Labstan Assignment

1
Mario Raymund Yap

3rd year College of Law
Labor Standards Atty. Villarente

Essential Elements of Illegal Recruitment

People v. Hadja Jarma Lalli
Second division
Justice Antonio Carpio

Section 6 of Republic Act No. 8042 (RA 8042) defines illegal recruitment, as follows:

Illegal recruitment shall mean any act of canvassing, enlisting, contracting, transporting,
utilizing, hiring, or procuring workers and includes referring, contact services, promising or
advertising for employment abroad, whether for profit or not, when undertaken by a non-
licensee or non-holder of authority contemplated under Article 13(f) of Presidential Decree No.
442, as amended, otherwise known as the Labor Code of the Philippines. It is clear that a
person or entity engaged in recruitment and placement activities without the requisite
authority from the Department of Labor and Employment (DOLE), whether for profit or not, is
engaged in illegal recruitment.

Article 13(b) of the Labor Code of the Philippines defines recruitment and placement as
any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers,
and includes referrals, contract services, promising or advertising for employment, locally or
abroad, whether for profit or not, provided, that any person or entity which, in any manner,
offers or promises for a fee, employment to two or more persons shall be deemed engaged in
recruitment and placement.
Clearly, given the broad definition of recruitment and placement, even the mere act of referring
someone for placement abroad can be considered recruitment. Such act of referral, in
connivance with someone without the requisite authority or POEA license, constitutes illegal
recruitment. In its simplest terms, illegal recruitment is committed by persons who, without
authority from the government, give the impression that they have the power to send workers
abroad for employment purposes.44
In this case, the trial court, as affirmed by the appellate court, found Lalli, Aringoy and
Relampagos to have conspired and confederated with one another to recruit and place Lolita
for work in Malaysia, without a POEA license. The three elements of syndicated illegal
recruitment are present in this case, in particular: (1) the accused have no valid license or
authority required by law to enable them to lawfully engage in the recruitment and placement
of workers; (2) the accused engaged in this activity of recruitment and placement by actually
recruiting, deploying and transporting Lolita to Malaysia; and (3) illegal recruitment was
committed by three persons (Aringoy, Lalli and Relampagos), conspiring and confederating with
one another.
Delia romero vs. people
3rd division
Justice Diosdado Peralta

The crime of illegal recruitment is committed when two elements concur, namely: (1)
the offender has no valid license or authority required by law to enable one to lawfully engage
in recruitment and placement of workers; and (2) he undertakes either any activity within the
meaning of "recruitment and placement" defined under Article 13 (b), or any prohibited
practices enumerated under Article 34 of the Labor Code.

2
In disputing the absence of the first element, petitioner offers her opinion that the CA
erred in affirming the trial court's reliance on a mere certification from the DOLE Dagupan
District Office that she does not have the necessary licence to recruit workers for abroad. She
claims that the prosecution committed a procedural lapse in not procuring a certification from
the agency primarily involved, the Philippine Overseas Employment Administration (POEA). The
said argument, however, is flawed.

Under the first element, a non-licensee or non-holder of authority is any person,
corporation or entity which has not been issued a valid license or authority to engage in
recruitment and placement by the Secretary of Labor, or whose license or authority has been
suspended, revoked or cancelled by the POEA or the Secretary. Clearly, the creation of the
POEA did not divest the Secretary of Labor of his/her jurisdiction over recruitment and
placement of activities.
Anent the second element, petitioner insists that the CA was wrong in affirming the factual
findings of the trial court. According to her, the accommodation extended by the petitioner to
the private respondents is far from the referral as contemplated in Article 13 (b) of the Labor
Code.
It is a settled rule that factual findings of the trial courts, including their assessment of the
witnesses' credibility, are entitled to great weight and respect by the Supreme Court,
particularly when the CA affirmed such findings. After all, the trial court is in the best position
to determine the value and weight of the testimonies of witnesses.

Nevertheless, the testimonies of the private respondents clearly establish the fact that
petitioner's conduct falls within the term recruitment as defined by law.

Simple illegal recruitment
People vs. Lourdes lo
1st division
Justice Teresita Leonardo-de Castro

Here, we are convinced that the three elements were sufficiently proved beyond
reasonable doubt.
First, accused-appellants, undoubtedly, did not have any license to recruit persons for
overseas work. This is substantiated by the POEA, Licensing Branch which issued a Certification
to this effect and the testimony of an employee of the POEA, Corazon Cristobal.
Second, accused-appellants engaged in illegal recruitment activities, offering overseas
employment for a fee. This is supported by the testimonies of the private complainants,
particularly Devanadera who categorically testified that accused-appellants promised private
complainants employment and assured them of placement overseas.
Magnaye and Agramon also corroborated the testimony of Devanadera. Their narration
undoubtedly established that accused-appellants promised them employment in Italy as factory
workers and they (accused-appellants) asked money from them (private complainants) to
allegedly process their papers and visas. Private complainants were deceived as they relied on
accused-appellants misrepresentation and scheme that caused them to entrust their money to
them in exchange of what they later discovered was a vain hope of obtaining employment
abroad.
Accused-appellants mere denials, as well as their self-serving and uncorroborated
testimonies, cannot stand against the straightforward testimonies of private complainants who
positively identified them in court as the persons who enticed them to part with their money
upon their fraudulent representations that they (accused-appellants) would be able to secure
for the former employment abroad. In the absence of any evidence that the prosecution
witnesses were motivated by improper motives, the trial courts assessment of the credibility of
the witnesses shall not be interfered with by this Court.
3
Third, accused-appellant Calimon committed illegal recruitment activities involving at
least three persons, i.e., the three private complainants herein. On the part of Comila, this third
element was not proved and thus, she was properly convicted of simple illegal recruitment
only.

Ilegal recruitment in a large scale
People vs. Melissa Chua
Gr. No. 187052, September 13, 2012
Justice Martin S. Villarama Jr.

The crime of illegal recruitment is defined and penalized under sections 6 and 7 of RA
8042 or the Migrant Workers and Overseas Filipinos Act of 1995.

Illegal recruitment is deemed committed by a syndicate if carried out by a group of
three (3) or more persons conspiring or confederating with one another. It is deemed
committed in large scale if committed against three (3) or more persons individually or as a
group.

In order to hold a person liable for illegal recruitment, the following elements must
concur: (1) the offender undertakes any of the activities within the meaning of recruitment
and placement under Article 13(b) of the Labor Code, or any of the prohibited practices
enumerated under Article 34 of the Labor Code and (2) the offender has no valid license or
authority required by law to enable him to lawfully engage in recruitment and placement of
workers. In the case of illegal recruitment in large scale, a third element is added: that the
offender commits any of the acts of recruitment and placement against three or more persons,
individually or as a group.

Inarguably, appellant Chua engaged in recruitment when she represented to private
complainants that she could send them to Taiwan as factory workers upon submission of the
required documents and payment of the placement fee. The four private complainants
positively identified appellant as the person who promised them employment as factory
workers in Taiwan for a fee of P80, 000. More importantly, Severino Maranan the Senior Labor
Employment Officer of the POEA, presented a Certification dated December 5, 2002, issued by
Director Felicitas Q. Bay, to the effect that appellant Chua is not licensed by the POEA to recruit
workers for overseas employment.

Illegal recruitment as economic sabotage
People vs. Rosario Ochoa;
G.R. No. 173792 August 31, 2011
1st division

Illegal recruitment in large scale

Ochoa was charged with violation of Section 6 of Republic Act No. 8042. Said provision
broadens the concept of illegal recruitment under the Labor Code and provides stiffer penalties,
especially for those that constitute economic sabotage, i.e., illegal recruitment in large scale
and illegal recruitment committed by a syndicate.

Section 6 of Republic Act No. 8042 defines illegal recruitment as follows:

SEC. 6. Definition. - For purposes of this Act, illegal recruitment shall mean any act of
canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring workers and
includes referring, contract services, promising or advertising for employment abroad, whether
4
for profit or not, when undertaken by a non-licensee or non-holder of authority contemplated
under Article 13(f) of Presidential Decree No. 442, as amended, otherwise known as the Labor
Code of the Philippines: Provided, That any such non-licensee or non-holder who, in any
manner, offers or promises for a fee employment abroad to two or more persons shall be
deemed so engaged. It shall likewise include the following acts, whether committed by any
person, whether a non-licensee, non-holder, licensee or holder of authority:

x x x x

(m) Failure to reimburse expenses incurred by the worker in connection with his
documentation and processing for purposes of deployment, in cases where the deployment
does not actually take place without the worker's fault. Illegal recruitment when committed by
a syndicate or in large scale shall be considered an offense involving economic sabotage.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or
more persons conspiring or confederating with one another. It is deemed committed in large
scale if committed against three (3) or more persons individually or as a group.

It is well-settled that to prove illegal recruitment, it must be shown that appellant gave
complainants the distinct impression that she had the power or ability to send complainants
abroad for work such that the latter were convinced to part with their money in order to be
employed. All eight private complainants herein consistently declared that Ochoa offered and
promised them employment overseas. Ochoa required private complainants to submit their
bio-data, birth certificates, and passports, which private complainants did. Private
complainants also gave various amounts to Ochoa as payment for placement and medical fees
as evidenced by the receipts Ochoa issued to Gubat, Cesar, and Agustin. Despite private
complainants compliance with all the requirements Ochoa specified, they were not able to
leave for work abroad. Private complainants pleaded that Ochoa return their hard-earned
money, but Ochoa failed to do so.

Distinction between illegal recruitment and estafa
Rosita Sy vs. people
G.R. No. 183879 April 14, 2010
3rd division
Justice Antonio Eduardo Nachura

Illegal recruitment and estafa cases may be filed simultaneously or separately. The filing
of charges for illegal recruitment does not bar the filing of estafa, and vice versa. Sys acquittal
in the illegal recruitment case does not prove that she is not guilty of estafa. Illegal recruitment
and estafa are entirely different offenses and neither one necessarily includes or is necessarily
included in the other. A person who is convicted of illegal recruitment may, in addition, be
convicted of estafa under Article 315, paragraph 2(a) of the RPC. In the same manner, a person
acquitted of illegal recruitment may be held liable for estafa. Double jeopardy will not set in
because illegal recruitment is malum prohibitum, in which there is no necessity to prove
criminal intent, whereas estafa ismalum in se, in the prosecution of which, proof of criminal
intent is necessary
Liabilities of local recruitment agencies violation of Labor Code committed by foreign
employers.

5
Liabilities of local recruitment agencies violation of Labor Code committed by foreign
employers
Santosa Datuman vs. 1st cosmo man power;
G.R. No. 156029 November 14, 2008
1st division

On whether respondent is solidarily liable for petitioners monetary claims

Section 1(3) of Rule II of the POEA Rules and Regulations states that:

(3) Shall assume joint and solidary liability with the employer for all claims and liabilities
which may arise in connection with the implementation of the contract; including but not
limited to payment of wages, death and disability compensation and repatriation.

The above provisions are clear that the private employment agency shall assume joint
and solidary liability with the employer. This Court has, time and again, ruled that private
employment agencies are held jointly and severally liable with the foreign-based employer for
any violation of the recruitment agreement or contract of employment. This joint and solidary
liability imposed by law against recruitment agencies and foreign employers is meant to assure
the aggrieved worker of immediate and sufficient payment of what is due him. This is in line
with the policy of the state to protect and alleviate the plight of the working class.

We cannot agree with the view of the CA that the solidary liability of respondent
extends only to the first contract (i.e. the original, POEA-approved contract which had a term of
until April 1990). The signing of the substitute contracts with the foreign employer/principal
before the expiration of the POEA-approved contract and any continuation of petitioners
employment beyond the original one-year term, against the will of petitioner, are continuing
breaches of the original POEA-approved contract. To accept the CAs reasoning will open the
floodgates to even more abuse of our overseas workers at the hands of their foreign employers
and local recruiters, since the recruitment agency could easily escape its mandated solidary
liability for breaches of the POEA-approved contract by colluding with their foreign principals in
substituting the approved contract with another upon the workers arrival in the country of
employment. Such outcome is certainly contrary to the States policy of extending protection
and support to our overseas workers. To be sure, Republic Act No. 8042 explicitly prohibits the
substitution or alteration to the prejudice of the worker of employment contracts already
approved and verified by the Department of Labor and Employment (DOLE) from the time of
actual signing thereof by the parties up to and including the period of the expiration of the
same without the approval of the DOLE.

Hence, in the present case, the diminution in the salary of petitioner from US$370.00 to
US$100 (BD 40.00) per month is void for violating the POEA-approved contract which set the
minimum standards, terms, and conditions of her employment. Consequently, the solidary
liability of respondent with petitioners foreign employer for petitioners money claims
continues although she was forced to sign another contract in Bahrain. It is the terms of the
original POEA-approved employment contract that shall govern the relationship of petitioner
with the respondent recruitment agency and the foreign employer. We agree with the Labor
Arbiter and the NLRC that the precepts of justice and fairness dictate that petitioner must be
compensated for all months worked regardless of the supposed termination of the original
contract in April 1990. It is undisputed that petitioner was compelled to render service until
April 1993 and for the entire period that she worked for the foreign employer or his unilaterally
appointed successor, she should have been paid US$370/month for every month worked in
accordance with her original contract.

6
Respondent cannot disclaim liability for the acts of the foreign employer which forced
petitioner to remain employed in violation of our laws and under the most oppressive
conditions on the allegation that it purportedly had no knowledge of, or participation in, the
contract unwillingly signed by petitioner abroad. We cannot give credence to this claim
considering that respondent by its own allegations knew from the outset that the contract
submitted to the POEA for approval was not to be the real contract. Respondent blithely
admitted to submitting to the POEA a contract stating that the position to be filled by petitioner
is that of Saleslady although she was to be employed as a domestic helper since the latter
position was not approved for deployment by the POEA at that time. Respondents evident bad
faith and admitted circumvention of the laws and regulations on migrant workers belie its
protestations of innocence and put petitioner in a position where she could be exploited and
taken advantage of overseas, as what indeed happened to her in this case.

Jurisdiction of labor arbiter and NLRC for foreign employees
Pacific Consultants vs. Klaus;
G.R. No. 166920 February 19, 2007
3rd division
Justice Romeo Callejo, Sr.

Petitioners contend that respondent should have filed his Complaint in his place of
permanent residence, or where the PCIJ holds its principal office, at the place where the
contract of employment was signed, in London as stated in their contract. By enumerating
possible venues where respondent could have filed his complaint, however, petitioners
themselves admitted that the provision on venue in the employment contract is indeed merely
permissive.

Petitioners insistence on the application of the principle of forum non conveniens must
be rejected. The bare fact that respondent is a Canadian citizen and was a repatriate does not
warrant the application of the principle for the following reasons:

First. The Labor Code of the Philippines does not include forum non conveniens as a
ground for the dismissal of the complaint.34

Second. The propriety of dismissing a case based on this principle requires a factual
determination; hence, it is properly considered as defense.35

Third. In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of
Appeals,36 this Court held that:

x x x [a] Philippine Court may assume jurisdiction over the case if it chooses to do so;
provided, that the following requisites are met: (1) that the Philippine Court is one to which the
parties may conveniently resort to; (2) that the Philippine Court is in a position to make an
intelligent decision as to the law and the facts; and, (3) that the Philippine Court has or is likely
to have power to enforce its decision. x x x

Admittedly, all the foregoing requisites are present in this case.

7
Constitutionality of Section 7 of RA 10022
Skippers United vs. Nathaniel;
G.R. No. 175558 February 8, 2012
2nd division

As admitted by Skippers in its Position Paper, the home allotment pay for December
1998 due to De Gracia, Lata and Aprosta is:
The monthly salary of De Gracia, according to his employment contract, is only US$800.00.
However, since Skippers admitted in its Position Paper a higher home allotment pay for De
Gracia, we award the higher amount of home allotment pay for De Gracia in the amount of
US$900.00. Since the home allotment pay can be considered as unpaid salaries, the peso
equivalent of the dollar amount should be computed using the prevailing rate at the time of
termination since it was due and demandable to De Gracia, et al. on 28 January 1999.
Section 10 of Republic Act No. 8042 (Migrant Workers Act) provides for money claims in cases
of unjust termination of employment contracts:

In case of termination of overseas employment without just, valid or authorized cause
as defined by law or contract, the workers shall be entitled to the full reimbursement of his
placement fee with interest of twelve percent (12%) per annum, plus his salaries for the
unexpired portion of his employment contract or for three (3) months for every year of the
unexpired term, whichever is less.

The Migrant Workers Act provides that salaries for the unexpired portion of the
employent contract or three (3) months for every year of the unexpired term, whichever is less,
shall be awarded to the overseas Filipino worker, in cases of illegal dismissal. However, in 24
March 2009, Serrano v. Gallant Maritime Services and Marlow Navigation Co. Inc.,58 the Court,
in an En Banc Decision, declared unconstitutional the clause or for three months for every year
of the unexpired term, whichever is less and awarded the entire unexpired portion of the
employment contract to the overseas Filipino worker.

On 8 March 2010, however, Section 7 of Republic Act No. 10022 (RA 10022) amended
Section 10 of the Migrant Workers Act, and once again reiterated the provision of awarding the
unexpired portion of the employent contract or three (3) months for every year of the

Nevertheless, since the termination occurred on January 1999 before the passage of the
amendatory RA 10022, we shall apply RA 8042, as unamended, without touching on the
constitutionality of Section 7 of RA 10022.

The declaration in March 2009 of the unconstitutionality of the clause or for three
months for every year of the unexpired term, whichever is less in RA 8042 shall be given
retroactive effect to the termination that occurred in January 1999 because an unconstitutional
clause in the law confers no rights, imposes no duties and affords no protection. The
unconstitutional provision is inoperative, as if it was not passed into law at all.

8
Theory of Imputed Knowledge
Sunance Intl mgt. vs. NLRC;
G.R. No. 161757 January 25, 2006
3rd division
Justice Conchita Carpio-Morales

The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to the
principal, employer Xiong, not the other way around. The knowledge of the principal-foreign
employer cannot, therefore, be imputed to its agent Sunace.

There being no substantial proof that Sunace knew of and consented to be bound under
the 2-year employment contract extension, it cannot be said to be privy thereto. As such, it
and its owner cannot be held solidarily liable for any of Divinas claims arising from the 2-year
employment extension. As the New Civil Code provides,

Contracts take effect only between the parties, their assigns, and heirs, except in case
where the rights and obligations arising from the contract are not transmissible by their nature,
or by stipulation or by provision of law.

Solidary Liability of foreign employer and local recruitment agency
Asian intl manpower v. ca;
G.R. No. 169652 October 9, 2006
1st division
Justice Consuelo Ynares-Santiago

There is no dispute that the last employer of Lacerna was Donna and not Daisy Lee
because the Hong Kong government directed her repatriation before she could sign her
contract with the latter. In dismissing her, Donna gave no reason for her termination. Neither
did Proxy explain the ground for her dismissal. And where there is no showing of a clear, valid,
and legal cause for the termination, the law considers the matter, a case of illegal dismissal. In
termination cases involving Filipino workers recruited for overseas employment, the burden of
proving just or authorized cause for termination rests with the foreign based
employer/principal and the local based entity which recruited the worker both being solidarily
liable for liabilities arising from the illegal dismissal of the worker. In this case, the Court of
Appeals correctly declared Lacernas termination illegal since no reason was given to justify her
termination.

AIMS argued that it cannot be held liable for the monetary claims of Lacerna because its
contract was limited only to Lacernas employment with Low See Ting. When she resigned as
domestic helper of the latter, the contract was allegedly extinguished making AIMS no longer
privy to the subsequent employment contract entered into by Proxy and Lacerna. Moreover,
even granting that Lacerna truly resigned as domestic helper of Low See Ting, the liability of
AIMS was not extinguished. The contract of Lacerna as approved by the Philippine Overseas
Employment Administration (POEA) reveals that Proxy was her designated principal employer;
the agreed salary was HK$3,670.00 a month; and the contract duration was for two years. Since
AIMS was the local agency which recruited Lacerna for Proxy, it is solidarily liable with the latter
for liabilities arising from her illegal dismissal. To detach itself from the liability of Proxy, AIMS
must show by clear and convincing evidence that its contract is limited to Lacernas
employment by Low See Ting. However, aside from its bare allegation, AIMS presented no
proof to corroborate its claim. On the contrary, it appears that in transferring Lacerna from one
employer to another, Proxy did not demand a new placement fee from Lacerna. This only
shows that Proxys conduct was in accordance with the original contract executed with AIMS
and not on an entirely new and separate agreement entered into in Hong Kong. This
interpretation is in accord with the rule that all doubts in the construction of labor contracts
9
should be resolved in favor of the working class. The Constitution mandates the protection of
labor and the sympathetic concern of the State for the workers conformably to the social
justice policy. Verily, to absolve AIMS from liability based on its unsubstantiated claim that it is
not privy to the subsequent employment provided by Proxy for Lacerna would be to undermine
the avowed policy of the State. The joint and solidary liability imposed by law against
recruitment agencies and foreign employers is meant to assure the aggrieved worker of
immediate and sufficient payment of what is due him.

The liability of the principal/employer and the recruitment/placement agency for any
and all claims under this section shall be joint and several. This provision shall be incorporated
in the contract for overseas employment and shall be a condition precedent for its approval.
The performance bond to be filed by the recruitment/placement agency, as provided by law,
shall be answerable for all money claims or damages that may be awarded to the workers. If
the recruitment/placement agency is a juridical being, the corporate officers and directors and
partners as the case may be, shall themselves be jointly and solidarily liable with the
corporation or partnership for the aforesaid claims and damages.

Such liabilities shall continue during the entire period or duration of the employment
contract and shall not be affected by any substitution, amendment or modification made locally
or in a foreign country of the said contract.

as defined by law or contract, the worker shall be entitled to the full reimbursement of his
placement fee with interest at twelve percent (12%) per annum, plus his salaries for the
unexpired portion of the employment contract or for three (3) months for every year of the
unexpired term, whichever is less

The illegal dismissal of Lacerna entitles her to the full reimbursement of placement fee
with interest at twelve percent (12%) per annum, plus salaries for the unexpired portion of her
employment contract or for three months for every year of the unexpired term, whichever is
less. Thus, the Court of Appeals was correct in ordering AIMS to pay HK$11,010.00
corresponding to three months of her salary or its equivalent in the Philippine Peso at the time
of payment, plus placement fee of P18,0000.00.

Santosa datuman vs. 1st cosmo man power;
G.R. No. 156029 November 14, 2008
1st division
Teresita Leonardo-de Castro

On whether respondent is solidarily liable for petitioners monetary claims

Section 1 of Rule II of the POEA Rules and Regulations states that:
Section 1. Requirements for Issuance of License. Every applicant for license to operate a
private employment agency or manning agency shall submit a written application together
with the following requirements:
x x x
f. A verified undertaking stating that the applicant:
x x x
(3) Shall assume joint and solidary liability with the employer for all claims and liabilities
which may arise in connection with the implementation of the contract; including but not
limited to payment of wages, death and disability compensation and repatriation.

10
The above provisions are clear that the private employment agency shall assume joint
and solidary liability with the employer.[19] This Court has, time and again, ruled that private
employment agencies are held jointly and severally liable with the foreign-based employer for
any violation of the recruitment agreement or contract of employment.[20] This joint and
solidary liability imposed by law against recruitment agencies and foreign employers is meant
to assure the aggrieved worker of immediate and sufficient payment of what is due him.[21]
This is in line with the policy of the state to protect and alleviate the plight of the working class.

We cannot agree with the view of the CA that the solidary liability of respondent
extends only to the first contract (i.e. the original, POEA-approved contract which had a term of
until April 1990). The signing of the substitute contracts with the foreign employer/principal
before the expiration of the POEA-approved contract and any continuation of petitioners
employment beyond the original one-year term, against the will of petitioner, are continuing
breaches of the original POEA-approved contract. To accept the CAs reasoning will open the
floodgates to even more abuse of our overseas workers at the hands of their foreign employers
and local recruiters, since the recruitment agency could easily escape its mandated solidary
liability for breaches of the POEA-approved contract by colluding with their foreign principals in
substituting the approved contract with another upon the workers arrival in the country of
employment. Such outcome is certainly contrary to the States policy of extending protection
and support to our overseas workers. To be sure, Republic Act No. 8042 explicitly prohibits the
substitution or alteration to the prejudice of the worker of employment contracts already
approved and verified by the Department of Labor and Employment (DOLE) from the time of
actual signing thereof by the parties up to and including the period of the expiration of the
same without the approval of the DOLE.[22]

Respondents contention that it was petitioner herself who violated their Contract of
Employment when she signed another contract in Bahrain deserves scant consideration. It is
the finding of both the Labor Arbiter and the NLRC which, significantly, the CA did not disturb
that petitioner was forced to work long after the term of her original POEA-approved
contract, through the illegal acts of the foreign employer.

In Placewell International Services Corporation v. Camote,[23] we held that the
subsequently executed side agreement of an overseas contract worker with her foreign
employer which reduced his salary below the amount approved by the POEA is void because it
is against our existing laws, morals and public policy. The said side agreement cannot
supersede the terms of the standard employment contract approved by the POEA.

Hence, in the present case, the diminution in the salary of petitioner from US$370.00 to
US$100 (BD 40.00) per month is void for violating the POEA-approved contract which set the
minimum standards, terms, and conditions of her employment. Consequently, the solidary
liability of respondent with petitioners foreign employer for petitioners money claims
continues although she was forced to sign another contract in Bahrain. It is the terms of the
original POEA-approved employment contract that shall govern the relationship of petitioner
with the respondent recruitment agency and the foreign employer. We agree with the Labor
Arbiter and the NLRC that the precepts of justice and fairness dictate that petitioner must be
compensated for all months worked regardless of the supposed termination of the original
contract in April 1990. It is undisputed that petitioner was compelled to render service until
April 1993 and for the entire period that she worked for the foreign employer or his unilaterally
appointed successor, she should have been paid US$370/month for every month worked in
accordance with her original contract.

Respondent cannot disclaim liability for the acts of the foreign employer which forced
petitioner to remain employed in violation of our laws and under the most oppressive
conditions on the allegation that it purportedly had no knowledge of, or participation in, the
11
contract unwillingly signed by petitioner abroad. We cannot give credence to this claim
considering that respondent by its own allegations knew from the outset that the contract
submitted to the POEA for approval was not to be the real contract. Respondent blithely
admitted to submitting to the POEA a contract stating that the position to be filled by petitioner
is that of Saleslady although she was to be employed as a domestic helper since the latter
position was not approved for deployment by the POEA at that time. Respondents evident bad
faith and admitted circumvention of the laws and regulations on migrant workers belie its
protestations of innocence and put petitioner in a position where she could be exploited and
taken advantage of overseas, as what indeed happened to her in this case.

Liability of transferee of recruitment agent of previous obligation
ABD overseas manpower vs. NLRC;
G.R. No. 117056 February 24, 1998
3rd division
Justice Flerida Ruth Romero

The basic issue here is: "As between petitioner and MARS, who should be held liable for
such awards?" This can only be resolved by interpreting Section 6, Rule I, Book III of the POEA
Rules which states as follows:

Sec. 6. Transfer of Accreditation. The accreditation of a principal or a project may be
transferred to another agency provided that transfer shall not involve any diminution of wages
and benefits of workers.

The transferee agency in these instances shall comply with the requirements for
accreditation and shall assume full and complete responsibility for all contractual obligations of
the principals to its workers originally recruited and processed by the former agency. Prior to
the transfer of accreditation, the Administration shall notify the previous agency and principal
of such application.

The rule on transfer of accreditation was prescribed under the general policies of the
POEA to "establish the environment conducive to the continued operations of legitimate,
responsible and professional private agencies" and to "afford protection to Filipino workers and
their families, promote their interests and safeguard their welfare." 13 In line with these
policies, Book III of the same rules provides for the accreditation of a principal or "any foreign
person, partnership or corporation hiring Filipino workers through an agency." 14 Principals
may be accredited in this country only through licensed local
agencies. 15 A land-based principal shall be accredited to only one agency but the POEA may
grant accreditation to a second agent as may be deemed necessary. 16 In the same manner, the
accreditation of a principal may be transferred to another agency under the aforequoted
Section 6, Rule I, Book III of the POEA Rules.

In the case at bar, petitioner became the accredited recruitment agency of the principal,
M.S. Al Babtain Recruitment Office, on September 3, 1990, after MARS had filed on July 5, 1990,
its answer to Macaraya's complaint for illegal dismissal. Petitioner got involved only on January
9, 1992, when it was impleaded in the case upon MARS' motion. The case having been
submitted for decision long before it became a party, petitioner naturally filed an answer
alleging its own claims against MARS.

Under the Rules of Court which were then in effect and applicable to the case at bar,
when MARS failed to file an answer to petitioner's cross-claim, it should have been declared in
default with respect to such claim. 17 In labor cases, however, technical rules of procedure are
not applicable, 18 but may apply only by analogy or in a suppletory character, for instance,
when there is a need to attain substantial justice and an expeditious, practical and convenient
12
solution to a labor problem. 19 Hence, when the POEA opted to overlook petitioner's cross-
claim against MARS, petitioner was denied substantial justice.

Basic principles of justice and equity, however, dictate that MARS should not be totally
cleared of its liability to Macaraya under the peculiar circumstances of this case. Section 6, Rule
II, Book III of the POEA Rules may not be used as a shield against liability by a recruitment
agency that has been substituted by a foreign principal as its local recruitment agency after it
has clearly incurred liability in favor of an overseas worker. After all, the POEA is presumed by
law to have intended right and justice to prevail 20 in promulgating its rules. Consequently,
considering that it was MARS with whom Macaraya entered into a contract and that it had been
accorded due process at the proceedings before the POEA, it is but meet and just that MARS be
the one to be held accountable for her claims.

In so ruling, the Court is not in any way invalidating Section 6, Rule II, Book III of the
POEA Rules. The presumption of its validity remains. Its application in this case should,
however, be an exception to the rule. Petitioner shall pay Macaraya the amount due her under
the assailed POEA decision, without prejudice to its right to be reimbursed by MARS under the
provision of the Civil Code that "(w)hoever pays for another may demand from the debtor what
he has paid." 21
Sameer overseas placement vs. lebaltino;
G.R. No. 153942. June 29, 2005
2nd division
Justice Dante Tinga

The remaining arguments posed by Sameer pertain to the merits of the case, i.e., on
whether it could be held jointly and severally liable with IDG considering that it was no longer
the agent of the foreign employer. We do not wish to belabor any discussion on this point,
considering that it has passed evaluation on three prior levels of review; but as with the Court
of Appeals, we agree that such ruling is supported by jurisprudence. In support of the holding
on Sameers liability, the Labor Arbiter cited the Courts ruling in ABD Overseas Manpower
Corp. v. NLRC.[15] We have reviewed the citation, and find its application to the present case
seemly. The Court therein accorded premium to the fact that it had been the previous local
recruitment agency of the foreign employer who had contracted with the complainant therein,
and that the POEA Rules on the assumption by the transferee agency of the contractual
obligations of the principal cannot be used as a shield against liability. Similarly in this case, it
was Sameer, not IDG, which had contracted with Levantino, and guaranteed the wages which
were not eventually paid to the employer, and it does not run contrary to justice that Sameer
be absolved from liability to Levantino.

Illegal termination of overseas employment without just cause
Quirico Lopez vs. Alturas
G.R. No. 191008 April 11, 2011
3rd division

Dismissals have two facets: the legality of the act of dismissal, which constitutes
substantive due process, and the legality of the manner of dismissal which constitutes
procedural due process.[12]

As to substantive due process, the Court finds that respondent companys loss of trust
and confidence arising from petitioners smuggling out of the scrap iron, conpounded by his
past acts of unauthorized selling cartons belonging to respondent company, constituted just
cause for terminating his services.
13

Loss of trust and confidence as a ground for dismissal of employees covers employees
occupying a position of trust who are proven to have breached the trust and confidence
reposed on them. Apropos is Cruz v. Court of Appeals[13] which explains the basis and
quantum of evidence of loss of trust and confidence, viz:

In addition, the language of Article 282(c) of the Labor Code states that the loss of trust
and confidence must be based on willful breach of the trust reposed in the employee by his
employer. Such breach is willful if it is done intentionally, knowingly, and purposely, without
justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or
inadvertently. Moreover, it must be based on substantial evidence and not on the employers
whims or caprices or suspicions otherwise, the employee would eternally remain at the mercy
of the employer. Loss of confidence must not be indiscriminately used as a shield by the
employer against a claim that the dismissal of an employee was arbitrary. And, in order to
constitute a just cause for dismissal, the act complained of must be work-related and shows
that the employee concerned is unfit to continue working for the employer. In addition, loss of
confidence as a just cause for termination of employment is premised on the fact that the
employee concerned holds a position of responsibility, trust and confidence or that the
employee concerned is entrusted with confidence with respect to delicate matters, such as the
handling or care and protection of the property and assets of the employer. The betrayal of
this trust is the essence of the offense for which an employee is penalized.

Petitioner, a driver assigned with a specific vehicle, was entrusted with the transportation
of respondent companys goods and property, and consequently with its handling and
protection, hence, even if he did not occupy a managerial position, he can be said to be holding
a position of responsibility. As to his actprincipal ground for his dismissal his attempt to
smuggle out the scrap iron belonging to respondent company, the same is undoubtedly work-
related.

Respondent companys charge against petitioner was amply proven by substantial
evidence consisting of the affidavits of various employees of respondent. Contrary to the
NLRCs observation, the security guard who apprehended petitioner, Gerardo Luega, actually
executed a statement[14] relative to the smuggling out of scrap iron, which was attached to,
and served as basis for the filing of, the corresponding complaint for Qualified Theft.
Petitioners claim that he was framed up after he allegedly lost his pay slip to draw respondent
company to suspect that he might file a labor complaint for underpayment does not inspire
credence.

It is, however, with respect to the appellate courts finding that petitioner was not
afforded procedural due process that the Court deviates from. Procedural due process has
been defined as giving an opportunity to be heard before judgment is rendered.[15] In
termination cases, Perez v. Philippine Telegraph and Telephone Company,[16] illuminates on
the correct proceedings to be followed therein in order to comply with the due process
requirement:

After receiving the first notice apprising him of the charges against him, the employee
may submit a written explanation (which may be in the form of a letter, memorandum, affidavit
or position paper) and offer evidence in support thereof, like relevant company records (such as
his 201 file and daily time records) and the sworn statements of his witnesses. For this
purpose, he may prepare his explanation personally or with the assistance of a representative
or counsel. He may also ask the employer to provide him copy of records material to his
defense. His written explanation may also include a request that a formal hearing or
conference be held. In such a case, the conduct of a formal hearing or conference becomes
14
mandatory, just as it is where there exist substantial evidentiary disputes or where company
rules or practice requires an actual hearing as part of employment pretermination procedure
Petitioner was given the opportunity to explain his side when he was informed of the charge
against him and required to submit his written explanation with which he complied. That there
might have been no hearing is of no moment, for as Autobus Workers Union v. NLRC*17+ holds:

This Court has held that there is no violation of due process even if no hearing was
conducted, where the party was given a chance to explain his side of the controversy. What is
frowned upon is the denial of the opportunity to be heard.

Parenthetically, the Court finds that it was error for the NLRC to opine that petitioner
should have been afforded counsel or advised of the right to counsel. The right to counsel and
the assistance of one in investigations involving termination cases is neither indispensable nor
mandatory, except when the employee himself requests for one or that he manifests that he
wants a formal hearing on the charges against him. In petitioners case, there is no showing
that he requested for a formal hearing to be conducted or that he be assisted by counsel.
Verily, since he was furnished a second notice informing him of his dismissal and the grounds
therefor, the twin-notice requirement had been complied with to call for a deletion of the
appellate courts award of nominal damages to petitioner.

Procedural due process in dismissal of employee
Solid waters vs. Solid
G.R. No. 165995 August 14, 2007
2nd division
Justice Leonardo Quisumbing

On the matter of due process, well-settled is the dictum that the twin requirements of
notice and hearing constitute the essential elements of due process in the dismissal of
employees. It is a cardinal rule in our jurisdiction that the employer must furnish the employee
with two written notices before the termination of employment can be effected: (1) the first
apprises the employee of the particular acts or omissions for which his dismissal is sought; and
(2) the second informs the employee of the employers decision to dismiss him. The
requirement of a hearing, on the other hand, is complied with as long as there was an
opportunity to be heard, and not necessarily that an actual hearing was conducted.[19]

In separate infraction reports, petitioners were both apprised of the particular acts or
omissions constituting the charges against them. They were also required to submit their
written explanation within 12 hours from receipt of the reports. Yet, neither of them complied.
Had they found the 12-hour period too short, they should have requested for an extension of
time. Further, notices of termination were also sent to them informing them of the basis of
their dismissal. In fine, petitioners were given due process before they were dismissed. Even if
no hearing was conducted, the requirement of due process had been met since they were
accorded a chance to explain their side of the controversy.

Meaning of substantive due process
Skippers vs. doza
G.R. No. 175558 February 8, 2012
2nd division

Substantive due process, on the other hand, requires that dismissal by the employer be
made under a just or authorized cause under Articles 282 to 284 of the Labor Code.
The monthly salary of De Gracia, according to his employment contract, is only US$800.00.
However, since Skippers admitted in its Position Paper a higher home allotment pay for De
15
Gracia, we award the higher amount of home allotment pay for De Gracia in the amount of
US$900.00. Since the home allotment pay can be considered as unpaid salaries, the peso
equivalent of the dollar amount should be computed using the prevailing rate at the time of
termination since it was due and demandable to De Gracia, et al. on 28 January 1999.

Section 10 of Republic Act No. 8042 (Migrant Workers Act) provides for money claims in
cases of unjust termination of employment contracts:

as defined by law or contract, the workers shall be entitled to the full reimbursement of his
placement fee with interest of twelve percent (12%) per annum, plus his salaries for the

The Migrant Workers Act provides that salaries for the unexpired portion of the
employent contract or three (3) months for every year of the unexpired term, whichever is less,
shall be awarded to the overseas Filipino worker, in cases of illegal dismissal. However, in 24
March 2009, Serrano v. Gallant Maritime Services and Marlow Navigation Co. Inc.,58 the Court,
in an En Banc Decision, declared unconstitutional the clause or for three months for every year
of the unexpired term, whichever is less and awarded the entire unexpired portion of the
employment contract to the overseas Filipino worker.

On 8 March 2010, however, Section 7 of Republic Act No. 10022 (RA 10022) amended
Section 10 of the Migrant Workers Act, and once again reiterated the provision of awarding the
unexpired portion of the employent contract or three (3) months for every year of the

Nevertheless, since the termination occurred on January 1999 before the passage of the
amendatory RA 10022, we shall apply RA 8042, as unamended, without touching on the
constitutionality of Section 7 of RA 10022.

The declaration in March 2009 of the unconstitutionality of the clause or for three
months for every year of the unexpired term, whichever is less in RA 8042 shall be given
retroactive effect to the termination that occurred in January 1999 because an unconstitutional
clause in the law confers no rights, imposes no duties and affords no protection. The
unconstitutional provision is inoperative, as if it was not passed into law at all.

Pre-termination by the employee/illegal termination of foreign employer
JSS indo China vs. Ferrer
G.R. No. 156381 October 14, 2005
THIRD DIVISION
Justice Angelina Sandoval-Gutierrez

The sole legal issue for our Resolution is whether respondents were illegally dismissed
from employment by petitioner.

There is no question that petitioner violated its contract with respondents. As found by
the Labor Arbiter, the NLRC and the Appellate Court, petitioner did not assign them as
construction workers for Formosa Plastics Corporation. Instead, they were directed to work as
cable tray/pipe tract workers at Shin Kwan Enterprise Co., Ltd.

The Labor Arbiter found that respondents decision to resign from their employment
were made by force of circumstances not attributable to their own fault, and it was not their
fault that they were left out from among those workers who were considered for employment
16
by the foreign employer. Likewise, the NLRC held that respondents decision to go home to
the Philippines was justified in view of the evident breach of contract by petitioner, as it
clearly appeared that upon their arrival at the jobsite, there was no employer on hand.
Clearly, both labor tribunals correctly concluded, as affirmed by the Court of Appeals, that they
were forced to resign and to pre-terminate their employment contracts in view of petitioners
breach of their provisions. Undoubtedly, the termination of respondents services is without
just or valid cause.

as defined by law or contract, the worker shall be entitled to the full reimbursement of his
placement fee with interest at twelve percent (12%) per annum, plus his salaries for the

Verily, as correctly held by the Court of Appeals, respondents who were unjustly
dismissed from work are actually entitled to an amount representing their three (3) months
salary considering that their employment contract has a term of exactly one (1) year; plus a full
refund of their placement fee, with no ceiling, with interest at 12% per annum.

Legal termination/ Ban on direct hiring
CF sharp vs. Secretary
G.R. No. 155903 September 14, 2007
THIRD DIVISION

The petitioner-appellant must be reminded that prior to approval of the transfer of
accreditation, no recruitment or deployment may be made by the principal by itself or through
the would-be transferee manning agency, or by the latter, as this would constitute illegal
recruitment by a non-holder of authority under Sec. 6, R.A. 8042 in relation to Article 13(b) and
(f) and Article 16 of the Labor Code as amended; Rule II(jj), Book I, and Sec. 1 and 6, Rule 1,
Book III, POEA Rules and Regulations Governing Overseas Employment.

The petitioner-appellant alleges that there is no need for a license to enable LCLs
officers to conduct their alleged activities of interviewing, selecting and hiring crewmen.
Indeed, LCLs officers could have conducted these activities without a license.

Such claim is without legal basis, as direct hiring by employers of Filipino workers for
overseas employment is banned; they can only do so through, among others, licensed private
recruitment and shipping/mining agencies (Art. 18, Labor Code as amended; Sec. 1, Rule 1,
Book II, POEA Rules and Regulations Governing Overseas Employment).

Power of Secretary to suspend or cancel license
Transaction vs. Secretary
G.R. No. 109583 September 5, 1997
SECOND DIVISION
Justice Flerida Ruth Romero

The power to suspend or cancel any license or authority to recruit employees for
overseas employment is vested upon the Secretary of Labor and Employment. Article 35 of the
Labor Code, as amended, which provides:

17
Art. 5. Suspension and/or Cancellation of License or Authority The Minister of Labor
shall have the power to suspend or cancel any license or authority to recruit employees for
overseas employment for violation of rules and regulations issued by the Ministry of Labor, the
Overseas Employment Development Board, and the National Seamen Board, or for violation of
the provisions of this and other applicable laws, General Orders and Letters of Instructions.

In the case of Eastern Assurance and Surety Corp. v. Secretary of
Labor, 5 we held that:

The penalties of suspension and cancellation of license or authority are prescribed for
violations of the above quoted provisions, among others. And the Secretary of Labor has the
power under Section 35 of the law to apply these sanctions, as well as the authority, conferred
by Section 36, not only to "restrict and regulate the recruitment and placement activities of all
agencies," but also to "promulgate rules and regulations to carry out the objectives and
implement the provisions" governing said activities. Pursuant to this rule-making power thus
granted, the Secretary of Labor gave the POEA, 6 "on its own initiative or upon filing of a
complaint or report or upon request for investigation by any aggrieved person, . . (authority to)
conduct the necessary proceedings for the suspension or cancellation of the license or
authority of any agency or entity" for certain enumerated offenses including

1) the imposition or acceptance, directly or indirectly, of any amount of money, goods or
services, or any fee or bond in excess of what is prescribed by the Administration, and

2) any other violation of pertinent provisions of the Labor Code and other relevant laws,
rules and regulations. 7

The Administrator was also given the power to "order the dismissal of the case of the
suspension of the license or authority of the respondent agency or contractor or recommend to
the Minister the cancellation thereof."
DOLE Circular of 2002 Compressed work week
Linton co. vs. Gillera
G.R. No. 163147 October 10, 2007
SECOND DIVISION
Justice Dante Tinga

The main issue in this labor dispute is whether or not there was an illegal reduction of
work when Linton implemented a compressed workweek by reducing from six to three the
number of working days with the employees working on a rotation basis.

In Philippine Graphic Arts, Inc. v. NLRC,[40] the Court upheld for the validity of the
reduction of working hours, taking into consideration the following: the arrangement was
temporary, it was a more humane solution instead of a retrenchment of personnel, there was
notice and consultations with the workers and supervisors, a consensus were reached on how
to deal with deteriorating economic conditions and it was sufficiently proven that the company
was suffering from losses.

The Bureau of Working Conditions of the DOLE, moreover, released a bulletin[41]
providing for in determining when an employer can validly reduce the regular number of
working days. The said bulletin states that a reduction of the number of regular working days is
valid where the arrangement is resorted to by the employer to prevent serious losses due to
causes beyond his control, such as when there is a substantial slump in the demand for his
goods or services or when there is lack of raw materials.
18

Although the bulletin stands more as a set of directory guidelines than a binding set of
implementing rules, it has one main consideration, consistent with the ruling in Philippine
Graphic Arts Inc., in determining the validity of reduction of working hoursthat the company
was suffering from losses.

Petitioners attempt to justify their action by alleging that the company was suffering
from financial losses owing to the Asian currency crisis. Was petitioners claim of financial losses
supported by evidence?

The lower courts did not give credence to the income statement submitted by Linton
because the same was not audited by an independent auditor.[42] The NLRC, on the other
hand, took judicial notice of the Asian currency crisis which resulted in the devaluation of the
peso and a slump in market demand.[43] The Court of Appeals for its part held that Linton
failed to present adequate, credible and persuasive evidence to show that it was in dire straits
and indeed suffering, or would imminently suffer, from drastic business losses. It did not find
the reduction of work hours justifiable, considering that the alleged loss of P3,645,422.00 in
1997 is insubstantial compared to Lintons total asset of P1,065,948,601.76.*44+

A close examination of petitioners financial reports for 1997-1998 shows that, while the
company suffered a loss of P3,645,422.00 in 1997, it retained a considerable amount of
earnings[45] and operating income.[46] Clearly then, while Linton suffered from losses for that
year, there remained enough earnings to sufficiently sustain its operations. In business,
sustained operations in the black is the ideal but being in the red is a cruel reality. However, a
year of financial losses would not warrant the immolation of the welfare of the employees,
which in this case was done through a reduced workweek that resulted in an unsettling
diminution of the periodic pay for a protracted period. Permitting reduction of work and pay at
the slightest indication of losses would be contrary to the States policy to afford protection to
labor and provide full employment.[47]

Certainly, management has the prerogative to come up with measures to ensure
profitability or loss minimization. However, such privilege is not absolute. Management
prerogative must be exercised in good faith and with due regard to the rights of labor.[48]

As previously stated, financial losses must be shown before a company can validly opt to
reduce the work hours of its employees. However, to date, no definite guidelines have yet
been set to determine whether the alleged losses are sufficient to justify the reduction of work
hours. If the standards set in determining the justifiability of financial losses under Article 283
(i.e., retrenchment) or Article 286 (i.e., suspension of work) of the Labor Code were to be
considered, petitioners would end up failing to meet the standards. On the one hand, Article
286 applies only when there is a bona fide suspension of the employers operation of a business
or undertaking for a period not exceeding six (6) months.[49] Records show that Linton
continued its business operations during the effectivity of the compressed workweek, which
spanned more than the maximum period. On the other hand, for retrenchment to be justified,
any claim of actual or potential business losses must satisfy the following standards: (1) the
losses incurred are substantial and not de minimis; (2) the losses are actual or reasonably
imminent; (3) the retrenchment is reasonably necessary and is likely to be effective in
preventing the expected losses; and (4) the alleged losses, if already incurred, or the expected
imminent losses sought to be forestalled, are proven by sufficient and convincing evidence.[50]
Linton failed to comply with these standards.

All taken into account, the compressed workweek arrangement was unjustified and
illegal. Thus, petitioners committed illegal reduction of work hours.

19
Rest Periods
Emirate Security vs. menses
G.R. No. 182848 October 5, 2011
SECOND DIVISION
Justice Arturo Brion

The overtime pay award

While the labor arbiter declared that Meneses claim for overtime pay is unrebutted*44+
and, indeed, nowhere in the petitioners position paper did they controvert Meneses claim, we
hold that the claim must still be substantiated. In Global Incorporated v. Commissioner
Atienza,[45] a claim for overtime pay will not be granted for want of factual and legal basis. In
this respect, the records indicate that the labor arbiter granted Meneses claim for holiday pay,
rest day and premium pay on the basis of payrolls.[46] There is no such proof in support of
Meneses claim for overtime pay other than her contention that she worked from 8:00 a.m. up
to 5:00 p.m. She presented no evidence to show that she was working during the entire one
hour meal break. We thus find the NLRCs deletion of the overtime pay award in order.

Meal breaks
PAL vs. NLRC
G.R. No. 132805. February 2, 1999
SECOND DIVISION
Justice Reynato Puno

First, as regards the legality of private respondents suspension. The facts do not
support petitioners allegation that private respondent abandoned his post on the evening of
February 17, 1994. Private respondent left the clinic that night only to have his dinner at his
house, which was only a few minutes drive away from the clinic. His whereabouts were known
to the nurse on duty so that he could be easily reached in case of emergency. Upon being
informed of Mr. Acostas condition, private respondent immediately left his home and returned
to the clinic. These facts belie petitioners claim of abandonment.

Petitioner argues that being a full-time employee, private respondent is obliged to stay
in the company premises for not less than eight (8) hours. Hence, he may not leave the
company premises during such time, even to take his meals.

We are not impressed.

Articles 83 and 85 of the Labor Code read:

Art. 83. Normal hours of work.The normal hours of work of any employee shall not
exceed eight (8) hours a day.

Health personnel in cities and municipalities with a population of at least one million
(1,000,000) or in hospitals and clinics with a bed capacity of at least one hundred (100) shall
hold regular office hours for eight (8) hours a day, for five (5) days a week, exclusive of time for
meals, except where the exigencies of the service require that such personnel work for six (6)
days or forty-eight (48) hours, in which case they shall be entitled to an additional
compensation of at least thirty per cent (30%) of their regular wage for work on the sixth day.
For purposes of this Article, health personnel shall include: resident physicians, nurses,
nutritionists, dieticians, pharmacists, social workers, laboratory technicians, paramedical
technicians, psychologists, midwives, attendants and all other hospital or clinic personnel.

20
Art. 85. Meal periods.Subject to such regulations as the Secretary of Labor may
prescribe, it shall be the duty of every employer to give his employees not less than sixty (60)
minutes time-off for their regular meals.

Section 7, Rule I, Book III of the Omnibus Rules Implementing the Labor Code further
states:

Sec. 7. Meal and Rest Periods.Every employer shall give his employees, regardless of
sex, not less than one (1) hour time-off for regular meals, except in the following cases when a
meal period of not less than twenty (20) minutes may be given by the employer provided that
such shorter meal period is credited as compensable hours worked of the employee;

(a) Where the work is non-manual work in nature or does not involve strenuous physical
exertion;

(b) Where the establishment regularly operates not less than sixteen hours a day;

(c) In cases of actual or impending emergencies or there is urgent work to be performed
on machineries, equipment or installations to avoid serious loss which the employer would
otherwise suffer; and

(d) Where the work is necessary to prevent serious loss of perishable goods.

Rest periods or coffee breaks running from five (5) to twenty (20) minutes shall be
considered as compensable working time.

Thus, the eight-hour work period does not include the meal break. Nowhere in the law
may it be inferred that employees must take their meals within the company premises.
Employees are not prohibited from going out of the premises as long as they return to their
posts on time. Private respondents act, therefore, of going home to take his dinner does not
constitute abandonment,

Waiting time
Teofilo vs. NLRC
G.R. No. 78210 February 28, 1989
2nd division
Justice Ricardo Paras

The said case involved a claim for "waiting time", as the complainants purportedly were
required to assemble at a designated area at least 30 minutes prior to the start of their
scheduled working hours "to ascertain the work force available for the day by means of a roll
call, for the purpose of assignment or reassignment of employees to such areas in the
plantation where they are most needed." (Rollo, pp. 64- 65)

Noteworthy is the decision of the Minister of Labor, on May 12, 1978 in the aforecited
case (Associated Labor Union vs. Standard (Phil.) Fruit Corporation, NLRC Case No. 26-LS-XI-76
where significant findings of facts and conclusions had already been made on the matter.

The Minister of Labor held:

The thirty (30)-minute assembly time long practiced and institutionalized by mutual
consent of the parties under Article IV, Section 3, of the Collective Bargaining Agreement
cannot be considered as waiting time within the purview of Section 5, Rule I, Book III of the
Rules and Regulations Implementing the Labor Code. ...
21

Furthermore, the thirty (30)-minute assembly is a deeply- rooted, routinary practice of
the employees, and the proceedings attendant thereto are not infected with complexities as to
deprive the workers the time to attend to other personal pursuits. They are not new employees
as to require the company to deliver long briefings regarding their respective work
assignments. Their houses are situated right on the area where the farm are located, such that
after the roll call, which does not necessarily require the personal presence, they can go back to
their houses to attend to some chores. In short, they are not subject to the absolute control of
the company during this period, otherwise, their failure to report in the assembly time would
justify the company to impose disciplinary measures. The CBA does not contain any provision to
this effect; the record is also bare of any proof on this point. This, therefore, demonstrates the
indubitable fact that the thirty (30)-minute assembly time was not primarily intended for the
interests of the employer, but ultimately for the employees to indicate their availability or non-
availability for work during every working day. Accordingly, the issues are reduced to the sole
question as to whether public respondent National Labor Relations Commission committed a
grave abuse of discretion in its resolution of December 17, 1986.

Overtime
Pigcaulan vs. Security
G.R. No. 173648 January 16, 2012
FIRST DIVISION
Justice Mariano del Castillo

There was no substantial evidence to support the grant of overtime pay.

The Labor Arbiter ordered reimbursement of overtime pay, holiday pay, service incentive
leave pay and 13th month pay for the year 2000 in favor of Canoy and Pigcaulan. The Labor
Arbiter relied heavily on the itemized computations they submitted which he considered as
representative daily time records to substantiate the award of salary differentials. The NLRC
then sustained the award on the ground that there was substantial evidence of underpayment
of salaries and benefits.

We find that both the Labor Arbiter and the NLRC erred in this regard. The handwritten
itemized computations are self-serving, unreliable and unsubstantial evidence to sustain the
grant of salary differentials, particularly overtime pay. Unsigned and unauthenticated as they
are, there is no way of verifying the truth of the handwritten entries stated therein. Written
only in pieces of paper and solely prepared by Canoy and Pigcaulan, these representative daily
time records, as termed by the Labor Arbiter, can hardly be considered as competent evidence
to be used as basis to prove that the two were underpaid of their salaries. We find nothing in
the records which could substantially support Pigcaulans contention that he had rendered
service beyond eight hours to entitle him to overtime pay and during Sundays to entitle him to
restday pay. Hence, in the absence of any concrete proof that additional service beyond the
normal working hours and days had indeed been rendered, we cannot affirm the grant of
overtime pay to Pigcaulan.

22
Nightshift differentials
Lepanto vs. lepanto
G.R. No. 161713 August 20, 2008
FIRST DIVISION
Justice Antonio CARPIO

The terms and conditions of a collective bargaining contract constitute the law between
the parties.[9] If the terms of the CBA are clear and have no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall prevail.[10]

The disputed provision of the 4th CBA provides:

ARTICLE VIII NIGHT SHIFT DIFFERENTIAL
Section 3. Night Differential pay. - The Company shall continue to pay nightshift differential for
work during the first and third shifts to all covered employees within the bargaining unit as
follows:

For the First Shift (11:00 p.m. to 7:00 a.m.), the differential pay will be 20% of the basic rate.
For the Third Shift (3:00 p.m. to 11:00 p.m.), the differential pay will be 15% of the basic rate.

However, for overtime work, which extends beyond the regular day shift (7:00 a.m. to 3:00
p.m.), there [will] be no night differential pay added before the overtime pay is calculated.

There is no question that workers are entitled to night shift differential of 20% of the basic
rate for work performed during the first shift from 11:00 p.m. to 7:00 a.m. Workers are also
entitled to night shift differential of 15% of the basic rate for work performed during the third
shift from 3:00 p.m. to 11:00 p.m. The issue is whether workers are entitled to night shift
differential for work performed beyond the regular day shift, from 7:00 a.m. to 3:00 p.m.

We sustain the interpretation of both the Voluntary Arbitrator and the Court of Appeals.
The first paragraph of Section 3 provides that petitioner shall continue to pay night shift
differential to workers of the first and third shifts. It does not provide that workers who
performed work beyond the second shift shall not be entitled to night shift differential. The
inclusion of the third paragraph is not intended to exclude the regular day shift workers from
receiving night shift differential for work performed beyond 3:00 p.m. It only provides that the
night shift differential pay shall be excluded in the computation of the overtime pay.

Part-time/schools
St. mary vs. ca
G.R. No. 157788. March 08, 2005
FIRST DIVISION
Leonardo Quisumbing

Section 93 of the 1992 Manual of Regulations for Private Schools, provides that full-time
teachers who have satisfactorily completed their probationary period shall be considered
regular or permanent.[6] Furthermore, the probationary period shall not be more than six
consecutive regular semesters of satisfactory service for those in the tertiary level.[7] Thus, the
following requisites must concur before a private school teacher acquires permanent status: (1)
the teacher is a full-time teacher; (2) the teacher must have rendered three consecutive years
of service; and (3) such service must have been satisfactory.[8]

In the present case, petitioner claims that private respondent lacked the requisite years
of service with the university and also the appropriate quality of his service, i.e., it is less than
satisfactory. The basic question, however, is whether respondent is a full-time teacher.
23

Section 45 of the 1992 Manual of Regulations for Private Schools provides that full-time
academic personnel are those meeting all the following requirements:

a. Who possess at least the minimum academic qualifications prescribed by the Department
under this Manual for all academic personnel;

b. Who are paid monthly or hourly, based on the regular teaching loads as provided for in the
policies, rules and standards of the Department and the school;

c. Whose total working day of not more than eight hours a day is devoted to the school;

d. Who have no other remunerative occupation elsewhere requiring regular hours of work
that will conflict with the working hours in the school; and

e. Who are not teaching full-time in any other educational institution.

All teaching personnel who do not meet the foregoing qualifications are considered part-time.

A perusal of the various orders of the then Department of Education, Culture and Sports
prescribing teaching loads shows that the regular full-time load of a faculty member is in the
range of 15 units to 24 units a semester or term, depending on the courses taught. Part-time
instructors carry a load of not more than 12 units.[9]

The evidence on record reveals that, except for four non-consecutive terms, respondent
generally carried a load of twelve units or less from 1992 to 1999. There is also no evidence
that he performed other functions for the school when not teaching. These give the impression
that he was merely a part-time teacher.[10] Although this is not conclusive since there are full-
time teachers who are allowed by the university to take fewer load, in this case, respondent did
not show that he belonged to the latter group, even after the university presented his teaching
record. With a teaching load of twelve units or less, he could not claim he worked for the
number of hours daily as prescribed by Section 45 of the Manual. Furthermore, the records
also indubitably show he was employed elsewhere from 1993 to 1996.

Since there is no showing that respondent worked on a full-time basis for at least three years,
he could not have acquired a permanent status.[11] A part-time employee does not attain
permanent status no matter how long he has served the school.[12] And as a part-timer, his
services could be terminated by the school without being held liable for illegal dismissal.
Moreover, the requirement of twin-notice applicable only to regular or permanent employees
could not be invoked by respondent.

Yet, this is not to say that part-time teachers may not have security of tenure. The school could
not lawfully terminate a part-timer before the end of the agreed period without just cause. But
once the period, semester, or term ends, there is no obligation on the part of the school to
renew the contract of employment for the next period, semester, or term.

In this case, the contract of employment of the respondent was not presented. However,
judicial notice may be taken that contracts of employment of part-time teachers are generally
on a per semester or term basis. In the absence of a specific agreement on the period of the
contract of employment, it is presumed to be for a term or semester. After the end of each
term or semester, the school does not have any obligation to give teaching load to each and
every part-time teacher. That petitioner did not give any teaching assignment to the
respondent during a given term or semester, even if factually true, did not amount to an
24
actionable violation of respondents rights. It did not amount to illegal dismissal of the part-
time teacher.

Part-time
Coca-cola vs. climaco
G.R. No. 146881 February 5, 2007
FIRST DIVISION
Justice Adolfo Azcuna

The Labor Arbiter also correctly found that the provision in the Retainer Agreement that
respondent was on call during emergency cases did not make him a regular employee. He
explained, thus:
Likewise, the allegation of complainant that since he is on call at anytime of the day and night
makes him a regular employee is off-tangent. Complainant does not dispute the fact that
outside of the two (2) hours that he is required to be at respondent companys premises, he is
not at all further required to just sit around in the premises and wait for an emergency to occur
so as to enable him from using such hours for his own benefit and advantage. In fact,
complainant maintains his own private clinic attending to his private practice in the city, where
he services his patients, bills them accordingly -- and if it is an employee of respondent
company who is attended to by him for special treatment that needs hospitalization or
operation, this is subject to a special billing. More often than not, an employee is required to
stay in the employers workplace or proximately close thereto that he cannot utilize his time
effectively and gainfully for his own purpose. Such is not the prevailing situation here.

In addition, the Court finds that the schedule of work and the requirement to be on call for
emergency cases do not amount to such control, but are necessary incidents to the
Retainership Agreement.

The Court also notes that the Retainership Agreement granted to both parties the power to
terminate their relationship upon giving a 30-day notice. Hence, petitioner company did not
wield the sole power of dismissal or termination.

The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong with the
employment of respondent as a retained physician of petitioner company and upholds the
validity of the Retainership Agreement which clearly stated that no employer-employee
relationship existed between the parties. The Agreement also stated that it was only for a
period of 1 year beginning January 1, 1988 to December 31, 1998, but it was renewed on a
yearly basis.

Considering that there is no employer-employee relationship between the parties, the
termination of the Retainership Agreement, which is in accordance with the provisions of the
Agreement, does not constitute illegal dismissal of respondent. Consequently, there is no basis
for the moral and exemplary damages granted by the Court of Appeals to respondent due to his
alleged illegal dismissal.

Part-time/attainment of full time status
PAL vs. Pascual
G.R. No. 143258. August 15, 2003
SECOND DIVISION
Justice Leonardo Quisumbing

We now come to the second issue, which touches on the valid exercise of management
prerogative. According to petitioner, NLRC encroached upon this exclusive sphere of
managerial decision, when it ruled that respondents should be made regular full-time
25
employees instead of regular part-time employees, and the appellate court thereby erred in
sustaining the NLRC. This contention does not quite ring true, much less persuade us. It must
be borne in mind that the exercise of management prerogative is not absolute. While it may be
conceded that management is in the best position to know its operational needs, the exercise
of management prerogative cannot be utilized to circumvent the law and public policy on labor
and social justice. That prerogative accorded management could not defeat the very purpose
for which our labor laws exist: to balance the conflicting interests of labor and management,
not to tilt the scale in favor of one over the other, but to guaranty that labor and management
stand on equal footing when bargaining in good faith with each other. By its very nature,
encompassing as it could be, management prerogative must be exercised always with the
principles of fair play at heart and justice in mind.

Records show that respondents were first hired to work for a period of one year.
Notwithstanding the fact that respondents perform duties that are usually necessary or
desirable in the usual trade or business of petitioner, respondents were considered temporary
employees as their engagement was fixed for a specific period. However, equally borne by the
records, is the fact that respondents employment was extended for more than two years.
Evidently, there was a continued and repeated necessity for their services, which puts to
naught the contention that respondents, beyond the one-year period, still continued to be
temporary part-time employees. Article 280 of the Labor Code[13] provides that any employee
who has rendered at least one year of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to the activity in which he is employed,
and his employment shall continue while such activity actually exists.

The NLRC decision now assailed is one based on substantial evidence, which is that amount of
relevant evidence that a reasonable mind might accept as adequate to justify a conclusion.[14]
It bears stressing that findings of fact of quasi-judicial agencies like the NLRC which have
acquired expertise in the specific matters entrusted to their jurisdiction are accorded by this
Court not only respect but even finality if they are supported by substantial evidence.[15] Here
we find no compelling reason to go against the factual findings of the NLRC. The parties had
ample opportunity to present below the necessary evidence and arguments in furtherance of
their causes, and it is presumed that the quasi-judicial body rendered its decision taking into
consideration the evidence and arguments thus presented. Such being the case, it is likewise
presumed that the official duty of the NLRC to render its decision was regularly performed.[16]
Petitioner has not shown any compelling justification to warrant reversal of the NLRC findings.
Absent any showing of patent error, or that the NLRC failed to consider a fact of substance that
if considered would warrant a different result, we yield to the factual conclusions of that quasi-
judicial agency. More so, when as here, these NLRC conclusions are affirmed by the appellate
court.

It is basic to the point of being elementary that nomenclatures assigned to a contract shall be
disregarded if it is apparent that the attendant circumstances do not support their use or
designation. The same is true with greater force concerning contracts of employment, imbued
as they are with public interest. Although respondents were initially hired as part-time
employees for one year, thereafter the over-all circumstances with respect to duties assigned
to them, number of hours they were permitted to work including over-time, and the extension
of employment beyond two years can only lead to one conclusion: that they should be declared
full-time employees. Thus, not without sufficient and substantial reasons, the claim of
management prerogative by petitioner ought to be struck down for being contrary to law and
policy, fair play and good faith.

26
Contract of piece work distinguished from a contract of sale
Engineering vs. ca
G.R. No. 52267 January 24, 1996
THIRD DIVISION
Justice Artemio Panganiban

Article 1713 of the Civil Code defines a contract for a piece of work thus:

By the contract for a piece of work the contractor binds himself to execute a piece of work for
the employer, in consideration of a certain price or compensation. The contractor may either
employ only his labor or skill, or also furnish the material.

A contract for a piece of work, labor and materials may be distinguished from a contract of sale
by the inquiry as to whether the thing transferred is one not in existence and which would
never have existed but for the order, of the person desiring it10 . In such case, the contract is
one for a piece of work, not a sale. On the other hand, if the thing subject of the contract would
have existed and been the subject of a sale to some other person even if the order had not
been given, then the contract is one of sale11 .

Thus, Mr. Justice Vitug12 explains that -

A contract for the delivery at a certain price of an article which the vendor in the ordinary
course of his business manufactures or procures for the general market, whether the same is
on hand at the time or not is a contract of sale, but if the goods are to be manufactured
specially for the customer and upon his special order, and not for the general market, it is a
contract for a piece of work (Art. 1467, Civil Code). The mere fact alone that certain articles are
made upon previous orders of customers will not argue against the imposition of the sales tax if
such articles are ordinarily manufactured by the taxpayer for sale to the public (Celestino Co. vs.
Collector, 99 Phil. 841).

To Tolentino, the distinction between the two contracts depends on the intention of the
parties. Thus, if the parties intended that at some future date an object has to be delivered,
without considering the work or labor of the party bound to deliver, the contract is one of sale.
But if one of the parties accepts the undertaking on the basis of some plan, taking into account
the work he will employ personally or through another, there is a contract for a piece of work13
.

Clearly, the contract in question is one for a piece of work. It is not petitioner's line of business
to manufacture air-conditioning systems to be sold "off-the-shelf." Its business and particular
field of expertise is the fabrication and installation of such systems as ordered by customers
and in accordance with the particular plans and specifications provided by the customers.
Naturally, the price or compensation for the system manufactured and installed will depend
greatly on the particular plans and specifications agreed upon with the customers.

The obligations of a contractor for a piece of work are set forth in Articles 1714 and 1715 of the
Civil Code, which provide:

Art. 1714. If the contractor agrees to produce the work from material furnished by him, he
shall deliver the thing produced to the employer and transfer dominion over the thing. This
contract shall be governed by the following articles as well as by the pertinent provisions on
warranty of title and against hidden defects and the payment of price in a contract of sale.

Art. 1715. The contractor shall execute the work in such a manner that it has the qualities
agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or
27
stipulated use. Should the work be not of such quality, the employer may require that the
contractor remove the defect or execute another work. If the contractor fails or refuses to
comply with this obligation, the employer may have the defect removed or another work
executed, at the contractor's cost.

Del monte vs. aragones
G.R. No. 153033. June 23, 2005
THIRD DIVISION

The authorities petitioner cited in fact show that the nature of the Supply Agreement
between Aragones and MEGA-WAFF was one for a piece of work.

Contrary to petitioners claim that save for the shape, there was no consideration of any
special needs or requirements of DMPI taken into account in the design or manufacture of the
concrete paving blocks, the Supply Agreement is replete with specifications, terms or
conditions showing that it was one for a piece of work.

As reflected in the highlighted and underscored above-quoted provisions of the Supply
Agreement, as well as other evidence on record, the machines Aragones was obliged to
fabricate were those for casting the concrete blocks specified by Garcia. Aragones did not have
those kind of machines in his usual business, hence, the special order.

Solidary liability imposed between owner of piece of work and supplier
JL investment vs. Philippines
G.R. No. 148596 January 22, 2007
SECOND DIVISION

The petition is partly meritorious. Although petitioner is solidarily liable with SMCC and Sta.
Maria to TPI for the balance under TPIs contract with SMCC, petitioner has a right to
reimbursement under its cross-claim against SMCC.

On the Owners Liability to Suppliers under Article 1729
Article 1729 of the Civil Code provides:

Those who put their labor upon or furnish materials for a piece of work undertaken by
the contractor have an action against the owner up to the amount owing from the latter to the
contractor at the time the claim is made. However, the following shall not prejudice the
laborers, employees and furnishers of materials:
1. Payments made by the owner to the contractor before they are due;
2. Renunciation by the contractor of any amount due from the owner.
This article is subject to the provisions of special laws.

This provision imposes a direct liability on an owner of a piece of work in favor of suppliers of
materials (and laborers) hired by the contractor up to the amount owing from the *owner+ to
the contractor at the time the claim is made.*7+ Thus, to this extent, the owners liability is
solidary with the contractor, if both are sued together. By creating a constructive vinculum
between suppliers of materials (and laborers), on the one hand, and the owner of a piece of
work, on the other hand, as an exception to the rule on privity of contracts, Article 1729
protects suppliers of materials (and laborers) from unscrupulous contractors and possible
connivance between owners and contractors.[8] As the Court of Appeals correctly ruled, the
suppliers cause of action under this provision, reckoned from the time of judicial or extra-
28
judicial demand, subsists so long as any amount remains owing from the owner to the
contractor. Only full payment of the agreed contract price serves as a defense against the
suppliers claim.*9+

Here, petitioner resists TPIs suit on the ground that it had fully paid, if not overpaid,
SMCC at the time TPI demanded payment on 3 December 1996. However, as the Court of
Appeals found, petitioner failed to substantiate its claim. What petitioner submits as proof of
its alleged full or over payment, namely, its answer to TPIs interrogatories and the testimony of
one of its witnesses, are no more than mere uncorroborated allegations. The only proof of
payment on record are the official receipt, voucher, and check for the seventh progress billing
dated 30 August 1996, nearly four months before TPI sought payment from petitioner on 3
December 1996. Allegation of payments, advance or otherwise, is no substitute for proof of
such fact. Thus, absent incontrovertible proof of payment such as receipts, checks, cash
disbursement vouchers, and the like, petitioners claim of full or over payment remains only
that. At any rate, Article 1729 clearly provides that payments made by the owner to the
contractor before they are due do not prejudice suppliers of materials.

Salaries and wages
Meaning of salary
Avelino vs. NLRC
G.R. No. 111042 October 26, 1999
SECOND DIVISION
Justice Jose Mendoza

First. There is no dispute that petitioners were employees of private respondents although they
were paid not on the basis of time spent on the job but according to the quantity and the
quality of work produced by them. There are two categories of employees paid by results: (1)
those whose time and performance are supervised by the employer. (Here, there is an element
of control and supervision over the manner as to how the work is to be performed. A piece-rate
worker belongs to this category especially if he performs his work in the company premises.);
and (2) those whose time and performance are unsupervised. (Here, the employers control is
over the result of the work. Workers on pakyao and takay basis belong to this group.) Both
classes of workers are paid per unit accomplished. Piece-rate payment is generally practiced in
garment factories where work is done in the company premises, while payment on pakyao and
takay basis is commonly observed in the agricultural industry, such as in sugar plantations
where the work is performed in bulk or in volumes difficult to quantify. 4 Petitioners belong to
the first category, i.e., supervised employees.

In determining the existence of an employer-employee relationship, the following elements
must be considered: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the employees conduct. 5 Of
these elements, the most important criterion is whether the employer controls or has reserved
the right to control the employee not only as to the result of the work but also as to the means
and methods by which the result is to be accomplished. 6

In this case, private respondents exercised control over the work of petitioners. As tailors,
petitioners worked in the companys premises from 8:00 a.m. to 7:00 p.m. daily, including
Sundays and holidays. The mere fact that they were paid on a piece-rate basis does not negate
their status as regular employees of private respondents. The term "wage" is broadly defined in
Art. 97 of the Labor Code as remuneration or earnings, capable of being expressed in terms of
money whether fixed or ascertained on a time, task, piece or commission basis. Payment by the
piece is just a method of compensation and does not define the essence of the relations. 7 Nor
29
does the fact that petitioners are not covered by the SSS affect the employer-employee
relationship.

Indeed, the following factors show that petitioners, although piece-rate workers, were regular
employees of private respondents: (1) within the contemplation of Art. 280 of the Labor Code,
their work as tailors was necessary or desirable in the usual business of private respondents,
which is engaged in the tailoring business; (2) petitioners worked for private respondents
throughout the year, their employment not being dependent on a specific project or season;
and, (3) petitioners worked for private respondents for more than one year.

Compensation for piece workers
Paper vs. nlrc
G.R. No. 116593. September 24, 1997
THIRD DIVISION

First Issue: Computation of Minimum Wage

Petitioner argues that private respondent was a piece-rate worker and not a time-worker.
Since private respondents employment as (p)acker/(w)rapper in 1975 until her separation on
June 29, 1991, (h)er salary depended upon the number of reams of bond paper she packed
per day. Petitioner contends that private respondents work depended upon the number and
availability of purchase orders from customers. Petitioner adds that, oftentimes,
packers/wrappers only work three to four hours a day. Thus, her separation pay must be
based on her latest actual compensation per piece or on the minimum wage per piece as
determined by Article 101 of the Labor Code, whichever is higher, and not on the daily
minimum wage applicable to time-workers.*11+

Compensation of Piece workers

In the absence of wage rates based on time and motion studies determined by the labor
secretary or submitted by the employer to the labor secretary for his approval, wage rates of
piece-rate workers must be based on the applicable daily minimum wage determined by the
Regional Tripartite Wages and Productivity Commission. To ensure the payment of fair and
reasonable wage rates, Article 101*12+ of the Labor Code provides that the Secretary of Labor
shall regulate the payment of wages by results, including pakyao, piecework and other nontime
work. The same statutory provision also states that the wage rates should be based,
preferably, on time and motion studies, or those arrived at in consultation with representatives
of workers and employers organizations. In the absence of such prescribed wage rates for
piece-rate workers, the ordinary minimum wage rates prescribed by the Regional Tripartite
Wages and Productivity Boards should apply. This is in compliance with Section 8 of the Rules
Implementing Wage Order Nos. NCR-02 and NCR-02-A -- the prevailing wage order at the time
of dismissal of private respondent, viz.:[13]

SEC. 8. Workers Paid by Results. -- a) All workers paid by results including those who are paid
on piece work, takay, pakyaw, or task basis, shall receive not less than the applicable minimum
wage rates prescribed under the Order for the normal working hours which shall not exceed
eight (8) hours work a day, or a proportion thereof for work of less than the normal working
hours.

The adjusted minimum wage rates for workers paid by results shall be computed in accordance
with the following steps:

1) Amount of increase in AMW x 100 = % increase Previous AMW
30
2) Existing rate/piece x % increase = increase in rate/piece;
3) Existing rate/piece + increase in rate/piece = adjusted rate/piece.
b) The wage rates of workers who are paid by results shall continue to be established in
accordance with Art. 101 of the Labor Code, as amended and its implementing regulations.

On November 29, 1991, private respondent was orally informed of the termination of her
employment. Wage Order No. NCR-02, in effect at the time, set the minimum daily wage for
non-agricultural workers like private respondent at P118.00.[14] This was the rate used by the
labor arbiter in computing the separation pay of private respondent. We cannot find any abuse
of discretion, let alone grave abuse, in the order of the labor arbiter which was later affirmed by
the NLRC.

Moreover, since petitioner employed piece-rate workers, it should have inquired from the
secretary of labor about their prescribed specific wage rates. In any event, there being no such
prescribed rates, petitioner, after consultation with its workers, should have submitted for the
labor secretarys approval time and motion studies as basis for the wage rates of its employees.
This responsibility of the employer is clear under Section 8, Rule VII, Book III of the Omnibus
Rules Implementing the Labor Code:

Section 8. Payment by result. (a) On petition of any interested party, or upon its initiative,
the Department of Labor shall use all available devices, including the use of time and motion
studies and consultations with representatives of employers and workers organizations, to
determine whether the employees in any industry or enterprise are being compensated in
accordance with the minimum wage requirements of this Rule.

(b) The basis for the establishment of rates for piece, output or contract work shall be the
performance of an ordinary worker of minimum skill or ability.

(c) An ordinary worker of minimum skill or ability is the average worker of the lowest
producing group representing 50% of the total number of employees engaged in similar
employment in a particular establishment, excluding learners, apprentices and handicapped
workers employed therein.

(d) Where the output rates established by the employer do not conform with the standards
prescribed herein, or with the rates prescribed by the Department of Labor in an appropriate
order, the employees shall be entitled to the difference between the amount to which they are
entitled to receive under such prescribed standards or rates and that actually paid them by
employer.

In the present case, petitioner as the employer unquestionably failed to discharge the foregoing
responsibility. Petitioner did not submit to the secretary of labor a proposed wage rate -- based
on time and motion studies and reached after consultation with the representatives from both
workers and employers organization -- which would have applied to its piece-rate workers.
Without those submissions, the labor arbiter had the duty to use the daily minimum wage rate
for non-agricultural workers prevailing at the time of private respondents dismissal, as
prescribed by the Regional Tripartite Wages and Productivity Boards. Put differently, petitioner
did not take the initiative of proposing an appropriate wage rate for its piece-rate workers. In
the absence of such wage rate, the labor arbiter cannot be faulted for applying the prescribed
minimum wage rate in the computation of private respondents separation pay. In fact, it acted
and ruled correctly and legally in the premises.

It is clear, therefore, that the applicable minimum wage for an eight-hour working day is the
basis for the computation of the separation pay of piece-rate workers like private respondent.
The computed daily wage should not be reduced on the basis of unsubstantiated claims that
31
her daily working hours were less than eight. Aside from its bare assertion, petitioner
presented no clear proof that private respondents regular working day was less than eight
hours. Thus, the labor arbiter correctly used the full amount of P118.00 per day in computing
private respondents separation pay. We agree with the following computation:*15+

Considering therefore that complainant had been laid-off for more than six (6) months now,
we strongly feel that it is already reasonable for the respondent to pay the complainant her
separation pay of one month for every year of service, a fraction of six (6) months to be
considered as one whole year. Separation pay should be computed based on her minimum
salary as will be determined hereunder.

Separation pay 1 month = 16 years
P118.00 x 26 x 16 years = P49,088.00

The amount P118.00 represents the applicable daily minimum wage per Wage Order Nos.
NCR-02 and NCR-02-A; 26, the number of working days in a month after excluding the four
Sundays which are deemed rest days; 16, the total number of years spent by private
respondent in the employ of petitioner.

Payment
San Miguel v. NLRC
G.R. No. 92772. November 28, 1996
THIRD DIVISION

Public respondent had found the private respondents -- drivers, dispatchers and mechanic -- to
be regular employees,[15] and, as mentioned earlier, petitioners yielded to said ruling, terming
it tinged with reason and authority. But even if they had not conceded thus, it is obvious that
public respondent is correct. The rationale for this ruling is simply that the
complainants/private respondents were unarguably performing work necessary and desirable
in the business of SMJS. Without the services rendered by private respondents, petitioners
could not have conducted their business of providing transportation services within the naval
base. This plus the fact that private respondents had each rendered from two to eight years of
service cause them to come squarely within the ambit of Art. 280 of the Labor Code; beyond
dispute, they were not only employees, but regular employees, as correctly held by public
respondent.

The mere fact that they were paid on commission basis does not affect or change their status as
regular employees. The test for determining whether an employee is regular or casual has
nothing to do with the manner of computing or paying a employees wages or compensation.
Rather,

The primary standard, x x x, of determining a regular (as against casual) employment is the
reasonable connection between the particular activity performed by the employee in relation
to the usual business or trade of the employer. The test is whether the former is usually
necessary or desirable in the usual business or trade of the employer. The connection can be
determined by considering the nature of the work performed and its relation to the scheme of
the particular business or trade in its entirety. Also, if the employee has been performing the
job for at least one year, even if the performance is not continuous or merely intermittent, the
law deems the repeated and continuing need for its performance as sufficient evidence of the
necessity if not indispensability of that activity to the business. Hence, the employment is also
considered regular, but only with respect to such activity and while such activity exists.*16+
(underscoring supplied)
32

On the other hand, we should hasten to add that while in this particular case, these
commission-basis employees involved were regular employees (by operation of law, plus of
course, the fact that their status as employees had never been challenged at any stage of the
present case), it does not follow that every employee paid (whether wholly or partly) on
commission basis can be considered a regular employee, or an employee at all, for that matter.
While this caveat may seem rather elementary, it is still needful to stress that there are many
lines of business legally and legitimately engaging the services of workers, who are paid on
commission basis to perform activities desirable and necessary for such businesses, without
creating any kind of employer-employee relationship at any time

Allowable deductions
Nina vs. montecede
G.R. No. 188169 : November 28, 2011
SECOND DIVISION
Justice Bienvenido L. Reyes

Articles 113 and 114 of the Labor Code are clear as to what are the exceptions to the general
prohibition against requiring deposits and effecting deductions from the employees' salaries.
Hence, a statutory construction of the aforecited provisions is not called for. Even if we were
however called upon to interpret the provisions, our inclination would still be to strictly
construe the same against the employer because evidently, the posting of cash bonds and the
making of deductions from the wages would inarguably impose an additional burden upon the
employees.

While the petitioners are not absolutely precluded from imposing the new policy, they can only
do so upon compliance with the requirements of the law.[44] In other words, the petitioners
should first establish that the making of deductions from the salaries is authorized by law, or
regulations issued by the Secretary of Labor. Further, the posting of cash bonds should be
proven as a recognized practice in the jewelry manufacturing business, or alternatively, the
petitioners should seek for the determination by the Secretary of Labor through the issuance of
appropriate rules and regulations that the policy the former seeks to implement is necessary or
desirable in the conduct of business. The petitioners failed in this respect. It bears stressing that
without proofs that requiring deposits and effecting deductions are recognized practices, or
without securing the Secretary of Labor's determination of the necessity or desirability of the
same, the imposition of new policies relative to deductions and deposits can be made subject
to abuse by the employers. This is not what the law intends.

Illegal withholding of wages as a constructive dismissal
SHS vs. diaz
SECOND DIVISION
G.R. No. 185814 October 13, 2010

Petitioners contend that withholding respondents salary from November 16 to November 30,
2005, was justified because respondent was absent and did not show up for work during that
period. He also failed to account for his whereabouts and work accomplishments during said
period. When there is an issue as to whether an employee has, in fact, worked and is entitled to
his salary, it is within management prerogative to temporarily withhold an employees
salary/wages pending determination of whether or not such employee did indeed work.

We disagree with petitioners.

33
Management prerogative refers to the right of an employer to regulate all aspects of
employment, such as the freedom to prescribe work assignments, working methods, processes
to be followed, regulation regarding transfer of employees, supervision of their work, lay-off
and discipline, and dismissal and recall of work.*12+ Although management prerogative refers
to the right to regulate all aspects of employment, it cannot be understood to include the
right to temporarily withhold salary/wages without the consent of the employee. To sanction
such an interpretation would be contrary to Article 116 of the Labor Code, which provides:

ART. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person,
directly or indirectly, to withhold any amount from the wages of a worker or induce him to give
up any part of his wages by force, stealth, intimidation, threat or by any other means
whatsoever without the workers consent.

Any withholding of an employees wages by an employer may only be allowed in the form of
wage deductions under the circumstances provided in Article 113 of the Labor Code, as set
forth below:

ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of any person, shall
make any deduction from the wages of his employees, except:

(a) In cases where the worker is insured with his consent by the employer, and the deduction is
to recompense the employer for the amount paid by him as premium on the insurance;

(b) For union dues, in cases where the right of the worker or his union to check-off has been
recognized by the employer or authorized in writing by the individual worker concerned; and

(c) In cases where the employer is authorized by law or regulations issued by the Secretary of
Labor.

As correctly pointed out by the LA, absent a showing that the withholding of complainants
wages falls under the exceptions provided in Article 113, the withholding thereof is thus
unlawful.*13+

Petitioners argue that Article 116 of the Labor Code only applies if it is established that an
employee is entitled to his salary/wages and, hence, does not apply in cases where there is an
issue or uncertainty as to whether an employee has worked and is entitled to his salary/wages,
in consonance with the principle of a fair days wage for a fair days work. Petitioners contend
that in this case there was precisely an issue as to whether respondent was entitled to his salary
because he failed to report to work and to account for his whereabouts and work
accomplishments during the period in question.

The Court finds petitioners evidence insufficient to prove that respondent did not work from
November 16 to November 30, 2005. As can be gleaned from respondents Contract of
Probationary Employment and the exchanges of electronic mail messages[22] between
Hartmannshenn and respondent, the latters duties as manager for business development
entailed cultivating business ties, connections, and clients in order to make sales. Such duties
called for meetings with prospective clients outside the office rather than reporting for work on
a regular schedule. In other words, the nature of respondents job did not allow close
supervision and monitoring by petitioners. Neither was there any prescribed daily monitoring
procedure established by petitioners to ensure that respondent was doing his job. Therefore,
granting that respondent failed to answer Hartmannshenns mobile calls and to reply to two
electronic mail messages and given the fact that he admittedly failed to report to work at the
SHS plant twice each week during the subject period, such cannot be taken to signify that he
did not work from November 16 to November 30, 2005.
34

Although it cannot be determined with certainty whether respondent worked for the entire
period from November 16 to November 30, 2005, the consistent rule is that if doubt exists
between the evidence presented by the employer and that by the employee, the scales of
justice must be tilted in favor of the latter[24] in line with the policy mandated by Articles 2 and
3 of the Labor Code to afford protection to labor and construe doubts in favor of labor. For
petitioners failure to satisfy their burden of proof, respondent is presumed to have worked
during the period in question and is, accordingly, entitled to his salary. Therefore, the
withholding of respondents salary by petitioners is contrary to Article 116 of the Labor Code
and, thus, unlawful.

Legality of 10% tithe deduction of 7th day Adventist
Labadan vs. NLRC
G.R. No. 172295 December 23, 2008
SECOND DIVISION
Justice Conchita Carpio Morales

On the deduction of 10% tithe, Article 113 of the Labor Code instructs:

ART. 113. No employer, in his own behalf or in behalf of any person, shall make any deduction
from the wages of his employees, except:

(a) In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as premium on the
insurance;

(b) For union dues, in cases where the right of the worker or his union to check-off has
been recognized by the employer or authorized in writing by the individual worker concerned;
and

(c) In cases where the employer is authorized by law or regulations issued by the Secretary of
Labor, as does Rule VIII, Section 10 of the Rules Implementing Book III of the Labor Code
reading:

SEC. 10. Deductions from the wages of the employees may be made by the employer in any of
the following cases:

(a) When the deductions are authorized by law, including deductions for the insurance
premiums advanced by the employer in behalf of the employee as well as union dues where
the right to check-off has been recognized by the employer or authorized in writing by the
individual employee himself;

(b) When the deductions are with the written authorization of the employees for payment
to a third person and the employer agrees to do so, provided that the latter does not receive
any pecuniary benefit, directly or indirectly, from the transaction.

In the absence then of petitioners written conformity to the deduction of the 10% tithe from
her salary, the deduction made by Forest Hills was illegal.

35
Legal compensation art. 113 of Labor Code
Protillo vs. Ca
Gr no. 196539 October 10, 2012
Justice Jose P. Perez

There is no causal connection between the petitioner employees claim for unpaid wages and
the respondent employers claim for damages for the alleged Goodwill Clause violation.
Portillos claim for unpaid salaries did not have anything to do with her alleged violation of the
employment contract as, in fact, her separation from employment is not rooted in the alleged
contractual violation. She resigned from her employment. She was not dismissed. Portillos
entitlement to the unpaid salaries is not even contested. Indeed, Lietz Inc.s argument about
legal compensation necessarily admits that it owes the money claimed by Portillo.
Indeed, the application of compensation in this case is effectively barred by Artivle 113 of the
Labor code which prohibits wage deduction except in three circumstances:

Art. 113. Wage Deduction no employer, in his own behalf or in behalf of any person,
shall make any deduction from wages of his employees, except:

a) In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as
premium on the insurance;
b) For union dues, in cases where the right of the worker or his union to check-off
has been recognized by the employer or authorized in writing by the invididual
worker concerned; and
c) In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor.

Non-diminution of benefits a constitutional mandate
Eastern vs. Eastern Telecoms
G.R. No. 185665 February 8, 2012
THIRD DIVISION

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

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

From a legal point of view, a bonus is a gratuity or act of liberality of the giver which the
recipient has no right to demand as a matter of right.[12] The grant of a bonus is basically a
management prerogative which cannot be forced upon the employer who may not be obliged
to assume the onerous burden of granting bonuses or other benefits aside from the employees
basic salaries or wages.[13]

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

Whether or not a bonus forms part of wages depends upon the circumstances and conditions
for its payment. If it is additional compensation which the employer promised and agreed to
give without any conditions imposed for its payment, such as success of business or greater
production or output, then it is part of the wage. But if it is paid only if profits are realized or if a
36
certain level of productivity is achieved, it cannot be considered part of the wage. Where it is
not payable to all but only to some employees and only when their labor becomes more
efficient or more productive, it is only an inducement for efficiency, a prize therefore, not a part
of the wage.

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

The Court believes so.

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

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

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

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

From the foregoing, ETPI cannot insist on business losses as a basis for disregarding its
undertaking. It is manifestly clear that although it incurred business losses of 149,068,063.00
in the year 2000, it continued to distribute 14th, 15th and 16th month bonuses for said year.
Notwithstanding such huge losses, ETPI entered into the 2001-2004 CBA Side Agreement on
September 3, 2001 whereby it contracted to grant the subject bonuses to ETEU in no uncertain
terms. ETPI continued to sustain losses for the succeeding years of 2001 and 2002 in the
amounts of 348,783,013.00 and 315,474,444.00, respectively. Still and all, this did not deter
it from honoring the bonus provision in the Side Agreement as it continued to give the subject
bonuses to each of the union members in 2001 and 2002 despite its alleged precarious financial
condition. Parenthetically, it must be emphasized that ETPI even agreed to the payment of the
37
14th, 15th and 16th month bonuses for 2003 although it opted to defer the actual grant in April
2004. All given, business losses could not be cited as grounds for ETPI to repudiate its obligation
under the 2001-2004 CBA Side Agreement.

Non-diminution of benefits company practice
Metal products vs. NAFLU
May 14, 2008
SECOND DIVISION
Justice Dante Tinga

Any benefit and supplement being enjoyed by employees cannot be reduced, diminished,
discontinued or eliminated by the employer.[14] The principle of non-diminution of benefits is
founded on the Constitutional mandate to "protect the rights of workers and promote their
welfare,*15+ and to afford labor full protection.*16+ Said mandate in turn is the basis of
Article 4 of the Labor Code which states that all doubts in the implementation and
interpretation of this Code, including its implementing rules and regulations shall be rendered
in favor of labor. Jurisprudence is replete with cases which recognize the right of employees
to benefits which were voluntarily given by the employer and which ripened into company
practice. Thus in Davao Fruits Corporation v. Associated Labor Unions, et al.[17] where an
employer had freely and continuously included in the computation of the 13th month pay those
items that were expressly excluded by the law, we held that the act which was favorable to the
employees though not conforming to law had thus ripened into a practice and could not be
withdrawn, reduced, diminished, discontinued or eliminated. In Sevilla Trading Company v.
Semana,*18+ we ruled that the employers act of including non-basic benefits in the
computation of the 13th month pay was a voluntary act and had ripened into a company
practice which cannot be peremptorily withdrawn. Meanwhile in Davao Integrated Port
Stevedoring Services v. Abarquez,[19] the Court ordered the payment of the cash equivalent of
the unenjoyed sick leave benefits to its intermittent workers after finding that said workers
had received these benefits for almost four years until the grant was stopped due to a different
interpretation of the CBA provisions. We held that the employer cannot unilaterally withdraw
the existing privilege of commutation or conversion to cash given to said workers, and as also
noted that the employer had in fact granted and paid said cash equivalent of the unenjoyed
portion of the sick leave benefits to some intermittent workers.

In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of freely,
voluntarily and consistently granting full benefits to its employees regardless of the length of
service rendered. True, there were only a total of seven employees who benefited from such a
practice, but it was an established practice nonetheless. Jurisprudence has not laid down any
rule specifying a minimum number of years within which a company practice must be
exercised in order to constitute voluntary company practice.[20] Thus, it can be six (6)
years,[21] three (3) years,[22] or even as short as two (2) years.[23] Petitioner cannot shirk
away from its responsibility by merely claiming that it was a mistake or an error, supported
only by an affidavit of its manufacturing group head portions of which read:

5. 13th month pay, bonus, and cash conversion of unused/earned vacation leave, sick leave and
emergency leave are computed and paid in full to employees who rendered services to the
company for the entire year and proportionately to those employees who rendered service to
the company for a period less than one (1) year or twelve (12) months in accordance with the
CBA provision relative thereto.

6. It was never the intention much less the policy of the management to grant the aforesaid
benefits to the employees in full regardless of whether or not the employee has rendered
38
services to the company for the entire year, otherwise, it would be unjust and inequitable not
only to the company but to other employees as well.

Non-diminution of benefits rule
Tarlac vs. NLU
G.R. No. 188949 July 26, 2010
SECOND DIVISION

The petition is denied for lack of merit.

The 13th-month pay mandated by Presidential Decree (P.D.) No. 851 represents an
additional income based on wage but not part of the wage. It is equivalent to one-twelfth
(1/12) of the total basic salary earned by an employee within a calendar year. All rank-and-file
employees, regardless of their designation or employment status and irrespective of the
method by which their wages are paid, are entitled to this benefit, provided that they have
worked for at least one month during the calendar year. If the employee worked for only a
portion of the year, the 13th-month pay is computed pro rata.[16]

Petitioner argues that there was an error in the computation of the 13th-month pay of its
employees as a result of its mistake in implementing P.D. No. 851, an error that was discovered
by the management only when respondent raised a question concerning the computation of
the employees
13th-month pay for 2006. Admittedly, it was an error that was repeatedly committed for
almost thirty (30) years. Petitioner insists that the length of time during which an employer has
performed a certain act beneficial to the employees, does not prove that such an act was not
done in error. It maintains that for the claim of mistake to be negated, there must be a clear
showing that the employer had freely, voluntarily, and continuously performed the act,
knowing that he is under no obligation to do so. Petitioner asserts that such voluntariness was
absent in this case.[17]

The Rules and Regulations Implementing P.D. No. 851, promulgated on December 22,
1975, defines 13th-month pay and basic salary as follows:

Sec. 2. Definition of certain terms. - As used in this issuance:

(a) "Thirteenth-month pay" shall mean one twelfth (1/12) of the basic salary of an employee
within a calendar year;

(b) "Basic salary" shall include all remunerations or earnings paid by an employer to an
employee for services rendered but may not include cost-of-living allowances granted pursuant
to Presidential Decree No. 525 or Letter of Instructions No. 174, profit-sharing payments, and
all allowances and monetary benefits which are not considered or integrated as part of the
regular or basic salary of the employee at the time of the promulgation of the Decree on
December 16, 1975.

On January 16, 1976, the Supplementary Rules and Regulations Implementing P.D. No.
851 was issued. The Supplementary Rules clarifies that overtime pay, earnings, and other
remuneration that are not part of the basic salary shall not be included in the computation of
the 13th-month pay.

On November 16, 1987, the Revised Guidelines on the Implementation of the 13th-Month
Pay Law was issued. Significantly, under this Revised Guidelines, it was specifically stated that
39
the minimum 13th-month pay required by law shall not be less than one-twelfth (1/12) of the
total basic salary earned by an employee within a calendar year.

Furthermore, the term basic salary of an employee for the purpose of computing the
13th-month pay was interpreted to include all remuneration or earnings paid by the employer
for services rendered, but does not include allowances and monetary benefits which are not
integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation
and sick leave credits, overtime, premium, night differential and holiday pay, and cost-of-living
allowances. However, these salary-related benefits should be included as part of the basic
salary in the computation of the 13th-month pay if, by individual or collective agreement,
company practice or policy, the same are treated as part of the basic salary of the employees.

Based on the foregoing, it is clear that there could have no erroneous interpretation or
application of what is included in the term basic salary for purposes of computing the 13th-
month pay of employees. From the inception of P.D. No. 851 on December 16, 1975, clear-cut
administrative guidelines have been issued to insure uniformity in the interpretation,
application, and enforcement of the provisions of P.D. No. 851 and its implementing
regulations.

As correctly ruled by the CA, the practice of petitioner in giving 13th-month pay based on
the employees gross annual earnings which included the basic monthly salary, premium pay
for work on rest days and special holidays, night shift differential pay and holiday pay continued
for almost thirty (30) years and has ripened into a company policy or practice which cannot be
unilaterally withdrawn.

Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule, mandates
that benefits given to employees cannot be taken back or reduced unilaterally by the employer
because the benefit has become part of the employment contract, written or unwritten. [18]
The rule against diminution of benefits applies if it is shown that the grant of the benefit is
based on an express policy or has ripened into a practice over a long period of time and that the
practice is consistent and deliberate. Nevertheless, the rule will not apply if the practice is due
to error in the construction or application of a doubtful or difficult question of law. But even in
cases of error, it should be shown that the correction is done soon after discovery of the
error.[19]

The argument of petitioner that the grant of the benefit was not voluntary and was due to
error in the interpretation of what is included in the basic salary deserves scant consideration.
No doubtful or difficult question of law is involved in this case. The guidelines set by the law are
not difficult to decipher. The voluntariness of the grant of the benefit was manifested by the
number of years the employer had paid the benefit to its employees. Petitioner only changed
the formula in the computation of the 13th-month pay after almost 30 years and only after the
dispute between the management and employees erupted. This act of petitioner in changing
the formula at this time cannot be sanctioned, as it indicates a badge of bad faith.

Furthermore, petitioner cannot use the argument that it is suffering from financial losses
to claim exemption from the coverage of the law on 13th-month pay, or to spare it from its
erroneous unilateral computation of the 13th-month pay of its employees. Under Section 7 of
the Rules and Regulations Implementing P.D. No. 851, distressed employers shall qualify for
exemption from the requirement of the Decree only upon prior authorization by the Secretary
of Labor.[20] In this case, no such prior authorization has been obtained by petitioner; thus, it is
not entitled to claim such exemption.

40
Facilities vs. supplements
SLL vs. NLRC
G.R. No. 172161 March 2, 2011
SECOND DIVISION

As a general rule, on payment of wages, a party who alleges payment as a defense has the
burden of proving it.17 Specifically with respect to labor cases, the burden of proving payment
of monetary claims rests on the employer, the rationale being that the pertinent personnel
files, payrolls, records, remittances and other similar documents which will show that
overtime, differentials, service incentive leave and other claims of workers have been paid
are not in the possession of the worker but in the custody and absolute control of the
employer.18

In this case, petitioners, aside from bare allegations that private respondents received wages
higher than the prescribed minimum, failed to present any evidence, such as payroll or payslips,
to support their defense of payment. Thus, petitioners utterly failed to discharge the onus
probandi.

Private respondents, on the other hand, are entitled to be paid the minimum wage, whether
they are regular or non-regular employees.

Section 3, Rule VII of the Rules to Implement the Labor Code19 specifically enumerates those
who are not covered by the payment of minimum wage. Project employees are not among
them.

On whether the value of the facilities should be included in the computation of the "wages"
received by private respondents, Section 1 of DOLE Memorandum Circular No. 2 provides that
an employer may provide subsidized meals and snacks to his employees provided that the
subsidy shall not be less that 30% of the fair and reasonable value of such facilities. In such
cases, the employer may deduct from the wages of the employees not more than 70% of the
value of the meals and snacks enjoyed by the latter, provided that such deduction is with the
written authorization of the employees concerned.

Moreover, before the value of facilities can be deducted from the employees wages, the
following requisites must all be attendant: first, proof must be shown that such facilities are
customarily furnished by the trade; second, the provision of deductible facilities must be
voluntarily accepted in writing by the employee; and finally, facilities must be charged at
reasonable value.20 Mere availment is not sufficient to allow deductions from employees
wages.21

These requirements, however, have not been met in this case. SLL failed to present any
company policy or guideline showing that provisions for meals and lodging were part of the
employees salaries. It also failed to provide proof of the employees written authorization,
much less show how they arrived at their valuations. At any rate, it is not even clear whether
private respondents actually enjoyed said facilities.

The Court, at this point, makes a distinction between "facilities" and "supplements." It is of the
view that the food and lodging, or the electricity and water allegedly consumed by private
respondents in this case were not facilities but supplements. In the case of Atok-Big Wedge
Assn. v. Atok-Big Wedge Co.,22 the two terms were distinguished from one another in this
wise:

41
"Supplements," therefore, constitute extra remuneration or special privileges or benefits given
to or received by the laborers over and above their ordinary earnings or wages. "Facilities," on
the other hand, are items of expense necessary for the laborer's and his family's existence and
subsistence so that by express provision of law (Sec. 2[g]), they form part of the wage and when
furnished by the employer are deductible therefrom, since if they are not so furnished, the
laborer would spend and pay for them just the same.

In short, the benefit or privilege given to the employee which constitutes an extra
remuneration above and over his basic or ordinary earning or wage is supplement; and when
said benefit or privilege is part of the laborers' basic wages, it is a facility. The distinction lies
not so much in the kind of benefit or item (food, lodging, bonus or sick leave) given, but in the
purpose for which it is given.23 In the case at bench, the items provided were given freely by
SLL for the purpose of maintaining the efficiency and health of its workers while they were
working at their respective projects.1avvphi1

For said reason, the cases of Agabon and Glaxo are inapplicable in this case. At any rate, these
were cases of dismissal with just and authorized causes. The present case involves the matter
of the failure of the petitioners to comply with the payment of the prescribed minimum wage.

Elements of wage distortion
Barnkard vs. NLRC
G.R. No. 140689 February 17, 2004
THIRD DIVISION
Justice Conchita Carpio Morales

The issue of whether wage distortion exists being a question of fact that is within the
jurisdiction of quasi-judicial tribunals,8 and it being a basic rule that findings of facts of quasi-
judicial agencies, like the NLRC, are generally accorded not only respect but at times even
finality if they are supported by substantial evidence, as are the findings in the case at bar, they
must be respected. For these agencies have acquired expertise, their jurisdiction being confined
to specific matters.9
Prubankers Association v. Prudential Bank and Trust Company5 laid down the four elements of
wage distortion, to wit: (1.) An existing hierarchy of positions with corresponding salary rates;
(2) A significant change in the salary rate of a lower pay class without a concomitant increase in
the salary rate of a higher one; (3) The elimination of the distinction between the two levels;
and (4) The existence of the distortion in the same region of the country.

It is thus clear that there is no hierarchy of positions between the newly hired and regular
employees of Bankard, hence, the first element of wage distortion provided in Prubankers is
wanting.lawphi1.nt

While seniority may be a factor in determining the wages of employees, it cannot be made the
sole basis in cases where the nature of their work differs.

Moreover, for purposes of determining the existence of wage distortion, employees cannot
create their own independent classification and use it as a basis to demand an across-the-board
increase in salary.

As National Federation of Labor v. NLRC, et al.10 teaches, the formulation of a wage structure
through the classification of employees is a matter of management judgment and discretion.

[W]hether or not a new additional scheme of classification of employees for compensation
purposes should be established by the Company (and the legitimacy or viability of the bases of
distinction there embodied) is properly a matter of management judgment and discretion, and
42
ultimately, perhaps, a subject matter for bargaining negotiations between employer and
employees. It is assuredly something that falls outside the concept of "wage distortion." Even
assuming that there is a decrease in the wage gap between the pay of the old employees and
the newly hired employees, to Our mind said gap is not significant as to obliterate or result in
severe contraction of the intentional quantitative differences in the salary rates between the
employee group. As already stated, the classification under the wage structure is based on the
rank of an employee, not on seniority. For this reason, wage distortion does not appear to
exist.12

Apart from the findings of fact of the NLRC and the Court of Appeals that some of the elements
of wage distortion are absent, petitioner cannot legally obligate Bankard to correct the alleged
"wage distortion" as the increase in the wages and salaries of the newly-hired was not due to a
prescribed law or wage order.

The wordings of Article 124 are clear. If it was the intention of the legislators to cover all kinds
of wage adjustments, then the language of the law should have been broad, not restrictive as it
is currently phrased:

Article 124. Standards/Criteria for Minimum Wage Fixing.

Where the application of any prescribed wage increase by virtue of a law or Wage Order issued
by any Regional Board results in distortions of the wage structure within an establishment, the
employer and the union shall negotiate to correct the distortions. Any dispute arising from the
wage distortions shall be resolved through the grievance procedure under their collective
bargaining agreement and, if it remains unresolved, through voluntary arbitration.

Article 124 is entitled "Standards/Criteria for Minimum Wage Fixing." It is found in CHAPTER V
on "WAGE STUDIES, WAGE AGREEMENTS AND WAGE DETERMINATION" which principally deals
with the fixing of minimum wage. Article 124 should thus be construed and correlated in
relation to minimum wage fixing, the intention of the law being that in the event of an increase
in minimum wage, the distinctions embodied in the wage structure based on skills, length of
service, or other logical bases of differentiation will be preserved.

If the compulsory mandate under Article 124 to correct "wage distortion" is applied to
voluntary and unilateral increases by the employer in fixing hiring rates which is inherently a
business judgment prerogative, then the hands of the employer would be completely tied even
in cases where an increase in wages of a particular group is justified due to a re-evaluation of
the high productivity of a particular group, or as in the present case, the need to increase the
competitiveness of Bankards hiring rate. An employer would be discouraged from adjusting the
salary rates of a particular group of employees for fear that it would result to a demand by all
employees for a similar increase, especially if the financial conditions of the business cannot
address an across-the-board increase.

Petitioner cites Metro Transit Organization, Inc. v. NLRC13 to support its claim that the
obligation to rectify wage distortion is not confined to wage distortion resulting from
government decreed law or wage order.

Reliance on Metro Transit is however misplaced, as the obligation therein to rectify the wage
distortion was not by virtue of Article 124 of the Labor Code, but on account of a then existing
"company practice" that whenever rank-and-file employees were paid a statutorily mandated
salary increase, supervisory employees were, as a matter of practice, also paid the same
amount plus an added premium. Thus this Court held in said case:

43
We conclude that the supervisory employees, who then (i.e., on April 17, 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. . . .

Wage distortion is a factual and economic condition that may be brought about by different
causes. In Metro Transit, the reduction or elimination of the normal differential between the
wage rates of rank-and-file and those of supervisory employees was due to the granting to the
former of wage increase which was, however, denied to the latter group of employees.

The mere factual existence of wage distortion does not, however, ipso facto result to an
obligation to rectify it, absent a law or other source of obligation which requires its
rectification.

Unlike in Metro Transit then where there existed a "company practice," no such management
practice is herein alleged to obligate Bankard to provide an across-the-board increase to all its
regular employees.

Bankards right to increase its hiring rate, to establish minimum salaries for specific jobs, and to
adjust the rates of employees affected thereby is embodied under Section 2, Article V (Salary
and Cost of Living Allowance) of the parties Collective Bargaining Agreement (CBA), to wit:

Section 2. Any salary increase granted under this Article shall be without prejudice to the right
of the Company to establish such minimum salaries as it may hereafter find appropriate for
specific jobs, and to adjust the rates of the employees thereby affected to such minimum
salaries thus established.15 (Italics and underscoring supplied)

This CBA provision, which is based on legitimate business-judgment prerogatives of the
employer, is a valid and legally enforceable source of rights between the parties.

In fine, absent any indication that the voluntary increase of salary rates by an employer was
done arbitrarily and illegally for the purpose of circumventing the laws or was devoid of any
legitimate purpose other than to discriminate against the regular employees, this Court will not
step in to interfere with this management prerogative. Employees are of course not precluded
from negotiating with its employer and lobby for wage increases through appropriate channels,
such as through a CBA.

Wage parity between employee of different regions/wage distortions
Pro bankers vs Prudential bank
G.R. No. 131247 January 25, 1999
THIRD DIVISION

Different Regional Wages

Mandated by RA 6727

Petitioner's claim of wage distortion must also be denied for one other reason. The difference
in wages between employees in the same pay scale in different regions is not the mischief
sought to be banished by the law. In fact, Republic Act No. 6727 (the Wage Rationalization Act),
recognizes "existing regional disparities in the cost of living." Section 2 of said law provides:

44
Sec 2. It is hereby declared the policy of the State to rationalize the fixing of minimum wages
and to promote productivity-improvement and gain-sharing measures to ensure a decent
standard of living for the workers and their families; to guarantee the rights of labor to its just
share in the fruits of production; to enhance employment generation in the countryside
through industry dispersal; and to allow business and industry reasonable returns on
investment, expansion and growth.

The State shall promote collective bargaining as the primary mode of settling wages and other
terms and conditions of employment; and whenever necessary, the minimum wage rates shall
be adjusted in a fair and equitable manner, considering existing regional disparities in the cost
of living and other socio-economic factors and the national economic and social development
plans.

RA 6727 also amended Article 124 of the Labor Code, thus:

Art. 124. Standards/Criteria for Minimum Wage Fixing. The regional minimum wages to
be established by the Regional Board shall be as nearly adequate as is economically feasible to
maintain the minimum standards of living necessary for the health, efficiency and general well-
being of the employees within the frame work of the national economic and social
development program. In the determination of such regional minimum wages, the Regional
Board shall, among other relevant factors, consider the following:

a) The demand for living wages;
b) Wage adjustment vis-a-vis the consumer price index;
c) The cost of living and changes or increases therein;
d) The needs of workers and their families;
e) The need to induce industries to invest in the countryside;
f) Improvements in standards of living;
g) The prevailing wage levels;
h) Fair return of the capital invested and capacity to pay of employers;
i) Effects on employment generation and family income; and
j) The equitable distribution of income and wealth along the imperatives of social and
economic development.
From the above-quoted rationale of the law, as well as the criteria enumerated, a disparity in
wages between employees with similar positions in different regions is necessarily expected. In
insisting that the employees of the same pay class in different regions should receive the same
compensation, petitioner has apparently misunderstood both the meaning of wage distortion
and the intent of the law to regionalize wage rates.

It must be understood that varying in each region of the country are controlling factors such as
the cost of living; supply and demand of basic goods, services and necessities; and the
purchasing power of the peso. Other considerations underscore the necessity of the law.
Wages in some areas may be increased in order to prevent migration to the National Capital
Region and, hence, to decongest the metropolis. Therefore, what the petitioner herein bewails
is precisely what the law provides in order to achieve its purpose.

Petitioner claims that it "does not insist that the Regional Wage Boards created pursuant to RA
6727 do not have the authority to issue wage orders based on the distinctive situations and
needs existing in each region. So also, . . . it does not insist that the [B]ank should not
implement regional wage orders. Neither does it seek to penalize the Bank for following Wage
Order VII-03. . . . What it simply argues is that it is wrong for the Bank to peremptorily abandon
a national wage structure and replace the same with a regionalized structure in violation of the
principle of equal pay for equal work. And, it is wrong to say that its act of abandoning its
national wage structure is mandated by law."
45

As already discussed above, we cannot sustain this argument. Petitioner contradicts itself in not
objecting, on the one hand, to the right of the regional wage boards to impose a regionalized
wage scheme; while insisting, on the other hand, on a national wage structure for the whole
Bank. To reiterate, a uniform national wage structure is antithetical to the purpose of RA 6727.

The objective of the law also explains the wage disparity in the example cited by petitioner:
Armae Librero, though only in Pay Class 4 in Mabolo, was, as a result of the Wage Order,
receiving more than Bella Cristobal, who was already in Pay Class 5 in Subic. 12 RA 6727
recognizes that there are different needs for the different situations in different regions of the
country. The fact that a person is receiving more in one region does not necessarily mean that
he or she is better off than a person receiving less in another region. We must consider, among
others, such factors as cost of living, fulfillment of national economic goals, and standard of
living. In any event, this Court, in its decisions, merely enforces the law. It has no power to pass
upon its wisdom or propriety.

Divisor to determine daily wage rate
Leyte vs. ELU
G.R. No. 157775 October 19, 2007
THIRD DIVISION
Justice Alicia Austria-Martinez

The Voluntary Arbitrator gravely abused its discretion in giving a strict or literal interpretation
of the CBA provisions that the holiday pay be reflected in the payroll slips. Such literal
interpretation ignores the admission of respondent in its Position Paper41 that the employees
were paid all the days of the month even if not worked. In light of such admission, petitioner's
submission of its 360 divisor in the computation of employees salaries gains significance.

In Union of Filipro Employees v. Vivar, Jr.42 the Court held that "[t]he divisor assumes an
important role in determining whether or not holiday pay is already included in the monthly
paid employees salary and in the computation of his daily rate". This ruling was applied in
Wellington Investment and Manufacturing Corporation v. Trajano,43 Producers Bank of the
Philippines v. National Labor Relations Commission44 and Odango v. National Labor Relations
Commission,45 among others.46

In Wellington,47 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 called the "314 factor"; that is, 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 covered
payment for 314 days of the year, including regular and special holidays, as well as days when
no work was done by reason of fortuitous cause, such as transportation strike, riot, or typhoon
or other natural calamity, or cause not attributable to the employees.

In Producers Bank,48 the employer used the divisor 314 in arriving at the daily wage rate of
monthly salaried employees. The divisor 314 was arrived at by subtracting all Sundays from the
total number of calendar days in a year, since Saturdays are considered paid rest days. The
Court held that the use of 314 as a divisor leads to the inevitable conclusion that the ten legal
holidays are already included therein.

In Odango v. National Labor Relations Commission,49 the Court ruled that the use of a divisor
that was less than 365 days cannot make the employer automatically liable for underpayment
of holiday pay. In said case, the employees were required to work only from Monday to Friday
46
and half of Saturday. Thus, the minimum allowable divisor is 287, which is the result of 365
days, less 52 Sundays and less 26 Saturdays (or 52 half Saturdays). Any divisor below 287 days
meant that the employees were deprived of their holiday pay for some or all of the ten legal
holidays. The 304-day divisor used by the employer was clearly above the minimum of 287
days.

In this case, the employees are required to work only from Monday to Friday.1wphi1 Thus, the
minimum allowable divisor is 263, which is arrived at by deducting 51 un-worked Sundays and
51 un-worked Saturdays from 365 days. Considering that petitioner used the 360-day divisor,
which is clearly above the minimum, indubitably, petitioner's employees are being given their
holiday pay.

Thus, the Voluntary Arbitrator should not have simply brushed aside petitioner's divisor
formula. In granting respondent's claim of non-payment of holiday pay, a "double burden" was
imposed upon petitioner because it was being made to pay twice for its employees' holiday pay
when payment thereof had already been included in the computation of their monthly salaries.
Moreover, it is absurd to grant respondent's claim of non-payment when they in fact admitted
that they were being paid all of the days of the month even if not worked. By granting
respondent's claim, the Voluntary Arbitrator sanctioned unjust enrichment in favor of the
respondent and caused unjust financial burden to the petitioner. Obviously, the Court cannot
allow this.

While the Constitution is committed to the policy of social justice50 and the protection of the
working class,51 it should not be supposed that every labor dispute would automatically be
decided in favor of labor. Management also has it own rights which, as such, are entitled to
respect and enforcement in the interest of simple fair play. Out of concern for those with less
privileges in life, this Court has inclined more often than not toward the worker and upheld his
cause in his conflicts with the employer. Such favoritism, however, has not blinded us to the
rule that justice is in every case for the deserving, to be dispensed in the light of the established
facts and the applicable law and doctrine.

CBA determined divisor
Odango vs. NLRC
G.R. No. 147420 June 10, 2004
FIRST DIVISION

We have long ago declared void Section 2, Rule IV of Book III of the Omnibus Rules
Implementing the Labor Code. In Insular Bank of Asia v. Inciong,14 we ruled as follows:

Section 2, Rule IV, Book III of the Implementing Rules and Policy Instructions No. 9 issued by the
Secretary (then Minister) of Labor are null and void since in the guise of clarifying the Labor
Codes provisions on holiday pay, they in effect amended them by enlarging the scope of their
exclusion.

The Labor Code 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 monthly-paid
employees are presumed to be paid for all days in the month whether worked or not.

Thus, Section 2 cannot serve as basis of any right or claim. Absent any other legal basis,
petitioners claim for wage differentials must fail.

47
Even assuming that Section 2, Rule IV of Book III is valid, petitioners claim will still fail. The
basic rule in this jurisdiction is "no work, no pay." The right to be paid for un-worked days is
generally limited to the ten legal holidays in a year.15 Petitioners claim is based on a mistaken
notion that Section 2, Rule IV of Book III gave rise to a right to be paid for un-worked days
beyond the ten legal holidays. In effect, petitioners demand that ANTECO should pay them on
Sundays, the un-worked half of Saturdays and other days that they do not work at all.
Petitioners line of reasoning is not only a violation of the "no work, no pay" principle, it also
gives rise to an invidious classification, a violation of the equal protection clause. Sustaining
petitioners argument will make monthly-paid employees a privileged class who are paid even if
they do not work.

The use of a divisor less than 365 days cannot make ANTECO automatically liable for
underpayment. The facts show that petitioners are required to work only from Monday to
Friday and half of Saturday. Thus, the minimum allowable divisor is 287, which is the result of
365 days, less 52 Sundays and less 26 Saturdays (or 52 half Saturdays). Any divisor below 287
days means that ANTECOs workers are deprived of their holiday pay for some or all of the ten
legal holidays. The 304 days divisor used by ANTECO is clearly above the minimum of 287 days.

Finally, petitioners cite Chartered Bank Employees Association v. Ople16 as an analogous
situation. Petitioners have misread this case.

In Chartered Bank, the workers sought payment for un-worked legal holidays as a right
guaranteed by a valid law. In this case, petitioners seek payment of wages for un-worked non-
legal holidays citing as basis a void implementing rule. The circumstances are also markedly
different. In Chartered Bank, there was a collective bargaining agreement that prescribed the
divisor. No CBA exists in this case. In Chartered Bank, the employer was liable for
underpayment because the divisor it used was 251 days, a figure that clearly fails to account for
the ten legal holidays the law requires to be paid. Here, the divisor ANTECO uses is 304 days.
This figure does not deprive petitioners of their right to be paid on legal holidays.

A final note. ANTECOs defense is likewise based on Section 2, Rule IV of Book III of the
Omnibus Rules Implementing the Labor Code although ANTECOs interpretation of this
provision is opposite that of petitioners. It is deplorable that both parties premised their
arguments on an implementing rule that the Court had declared void twenty years ago in
Insular Bank. This case is cited prominently in basic commentaries.17 And yet, counsel for both
parties failed to consider this. This does not speak well of the quality of representation they
rendered to their clients. This controversy should have ended long ago had either counsel first
checked the validity of the implementing rule on which they based their contentions.

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