G.R. No.

145561, June 15, 2005

Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda,

Facts: Honda Phils, Inc (company) and Samahan ng Malayang Manggagawa sa Honda (union) started
renegotiations of their CBA. When there was a bargaining deadlock, the union filed a notice of strike. The
company likewise filed a notice of lockout. SOLE assumed jurisdiction and ordered both parties to desist from
their strike and lockout. However, the union subsequently filed a second notice of strike on the ground of unfair
labor practice, alleging that the company illegally contracted out work to the detriment of the workers. The
union went on strike. SOLE assumed jurisdiction and certified the case to NLRC for compulsory arbitration.
The striking employees were ordered to return to work and management accepted them back. Honda then issued
a memorandum announcing its new computation of the 13th and 14th month pay whereby the 31-day strike
shall be considered unworked days for the purpose of computing said benefits. The amount equivalent to 1/12
of the employees basic salary shall be deducted from the bonuses (because they did not work for 1 month).
Furthermore, Honda wanted a pro-rata payment of the 13th month pay. The union opposed said computation
because it was contrary to their current CBA which mandates that the company shall maintain the present
practice in the implementation of the 13th month pay and that the 14th month pay shall be computed in the
same way as the former.

Issues:
Whether or not there is ambiguity in the CBA provisions concerning the 13th and 14th month pay
Whether or not the proposed computation of Honda deducting 1/12 of the employees basic salary from the
13th and 14th month pay and its pro-rata payment are valid

Held:
(1) YES. A collective bargaining agreement refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and conditions of
employment in a bargaining unit. The parties in a CBA may establish such stipulations, clauses, terms and
conditions as they may deem convenient as long as they are not contrary to law, morals, good customs, public
order or public policy. Where the CBA is clear and unambiguous, it becomes the law between the
parties. However, there are times when the CBA provisions may become contentious. In this case, Honda
wanted to implement a pro-rated computation based on the no work, no pay rule. Honda argues that the
phrase present practice in the CBA refers to the manner of payment of the bonuses (50% in May and 50% in
December). The union, on the other hand, insists that the CBA provisions necessarily relate to the computation
of the benefits. As the voluntary arbitrator has correctly observed, there is ambiguity in the assailed CBA
provisions because they did not categorically state whether the computation of the 13th and 14th month pay
would be based on a one full months basic salary of the employees, or pro-rated based on the compensation
actually received.
(2) NO. The ambiguity in the CBA provisions was correctly resolved by the arbitrator by relying on Article
1702 of the Civil Code, which provides that in case of doubt, all labor legislation and all labor contracts shall
be construed in favor of the safety and decent living of the laborer. CA is also correct in ruling that the
computation of the 13th month pay should be based on the length of service and not on the actual wage earned
by the worker. PD 851 or the 13th Month Pay Law was issued to protect the level of wages of workers from
worldwide inflation. Under the IRR of said law, the minimum 13th month pay shall not be less than 1/12 of the
total basic salary earned by an employee within a calendar year. The Court has interpreted basic salary to
mean, NOT the amount actually received by an employee, but 1/12 of their standard monthly wage multiplied
by their length of service within a given calendar year. The IRR also provide for a pro-ration of this benefit
ONLY in cases of resignation or separation from work. In the present case, there being no
resignation/separation, the computation of the 13th month pay should not be pro-rated but should be given in
full. Moreover, it has not been proven that Honda has been implementing pro-rating of the 13th month pay
before the present case. It is not a company practice. In fact, there was an implicit acceptance that prior to the
strike, a full month basic pay computation was the present practice intended in the CBA. It was the second
strike that prompted the company to adopt the pro-rata computation.