the respondent herself had stated in her order subject of this petition, that it had been more than six (6) months since the expiration of the third anniversary of the CBA and, therefore, the automatic renewal clause of Art. 253-A of the Labor Code had no application. Although petitioner originally opposed giving retroactive effect to their agreement, it subsequently modified its stand and agreed that the fourth year wage increase and the other provisions of the CBA be made retroactive to the date the Secretary of Labor assumed jurisdiction of the dispute on March 10, 1993. The petition is without merit. Art. 253-A of the Labor Code reads: Terms of a collective bargaining agreement. Any Collective Bargaining Agreement that the parties may enter into shall, insofar as the representation aspect is concerned, be for a term of five (5) years. No petition questioning the majority status of the incumbent bargaining agent shall be entertained and no certification election shall be conducted by the Department of Labor and Employment outside of the sixty-day period immediately before the date of expiry of such five year term of the Collective Bargaining Agreement. All other provisions of the Collective Bargaining Agreement shall be renegotiated not later than three (3) years after its execution. Any agreement on such other provisions of the Collective Bargaining Agreement entered into within six (6) months from the date of expiry of the term of such other provisions as fixed in such Collective Bargaining Agreement, shall retroact to the day immediately following such date. If any such agreement is entered into beyond six months, the parties shall agree on the duration of retroactivity thereof. In case of a deadlock in the renegotiation of the collective bargaining agreement, the parties may exercise their rights under this Code. The respondent indeed stated in her order of May 14, 1993 that "this case is clearly beyond the scope of the automatic renewal clause," 2 but she also stated in the same order that "the parties have reached an agreement on all the renegotiated provisions of the CBA" on January 14, 1993, i.e., within six (6) months of the expiration of the third year of the CBA. The signing of the CBA is not determinative of the question whether "the agreement was entered into within six months from the date of expiry of the term of such other provisions as fixed in such collective bargaining agreement" within the contemplation of Art. 253-A. As already stated, on November 12, 1992, the Union sent the Company a notice of deadlock in view of their inability to reconcile their positions on the main issues, 3 particularly on wages.

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The Union filed a notice of strike. However, on December 18, 1992, in a conference called by the NCMB, the Union and the Company agreed on a number of provisions of the CBA, including the provision on wage increase, 4 leaving only the issue of retirement to be threshed out. In time, this, too, was settled, so that in his record of the January 14, 1993 conference, the Med-Arbiter noted that "the issues raised by the notice of strike had been settled and said notice is thus terminated." It would therefore seem that at that point, there was already a meeting of the minds of the parties, which was before the February 1993 end of the six-month period provided in Art. 253-A. The fact that no agreement was then signed is of no moment. Art. 253-A refers merely to an "agreement" which, according to Black's Law Dictionary is "a coming together of minds; the coming together in accord of two minds on a given proposition." 5 This is similar to Art. 1305 of the Civil Code's definition of "contract" as "a meeting of minds between two persons." prcd The two terms, "agreement" and "contract," are indeed similar, although the former is broader than the latter because an agreement may not have all the elements of a contract. As in the case of contracts, however, agreements may be oral or written. 6 Hence, even without any written evidence of the Collective Bargaining Agreement made by the parties, a valid agreement existed in this case from the moment the minds of the parties met on all matters they set out to discuss. As Art. 1315 of the Civil Code states: Contracts are perfected by mere consent, and from that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. The Secretary of Labor found that "as early as January 14, 1993, well within the six (6) month period provided by law, the Company and the Union have perfected their agreement." 7 The claim of petitioner to the contrary notwithstanding, this is a finding of an administrative agency which, in the absence of evidence to the contrary, must be affirmed. Moreover, the order of the Secretary of Labor may be considered in the nature of an arbitral award, pursuant to Art. 263(g) of the Labor Code, and, therefore, binding on the parties. After all, the Secretary of Labor assumed jurisdiction over the dispute because petitioner asked the Secretary of Labor to do so after the NCMB failed to make the parties come to an agreement. It is also conceded that the industry in which the petitioner is engaged is vital to the national interest. As stated in the Order issued by the Secretary of Labor on March 10, 1993: 8 The services being provided by the Company evidently reflect their indispensability to the normal operations of the Davao City Pier where millions of crates and boxes of goods are loaded and unloaded monthly. The current disruption, therefore, of the Company's services, if allowed to continue, will cause serious prejudice and damages to the agricultural exporters, the cargo handlers, the vessel owners, the foreign buyers of agricultural products and the entire business sector in the area. These considerations and the dispute's implications on the national economy warrant the intervention by this Office to exercise its power under Article 263(g) of the Labor Code, as amended. In St. Luke's Medical Center, Inc. vs. Torres, 9 a deadlock also developed during the CBA negotiations between management and the union. The Secretary of Labor assumed

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jurisdiction and ordered the retroaction of their CBA to the date of expiration of the previous CBA. As in this case, it was alleged that the Secretary of Labor gravely abused his discretion in making his award retroactive. In dismissing this contention this Court held: Therefore, in the absence of a specific provision of law prohibiting retroactivity of the effectivity of arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such as herein involved, public respondent is deemed vested with plenary and discretionary powers to determine the effectivity thereof. This case is controlled by the ruling in that case. With respect to the issue of the creditability of the fourth and fifth year wage increases, the Court takes cognizance of the fact that the question was raised by the Company only when the six-month period was almost over and all that was left to be done by the parties was to sign their agreement. Before that, the Company did not qualify its position. It should have known that crediting of wage increases in the CBA as compliance with future mandated increases is the exception rather than the rule. For the general rule is that such increases are over and above any increase that may be granted by law or wage order. As held in Meycauayan College v. Drilon: 10 Increments to the laborers' financial gratification, be they in the form of salary increases or changes in the salary scale are aimed at one thing improvement of the economic predicament of the laborers. As such they should be viewed in the light of the State's avowed policy to protect labor. Thus, having entered into an agreement with its employees, an employer may not be allowed to renege on its obligation under a collective bargaining agreement should, at the same time, the law grant the employees the same or better terms and conditions of employment. Employee benefits derived from law are exclusive of benefits arrived at through negotiation and agreement unless otherwise provided by the agreement itself or by law. For making a belated issue of "creditability," petitioner is correctly said to have "delay[ed] the agreement beyond the six (6) month period so as to minimize its expenses to the detriment of its workers" and its conduct to smack of "bad faith and [to run counter] to the good faith required in Collective Bargaining." 11 If petitioner wanted to be given credit for the wage increases in the event of future mandated wage increases, it should have expressly stated its reservation during the early part of the CBA negotiations. WHEREFORE, the instant petition is hereby DISMISSED for lack of merit. cda SO ORDERED.

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16. SECOND DIVISION [G.R. No. 111722. May 27, 1997.] ALPHA INVESTIGATION AND SECURITY AGENCY, INC. (AISA), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, THIRD DIVISION, and WILLIAM GALIMBA, NESTOR LOLOQUISEN, NESTOR IBUYAT, CARLITO CASTRO, JOSE PERDIDO, FELIPE TOLENTINO, LEONARDO IBUYAT, FELINO CULANNAY, RONIE NINO, ROMAN NALUNDASAN, JAIME FONTANILLA, WILFRED BUTAY, JOSE ACIO, EDISON VALDEZ, CRESENCIO AGRES, RODRIGO LUIS, MARIO SUGUI, BENEDICTO SUGUI, ROGER RAMBAUD, respondents. Marcelino A. Bueno for petitioner. Robert O. Rudio for private respondents. SYLLABUS 1. STATUTORY CONSTRUCTION; STATUTES; LEGISLATIVE INTENT, HOW ASCERTAINED. It is a cardinal rule in statutory construction that in interpreting the meaning and scope of a term used in the law, a careful review of the whole law involved, as well as the intendment of the law, must be made. In fact, legislative intent must be ascertained from a consideration of the statute as a whole, and not of an isolated part or a particular provision alone. HIaSDc 2. LABOR AND SOCIAL LEGISLATION; CONDITIONS OF EMPLOYMENT; SOLIDARY LIABILITY OF CONTRACTOR AND PRINCIPAL FOR WAGE INCREASES; CASE AT BENCH. AISA's solidary liability for the amounts due the security guards finds support in Articles 106, 107 and 109 of the Labor Code . . . The joint and several liability of the contractor and the principal is mandated by the Labor Code to ensure compliance with its provisions, including the statutory minimum wage. The contractor is made liable by virtue of his status as direct employer, while the principal becomes the indirect employer of the former's employees for the purpose of paying their wages in the event of failure of the contractor to pay them. This gives the workers ample protection consonant with the labor and social justice provisions of the 1987 Constitution. In the case at bar, it is not disputed that private respondents are the employees of AISA. Neither is there any question that they were assigned to guard the premises of DMMSU pursuant to the latter's security service agreement with AISA and that these two entities paid their wage increases. It is to be borne in mind that wage orders being statutory and mandatory, cannot be waived. AISA cannot escape liability since the law provides for the joint and solidary liability of the principal and the contractor to protect the laborers. 3. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; GRAVE ABUSE OF DISCRETION; NOT PRESENT IN CASE AT BENCH. The Court finds that the NLRC acted correctly in holding petitioner jointly and severally liable with DMMSU for the payment of the wage increases to private respondents. Accordingly, no grave abuse of discretion may be attributed to the NLRC in arriving at the impugned decision. CDcHSa DECISION ROMERO, J p:

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May the principal of a security service agreement be held jointly and severally liable with the contractor for non-payment of the minimum wage? The facts are undisputed. cdtai Petitioner Alpha Investigation and Agency, Inc. (AISA) is a private corporation engaged in the business of providing security services to its clients, one of whom is the Don Mariano Marcos State University (DMMSU). Private respondents were hired as security guards by AISA on February 16, 1990. Five months later, 43 security guards filed before the Regional Office of the Department of Labor and Employment (DOLE) a complaint against AISA for non-compliance with the current minimum wage order. After 24 of the original complainants filed a motion for exclusion from the case, the remaining 19 security guards filed their individual amended complaints impleading DMMSU as party-respondent. Private respondents have been receiving a monthly salary of P900.00 although the security service agreement between AISA and DMMSU 1 provided a monthly pay of P1,200.00 for each security guard. AISA made representations with DMMSU for an increase in the contract rates of the security guards to enable them to pay the mandated minimum wage rates without compromising its administrative and operational expenses. DMMSU, however, replied that, being a government corporation, it cannot grant said request due to budgetary constraints.

On August 17, 1992, Labor Arbiter Emiliano T. de Asis rendered a decision, the dispositive portion of which reads as follows: "RESPONSIVE TO THE FOREGOING, judgment is hereby rendered: a) Ordering the respondent Alpha Investigation and Security Agency and Mariano Marcos State University to pay each complainant the amount of FORTY ONE THOUSAND FOUR HUNDRED FIFTY NINE PESOS AND FIFTY ONE CENTAVOS (P41,459.51) representing salary differential for the period from February 16, 1990 to September 30, 1991, or the total amount of P787,730.69 as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9. Nestor Loloquisen P41,459.51 41,459.51

Nestor Ibuyat Jose Acio

41,459.51 41,459.51 41,459.51 41,459.51

Cresencio Agres Wilfred Butay Carlito Castro

Federico Calunnay 41,459.51 Jaime Fontanilla William Galimba 41,459.51 41,459.51

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10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

Leonardo Ibuyat

41,459.51

Rodrigo Luis 41,459.51 Roman Nalundasan Ronnie Nino 41,459.51 Jose Perdido41,459.51 Roger Rambaud Benedicto Sugui 41,459.51 41,459.51 41,459.51

Mario Sugui 41,459.51 Felipe Tolentino Edison Valdez P787,730.69 41,459.51 41,459.51

b) c)

Dismissing the claims for 13th month pay for failure to substantiate the same. Claims of complainants who filed their motion for reconsideration are hereby dismissed.

SO ORDERED." 2 AISA and DMMSU interposed separate appeals. The NLRC, on May 7, 1993, rendered a decision affirming the solidary liability of AISA and DMMSU and remanding the records of the case to the arbitration branch of origin for computation of the salary differential awarded by the Labor Arbiter. Only AISA filed a motion for reconsideration, which was denied by the NLRC on July 1, 1993, for lack of merit. The judgment against DMMSU, finding it jointly and severally liable with AISA for the payment of increase in wages, became final and executory after it failed to file a petition for certiorari with this Court within a reasonable time. "Although Rule 65 does not specify any period for the filing of a petition for certiorari and mandamus, it must, nevertheless, be filed within a reasonable time. In certiorari cases, the definitive rule now is that such reasonable time is within three months from the commission of the complained act." 3 In this petition, AISA alleges that payment of the wage increases under the current minimum wage order should be borne exclusively by DMMSU, pursuant to Section 6 of Republic Act 6727 (RA 6727) 4 which reads as follows: "Sec. 6. In the case of contracts for construction projects and for security, janitorial and similar services, the prescribed increases in the wage rates of the workers shall be borne by the principals or clients of the construction/service contractors and the contract shall be deemed amended accordingly. In the event, however, that the principal or client fails to pay

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the prescribed wage rates, the construction/service contractor shall be jointly and severally liable with his principal or client." It further contends that Articles 106, 107 and 109 of the Labor Code generally refer to the failure of the contractor or sub-contractor to pay wages in accordance with the Labor Code with a mandate that failure to pay such wages would make the employer and contractor jointly and severally liable for such payment. AISA insists that the matter involved in the case at bar hinges on wage differentials or wages increases, as prescribed in the aforequoted Section 6 of RA 6727, and not wages in general, as provided by the Labor Code. This interpretation is not acceptable. It is a cardinal rule in statutory construction that in interpreting the meaning and scope of a term used in the law, a careful review of the whole law involved, as well as the intendment of the law, must be made. 5 In fact, legislative intent must be ascertained from a consideration of the statute as a whole, and not of an isolated part or a particular provision alone. 6 AISA's solidary liability for the amounts due the security guards finds support in Articles 106, 107 and 109 of the Labor Code, to wit: "ART. 106. Contractor or Sub-Contractor. Whenever an employer enters into a contract with another person for the performance of the former's work, the employees of the contractor and of the latter's sub-contractor, if any, shall be paid in accordance with the provisions of this code. In the event that the contractor or sub-contractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or sub-contractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. . . . ART. 107. Indirect employer. The provisions of the immediately preceding Article shall likewise apply to any person, partnership association or corporation which, nor being an employer, contracts with an independent contractor for the performance of any work, task, job or project. ART. 109. Solidary Liability. The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or sub-contractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under the Chapter, they shall be considered as direct employers." The joint and several liability of the contractor and the principal is mandated by the Labor Code to ensure compliance with its provisions, including the statutory minimum wage. 7 The contractor is made liable by virtue of his status as direct employer, while the principal becomes the indirect employer of the former's employees for the purpose of paying their wages in the event of failure of the contractor to pay them. This gives the workers ample protection consonant with the labor and social justice provisions of the 1987 Constitution. 8

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In the case at bar, it is not disputed that private respondents are the employees of AISA. Neither is there any question that they were assigned to guard the premises of DMMSU pursuant to the latter's security service agreement with AISA and that these two entities paid their wages increases. It is to be borne in mind that wages orders, being statutory and mandatory, cannot be waived. AISA cannot escape liability since the law provides for the joint and solidary liability of the principal and the contractor to protect the laborers. 9 Thus, the Court held in the Eagle Security v. NLRC: 10 "The solidary liability of PTSI and EAGLE, however, does not preclude the right of reimbursement from his co-debtor by the one who paid (See Article 1217, Civil Code). It is with respect to this right of reimbursement that petitioners can find support in the aforecited contractual stipulation and Wage Order provision. The Wage Orders are explicit that payment of the increases are 'to be borne' by the principal or client. 'To be borne', however, does not mean that the principal, PTSI in this case, would directly pay the security guards the wage and allowance increases because there is no privity of contract between them. The security guards' contractual relationship is with their immediate employer, EAGLE. As an employer, EAGLE is tasked, among others, with the payment of their wages. (See Article VII Sec. 3 of the Contract for Security Services, supra and Bautista v. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 556). Premises considered, the security guards' immediate recourse for the payment of the increases is with their direct employer, EAGLE. However, in order for the security agency to comply with the new wage and allowance rates it has to pay the security guards, the Wage Order made specific provision to amend existing contracts for security services by allowing the adjustments of the consideration paid by the principal to the security agency concerned. What the Wage Orders require, therefore, is the amendment of the contract as to the consideration to cover the service contractor's payment of the increases mandated. In the end, therefore, ultimate liability for the payment of the increases rests with the principal." (Emphasis supplied) Section 6 of RA 6727 merely provides that in case of wage increases resulting in a salary differential, the liability of the principal and the contractor shall be joint and several. The same liability attaches under Articles 106, 107 and 109 of the Labor Code, which refer to the prevailing standard minimum wage. The Court finds that the NLRC acted correctly in holding petitioner jointly and severally liable with DMMSU for the payment of the wage increases to private respondents. Accordingly, no grave abuse of discretion may be attributed to the NLRC in arriving at the impugned decision. cdll WHEREFORE, premises considered, the petition is DISMISSED for lack of merit and the assailed resolution is AFFIRMED. Costs against petitioner. SO ORDERED. Regalado, Puno, Mendoza and Torres, Jr., JJ., concur.

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17.

SECOND DIVISION [G.R. No. 118978. May 23, 1997.] PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY, * petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and GRACE DE GUZMAN, respondents. D. P. Mercado & Associates for petitioner. AC Estrada & Partner for private respondent. SYLLABUS 1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; EMPLOYMENT; EMPLOYER'S POLICY OF NOT ACCEPTING FOR WORK ANY WOMAN WORKER WHO CONTRACTS MARRIAGE, CONTRARY TO LAW, GOOD MORALS AND PUBLIC POLICY. In the case at bar, petitioner's policy of not accepting or considering as disqualified from work any woman worker who contracts marriage runs afoul of the test of, and the right against, discrimination, afforded all women workers by our labor laws and by no less than the Constitution. Petitioner's policy is not only in derogation of the provisions of Article 136 of the Labor Code on the right of a woman to be free from any kind of stipulation against marriage in connection with her employment, but it likewise assaults good morals and public policy, tending as it does to deprive a woman of the freedom to choose her status, a privilege that by all accounts inheres in the individual as an intangible and inalienable right. Hence, while it is true that the parties to a contract may establish any agreements, terms, and conditions that they may deem convenient the same should not be contrary to law, morals, good customs, public order, or public policy. Carried to its logical consequences, it may even be said that petitioner's policy against legitimate marital bonds would encourage illicit or common-law relations and subvert the sacrament of marriage. 2. ID.; ID.; ID.; DISMISSAL; LOSS OF CONFIDENCE, VALID GROUND. While loss of confidence is a just cause of termination of employment, it should not be simulated. It must rest on an actual breach of duty committed by the employee and not on the employer's caprices. Furthermore, it should never be used as a subterfuge for causes which are improper, illegal, or unjustified. 3. ID.; ID.; ID.; ID.; ID.; CONCEALMENT OF FEMALE EMPLOYEE OF TRUE NATURE OF STATUS FOR FEAR OF BEING DISQUALIFIED FROM WORK, NOT SUFFICIENT BASIS. Contrary to petitioner's assertion that it dismissed private respondent from employment on account of her dishonesty, the record discloses clearly that her ties with the company were dissolved principally because of the company's policy that married women are not qualified for employment in PT & T, and not merely because of her supposed acts of dishonesty. Private respondent's act of concealing the true nature of her status from PT & T could not be properly characterized as willful or in bad faith as she was moved to act the way she did mainly because she wanted to retain a permanent job in a stable company. In other words, she was practically forced by that very same illegal company policy into misrepresenting her civil status for fear of being disqualified from work.

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4. ID.; ID.; ID.; ID.; FAILURE TO REMIT COMPANY FUNDS, NOT AN ADDITIONAL GROUND; CASE AT BAR. Finally, petitioner's collateral insistence on the admission of private respondent that she supposedly misappropriated company funds, as an additional ground to dismiss her from employment, is somewhat insincere and self-serving. Concededly, private respondent admitted in the course of the proceedings that she failed to remit some of her collections, but that is an altogether different story. The fact is that she was dismissed solely because of her concealment of her marital status, and not on the basis of that supposed defalcation of company funds. That the labor arbiter would thus consider petitioner's submissions on this a mere afterthought, just too bolster its supposed dishonesty as case for dismissal, is a perceptive conclusion born of experience in labor cases. For, there was no showing that private respondent deliberately misappropriated the amount or whether her failure to remit the same was through negligence and, if so, whether the negligence was in nature simple or grave. In fact, it was merely agreed that private respondent execute a promissory note to refund the same, which she did, and the matter was deemed settled as a peripheral issue in the labor case. 5. ID.; ID.; ID., EMPLOYEE ILLEGALLY DISMISSED A FEW DAYS BEFORE COMPLETION OF HER PROBATIONARY EMPLOYMENT AND WHO WAS PREVIOUSLY HIRED RELIEVER FOR SEVERAL TIMES GAINED REGULAR STATUS. Private respondent, it must be observed, had gained regular status at the time of her dismissal. When she was served her walking papers on January 29, 1992, she was about to complete the probationary period of 150 days as she was contracted as a probationary employee on September 2, 1991. That her dismissal would be effected just when her probationary period was winding down clearly raises the plausible conclusion that it was done in order to prevent her from earning security of tenure. On the other hand, her earlier stints with the company as reliever were undoubtedly those of a regular employee, even if the same were for fixed periods, as she performed activities which were essential or necessary in the usual trade and business of PT & T. The primary standard of determining regular employment is the reasonable connection between the activity performed by the employee in relation to the business or trade of the employer. 6. ID.; ID.; ID.; ID.; ENTITLED TO REINSTATEMENT WITHOUT LOSS OF SENIORITY RIGHTS AND OTHER PRIVILEGES. As an employee who had therefore gained regular status, and as she had been dismissed without just cause, she is entitled to reinstatement without loss of seniority rights and other privileges and to full back wages, inclusive of allowances and other benefits or their monetary equivalent. 7. ID.; ID.; ID.; ID.; ID; PERIOD OF SUSPENSION FOR DISHONESTY DEDUCTED FROM AMOUNT RECOVERABLE FOR ILLEGAL DISMISSAL. However, as she had undeniably committed an act of dishonesty, in concealing her status, albeit under the compulsion of an unlawful imposition of petitioner, the three-month suspension imposed by respondent NLRC must be upheld to obviate the impression or inference that such act should be condoned. It would be unfair to the employer if she were to return to its fold without any sanction whatsoever for her act which was not totally, justified. Thus, her entitlement to back wages, which shall be computed from the time her compensation was withheld up to the time of her actual reinstatement, shall be reduced by, deducting therefrom the amount corresponding to her three months suspension.

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8. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT OF LABOR; IMPRESSED WITH PUBLIC POLICY SHOULD NOT CONTAIN OPPRESSIVE PROVISIONS NOR IMPAIR THE INTEREST OR CONVENIENCE OF THE PUBLIC; POLICY AGAINST MARRIAGE, A PROHIBITED PROVISION. Parenthetically, the Civil Code provisions on the contract of labor state that the relations between the parties, that is, of capital and labor, are not merely, contractual, impressed as they are with so much public interest that the same should yield to the common good. It goes on to intone dust neither capital nor labor should visit acts of oppression against the other, nor impair the interest or convenience of the public. In the final reckoning, the danger of just such a policy against marriage followed by petitioner PT & T is that it strikes at the very essence, ideals and purpose of marriage as an inviolable social institution and. ultimately, of the family as the foundation of the nation. That it must be effectively interdicted here in all its indirect, disguised or dissembled forms as discriminatory conduct derogatory of the laws of the land is not only in order but imperatively required. DECISION REGALADO, J p: Seeking relief through the extraordinary writ of certiorari, petitioner Philippine Telegraph and Telephone Company (hereafter, PT&T) invokes the alleged concealment of civil status and defalcation of company funds as grounds to terminate the services of an employee. That employee, herein private respondent Grace de Guzman, contrarily argues that what really motivated PT&T to terminate her services was her having contracted marriage during her employment, which is prohibited by petitioner in its company policies. She thus claims that she was discriminated against in gross violation of law, such a proscription by an employer being outlawed by Article 136 of the Labor Code. Grace de Guzman was initially hired by petitioner as a reliever, specifically as a "Supernumerary Project Worker," for a fixed period from November 21, 1990 until April 20, 1991 vice one C.F. Tenorio who went on maternity leave. 1 Under the Reliever Agreement which she signed with petitioner company, her employment was to be immediately terminated upon expiration of the agreed period. Thereafter, from June 10, 1991 to July 1, 1991, and from July 19, 1991 to August 8, 1991, private respondent' s services as reliever were again engaged by petitioner, this time in replacement of one Erlinda F. Dizon who went on leave during both periods. 2 After August 8, 1991, and pursuant to their Reliever Agreement, her services were terminated. LibLex On September 2, 1991, private respondent was once more asked to join petitioner company as a probationary employee, the probationary period to cover 150 days. In the job application form that was furnished her to be filled up for the purpose, she indicated in the portion for civil status therein that she was single although she had contracted marriage a few months earlier, that is, on May 26, 1991. 3 It now appears that private respondent had made the same representation in the two successive reliever agreements which she signed on June 10, 1991 and July 8, 1991. When petitioner supposedly learned about the same later, its branch supervisor in Baguio City, Delia M. Oficial, sent to private respondent a memorandum dated January 15, 1992 requiring her to

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explain the discrepancy. In that memorandum, she was reminded about the company's policy of not accepting married women for employment. 4 In her reply letter dated January 17, 1992, private respondent stated that she was not aware of PT&T's policy regarding married women at the time, and that all along she had not deliberately hidden her true civil status. 5 Petitioner nonetheless remained unconvinced by her explanations. Private respondent was dismissed from the company effective January 29, 1992, 6 which she readily contested by initiating a complaint for illegal dismissal, coupled with a claim for non-payment of cost of living allowances (COLA), before the Regional Arbitration Branch of the National Labor Relations Commission in Baguio City. At the preliminary conference conducted in connection therewith, private respondent volunteered the information, and this was incorporated in the stipulation of facts between the parties, that she had failed to remit the amount of P2,380.75 of her collections. She then executed a promissory note for that amount in favor of petitioner. 7 All of these took place in a formal proceeding and with the agreement of the parties and/or their counsel. On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down a decision declaring that private respondent, who had already gained the status of a regular employee, was illegally dismissed by petitioner. Her reinstatement, plus payment of the corresponding back wages and COLA, was correspondingly ordered, the labor arbiter being of the firmly expressed view that the ground relied upon by petitioner in dismissing private respondent was clearly insufficient, and that it was apparent that she had been discriminated against on account of her having contracted marriage in violation of company rules. On appeal to the National Labor Relations Commission (NLRC), said public respondent upheld the labor arbiter and, in its decision dated April 29, 1994, it ruled that private respondent had indeed been the subject of an unjust and unlawful discrimination by her employer, PT&T. However, the decision of the labor arbiter was modified with the qualification that Grace de Guzman deserved to be suspended for three months in view of the dishonest nature of her acts which should not be condoned. In all other respects, the NLRC affirmed the decision of the labor arbiter, including the order for the reinstatement of private respondent in her employment with PT&T. The subsequent motion for reconsideration filed by petitioner was rebuffed by respondent NLRC in its resolution of November 9, 1994, hence this special civil action assailing the aforestated decisions. of the labor arbiter and respondent NLRC, as well as the denial resolution of the latter. 1. Decreed in the Bible itself is the universal norm that women should be regarded with love and respect but, through the ages, men have responded to that injunction with indifference, on the hubristic conceit that women constitute the inferior sex. Nowhere has that prejudice against womankind been so pervasive as in the field of labor, especially on the matter of equal employment opportunities and standards. In the Philippine setting, women have traditionally been considered as falling within the vulnerable groups or types of workers who must be safeguarded with preventive and remedial social legislation against discriminatory and exploitative practices in hiring, training, benefits, promotion and retention.

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The Constitution, cognizant of the disparity in rights between men and women in almost all phases of social and political life, provides a gamut of protective provisions. To cite a few of the primordial ones, Section 14, Article II 8 on the Declaration of Principles and State Policies, expressly recognizes the role of women in nation-building and commands the State to ensure, at all times, the fundamental equality before the law of women and men. Corollary thereto, Section 3 of Article XIII 9 (the progenitor whereof dates back to both the 1935 and 1973 Constitution) pointedly requires the State to afford full protection to labor and to promote full employment and equality of employment opportunities for all, including an assurance of entitlement to tenurial security of all workers. Similarly, Section 14 of Article XIII 10 mandates that the State shall protect working women through provisions for opportunities that would enable them to reach their full potential. 2. Corrective labor and social laws on gender inequality have emerged with more frequency in the years since the Labor Code was enacted on May 1, 1974 as Presidential Decree No. 442, largely due to our country's commitment as a signatory to the United Nations Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW). 11 Principal among these laws are Republic Act No. 6727 12 which explicitly prohibits discrimination against women with respect to terms and conditions of employment, promotion, and training opportunities, Republic Act No. 6955 13 which bans the "mail-orderbride" practice for a fee and the export of female labor to countries that cannot guarantee protection to the rights of women workers; Republic Act No. 7192, 14 also known as the "Women in Development and Nation Building Act," which affords women equal opportunities with men to act and to enter into contracts, and for appointment, admission, training, graduation, and commissioning in all military or similar schools of the Armed Forces of the Philippines and the Philippine National Police; Republic Act No. 7322 15 increasing the maternity benefits granted to women in the private sector; Republic Act No. 7877 16 which outlaws and punishes sexual harassment in the workplace and in the education and training environment; and Republic Act No. 8042, 17 or the "Migrant Workers and Overseas Filipinos Act of 1995," which prescribes as a matter of policy, inter alia, the deployment of migrant workers, with emphasis on women, only in countries where their rights are secure. Likewise, it would not be amiss to point out that in the Family Code, 18 women's rights in the field of civil law have been greatly enhanced and expanded. In the Labor Code, provisions governing the rights of women workers are found in Articles 130 to 138 thereof. Article 130 involves the right against particular kinds of night work while Article 132 ensures the right of women to be provided with facilities and standards which the Secretary of Labor may establish to ensure their health and safety. For purposes of labor and social legislation, a woman working in a nightclub, cocktail lounge, massage clinic, bar or other similar establishments shall be considered as an employee under Article 138. Article 135, on the other hand, recognizes a woman' s right against discrimination with respect to terms and conditions of employment on account simply of sex. Finally, and this brings us to the issue at hand, Article 136 explicitly prohibits discrimination merely by reason of the marriage of a female employee.

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3. Acknowledged as paramount in the due process scheme is the constitutional guarantee of protection to labor and security of tenure. Thus, an employer is required, as a condition sine qua non prior to severance of the employment ties of an individual under his employ, to convincingly establish, through substantial evidence, the existence of a valid and just cause in dispensing with the services of such employee, one' s labor being regarded as constitutionally protected property. On the other hand, it is recognized that regulation of manpower by the company falls within the so-called management prerogatives, which prescriptions encompass the matter of hiring, supervision of workers, work assignments, working methods and assignments, as well as regulations on the transfer of employees, lay-off of workers, and the discipline, dismissal, and recall of employees. 19 As put in a case, an employer is free to regulate, according to his discretion and best business judgment, all aspects of employment, "from hiring to firing," except in cases of unlawful discrimination or those which may be provided by law. 20 In the case at bar, petitioner's policy of not accepting or considering as disqualified from work any woman worker who contracts marriage runs afoul of the test of, and the right against, discrimination, afforded all women workers by our labor laws and by no less than the Constitution. Contrary to petitioner's assertion that it dismissed private respondent from employment on account of her dishonesty, the record discloses clearly that her ties with the company were dissolved principally because of the company's policy that married women are not qualified for employment in PT&T, and not merely because of her supposed acts of dishonesty. That it was so can easily be seen from the memorandum sent to private respondent by Delia M. Oficial, the branch supervisor of the company, with the reminder, in the words of the latter, that "you're fully aware that the company is not accepting married women employee (sic), as it was verbally instructed to you." 21 Again, in the termination notice sent to her by the same branch supervisor, private respondent was made to understand that her severance from the service was not only by reason of her concealment of her married status but, over and on top of that, was her violation of the company' s policy against marriage ("and even told you that married women employees are not applicable [sic] or accepted in our company.") 22 Parenthetically, this seems to be the curious reason why it was made to appear in the initiatory pleadings that petitioner was represented in this case only by its said supervisor and not by its highest ranking officers who would otherwise be solidarily liable with the corporation. 23 Verily, private respondent's act of concealing the true nature of her status from PT&T could not be properly characterized as willful or in bad faith as she was moved to act the way she did mainly because she wanted to retain a permanent job in a stable company. In other words, she was practically forced by that very same illegal company policy into misrepresenting her civil status for fear of being disqualified from work. While loss of confidence is a just cause for termination of employment, it should not be simulated. 24 It must rest on an actual breach of duty committed by the employee and not on the employer's caprices. 25 Furthermore, it should never be used as a subterfuge for causes which are improper, illegal, or unjustified. 26 LLphil

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In the present controversy, petitioner's expostulations that it dismissed private respondent, not because the latter got married but because she concealed that fact, does have a hollow ring. Her concealment, so it is claimed, bespeaks dishonesty hence the consequent loss of confidence in her which justified her dismissal. Petitioner would asseverate, therefore, that while it has nothing against marriage, it nonetheless takes umbrage over the concealment of that fact. This improbable reasoning, with interstitial distinctions, perturbs the Court since private respondent may well be minded to claim that the imputation of dishonesty should be the other way around. Petitioner would have the Court believe that although private respondent defied its policy against its female employees contracting marriage, what could be an act of insubordination was inconsequential. What it submits as unforgivable is her concealment of that marriage yet, at the same time, declaring that marriage as a trivial matter to which it supposedly has no objection. In other words, PT&T says it gives its blessings to its female employees contracting marriage, despite the maternity leaves and other benefits it would consequently respond for and which obviously it would have wanted to avoid. If that employee confesses such fact of marriage, there will be no sanction; but if such employee conceals the same instead of proceeding to the confessional, she will be dismissed. This line of reasoning does not impress us as reflecting its true management policy or that we are being regaled with responsible advocacy. This Court should be spared the ennui of strained reasoning and the tedium of propositions which confuse through less

than candid arguments. Indeed, petitioner glosses over the fact that it was its unlawful policy against married women, both on the aspects of qualification and retention, which compelled private respondent to conceal her supervenient marriage. It was, however, that very policy alone which was the cause of private respondent's secretive conduct now complained of. It is then apropos to recall the familiar saying that he who is the cause of the cause is the cause of the evil caused. Finally, petitioner's collateral insistence on the admission of private respondent that she supposedly misappropriated company funds, as an additional ground to dismiss her from employment, is somewhat insincere and self-serving. Concededly, private respondent admitted in the course of the proceedings that she failed to remit some of her collections, but that is an altogether different story. The fact is that she was dismissed solely because of her concealment of her marital status, and not on the basis of that supposed defalcation of company funds. That the labor arbiter would thus consider petitioner's submissions on this supposed dishonesty as a mere afterthought, just to bolster its case for dismissal, is a perceptive conclusion born of experience in labor cases. For, there was no showing that private respondent deliberately misappropriated the amount or whether her failure to remit the same was through negligence and, if so, whether the negligence was in nature simple or grave. In fact, it was merely agreed that private respondent execute a promissory note to refund the same, which she did, and the matter was deemed settled as a peripheral issue in the labor case.

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Private respondent, it must be observed, had gained regular status at the time of her dismissal. When she was served her walking papers on January 29, 1992, she was about to complete the probationary period of 150 days as she was contracted as a probationary employee on September 2, 1991. That her dismissal would be effected just when her probationary period was winding down clearly raises the plausible conclusion that it was done in order to prevent her from earning security of tenure. 27 On the other hand, her earlier stints with the company as reliever were undoubtedly those of a regular employee, even if the same were for fixed periods, as she performed activities which were essential or necessary in the usual trade and business of PT&T. 28 The primary standard of determining regular employment is the reasonable connection between the activity performed by the employee in relation to the business or trade of the employer. 29 As an employee who had therefore gained regular status, and as she had been dismissed without just cause, she is entitled to reinstatement without loss of seniority rights and other privileges and to full back wages, inclusive of allowances and other benefits or their monetary equivalent. 30 However, as she had undeniably committed an act of dishonesty in concealing her status, albeit under the compulsion of an unlawful imposition of petitioner, the threemonth suspension imposed by respondent NLRC must be upheld to obviate the impression or inference that such act should be condoned. It would be unfair to the employer if she were to return to its fold without any sanction whatsoever for her act which was not totally justified. Thus, her entitlement to back wages, which shall be computed from the time her compensation was withheld up to the time of her actual reinstatement, shall be reduced by deducting therefrom the amount corresponding to her three months suspension. 4. The government, to repeat, abhors any stipulation or policy in the nature of that adopted by petitioner PT&T. The Labor Code states, in no uncertain terms, as follows: "ART. 136. Stipulation against marriage. It shall be unlawful for an employer to require as a condition of employment or continuation of employment that a woman shall not get married, or to stipulate expressly or tacitly that upon getting married, a woman employee shall be deemed resigned or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of marriage." This provision had a studied history for its origin can be traced to Section 8 of Presidential Decree No. 148, 31 better known as the "Women and Child Labor Law," which amended paragraph (c), Section 12 of Republic Act No. 679, 32 entitled "An Act to Regulate the Employment of Women and Children, to Provide Penalties for Violations Thereof, and for Other Purposes." The forerunner to Republic Act No. 679, on the other hand, was Act No. 3071 which became law on March 16, 1923 and which regulated the employment of women and children in shops, factories, industrial, agricultural, and mercantile establishments and other places of labor in the then Philippine Islands. It would be worthwhile to reflect upon and adopt here the rationalization in Zialcita, et al. vs. Philippine Air Lines, 33 a decision that emanated from the Office of the President. There, a policy of Philippine Air Lines requiring that prospective flight attendants must be single and that they will be automatically separated from the service once they marry was declared void, it being violative of the clear mandate in Article 136 of the Labor Code with regard to

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discrimination against married women. Thus:

"Of first impression is the incompatibility of the respondent's policy or regulation with the codal provision of law. Respondent is resolute in its contention that Article 136 of the Labor Code applies only to women employed in ordinary occupations and that the prohibition against marriage of women engaged in extraordinary occupations, like flight attendants, is fair and reasonable, considering the peculiarities of their chosen profession. We cannot subscribe to the line of reasoning pursued by respondent. All along, it knew that the controverted policy has already met its doom as early as March 13, 1973 when Presidential Decree No. 148, otherwise known as the Women and Child Labor Law, was promulgated. But for the timidity of those affected or their labor unions in challenging the validity of the policy, the same was able to obtain a momentary reprieve. A close look at Section 8 of said decree, which amended paragraph (c) of Section 12 of Republic Act No. 679, reveals that it is exactly the same provision reproduced verbatim in Article 136 of the Labor Code, which was promulgated on May 1, 1974 to take effect six (6) months later, or on November 1, 1974. It cannot be gainsaid that, with the reiteration of the same provision in the new Labor Code, all policies and acts against it are deemed illegal and therefore abrogated. True, Article 132 enjoins the Secretary of Labor to establish standards that will ensure the safety and health of women employees and in appropriate cases shall by regulation require employers to determine appropriate minimum standards for termination in special occupations, such as those of flight attendants, but that is precisely the factor that militates against the policy of respondent. The standards have not yet been established as set forth in the first paragraph, nor has the Secretary of Labor issued any regulation affecting flight attendants. It is logical to presume that, in the absence of said standards or regulations which are as yet to be established, the policy of respondent against marriage is patently illegal. This finds support in Section 9 of the New Constitution, which provides: "Sec. 9. The State shall afford protection to labor, promote full employment and equality in employment, ensure equal work opportunities regardless of sex, race, or creed, and regulate the relations between workers and employees. The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work . . ." Moreover, we cannot agree to the respondent's proposition that termination from employment of flight attendants on account of marriage is a fair and reasonable standard designed for their own health, safety, protection and welfare, as no basis has been laid therefor. Actually, respondent claims that its concern is not so much against the continued employment of the flight attendant merely by reason of marriage as observed by the Secretary of Labor, but rather on the consequence of marriage-pregnancy. Respondent discussed at length in the instant appeal the supposed ill effects of pregnancy on flight attendants in the course of their employment. We feel that this needs no further discussion as it had been adequately explained by the Secretary of Labor in his decision of May 2, 1976. cdll

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In a vain attempt to give meaning to its position, respondent went as far as invoking the provisions of Articles 52 and 216 of the New Civil Code on the preservation of marriage as an inviolable social institution and the family as a basic social institution, respectively, as bases for its policy of non-marriage. In both instances, respondent predicates absence of a flight attendant from her home for long periods of time as contributory to an unhappy married life. This is pure conjecture not based on actual conditions, considering that, in this modern world, sophisticated technology has narrowed the distance from one place to another. Moreover, respondent overlooked the fact that married flight attendants can program their lives to adapt to prevailing circumstances and events. Article 136 is not intended to apply only to women employed in ordinary occupations, or it should have categorically expressed so. The sweeping intendment of the law, be it on special or ordinary occupations, is reflected in the whole text and supported by Article 135 that speaks of non-discrimination on the employment of women. The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining & Industrial Corporation 34 considered as void a policy of the same nature. In said case, respondent, in dismissing from the service the complainant, invoked a policy of the firm to consider female employees in the project it was undertaking as separated the moment they get married due to lack of facilities for married women. Respondent further claimed that complainant was employed in the project with an oral understanding that her services would be terminated when she gets married. Branding the policy of the employer as an example of "discriminatory chauvinism tantamount to denying equal employment opportunities to women simply on account of their sex, the appellate court struck down said employer policy as unlawful in view of its repugnance to the Civil Code, Presidential Decree No. 148 and the Constitution. Under American jurisprudence, job requirements which establish employer preference or conditions relating to the marital status of an employee are categorized as a "sex-plus" discrimination where it is imposed on one sex and not on the other. Further, the same should be evenly applied and must not inflict adverse effects on a racial or sexual group which is protected by federal job discrimination laws. Employment rules that forbid or restrict the employment of married women, but do not apply to married men, have been held to violate Title VII of the United States Civil Rights Act of 1964, the main federal statute prohibiting job discrimination against employees and applicants on the basis of, among other things, sex. 35 Further, it is not relevant that the rule is not directed against all women but just against married women. And, where the

employer discriminates against married women, but not against married men, the variable is sex and the discrimination is unlawful. 36 Upon the other hand, a requirement that a woman employee must remain unmarried could be justified as a "bona fide occupational qualification," or BFOQ, where the particular requirements of the job would justify the same, but not on the ground of a general principle, such as the desirability of spreading work in the workplace. A requirement of that nature would be valid provided it reflects an inherent quality reasonably necessary for satisfactory job performance. Thus, in one case, a no-marriage rule applicable to both male

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and female flight attendants, was regarded as unlawful since the restriction was not related to the job performance of the flight attendants. 37 5. Petitioner's policy is not only in derogation of the provisions of Article 136 of the Labor Code on the right of a woman to be free from any kind of stipulation against marriage in connection with her employment, but it likewise assaults good morals and public policy, tending as it does to deprive a woman of the freedom to choose her status, a privilege that by all accounts inheres in the individual as an intangible and inalienable right. 38 Hence, while it is true that the parties to a contract may establish any agreements, terms, and conditions that they may deem convenient, the same should not be contrary to law, morals, good customs, public order, or public policy. 39 Carried to its logical consequences, it may even be said that petitioner's policy against legitimate marital bonds would encourage illicit or common-law relations and subvert the sacrament of marriage. Parenthetically, the Civil Code provisions on the contract of labor state that the relations between the parties, that is, of capital and labor, are not merely contractual, impressed as they are with so much public interest that the same should yield to the common good. 40 It goes on to intone that neither capital nor labor should visit acts of oppression against the other, nor impair the interest or convenience of the public. 41 In the final reckoning, the danger of just such a policy against marriage followed by petitioner PT&T is that it strikes at the very essence, ideals and purpose of marriage as an inviolable social institution and, ultimately, of the family as the foundation of the nation. 42 That it must be effectively interdicted here in all its indirect, disguised or dissembled forms as discriminatory conduct derogatory of the laws of the land is not only in order but imperatively required. ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and Telephone Company is hereby DISMISSED for lack of merit, with double costs against petitioner. llcd SO ORDERED. Romero, Puno, Mendoza and Torres, Jr., JJ ., concur.

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18. SECOND DIVISION [G.R. No. 162994. September 17, 2004.] DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners, vs. GLAXO WELLCOME PHILIPPINES, INC., respondent. RESOLUTION TINGA, J p: Confronting the Court in this petition is a novel question, with constitutional overtones, involving the validity of the policy of a pharmaceutical company prohibiting its employees from marrying employees of any competitor company. DcaCSE This is a Petition for Review on Certiorari assailing the Decision 1 dated May 19, 2003 and the Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434. 2 Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc. (Glaxo) as medical representative on October 24, 1995, after Tecson had undergone training and orientation. Thereafter, Tecson signed a contract of employment which stipulates, among others, that he agrees to study and abide by existing company rules; to disclose to management any existing or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies and should management find that such relationship poses a possible conflict of interest, to resign from the company. The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform management of any existing or future relationship by consanguinity or affinity with coemployees or employees of competing drug companies. If management perceives a conflict of interest or a potential conflict between such relationship and the employees employment with the company, the management and the employee will explore the possibility of a transfer to another department in a non-counterchecking position or preparation for employment outside the company after six months. Tecson was initially assigned to market Glaxos products in the Camarines Sur-Camarines Norte sales area. SHADcT Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra Pharmaceuticals 3 (Astra), a competitor of Glaxo. Bettsy was Astras Branch Coordinator in Albay. She supervised the district managers and medical representatives of her company and prepared marketing strategies for Astra in that area. Even before they got married, Tecson received several reminders from his District Manager regarding the conflict of interest which his relationship with Bettsy might engender. Still, love prevailed, and Tecson married Bettsy in September 1998.

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In January 1999, Tecsons superiors informed him that his marriage to Bettsy gave rise to a conflict of interest. Tecsons superiors reminded him that he and Bettsy should decide which one of them would resign from their jobs, although they told him that they wanted to retain him as much as possible because he was performing his job well. Tecson requested for time to comply with the company policy against entering into a relationship with an employee of a competitor company. He explained that Astra, Bettsys employer, was planning to merge with Zeneca, another drug company; and Bettsy was planning to avail of the redundancy package to be offered by Astra. With Bettsys separation from her company, the potential conflict of interest would be eliminated. At the same time, they would be able to avail of the attractive redundancy package from Astra. In August 1999, Tecson again requested for more time resolve the problem. In September 1999, Tecson applied for a transfer in Glaxos milk division, thinking that since Astra did not have a milk division, the potential conflict of interest would be eliminated. His application was denied in view of Glaxos least-movement-possible policy. TacESD In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur sales area. Tecson asked Glaxo to reconsider its decision, but his request was denied. Tecson sought Glaxos reconsideration regarding his transfer and brought the matter to Glaxos Grievance Committee. Glaxo, however, remained firm in its decision and gave Tecson until February 7, 2000 to comply with the transfer order. Tecson defied the transfer order and continued acting as medical representative in the Camarines Sur-Camarines Norte sales area.

During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued samples of products which were competing with similar products manufactured by Astra. He was also not included in product conferences regarding such products.

Because the parties failed to resolve the issue at the grievance machinery level, they submitted the matter for voluntary arbitration. Glaxo offered Tecson a separation pay of onehalf () month pay for every year of service, or a total of P50,000.00 but he declined the offer. On November 15, 2000, the National Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxos policy on relationships between its employees and persons employed with competitor companies, and affirming Glaxos right to transfer Tecson to another sales territory. Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the NCMB Decision. EHSTcC On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for Review on the ground that the NCMB did not err in rendering its Decision. The appellate court held that Glaxos policy prohibiting its employees from having personal relationships with employees of competitor companies is a valid exercise of its management prerogatives. 4 Tecson filed a Motion for Reconsideration of the appellate courts Decision, but the motion was denied by the appellate court in its Resolution dated March 26, 2004. 5

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Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in affirming the NCMBs finding that the Glaxos policy prohibiting its employees from marrying an employee of a competitor company is valid; and (ii) the Court of Appeals also erred in not finding that Tecson was constructively dismissed when he was transferred to a new sales territory, and deprived of the opportunity to attend products seminars and training sessions. 6 Petitioners contend that Glaxos policy against employees marrying employees of competitor companies violates the equal protection clause of the Constitution because it creates invalid distinctions among employees on account only of marriage. They claim that the policy restricts the employees right to marry. 7 They also argue that Tecson was constructively dismissed as shown by the following circumstances: (1) he was transferred from the Camarines Sur-Camarines Norte sales area to the Butuan-Surigao-Agusan sales area, (2) he suffered a diminution in pay, (3) he was excluded from attending seminars and training sessions for medical representatives, and (4) he was prohibited from promoting respondents products which were competing with Astras products. 8 In its Comment on the petition, Glaxo argues that the company policy prohibiting its employees from having a relationship with and/or marrying an employee of a competitor company is a valid exercise of its management prerogatives and does not violate the equal protection clause; and that Tecsons reassignment from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City and Agusan del Sur sales area does not amount to constructive dismissal. 9 Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical products, it has a genuine interest in ensuring that its employees avoid any activity, relationship or interest that may conflict with their responsibilities to the company. Thus, it expects its employees to avoid having personal or family interests in any competitor company which may influence their actions and decisions and consequently deprive Glaxo of legitimate profits. The policy is also aimed at preventing a competitor company from gaining access to its secrets, procedures and policies. 10 It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or future relationships with employees of competitor companies, and is therefore not violative of the equal protection clause. It maintains that considering the nature of its business, the prohibition is based on valid grounds. 11 According to Glaxo, Tecsons marriage to Bettsy, an employee of Astra, posed a real and potential conflict of interest. Astras products were in direct competition with 67% of the products sold by Glaxo. Hence, Glaxos enforcement of the foregoing policy in Tecsons case was a valid exercise of its management prerogatives. 12 In any case, Tecson was given several months to remedy the situation, and was even encouraged not to resign but to ask his wife to resign from Astra instead. 13 Glaxo also points out that Tecson can no longer question the assailed company policy because when he signed his contract of employment, he was aware that such policy was stipulated therein. In said contract, he also agreed to resign from respondent if the management finds

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that his relationship with an employee of a competitor company would be detrimental to the interests of Glaxo. 14

Glaxo likewise insists that Tecsons reassignment to another sales area and his exclusion from seminars regarding respondents new products did not amount to constructive dismissal. acCTIS It claims that in view of Tecsons refusal to resign, he was relocated from the Camarines SurCamarines Norte sales area to the Butuan City-Surigao City and Agusan del Sur sales area. Glaxo asserts that in effecting the reassignment, it also considered the welfare of Tecsons family. Since Tecsons hometown was in Agusan del Sur and his wife traces her roots to Butuan City, Glaxo assumed that his transfer from the Bicol region to the Butuan City sales area would be favorable to him and his family as he would be relocating to a familiar territory and minimizing his travel expenses. 15 In addition, Glaxo avers that Tecsons exclusion from the seminar concerning the new antiasthma drug was due to the fact that said product was in direct competition with a drug which was soon to be sold by Astra, and hence, would pose a potential conflict of interest for him. Lastly, the delay in Tecsons receipt of his sales paraphernalia was due to the mix-up created by his refusal to transfer to the Butuan City sales area (his paraphernalia was delivered to his new sales area instead of Naga City because the supplier thought he already transferred to Butuan). 16 The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in ruling that Glaxos policy against its employees marrying employees from competitor companies is valid, and in not holding that said policy violates the equal protection clause of the Constitution; (2) Whether Tecson was constructively dismissed. The Court finds no merit in the petition. The stipulation in Tecsons contract of employment with Glaxo being questioned by petitioners provides: ScaEIT xxx xxx xxx

10. You agree to disclose to management any existing or future relationship you may have, either by consanguinity or affinity with co-employees or employees of competing drug companies. Should it pose a possible conflict of interest in management discretion, you agree to resign voluntarily from the Company as a matter of Company policy. xxx xxx xxx 17

The same contract also stipulates that Tecson agrees to abide by the existing company rules of Glaxo, and to study and become acquainted with such policies. 18 In this regard, the Employee Handbook of Glaxo expressly informs its employees of its rules regarding conflict of interest: 1. Conflict of Interest

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Employees should avoid any activity, investment relationship, or interest that may run counter to the responsibilities which they owe Glaxo Wellcome. Specifically, this means that employees are expected: a. To avoid having personal or family interest, financial or otherwise, in any competitor supplier or other businesses which may consciously or unconsciously influence their actions or decisions and thus deprive Glaxo Wellcome of legitimate profit. b. To refrain from using their position in Glaxo Wellcome or knowledge of Company plans to advance their outside personal interests, that of their relatives, friends and other businesses. c. To avoid outside employment or other interests for income which would impair their effective job performance. d. To consult with Management on such activities or relationships that may lead to conflict of interest. SDTIaE 1.1. Employee Relationships

Employees with existing or future relationships either by consanguinity or affinity with coemployees of competing drug companies are expected to disclose such relationship to the Management. If management perceives a conflict or potential conflict of interest, every effort shall be made, together by management and the employee, to arrive at a solution within six (6) months, either by transfer to another department in a non-counter checking position, or by career preparation toward outside employment after Glaxo Wellcome. Employees must be prepared for possible resignation within six (6) months, if no other solution is feasible. 19 No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxos policy prohibiting an employee from

having a relationship with an employee of a competitor company is a valid exercise of management prerogative. Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors, especially so that it and Astra are rival companies in the highly competitive pharmaceutical industry. The prohibition against personal or marital relationships with employees of competitor companies upon Glaxos employees is reasonable under the circumstances because relationships of that nature might compromise the interests of the company. In laying down the assailed company policy, Glaxo only aims to protect its interests against the possibility that a competitor company will gain access to its secrets and procedures. That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its right to reasonable returns on investments and to expansion and growth. 20 Indeed, while our laws endeavor to give life to the constitutional policy on social justice and the protection of labor, it does not mean that every labor dispute will be decided in favor of

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the workers. The law also recognizes that management has rights which are also entitled to respect and enforcement in the interest of fair play. 21 As held in a Georgia, U.S.A case, 22 it is a legitimate business practice to guard business confidentiality and protect a competitive position by even-handedly disqualifying from jobs male and female applicants or employees who are married to a competitor. Consequently, the court ruled than an employer that discharged an employee who was married to an employee of an active competitor did not violate Title VII of the Civil Rights Act of 1964. 23 The Court pointed out that the policy was applied to men and women equally, and noted that the employers business was highly competitive and that gaining inside information would constitute a competitive advantage. The challenged company policy does not violate the equal protection clause of the Constitution as petitioners erroneously suggest. It is a settled principle that the commands of the equal protection clause are addressed only to the state or those acting under color of its authority. 24 Corollarily, it has been held in a long array of U.S. Supreme Court decisions that the equal protection clause erects no shield against merely private conduct, however, discriminatory or wrongful. 25 The only exception occurs when the state 26 in any of its manifestations or actions has been found to have become entwined or involved in the wrongful private conduct. 27 Obviously, however, the exception is not present in this case. Significantly, the company actually enforced the policy after repeated requests to the employee to comply with the policy. Indeed, the application of the policy was made in an impartial and even-handed manner, with due regard for the lot of the employee. ITDHSE In any event, from the wordings of the contractual provision and the policy in its employee handbook, it is clear that Glaxo does not impose an absolute prohibition against relationships between its employees and those of competitor companies. Its employees are free to cultivate relationships with and marry persons of their own choosing. What the company merely seeks to avoid is a conflict of interest between the employee and the company that may arise out of such relationships. As succinctly explained by the appellate court, thus: The policy being questioned is not a policy against marriage. An employee of the company remains free to marry anyone of his or her choosing. The policy is not aimed at restricting a personal prerogative that belongs only to the individual. However, an employees personal decision does not detract the employer from exercising management prerogatives to ensure maximum profit and business success . . . 28 The Court of Appeals also correctly noted that the assailed company policy which forms part of respondents Employee Code of Conduct and of its contracts with its employees, such as that signed by Tecson, was made known to him prior to his employment. Tecson, therefore, was aware of that restriction when he signed his employment contract and when he entered into a relationship with Bettsy. Since Tecson knowingly and voluntarily entered into a contract of employment with Glaxo, the stipulations therein have the force of law between them and, thus, should be complied with in good faith. 29 He is therefore estopped from questioning said policy. caADSE The Court finds no merit in petitioners contention that Tecson was constructively dismissed when he was transferred from the Camarines Norte-Camarines Sur sales area to the Butuan

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City-Surigao City-Agusan del Sur sales area, and when he was excluded from attending the companys seminar on new products which were directly competing with similar products manufactured by Astra. Constructive dismissal is defined as a quitting, an involuntary resignation resorted to when continued employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee. 30 None of these conditions are present in the instant case. The record does not show that Tecson was demoted or unduly discriminated upon by reason of such transfer. As found by the appellate court, Glaxo properly exercised its management prerogative in reassigning Tecson to the Butuan City sales area: . . . In this case, petitioners transfer to another place of assignment was merely in keeping with the policy of the company in avoidance of conflict of interest, and thus valid . . . Note that *Tecsons+ wife holds a sensitive supervisory position as Branch Coordinator in her employercompany which requires her to work in close coordination with District Managers and Medical Representatives. Her duties include monitoring sales of Astra products, conducting sales drives, establishing and furthering relationship with customers, collection, monitoring and managing Astras inventory . . . she therefore takes an active participation in the market war characterized as it is by stiff competition among pharmaceutical companies. Moreover, and this is significant, petitioners sales territory covers Camarines Sur and Camarines Norte while his wife is supervising a branch of her employer in Albay. The proximity of their areas of responsibility, all in the same Bicol Region, renders the conflict of interest not only possible, but actual, as learning by one spouse of the others market strategies in the region would be inevitable. *Managements+ appreciation of a conflict of interest is therefore not merely illusory and wanting in factual basis . . . 31 In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission, 32 which involved a complaint filed by a medical representative against his employer drug company for illegal dismissal for allegedly terminating his employment when he refused to accept his reassignment to a new area, the Court upheld the right of the drug company to transfer or reassign its employee in accordance with its operational demands and requirements. The ruling of the Court therein, quoted hereunder, also finds application in the instant case: STaCcA By the very nature of his employment, a drug salesman or medical representative is expected to travel. He should anticipate reassignment according to the demands of their business. It would be a poor drug corporation which cannot even assign its representatives or detail men to new markets calling for opening or expansion or to areas where the need for pushing its products is great. More so if such reassignments are part of the employment contract. 33 As noted earlier, the challenged policy has been implemented by Glaxo impartially and disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo gave Tecson several chances to eliminate the conflict of interest brought about by his relationship with Bettsy. When their relationship was still in its initial stage, Tecsons supervisors at Glaxo constantly reminded him about its effects on his employment with the company and on the companys interests. After Tecson married Bettsy, Glaxo gave him time to resolve the conflict by either resigning from the company or asking his wife to resign from Astra. Glaxo even

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expressed its desire to retain Tecson in its employ because of his satisfactory performance and suggested that he ask Bettsy to resign from her company instead. Glaxo likewise acceded to his repeated requests for more time to resolve the conflict of interest. When the problem could not be resolved after several years of waiting, Glaxo was constrained to reassign Tecson to a sales area different from that handled by his wife for Astra. Notably, the Court did not terminate Tecson from employment but only reassigned him to another area where his home province, Agusan del Sur, was included. In effecting Tecsons transfer, Glaxo even considered the welfare of Tecsons family. Clearly, the foregoing dispels any suspicion of unfairness and bad faith on the part of Glaxo. 34 WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners. SO ORDERED. HSEIAT Austria-Martinez and Callejo, Sr., JJ ., concur. Puno, J ., concurs in the result.Chico-Nazario, J ., is on leave

19. SECOND DIVISION [G.R. No. 164774. April 12, 2006.] STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN CHUA, petitioners, vs. RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, respondents. DECISION PUNO, J p: We are called to decide an issue of first impression: whether the policy of the employer banning spouses from working in the same company violates the rights of the employee under the Constitution and the Labor Code or is a valid exercise of management prerogative. ICTDEa At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated August 3, 2004 in CA-G.R. SP No. 73477 reversing the decision of the National Labor Relations Commission (NLRC) which affirmed the ruling of the Labor Arbiter. Petitioner Star Paper Corporation (the company) is a corporation engaged in trading principally of paper products. Josephine Ongsitco is its Manager of the Personnel and Administration Department while Sebastian Chua is its Managing Director. The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol), Wilfreda N. Comia (Comia) and Lorna E. Estrella (Estrella) were all regular employees of the company. 1 Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an employee of the company, whom he married on June 27, 1998. Prior to the marriage, Ongsitco advised the couple that should they decide to get married, one of them should resign pursuant to a company policy promulgated in 1995, 2 viz.:

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1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to [the] 3rd degree of relationship, already employed by the company. 2. In case of two of our employees (both singles [sic], one male and another female) developed a friendly relationship during the course of their employment and then decided to get married, one of them should resign to preserve the policy stated above. 3

Simbol resigned on June 20, 1998 pursuant to the company policy. 4 Comia was hired by the company on February 5, 1997. She met Howard Comia, a coemployee, whom she married on June 1, 2000. Ongsitco likewise reminded them that pursuant to company policy, one must resign should they decide to get married. Comia resigned on June 30, 2000. 5 Estrella was hired on July 29, 1994. She met Luisito Zuiga (Zuiga), also a co-worker. Petitioners stated that Zuiga, a married man, got Estrella pregnant. The company allegedly could have terminated her services due to immorality but she opted to resign on December 21, 1999. 6 The respondents each signed a Release and Confirmation Agreement. They stated therein that they have no money and property accountabilities in the company and that they release the latter of any claim or demand of whatever nature. 7 Respondents offer a different version of their dismissal. Simbol and Comia allege that they did not resign voluntarily; they were compelled to resign in view of an illegal company policy. As to respondent Estrella, she alleges that she had a relationship with co-worker Zuiga who misrepresented himself as a married but separated man. After he got her pregnant, she discovered that he was not separated. Thus, she severed her relationship with him to avoid dismissal due to the company policy. On November 30, 1999, she met an accident and was advised by the doctor at the Orthopedic Hospital to recuperate for twenty-one (21) days. She returned to work on December 21, 1999 but she found out that her name was on-hold at the gate. She was denied entry. She was directed to proceed to the personnel office where one of the staff handed her a memorandum. The memorandum stated that she was being dismissed for immoral conduct. She refused to sign the memorandum because she was on leave for twenty-one (21) days and has not been given a chance to explain. The management asked her to write an explanation. However, after submission of the explanation, she was nonetheless dismissed by the company.

Due to her urgent need for money, she later submitted a letter of resignation in exchange for her thirteenth month pay. 8 Respondents later filed a complaint for unfair labor practice, constructive dismissal, separation pay and attorney's fees. They averred that the aforementioned company policy is illegal and contravenes Article 136 of the Labor Code. They also contended that they were dismissed due to their union membership. aESIDH On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for lack of merit, viz.:

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[T]his company policy was decreed pursuant to what the respondent corporation perceived as management prerogative. This management prerogative is quite broad and encompassing for it covers hiring, work assignment, working method, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers. Except as provided for or limited by special law, an employer is free to regulate, according to his own discretion and judgment all the aspects of employment. 9 (Citations omitted.) On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on January 11, 2002. 10 Respondents filed a Motion for Reconsideration but was denied by the NLRC in a Resolution 11 dated August 8, 2002. They appealed to respondent court via Petition for Certiorari. In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC decision, viz.: WHEREFORE, premises considered, the May 31, 2002 (sic) 12 Decision of the National Labor Relations Commission is hereby REVERSED and SET ASIDE and a new one is entered as follows: (1) Declaring illegal, the petitioners' dismissal from employment and ordering private respondents to reinstate petitioners to their former positions without loss of seniority rights with full backwages from the time of their dismissal until actual reinstatement; and STaAcC (2) Ordering private respondents to pay petitioners attorney's fees amounting to 10% of the award and the cost of this suit. 13 On appeal to this Court, petitioners contend that the Court of Appeals erred in holding that: 1. . . . THE SUBJECT 1995 POLICY/REGULATION IS VIOLATIVE OF THE CONSTITUTIONAL RIGHTS TOWARDS MARRIAGE AND THE FAMILY OF EMPLOYEES AND OF ARTICLE 136 OF THE LABOR CODE; AND 2. . . . RESPONDENTS' RESIGNATIONS WERE FAR FROM VOLUNTARY. 14

We affirm. The 1987 Constitution 15 states our policy towards the protection of labor under the following provisions, viz.: Article II, Section 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare. xxx xxx xxx

Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with

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law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law. aIHCSA The State shall promote the principle of shared responsibility between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and growth. The Civil Code likewise protects labor with the following provisions: Art. 1700. The relation between capital and labor are not merely contractual. They are so impressed with public interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects. Art. 1702. 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. The Labor Code is the most comprehensive piece of legislation protecting labor. The case at bar involves Article 136 of the Labor Code which provides: Art. 136. It shall be unlawful for an employer to require as a condition of employment or continuation of employment that a woman employee shall not get married, or to stipulate expressly or tacitly that upon getting married a woman employee shall be deemed resigned or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of her marriage. Respondents submit that their dismissal violates the above provision. Petitioners allege that its policy "may appear to be contrary to Article 136 of the Labor Code" but it assumes a new meaning if read together with the first paragraph of the rule. The rule does not require the woman employee to resign. The employee spouses have the right to choose who between them should resign. Further, they are free to marry persons other than co-employees. Hence, it is not the marital status of the employee, per se, that is being discriminated. It is only intended to carry out its no-employment-for-relatives-within-the-third-degree-policy which is within the ambit of the prerogatives of management. 16 It is true that the policy of petitioners prohibiting close relatives from working in the same company takes the nature of an anti-nepotism employment policy. Companies adopt these policies to prevent the hiring of unqualified persons based on their status as a relative, rather than upon their ability. 17 These policies focus upon the potential employment problems arising from the perception of favoritism exhibited towards relatives. CHDAEc With more women entering the workforce, employers are also enacting employment policies specifically prohibiting spouses from working for the same company. We note that two types of employment policies involve spouses: policies banning only spouses from working in the same company (no-spouse employment policies), and those banning all immediate family members, including spouses, from working in the same company (anti-nepotism employment policies). 18

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Unlike in our jurisdiction where there is no express prohibition on marital discrimination, 19 there are twenty state statutes 20 in the United States prohibiting marital discrimination. Some state courts 21 have been confronted with the issue of whether no-spouse policies violate their laws prohibiting both marital status and sex discrimination. In challenging the anti-nepotism employment policies in the United States, complainants utilize two theories of employment discrimination: the disparate treatment and the disparate impact. Under the disparate treatment analysis, the plaintiff must prove that an employment policy is discriminatory on its face. No-spouse employment policies requiring an employee of a particular sex to either quit, transfer, or be fired are facially discriminatory. For example, an employment policy prohibiting the employer from hiring wives of male employees, but not husbands of female employees, is discriminatory on its face. 22 On the other hand, to establish disparate impact, the complainants must prove that a facially neutral policy has a disproportionate effect on a particular class. For example, although most employment policies do not expressly indicate which spouse will be required to transfer or leave the company, the policy often disproportionately affects one sex. 23 The state courts' rulings on the issue depend on their interpretation of the scope of marital status discrimination within the meaning of their respective civil rights acts. Though they agree that the term "marital status" encompasses discrimination based on a person's status as either married, single, divorced, or widowed, they are divided on whether the term has a broader meaning. Thus, their decisions vary. 24 The courts narrowly 25 interpreting marital status to refer only to a person's status as married, single, divorced, or widowed reason that if the legislature intended a broader definition it would have either chosen different language or specified its intent. They hold that the relevant inquiry is if one is married rather than to whom one is married. They construe marital status discrimination to include only whether a person is single, married, divorced, or widowed and not the "identity, occupation, and place of employment of one's spouse." These courts have upheld the questioned policies and ruled that they did not violate the marital status discrimination provision of their respective state statutes. ADScCE The courts that have broadly 26 construed the term "marital status" rule that it encompassed the identity, occupation and employment of one's spouse. They strike down the no-spouse employment policies based on the broad legislative intent of the state statute. They reason that the no-spouse employment policy violate the marital status provision because it arbitrarily discriminates against all spouses of present employees without regard to the actual effect on the individual's qualifications or work performance. 27 These courts also find the no-spouse employment policy invalid for failure of the employer to present any evidence of business necessity other than the general perception that spouses in the same workplace might adversely affect the business. 28 They hold that the absence of such a bona fide occupational qualification 29 invalidates a rule denying employment to one spouse due to the current employment of the other spouse in the same office. 30 Thus, they rule that unless the employer can prove that the reasonable demands of the business require a distinction based on marital status and there is no better available or acceptable policy which would better accomplish the business purpose, an employer may not discriminate

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against an employee based on the identity of the employee's spouse. 31 This is known as the bona fide occupational qualification exception. We note that since the finding of a bona fide occupational qualification justifies an employer's no-spouse rule, the exception is interpreted strictly and narrowly by these state courts. There must be a compelling business necessity for which no alternative exists other than the discriminatory practice. 32 To justify a bona fide occupational qualification, the employer must prove two factors: (1) that the employment qualification is reasonably related to the essential operation of the job involved; and, (2) that there is a factual basis for believing that all or substantially all persons meeting the qualification would be unable to properly perform the duties of the job. 33 The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We employ the standard of reasonableness of the company policy which is parallel to the bona fide occupational qualification requirement. In the recent case of Duncan Association of Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, Inc., 34 we passed on the validity of the policy of a pharmaceutical company prohibiting its employees from marrying employees of any competitor company. We held that Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors. We considered the prohibition against personal or marital relationships with employees of competitor companies upon Glaxo's employees reasonable under the circumstances because relationships of that nature might compromise the interests of Glaxo. In laying down the assailed company policy, we recognized that Glaxo only aims to protect its interests against the possibility that a competitor company will gain access to its secrets and procedures. 35 The requirement that a company policy must be reasonable under the circumstances to qualify as a valid exercise of management prerogative was also at issue in the 1997 case of Philippine Telegraph and Telephone Company v. NLRC. 36 In said case, the employee was dismissed in violation of petitioner's policy of disqualifying from work any woman worker who contracts marriage. We held that the company policy violates the right against discrimination afforded all women workers under Article 136 of the Labor Code, but established a permissible exception, viz.: [A] requirement that a woman employee must remain unmarried could be justified as a "bona fide occupational qualification," or BFOQ, where the particular requirements of the job would justify the same, but not on the ground of a general principle, such as the desirability of spreading work in the workplace. A requirement of that nature would be valid provided it reflects an inherent quality reasonably necessary for satisfactory job performance. 37 (Emphases supplied.) The cases of Duncan and PT&T instruct us that the requirement of reasonableness must be clearly established to uphold the questioned employment policy. The employer has the burden to prove the existence of a reasonable business necessity. The burden was successfully discharged in Duncan but not in PT&T. ISDCHA We do not find a reasonable business necessity in the case at bar.

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Petitioners' sole contention that "the company did not just want to have two (2) or more of its employees related between the third degree by affinity and/or consanguinity" 38 is lame. That the second paragraph was meant to give teeth to the first paragraph of the questioned rule 39 is evidently not the valid reasonable business necessity required by the law. It is significant to note that in the case at bar, respondents were hired after they were found fit for the job, but were asked to resign when they married a co-employee. Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an employee of the Repacking Section, could be detrimental to its business operations. Neither did petitioners explain how this detriment will happen in the case of Wilfreda Comia, then a Production Helper in the Selecting Department, who married Howard Comia, then a helper in the cutter-machine. The policy is premised on the mere fear that employees married to each other will be less efficient. If we uphold the questioned rule without valid justification, the employer can create policies based on an unproven presumption of a perceived danger at the expense of an employee's right to security of tenure. Petitioners contend that their policy will apply only when one employee marries a coemployee, but they are free to marry persons other than co-employees. The questioned policy may not facially violate Article 136 of the Labor Code but it creates a disproportionate effect and under the disparate impact theory, the only way it could pass judicial scrutiny is a showing that it is reasonable despite the discriminatory, albeit disproportionate, effect. The failure of petitioners to prove a legitimate business concern in imposing the questioned policy cannot prejudice the employee's right to be free from arbitrary discrimination based upon stereotypes of married persons working together in one company. 40 Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction is vast and extensive that we cannot prudently draw inferences from the legislature's silence 41 that married persons are not protected under our Constitution and declare valid a policy based on a prejudice or stereotype. Thus, for failure of petitioners to present undisputed proof of a reasonable business necessity, we rule that the questioned policy is an invalid exercise of management prerogative. Corollarily, the issue as to whether respondents Simbol and Comia resigned voluntarily has become moot and academic. cAaDHT As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the singular fact that her resignation letter was written in her own handwriting. Both ruled that her resignation was voluntary and thus valid. The respondent court failed to categorically rule whether Estrella voluntarily resigned but ordered that she be reinstated along with Simbol and Comia. Estrella claims that she was pressured to submit a resignation letter because she was in dire need of money. We examined the records of the case and find Estrella's contention to be more in accord with the evidence. While findings of fact by administrative tribunals like the NLRC are generally given not only respect but, at times, finality, this rule admits of exceptions, 42 as in the case at bar.

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Estrella avers that she went back to work on December 21, 1999 but was dismissed due to her alleged immoral conduct. At first, she did not want to sign the termination papers but she was forced to tender her resignation letter in exchange for her thirteenth month pay. The contention of petitioners that Estrella was pressured to resign because she got impregnated by a married man and she could not stand being looked upon or talked about as immoral 43 is incredulous. If she really wanted to avoid embarrassment and humiliation, she would not have gone back to work at all. Nor would she have filed a suit for illegal dismissal and pleaded for reinstatement. We have held that in voluntary resignation, the employee is compelled by personal reason(s) to dissociate himself from employment. It is done with the intention of relinquishing an office, accompanied by the act of abandonment. 44 Thus, it is illogical for Estrella to resign and then file a complaint for illegal dismissal. Given the lack of sufficient evidence on the part of petitioners that the resignation was voluntary, Estrella's dismissal is declared illegal. IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477 dated August 3, 2004 is AFFIRMED. IHTaCE SO ORDERED. Sandoval-Gutierrez, Corona, Azcuna and Garcia, JJ., concur.

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