THIRD DIVISION

[G.R. No. 124841. July 31, 1998.]

PEFTOK INTEGRATED SERVICES, INC., petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and EDUARDO ABUGHO, ET AL., respondents.
Marcelino A. Bueno for petitioner.
The Solicitor General for respondents.
SYNOPSIS
Petitioner filed this petition for certiorari under Rule 65 seeking to set
aside the decision of the National Labor Relations Commission dismissing
its appeal. Private respondents asserted that the waivers and quitclaims
signed by them renouncing whatever claims which they may have against
petitioner were contrary to public policy, the same being written in the
English language which they do not understand and the contents thereof
were not explained to them. Moreover, the aforementioned quitclaims
were prepared and readied for their signature by petitioner and they were
forced to sign the same for fear that they would not be given their salary
on pay day and their services would be terminated if they did not sign
them. The petitioner, on the other hand, claimed that the quitclaims
executed by private respondents suffered no legal infirmity. Like any other
right, the claims can be waived and the waiver thereof was not prohibited
by law. Petitioner likewise maintained that no surety bond is required to
perfect an appeal, in the same manner that no bond is necessary for the
issuance of an alias writ of execution. The Solicitor General prayed that
the petition be dismissed outright for non-compliance with the requisite
motion for reconsideration and that quitclaims by employees are basically
against public policy.
The Supreme Court held that the petition was dismissable on the ground
of prematurity. In consonance with the principle of exhaustion of
administrative remedies, it was necessary for a motion for
reconsideration of the decision of the NLRC to be filed in order to give it a
chance to correct its mistakes, if there be any. So also, under Rule 65 of
the Revised Rules of Court, petitioner must establish that it has no plain,
speedy and adequate remedy in the ordinary course of law for its
perceived grievance. The Court also found there was no voluntariness in
the execution of the quitclaims and waivers in question. Moreover,
quitclaims, waivers or releases are commonly frowned upon as contrary
to public policy and ineffective to bar claims for the full measure of the

workers' legal rights. With respect to the posting of cash or surety bond,
the Court held that the requirement therefor is mandatory. The bond is
sine qua non to the perfection of appeal from the Labor Arbiter's
monetary award. The posting of cash or surety bond is unconditional and
cannot therefore be trifled with. Hence, the Court dismissed the petition.
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATION; LABOR RELATIONS; APPEAL FROM
LABOR ARBITER TO THE NLRC; 10-DAY FILING PERIOD, BOTH MANDATORY
AND JURISDICTIONAL. There is no quibble over the fact that subject
decision of the labor arbiter appealed from was received by petitioner on
June 30, 1995. The appeal therefrom should have been interposed within
10 days or not later than July 10, 1995. But unfortunately for petitioner,
its appeal was only filed on July 17. 1995. Indeed, it is decisively clear
that petitioner's appeal is flawed by late filing. The prescribed period for
appeal is both mandatory and jurisdictional.
2.
ID.; ID.; APPEAL; CASH OR SURETY BOND, A SINE QUA NON TO THE
PERFECTION THEREOF; RATIONALE. With respect to the posting of cash
or surety bond, the requirement therefor is mandatory. The bond is sine
qua non to the perfection of appeal from the labor arbiter's monetary
award. The posting of cash or surety bond is unconditional and cannot
therefore be trifled with. It is the intendment of the law that employees
be assured that if they finally prevail in the case, they will receive the
monetary award granted them. The bond also serves to discourage
employers from using the appeal as a ploy to delay or evade payment of
monetary obligations to their employees.
3.
ID.; ID.; TERMINATION OF EMPLOYMENT; WAIVER OR QUITCLAIM;
BASICALLY CONTRARY TO PUBLIC POLICY: LACK OF VOLUNTARINESS IN
THE EXECUTION OF WAIVER OR QUITCLAIM IN CASE AT BAR. It is
decisively clear that they (guards) affixed their signatures to subject
waivers and/or quitclaims for fear that they will not be paid their salaries
on pay day or worse, still, their services would be terminated if they did
not sign those papers. In short, there was no voluntariness in the
execution of the quitclaim or waivers in question. It should be borne in
mind that in this jurisdiction, quitclaims, waivers, or releases are looked
upon with disfavor. "Necessitous men are not free men." (954 SCRA 457)
"They are commonly frowned upon as contrary to public policy and
ineffective to bar claims for the full measure of the workers' legal rights."
(259 SCRA 280)

4.
REMEDIAL LAW; CIVIL PROCEDURE; PETITION FOR CERTIORARI
UNDER RULE 65; DISMISSAL THEREOF, PROPER ON GROUND OF
PREMATURITY; FILING OF MOTION FOR RECONSIDERATION OF NLRC
DECISION IS A REQUIREMENT BEFORE AVAILING OF PETITION FOR
CERTIORARI. Then, too, the petition under consideration is likewise
dismissable on the ground of prematurity. In consonance with the
principle of exhaustion of administrative remedies, it was necessary for a
motion for reconsideration of the decision of the National Labor Relations
Commission to be filed in order to give NLRC a chance to correct its
mistakes, if there be any. So also, under Rule 65 of the Revised Rules of
Court, petitioner must establish that it has no plain, speedy and adequate
remedy in the ordinary course of law for its perceived grievance.
DECISION
PURISIMA, J p:
Pacta privata juri publico derogare non possunt. Private agreements
(between parties) cannot derogate from public right. llcd
Filed on May 22, 1996, this petition for certiorari under Rule 65 of the
Revised Rules of Court seeks to set aside the decision of the National
Labor Relations Commission (NLRC) dismissing the appeal of petitioner.
The case stemmed from the decision handed down by Labor Arbiter Noel
Augusto S. Magbanua, disposing, as follows:
"WHEREFORE, in view of the foregoing premises, respondents-PEKTOK
Security Agency and Timber Industries of the Philippines, Inc. (TIPI) and
Union Plywood Corporation are hereby ordered to pay, jointly and
solidarity the claims of complainants as previously computed, as follows:
1.

Eduardo Abugho

P49,397.83

2.

Clenio Macanoquit

31,596.12

3.

Claro Mendez 49,308.83

4.

Leovemin Lumban

16,666.45

5.

Crispin Balingkit

44,772.34

6.

Ulysses Labis

7.

Fidel Sabellina 23,666.90

8.

Leonardo Daluperi

43,812.64

27,026.59

9.

Valentine Adame

17, 84.92

10. Gonzalo Ernero18, 18.56

11. Celso Niluag

18,670.00

12. Reynaldo Maasin

19,499.28 1

GRAND TOTAL P342,598.52

Other claims are hereby dismissed for failure to substantiate and for lack
of merit.
SO ORDERED."
Pertinent sheriff's return shows that the aforesaid decision was partly
executed up to fifty percent (50%), Timber Industries of the Philippines
(TIPI) having paid half of their solidary obligation to the security guardsemployees, who quitclaimed and waived fifty percent (50%) of the
benefits adjudged in their favor. On October 13, 1989, 2 Eduardo Abugho,
Claro Mendez and Leonardo Daluperi executed a waiver 3 of all their
claims against Peftok Integrated Services, Inc. (PEFTOK, for brevity) for
the period ending on June 30, 1989. Said waiver 4 appeared to bar all
claims they may have had against PEFTOK before June 30, 1989. Urged
by their entitlement to full benefits as provided in the labor arbiter's
decision, the private respondents sought the issuance of an alias writ of
execution.
On May 29, 1992, Eduardo Abugho, Fidel Sabellina, Leonardo Daluperi,
Claro Mendez and Reynaldo Maasin executed another waiver and
quitclaim 5 purportedly renouncing whatever claims they may have
against PEFTOK for the period ending March 15, 1998. Such waiver or
quitclaim was worded to preclude whatever claim they may have against
PEFTOK on or before March 16, 1998. However, Eduardo Abugho, Fidel
Sabellina, Leonardo Daluperi, Reynaldo Maasin and Claro Mendez
subsequently executed affidavits 6 stating that the aforementioned
quitclaims were prepared and readied for their signature by PEFTOK and
they were forced to sign the same for fear that they would not be given
their salary on pay day, and worse, their services would be terminated if
they did not sign the said quitclaims under controversy.
Private respondents asserted that the waivers of claims signed by them
are contrary to public policy; the same being written in the English

language which they do not understand and the contents thereof were
not explained to them. On June 19, 1995, the prayer for alias writ of
execution was granted by Labor Arbiter Henry F. Te. cdrep
In support of its prayer, petitioner PEFTOK theorizes that the quitclaims
executed by the security guards suffer no legal infirmity. Like any other
right, the claims in dispute can be waived and waiver thereof is not
prohibited by law. No surety bond is required to perfect an appeal, in the
same manner that no bond is necessary for the issuance of an alias writ
of execution; petitioner maintains.
The comment sent in by the Solicitor General prays that the petition be
dismissed outright for being premature and for non-compliance with the
requisite motion for reconsideration of the NLRC decision before elevating
the same to this court. It stressed that quitclaims by employees are
basically against public policy.
There is no quibble over the fact that subject decision of the labor arbiter
appealed from was received by petitioner on June 30, 1995. The appeal
therefrom should have been interposed within 10 days or not later than
July 10, 1995. But unfortunately for petitioner, its appeal was only filed on
July 17, 1995. Indeed, it is decisively clear that petitioner's appeal is
flawed by late filing. The prescribed period for appeal is both mandatory
and jurisdictional.
Then, too, the petition under consideration is likewise dismissable on the
ground of prematurity. In consonance with the principle of exhaustion of
administrative remedies, it was necessary for a motion for
reconsideration of the decision of the National Labor Relations
Commission to be filed in order to give NLRC a chance to correct its
mistakes, if there be any. So also, under Rule 65 of the Revised Rules of
Court, petitioner must establish that it has no plain, speedy and adequate
remedy in the ordinary course of law for its perceived grievance. 7
It is decisively clear that they (guards) affixed their signatures to subject
waivers and/or quitclaims for fear that they would not be paid their
salaries on pay day or worse, still, their services would be terminated if
they did not sign those papers. In short, there was no voluntariness in the
execution of the quitclaim or waivers in question. It should be borne in
mind that in this jurisdiction, quitclaims, waivers or releases are looked
upon with disfavor. 8 "Necessitous men are not free men." 9 "They are
commonly frowned upon as contrary to public policy and ineffective to
bar claims for the full measure of the workers' legal rights." 10

With respect to the posting of cash or surety bond, the requirement

therefor is mandatory. The bond is sine qua non to the perfection of
appeal from the labor arbiter's monetary award. 11 The posting of cash or
surety bond is unconditional" 12 and cannot therefore be trifled with. It is
the intendment of the law that employees be assured that if they finally
prevail in the case, they will receive the monetary award granted them.
The bond also serves to discourage employers from using the appeal as a
ploy to delay or evade payment of monetary obligations to their
employees.
WHEREFORE, the petition is hereby DISMISSED for lack of merit; the
decision of the NLRC dated February 26, 1995 is AFFIRMED and the
questioned alias writ of execution UPHELD.
SO ORDERED. cdtai
Narvasa, C .J ., Romero and Kapunan, JJ ., concur.

FIRST DIVISION
[G.R. No. 95844. July 20, 1992.]
COMMANDO SECURITY AGENCY, petitioner, vs. NATIONAL
RELATIONS COMMISSION and NEMESIO DECIERDO, respondent.

LABOR

Antonio O. Montana, Sr. for petitioner.

Antonio A. Billiones, Sr. for private respondent.
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT;
ABANDONMENT; CLEAR PRONOUNCEMENT THEREOF NO LONGER
NECESSARY WHEN EMPLOYEE IS NO LONGER INTERESTED IN HIS JOB.
The NLRC did find that Decierdo had given up his job and chose
separation pay in lieu or reinstatement. There was no need for the
Executive Labor Arbiter to fix a period within which to require Decierdo to
report for work considering that the latter is no longer interested in his job
and had claimed for separation benefits in lieu of reinstatement.
Petitioner should not begrudge the Labor Arbiter's 'failure' to fix a returnto-work period considering that the Labor Arbiter practically found
Decierdo to have abandoned his job and, besides, his claim for separation
pay was not granted. If there was anyone who should have been
interested in being recalled to work, it should have been Decierdo himself
and not petitioner.
2.
CONSTITUTIONAL LAW; BILL OF RIGHTS; PROCEDURAL DUE
PROCESS; MERELY REQUIRES NOTICE AND OPPORTUNITY TO BE HEARD.
Regarding the petitioner's allegation that it was denied due process, we
have time and again pointed out that procedural due process merely
requires notice and opportunity to be heard (Var Orient Shipping
Company vs. Achacoso, 161 SCRA 732, Bermejo vs. Barrios, 31 SCRA 764)
which the petitioner was given when it filed its position paper. The
petitioner was properly notified and even took part in the conciliation
conference for the amicable settlement of the case. It was aware of the
nature and specifics of the charges against it but failed to refute them
expecting that a hearing would be called. However, the Labor Arbiter
proceeded to decide the case based on the parties' position papers, the
records submitted by petitioner, and the report and the computations
made by the Corporate Auditing Examiner regarding the sums which
Decierdo was entitled to recover. That procedure complied with the
Revised Rules of the NLRC, particularly Sections 2 and 3.

3.
ID.; DECLARATION OF PRINCIPLES AND STATE POLICIES; RIGHTS OF
WORKERS WHO ARE PLACED IN A CONTRACTUALLY DISADVANTAGED
POSITION SHOULD BE PROTECTED. Petitioner's contention that
Decierdo is estopped from complaining about the 25% deduction from his
salary representing petitioner's share in procuring job placement for him,
is not well taken. That provision of the employment contract was illegal
and inequitous, hence, null and void. The constitutional provisions on
social justice (Sections 9 and 10, Article II) and protection to labor (Sec.
18, Article II) in the declaration of Principles and State Policies, impose
upon the courts the duty to be ever vigilant in protecting the rights of
workers who are placed in a contractually disadvantaged position and
who sign waivers or provisions contrary to law and public policy (Mercury
Drug Co., Inc. vs. Dayao, 117 SCRA 99, 116). We affirm the NLRC's ruling
that: "It goes without saying that respondent may not deduct its so-called
'share' from the salaries of its guards without the latter's express consent
and if such deductions are not allowed by law. This is notwithstanding any
previous agreement or understanding between them. Any such
agreement or contract is void ab initio being contrary to law and public
policy (Mercury Drug Co. vs. Nardo Dayao, G.R. No. 30432, September 30,
1982)."
DECISION
GRIO-AQUINO, J p:
Petitioner assails the resolutions of the National Labor Relations
Commission dated May 26, 1989 and September 25, 1990, affirming with
modification the decision of the Labor Arbiter in NLRC Case No. 110200075-88.
Private respondent Nemesio Decierdo was a security guard of the
petitioner since February 1981. In April 1987, petitioner entered into a
contract to provide guarding services to the Alsons Development and
Investment Corporation (ALSONS for brevity) at its Aldevinco Building on
Claro M. Recto Avenue, Davao City, for a period of one year, i.e., from
April 11, 1987 to April 10, 1988, unless renewed under such terms and
conditions as may be mutually acceptance. The number of guards to be
assigned by the petitioner would depend on ALSON's demand, sometimes
two (2) guards on a daily shift, and sometimes four (4) guards. Decierdo
was one of the guards assigned to the Aldevinco Building by the
petitioner.

On February 9, 1988, Maria Mila D. Samonte, Properties Administration

Head on ALSONS, requested the petitioner for a "periodic reshuffling" of
guards. The pertinent portion of her letter reads:
"Our corporation offers spaces to tenants including services of
maintenance and security. The latter causes us to hire your agency's
services. It is therefore clearly understood that Aldevinco assures tenants
of security of their properties found in Aldevinco's compound, and
likewise Commando Security Service Agency assures Aldevinco the same.
LLjur
"We hope that the above shall be clearly explained to the incoming
guards, we requested for a period reshuffling. We do extend our gratitude
to your immediate services in response to or request in the past." (pp. 45A-46, Rollo.)
Pursuant to that reasonable request of its client, petitioner on February
10, 1988 served the following recall order on Decierdo:
"Report to this HQs for instruction. You are hereby recalled from your
present post at Aldevinco Bldg. as per Rotation Policy Order by the
management effective 11 February 1988." (p. 46, Rollo.)
On the same date, February 10, 1988, Detail Order 02-016 was issued to
Decierdo assigning him to the Pacific Oil Company in Bunawan, Davao
City, with instruction to report to the manager, but Decierdo refused to
accept the assignment as shown by the annotation at the bottom of the
Order, viz:
"Refused to accept assignment he is going to rest for a while." (p. 54,
Rollo.)
On February 11, 1988, which was the effective date of the detail order,
Decierdo filed a complaint for illegal dismissal, unfair labor practice,
underpayment of wages, overtime pay, night premium, 13th month pay,
holiday pay, rest day pay and incentive leave pay.
On June 28, 1988, the Executive Labor Arbiter rendered a decision, the
dispositive portion of which reads as follows:
"WHEREFORE, in consideration of all the foregoing, judgment is hereby
rendered:
"1. Ordering respondent Commando Security Agency to pay complaint
Security Agency to pay complainant Nemesio Decierdo the total amount

of THIRTY-THREE THOUSAND EIGHT HUNDRED SEVENTY-SEVEN AND

92/100 PESOS (P33,877.92). as salary, holiday and rest day pay
differentials, 13th month pay differentials and service incentive leave
pay; and
"2. Dismissing the complaint for illegal dismissal, unfair labor practice,
overtime pay and night premium for lack of merit." (pp. 19-20, Rollo.)
Petitioner appealed to the NLRC which on May 26, 1989, affirmed with
modification the decision of the Labor Arbiter, to wit:
"WHEREFORE, the appealed Decision is hereby AFFIRMED with the
modification that the amount of P1,498.39 representing complainant's
accountability with (sic) respondent is hereby ordered deducted from the
total award." (p. 58, Rollo.)
Hence, this petition for certiorari alleging that the NLRC gravely abused
its discretion:
1.
in failing to make a clear pronouncement that Decierdo had
abandoned his employment as he went on AWOL and therefore is
considered resigned; LibLex
2.

in denying petitioner due process of law, or a right to be heard;

3.

in not considering that Decierdo is in estoppel; and

4.
in not holding that petitioner is entitled to a 25% share of his
monthly salary as agreed between them.
The petition for certiorari is without merit.
The first ground of the petition is not well taken for the NLRC did find that
Decierdo had given up his job and chose separation pay in lieu or
reinstatement.
"Anent the first issue, suffice it to state that there was no need for the
Executive Labor Arbiter to fix a period within which to require complainant
to report for work considering that the latter is no longer interested in his
job and had claimed for separation benefits in lieu of reinstatement. Why
respondent had begrudged the Labor Arbiter's 'failure' to fix a return-towork period escapes us considering that the Labor Arbiter practically
found complainant to have abandoned his job and, besides, complainant's
claims for separation pay was not granted. If there was anyone who
should have been interested in being recalled to work, it should have
been complainant himself and not respondent." (pp. 54-55, Rollo.)

As a result, the NLRC dismissed the charge of illegal dismissal and unfair
labor practice against the petitioner and denied Decierdo's claim for
separation pay.
Regarding the petitioner's allegation that it was denied due process, we
have time and again pointed out that procedural due process merely
requires notice and opportunity to be heard (Var Orient Shipping
Company vs. Achacoso, 161 SCRA 732, Bermejo vs. Barrios, 31 SCRA 764)
which the petitioner was given when it filed its position paper. The
petitioner was properly notified and even took part in the conciliation
conference for the amicable settlement of the case. It was aware of the
nature and specifics of the charges against it but failed to refute them
expecting that a hearing would be called. However, the Labor Arbiter
proceeded to decide the case based on the parties' position papers, the
records submitted by petitioner, and the report and the computations
made by the Corporate Auditing Examiner regarding the sums which
Decierdo was entitled to recover. That procedure complied with the
Revised Rules of the NLRC, particularly Sections 2 and 3, which provide:
"Sec. 2. Submission of position papers. During the immediately
thereafter, the Labor Arbiter shall require the parties to simultaneously
submit to him their respective verified position papers, which shall cover
only the issues raised in the complaint, accompanied by all supporting
documents then available to them and the affidavits of their witnesses
which shall take the place of their direct, testimony. The parties shall
thereafter not be allowed to allege, or present evidence to prove, facts
not referred to and any cause or causes of action not included in their
complaint or position papers, affidavits and other documents. The parties
shall furnish each other with copies of the position papers, together with
the supporting affidavits and documents submitted by them.
"Sec. 3. Determination of necessity of hearing. Immediately after the
submission by the parties of their position papers and supporting proofs,
the Labor Arbiter shall determine whether there is a need for a formal
hearing or investigation. At this state, he may, in his discretion, and for
the purpose of making such determination, elicit pertinent facts or
information, including documentary evidence, if any, from any party or
witness to complete, as far as possible, the facts of the case. Facts or
information so elicited may serve as basis for his clarification or
simplification and limitation of the issues in the case, encouraging for this
purpose the submission by the parties of admissions and stipulations of
fact to abbreviate the proceedings. He shall participate actively in the

preparation of such stipulations, making suggestions on what facts the

parties need not prove." (Emphasis supplied.) LLjur
The NLRC correctly held that:
". . . the Executive Labor Arbiter did not err when she dispensed with a
full blown hearing there being no necessity for one. Under Section 3 of
the same rule as above-cited, the Labor Arbiter may, in his sound
discretion, dispense with a hearing and require, instead, the parties to file
their respective position papers together with all the supporting proofs. . .
. all that respondent had to do was present its payrolls and other records
which it is required to keep and maintain (see Sec. 6-12, Rule X, Book III
of Omnibus Rules Implementing the Labor Code) and it could already be
determined on the face thereof if complainant's monetary claims had
actually been paid or not, . . . complainant's entitlements were computed
by the Corporate Auditing Examiner (p. 63, Records) on the basis of
respondent's records which was secured by virtue of a subpoena duces
tecum (p. 43, record). Respondent should have met head-on the accuracy
of correctness of the computations and not skirt the issue by dwelling
merely on technicalities by complaining that the records were irregularly
procured." (p. 56, Rollo.)
Petitioner's contention that Decierdo is estopped from complaining about
the 25% deduction from his salary representing petitioner's share in
procuring job placement for him, is not well taken. That provision of the
employment contract was illegal and inequitous, hence, null and void.
The constitutional provisions on social justice (Sections 9 and 10, Article
II) and protection to labor (Sec. 18, Article II) in the declaration of
Principles and State Policies, impose upon the courts the duty to be ever
vigilant in protecting the rights of workers who are placed in a
contractually disadvantaged position and who sign waivers or provisions
contrary to law and public policy (Mercury Drug Co., Inc. vs. Dayao, 117
SCRA 99, 116). We affirm the NLRC's ruling that:
"It goes without saying that respondent may not deduct its so-called
'share' from the salaries of its guards without the latter's express consent
and if such deductions are not allowed by law. This is notwithstanding any
previous agreement or understanding between them. Any such
agreement or contract is void ab initio being contrary to law and public
policy (Mercury Drug Co. vs. Nardo Dayao, G.R. No. 30432, September 30,
1982)." (pp. 57-58, Rollo.)

WHEREFORE, finding no abuse of discretion on the part of the National

Labor Relations Commission in rendering the assailed decision, the
petition for certiorari is DISMISSED for lack of merit.
SO ORDERED.
Cruz, Medialdea and Bellosillo, JJ ., concur.

FIRST DIVISION
[G.R. No. 53515. February 8, 1989.]
SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioners, vs.
HON. BLAS F. OPLE, as Minister of Labor and SAN MIGUEL CORPORATION,
respondents.
Lorenzo F . Miravite for petitioner.
Isidro D. Amoroso for New San Miguel Corp. Sales Force Union.
Siguion Reyna, Montecillo & Ongsiako for respondent.
SYLLABUS
LABOR LAW; MANAGEMENT PREROGATIVE, VALIDLY EXERCISED IN CASE
AT BAR. Public respondent was correct in holding that the CDS is a valid
exercise of management prerogatives: "Except as limited by special laws,
an employer is free to regulate, according to his own discretion and
judgment, all aspects of employment, including hiring, work assignments,
working methods, time, place and manner of work, tools to be used,
processes to be followed, supervision of workers, working regulations,
transfer of employees, work supervision, lay-off of workers and the
discipline, dismissal and recall of work. . . . (NLU vs. Insular La Yebana Co.,
2 SCRA 924; Republic Savings Bank vs. CIR, 21 SCRA 226, 235.)" (Perfecto
V. Hernandez, Labor Relations Law, 1985 Ed., p. 44.) Every business
enterprise endeavors to increase its profits. In the process, it may adopt
or devise means designed towards that goal. So long as a company's
management prerogatives are exercised in good faith for the
advancement of the employer's interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws
or under valid agreements, this Court will uphold them (LVN Pictures
Workers vs. LVN, 35 SCRA 147; Phil. American Embroideries vs.
Embroidery and Garment Workers, 26 SCRA 634; Phil. Refining Co. vs.
Garcia, 18 SCRA 110). San Miguel Corporation's offer to compensate the
members of its sales force who will be adversely affected by the
implementation of the CDS, by paying them a so-called "back adjustment
commission" to make up for the commissions they might lose as a result
of the CDS, proves the company's good faith and lack of intention to bust
their union.
DECISION
GRIO-AQUINO, J p:

This is a petition for review of the Order dated February 28, 1980 of the
Minister of Labor in Labor Case No. AJML-069-79, approving the private
respondent's marketing scheme, known as the "Complementary
Distribution System" (CDS), and dismissing the petitioner labor union's
complaint for unfair labor practice.
On April 17, 1978, a collective bargaining agreement (effective on May 1,
1978 until January 31, 1981) was entered into by petitioner San Miguel
Corporation Sales Force Union (PTGWO), and the private respondent, San
Miguel Corporation, Section 1, of Article IV of which provided as follows:
"Art. IV, Section 1. Employees within the appropriate bargaining unit shall
be entitled to a basic monthly compensation plus commission based on
their respective sales." (p. 6, Annex A; p. 113, Rollo.)
In September 1979, the company introduced a marketing scheme known
as the "Complementary Distribution System" (CDS) whereby its beer
products were offered for sale directly to wholesalers through San
Miguel's sales offices.
The labor union (herein petitioner) filed a complaint for unfair labor
practice in the Ministry of Labor, with a notice of strike on the ground that
the CDS was contrary to the existing marketing scheme whereby the
Route Salesmen were assigned specific territories within which to sell
their stocks of beer, and wholesalers had to buy beer products from them,
not from the company. It was alleged that the new marketing scheme
violates Section 1, Article IV of the collective bargaining agreement
because the introduction of the CDS would reduce the take-home pay of
the salesmen and their truck helpers for the company would be unfairly
competing with them. cdll
The complaint filed by the petitioner against the respondent company
raised two issues: (1) whether the CDS violates the collective bargaining
agreement, and (2) whether it is an indirect way of busting the union.
In its order of February 28, 1980, the Minister of Labor found:
". . . We see nothing in the record as to suggest that the unilateral action
of the employer in inaugurating the new sales scheme was designed to
discourage union organization or diminish its influence, but rather it is
undisputable that the establishment of such scheme was part of its
overall plan to improve efficiency and economy and at the same time
gain profit to the highest. While it may be admitted that the introduction
of new sales plan somewhat disturbed the present set-up, the change

however was too insignificant as to convince this Office to interpret that

the innovation interfered with the worker's right to self-organization.
"Petitioner's conjecture that the new plan will sow dissatisfaction from its
ranks is already a prejudgment of the plan's viability and effectiveness. It
is like saying that the plan will not work out to the workers' [benefit] and
therefore management must adopt a new system of marketing. But what
the petitioner failed to consider is the fact that corollary to the adoption
of the assailed marketing technique is the effort of the company to
compensate whatever loss the workers may suffer because of the new
plan over and above than what has been provided in the collective
bargaining agreement. To us, this is one indication that the action of the
management is devoid of any anti-union hues." (pp. 24-25, Rollo.)
The dispositive part of the Minister's Order reads:
"WHEREFORE, premises considered, the notice of strike filed by the
petitioner, San Miguel Brewery Sales Force Union-PTGWO is hereby
dismissed. Management however is hereby ordered to pay an additional
three (3) months back adjustment commissions over and above the
adjusted commission under the complementary distribution system." (p.
26, Rollo.)
The petition has no merit. LLphil
Public respondent was correct in holding that the CDS is a valid exercise
of management prerogatives:
"Except as limited by special laws, an employer is free to regulate,
according to his own discretion and judgment, all aspects of employment,
including hiring, work assignments, working methods, time, place and
manner of work, tools to be used, processes to be followed, supervision of
workers, working regulations, transfer of employees, work supervision,
lay-off of workers and the discipline, dismissal and recall of work. . . . (NLU
vs. Insular La Yebana Co., 2 SCRA 924; Republic Savings Bank vs. CIR, 21
SCRA 226, 235.)" (Perfecto V. Hernandez, Labor Relations Law, 1985 Ed.,
p. 44.) (Emphasis ours.)
Every business enterprise endeavors to increase its profits. In the
process, it may adopt or devise means designed towards that goal. In
Abott Laboratories vs. NLRC, 154 SCRA 713, We ruled:
". . . Even as the law is solicitous of the welfare of the employees, it must
also protect the right of an employer to exercise what are clearly

management prerogatives. The free will of management to conduct its

own business affairs to achieve its purpose cannot be denied."
So long as a company's management prerogatives are exercised in good
faith for the advancement of the employer's interest and not for the
purpose of defeating or circumventing the rights of the employees under
special laws or under valid agreements, this Court will uphold them (LVN
Pictures Workers vs. LVN, 35 SCRA 147; Phil. American Embroideries vs.
Embroidery and Garment Workers, 26 SCRA 634; Phil. Refining Co. vs.
Garcia, 18 SCRA 110). San Miguel Corporation's offer to compensate the
members of its sales force who will be adversely affected by the
implementation of the CDS, by paying them a so-called "back adjustment
commission" to make up for the commissions they might lose as a result
of the CDS, proves the company's good faith and lack of intention to bust
their union. cdrep
WHEREFORE, the petition for certiorari is dismissed for lack of merit.
SO ORDERED.
Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

FIRST DIVISION
[G.R. No. L-44169. December 3, 1985.]
ROSARIO A. GAA, petitioner, vs. THE HONORABLE COURT OF APPEALS,
EUROPHIL INDUSTRIES CORPORATION, and CESAR R. ROXAS, Deputy
Sheriff of Manila, respondents.
Federico C. Alikpala and Federico Y. Alikpala Jr. for petitioner.
Borbe and Palma for private respondent.
DECISION
PATAJO, J p:
This is a petition for review on certiorari of the decision of the Court of
Appeals promulgated on March 30, 1976, affirming the decision of the
Court of First Instance of Manila.
It appears that respondent Europhil Industries Corporation was formerly
one of the tenants in Trinity Building at T.M. Kalaw Street, Manila, while
petitioner Rosario A. Gaa was then the building administrator. On
December 12, 1973, Europhil Industries commenced an action (Civil Case
No. 92744) in the Court of First Instance of Manila for damages against
petitioner "for having perpetrated certain acts that Europhil Industries
considered a trespass upon its rights, namely, cutting of its electricity,
and removing its name from the building directory and gate passes of its
officials and employees" (p. 87, Rollo). On June 28, 1974, said court
rendered judgment in favor of respondent Europhil Industries, ordering
petitioner to pay the former the sum of P10,000.00 as actual damages,
P5,000.00 as moral damages, P5,000.00 as exemplary damages and to
pay the costs.
The said decision having become final and executory, a writ of
garnishment was issued pursuant to which Deputy Sheriff Cesar A. Roxas
on August 1, 1975 served a Notice of Garnishment upon El Grande Hotel,
where petitioner was then employed, garnishing her "salary, commission
and/or remuneration." Petitioner then filed with the Court of First Instance
of Manila a motion to lift said garnishment on the ground that her
"salaries, commission and or remuneration" are exempted from execution
under Article 1708 of the New Civil Code. Said motion was denied by the
lower Court in an order dated November 7, 1975. A motion for
reconsideration of said order was likewise denied, and on January 26,

1976 petitioner filed with the Court of Appeals a petition for certiorari
against said order of November 7, 1975.
On March 30, 1976, the Court of Appeals dismissed the petition for
certiorari. In dismissing the petition, the Court of Appeals held that
petitioner is not a mere laborer as contemplated under Article 1708 as
the term laborer does not apply to one who holds a managerial or
supervisory position like that of petitioner, but only to those "laborers
occupying the lower strata." It also held that the term "wages" means the
pay given "as hire or reward to artisans, mechanics, domestics or menial
servants, and laborers employed in manufactories, agriculture, mines,
and other manual occupation and usually employed to distinguish the
sums paid to persons hired to perform manual labor, skilled or unskilled,
paid at stated times, and measured by the day, week, month, or season,"
citing 67 C.J. 285, which is the ordinary acceptation of the said term, and
that "wage" in Spanish is "jornal" and one who receives a wage is a
"jornalero."
In the present petition for review on certiorari of the aforesaid decision of
the Court of Appeals, petitioner questions the correctness of the
interpretation of the then Court of Appeals of Article 1708 of the New Civil
Code which reads as follows:
"ART. 1708.
The laborer's wage shall not be subject to execution or
attachment, except for debts incurred for food, shelter, clothing and
medical attendance."
It is beyond dispute that petitioner is not an ordinary or rank and file
laborer but "a responsibly place employee," of El Grande Hotel,
"responsible for planning, directing, controlling, and coordinating the
activities of all housekeeping personnel" (p. 95, Rollo) so as to ensure the
cleanliness, maintenance and orderliness of all guest rooms, function
rooms, public areas, and the surroundings of the hotel. Considering the
importance of petitioner's function in El Grande Hotel, it is undeniable
that petitioner is occupying a position equivalent to that of a managerial
or supervisory position.
In its broadest sense, the word "laborer" includes everyone who performs
any kind of mental or physical labor, but as commonly and customarily
used and understood, it only applies to one engaged in some form of
manual or physical labor. That is the sense in which the courts generally
apply the term as applied in exemption acts, since persons of that class
usually look to the reward of a day's labor for immediate or present

support and so are more in need of the exemption than are other. (22 Am.
Jur. 22 citing Briscoe vs. Montgomery, 93 Ga 602, 20 SE 40; Miller vs.
Dugas, 77 Ga 4 Am St Rep 192; State ex rel I.X.L. Grocery vs. Land, 108
La 512, 32 So 433; Wildner vs. Ferguson, 42 Minn 112, 43 NW 793; 6 LRA
338; Anno 102 Am St Rep. 84.
In Oliver vs. Macon Hardware Co., 98 Ga 249, 25 SE 403, it was held that
in determining whether a particular laborer or employee is really a
"laborer," the character of the word he does must be taken into
consideration. He must be classified not according to the arbitrary
designation given to his calling, but with reference to the character of the
service required of him by his employer. LLjur
In Wildner vs. Ferguson, 42 Minn 112, 43 NW 793, the Court also held that
all men who earn compensation by labor or work of any kind, whether of
the head or hands, including judges, lawyers, bankers, merchants, officers
of corporations, and the like, are in some sense "laboring men." But they
are not "laboring men" in the popular sense of the term, when used to
refer to a man's employment, and that is the sense in which the court
must presume, the legislature used the term. The Court further held in
said case:
"There are many cases holding that contractors, consulting or assistant
engineers, agents, superintendents, secretaries of corporations and livery
stable keepers, do not come within the meaning of the term. (Powell v.
Eldred, 39 Mich. 554; Atkin v. Wasson, 25 N.Y. 482; Short v. Medberry, 29
Hun. 39; Dean v. De Wolf, 16 Hun. 186; Krausen v. Buckel, 17 Hun. 463;
Ericson v. Brown, 39 Barb. 390; Coffin v. Reynolds, 37 N.Y. 640; Brusie v.
Griffith, 34 Cal. 306; Dave v. Nunan, 62 Cal. 400)."
Thus, in Jones vs. Avery, 50 Mich, 326, 15 N.W. Rep. 494, it was held that
a traveling salesman, selling by sample, did not come within the meaning
of a constitutional provision making stockholders of a corporation liable
for "labor debts" of the corporation.
In Kline vs. Russel, 113 Ga. 1085, 39 SE 477, citing Oliver vs. Macon
Hardware Co., supra, it was held that a laborer, within the statute
exempting from garnishment the wages of a "laborer," is one whose work
depends on mere physical power to perform ordinary manual labor, and
not one engaged in services consisting mainly of work requiring mental
skill or business capacity, and involving the exercise of intellectual
faculties.

So, also in Wakefield vs. Fargo, 90 N.Y. 213, the Court, in construing an act
making stockholders in a corporation liable for debts due "laborers,
servants and apprentices" for services performed for the corporation, held
that a "laborer" is one who performs menial or manual services and
usually looks to the reward of a day's labor or services for immediate or
present support. And in Weymouth vs. Sanborn, 43 N.H. 173, 80 Am. Dec.
144, it was held that "laborer" is a term ordinarily employed to denote
one who subsists by physical toil in contradistinction to those who
subsists by professional skill. And in Consolidated Tank Line Co. vs. Hunt,
83 Iowa, 6, 32 Am. St. Rep. 285, 43 N.W. 1057, 12 L.R.A. 476, it was
stated that "laborers" are those persons who earn a livelihood by their
own manual labor.
Article 1708 used the word "wages" and not "salary" in relation to
"laborer" when it declared what are to be exempted from attachment and
execution. The term "wages" as distinguished from "salary", applies to the
compensation for manual labor, skilled or unskilled, paid at stated times,
and measured by the day, week, month, or season, while "salary" denotes
a higher degree of employment, or a superior grade of services, and
implies a position of office: by contrast, the term "wages" indicates
considerable pay for a lower and less responsible character of
employment, while "salary" is suggestive of a larger and more important
service (35 Am. Jur. 496).
The distinction between wages and salary was adverted to in Bell vs.
Indian Livestock Co. (Tex. Sup.), 11 S.W. 344, wherein it was said:
"'Wages' are the compensation given to a hired person for service, and
the same is true of 'salary'. The words seem to be synonymous,
convertible terms, though we believe that use and general acceptation
have given to the word 'salary' a significance somewhat different from the
word 'wages' in this: that the former is understood to relate to position of
office, to be the compensation given for official or other service, as
distinguished from 'wages', the compensation for labor." Annotation 102
Am. St. Rep. 81, 95. LLjur
We do not think that the legislature intended the exemption in Article
1708 of the New Civil Code to operate in favor of any but those who are
laboring men or women in the sense that their work is manual. Persons
belonging to this class usually look to the reward of a day's labor for
immediate or present support, and such persons are more in need of the
exemption than any others. Petitioner Rosario A. Gaa is definitely not
within that class.

We find, therefore, and so hold that the Trial Court did not err in denying
in its order of November 7, 1975 the motion of petitioner to lift the notice
of garnishment against her salaries, commission and other remuneration
from El Grande Hotel since said salaries, commission and other
remuneration due her from the El Grande Hotel do not constitute wages
due a laborer which, under Article 1708 of the Civil Code, are not subject
to execution or attachment.
IN VIEW OF THE FOREGOING, We find the present petition to be without
merit and hereby AFFIRM the decision of the Court of Appeals, with costs
against petitioner.
SO ORDERED.
Teehankee (Chairman), Plana, Gutierrez, Jr. and De la Fuente, JJ., concur.
Melencio-Herrera and Relova, JJ., are on leave.

FIRST DIVISION
[G.R. No. 149758. August 25, 2005.]
PHILEX GOLD PHILIPPINES, INC., GERARDO H. BRIMO, LEONARD P. JOSEF,
and JOSE B. ANIEVAS, petitioners, vs. PHILEX BULAWAN SUPERVISORS
UNION, represented by its President, JOSE D. PAMPLIEGA, respondents.
Roco Kapunan Migallos Perez & Luna for petitioners.
Arnel L. Lapore for respondents.
SYLLABUS
1.
MERCANTILE LAW; CORPORATION CODE; CORPORATION; LIABILITIES;
OBLIGATIONS INCURRED BY CORPORATION ACTING THROUGH ITS
DIRECTORS, OFFICERS AND EMPLOYEES ARE ITS SOLE LIABILITIES;
EXCEPTIONS. A corporation is a juridical entity with legal personality
separate and distinct from those acting for and in its behalf and, in
general, from the people comprising it. The rule is that obligations
incurred by the corporation, acting through its directors, officers and
employees, are its sole liabilities. However, it is possible for a corporate
director, trustee or officer to be held solidarily liable with the corporation
in the following instances: 1. When directors and trustees or, in
appropriate cases, the officers of a corporation (a) vote for or assent to
patently unlawful acts of the corporation; (b) act in bad faith or with gross
negligence in directing the corporate affairs; (c) are guilty of conflict of
interest to the prejudice of the corporation, its stockholders or members,
and other persons. 2. When a director or officer has consented to the
issuance of watered stocks or who, having knowledge thereof, did not
forthwith file with the corporate secretary his written objection thereto. 3.
When a director, trustee or officer has contractually agreed or stipulated
to hold himself personally and solidarily liable with the Corporation. 4.
When a director, trustee or officer is made, by specific provision of law,
personally liable for his corporate action. ETCcSa
2.
LABOR AND SOCIAL LEGISLATION; LABOR RELATIONS; MANAGEMENT
PREROGATIVES ARE SUBJECT TO LEGAL LIMITS, COLLECTIVE BARGAINING
AGREEMENTS AND THE GENERAL PRINCIPLES OF FAIR PLAY AND JUSTICE;
VIOLATION IN CASE AT BAR. The records only show that an ex-Padcal
supervisor is paid a higher salary than a locally hired supervisor of the
same rank. Therefore, petitioner failed to prove with satisfactory evidence
that it has not discriminated against the locally hired supervisor in view of
the unequal salary. To reiterate the ruling of
Philippine-Singapore

Transport Services, Inc. v. NLRC, which was cited by the Court of Appeals
in its Decision: . . . It is noteworthy to state that an employer is free to
manage and regulate, according to his own discretion and judgment, all
phases of employment, which includes hiring, work assignments, working
methods, time, place and manner of work, supervision of workers,
working regulations, transfer of employees, lay-off of workers, and the
discipline, dismissal and recall of work. While the law recognizes and
safeguards this right of an employer to exercise what are clearly
management prerogatives, such right should not be abused and used as a
tool of oppression against labor. The company's prerogative must be
exercised in good faith and with due regard to the rights of labor. A priori,
they are not absolute prerogatives but are subject to legal limits,
collective bargaining agreements and the general principles of fair play
and justice.
DECISION
AZCUNA, J p:
This is a petition for review on certiorari, with prayer for the issuance of a
temporary restraining and/or status quo order, assailing the Decision of
the Court of Appeals in CA-G.R. SP No. 57701 promulgated on April 23,
2001 and its Resolution, promulgated on August 29, 2001, denying
petitioner's Motion for Reconsideration. The said Decision of the Court of
Appeals reversed and set aside the Resolution dated February 29, 2000 of
the Voluntary Arbitrator and reinstated the Voluntary Arbitrator's
Resolution dated January 14, 2000 with modification. caDTSE
The antecedents 1 of the case are as follows:
Respondent Philex Bulawan Supervisors Union ("Philex Supervisors
Union") is the sole and exclusive bargaining representative of all
supervisors of petitioner Philex Gold Philippines, Incorporated ("Philex
Gold"), a gold mining company with mine site at Vista Alegre, Nabulao,
Sipalay, Negros Occidental. On July 2, 1997, respondent union entered
into a Collective Bargaining Agreement (CBA) with petitioner company
effective August 1, 1996 up to July 31, 2001.
It appears, however, that after the signing of the CBA, Philex Gold made
the employees of Philex Mining Corporation from Padcal, Tuba, Benguet,
its regular supervisory employees effective July 1, 1997. Some of the socalled "ex-Padcal" supervisors began to work in the Bulawan mines of
Philex Mining Corporation in 1992 as ordinary rank-and-file workers. When
Philex Gold was incorporated in 1996 to exclusively handle gold mining, it

took over the operations of the Bulawan mines and absorbed some of the
ex-Padcal employees.
Philex Gold conveyed to Philex Supervisors Union the status of the exPadcal supervisors in November 1997 upon the insistence of the union to
be informed of their standing.
It turned out that the ex-Padcal supervisors were maintained under a
confidential payroll, receiving a different set of benefits and higher
salaries compared to the locally hired supervisors of similar rank and
classification doing parallel duties and functions.
Philex Supervisors Union filed a Complaint 2 against Philex Gold with the
National Conciliation and Mediation Board (NCMB), Bacolod City, for the
payment of wage differential and damages and the rectification of the
discriminatory salary structure and benefits between the ex-Padcal
supervisors and the local-hires.
After the submission of the parties' respective position papers and
rejoinders/supplemental position papers, the Voluntary Arbitrator
rendered a decision on January 14, 2000 in favor of respondent Union.
As regards the supervisors' wage rates 3 which was submitted by Philex
Gold, the Voluntary Arbitrator held:
xxx

xxx

xxx

The Wage rates of the employers as classified and classed by them are
not also reasonable and undiscriminatory.
This is shown by the fact that the maximum rate for S-4 at P18,065 per
month is higher than the minimum rate for S-5, the highest category at
P13,295 a month only. The rate difference between the maximum rate of
S-4 and the minimum rate for S-5 is P4,770, the maximum rate of S-4
being higher than the minimum rate of S-5.
Simply stated, an S-4 employee getting the maximum salary of P18,065 a
month will merely get a reduced or diminished salary of P13,295 upon his
promotion to S-5, the highest class or category of supervisors upon his
promotion. This condition is not an ideal labor relation but a situation
which will surely ignite labor conflicts and disputes in the work place.
In whatever shade or color that we shall look upon the issue of whether or
not the herein employer can be held liable to pay the wage differential
pay to the LOCALLY HIRED SUPERVISORS due to its obvious discriminatory

wage policy, one thing stands out supervisors of the same ranks are
not paid the same rates of pay. EHTIDA
This inequitable rates of pay being implemented by respondents result
naturally into the herein employers' discriminatory wage policy which
Article 248 (e) of the LABOR CODE prohibits and defines as UNFAIR LABOR
PRACTICE OF EMPLOYERS. 4
The dispositive portion of the Decision reads:
WHEREFORE, in view of all the FOREGOING, judgment is hereby decreed
ORDERING the respondent PHILEX GOLD PHILIPPINES, INC./GERARD H.
BRIMO/LEONARD P. JOSEF/JOSE B. ANIEVAS, JOINTLY and SEVERALLY to:
1.
Readjust the MONTHLY RATES OF PAY of locally hired SUPERVISORS in
the categories of S-1 to S-5 RANKS in the same level/or amount with that
of PADCAL SUPERVISORS of the same RANKS namely:
S-1 P13,081.60
S-2 P13,893.60
S-3 P15,209.60
S-4 P17,472.00
S-5 P20,300.00
effective November 1, 1998 and to pay Wage differential pay from
November 1, 1998 up to the date of the Decision to all affected locally
hired supervisors.
2.
To revise or modify its existing wage rates per supervisory ranking,
making the maximum rate of a lower category lower than the minimum
rate of the next higher category; and,
3.
Pay to the UNION ATTORNEY'S FEES at 5% of the total sum of the
Wage differential pay awarded within ten (10) days from receipt of this
Decision.
The respondent is further ordered to deposit with the cashier of the NCMB
the sum which is equivalent to the wage differential pay computed at a
differential of P5,501.24 per person/supervisor per month from November
1, 1998 up to the date of this decision, for S-1; P5,663.24 per month per
supervisor, for S-2; P5,979.24 per supervisor per month, for S-3;
P7,065.75 per supervisor per month for S-4 and P8,428.46 per supervisor

per month for S-5, and the ATTORNEY'S FEE which is 5% of the total wage
differential pay also within ten (10) days from receipt of this decision.
SO ORDERED. 5
Philex Supervisors Union filed a Motion for Partial Reconsideration dated
January 20, 2000, seeking, among others, the modification of the
effectivity of the readjustment of the monthly rates of pay of the locally
hired supervisors and of the computation of their wage differential from
November 1, 1998 to August 1, 1997 although the discrimination in
wages started upon the regularization of the ex-Padcal supervisors on July
1, 1997.
On January 25, 2000, Philex Gold also filed a motion for reconsideration,
which was allegedly filed a day late, contending that it was denied due
process as the Voluntary Arbitrator decided the case without its
supplemental position paper, that the decision undermined the collective
bargaining process between the parties relative to wage differentials, and
that there was neither unlawful discrimination nor wage distortion
between the ex-Padcal supervisors and the locally hired supervisors.
EICDSA
On February 29, 2000, the Voluntary Arbitrator issued the assailed
Resolution modifying his earlier Decision dated January 14, 2000, this
time finding that there was no discrimination in the determination of the
rates of pay of the supervisors. The Voluntary Arbitrator, however,
readjusted the amount of wages of local supervisors by adding or
increasing their wages in the uniform sum of P800.00 a month effective
October 1, 1999 "to erase the shadows of inequities among the various
grades of supervisors." The dispositive portion of the Decision reads:
WHEREFORE, IN VIEW of the foregoing, the Decision dated January 14,
2000 is hereby modified in the following manner, to wit:
1.
The respondent employer is hereby ordered to readjust the wage
rates of S-1 to S-5 supervisors by adding or increasing their wages in the
uniform sum of P800.00 a month each effective October 1, 1999; and to
compute and pay their differential pay from October 1, 1999 up to the
time it is paid and implemented;
2.
The respondent is further ordered to pay Attorney's Fee to the
Union's lawyer at 5% of the total amount of WAGE DIFFERENTIAL PAY;

3.
Finally, the respondent employer is ordered to deposit to the cashier
of the NCMB the WAGE DIFFERENTIAL PAY and the Attorney's Fee
adjudged within 10 days from receipt of this Resolution.
SO ORDERED. 6
On March 13, 2000, respondent Union filed a petition for review before
the Court of Appeals raising the following issues: (1) whether or not the
Voluntary Arbitrator erred in admitting petitioner's motion for
reconsideration which was filed beyond the reglementary period; (2)
whether or not the Voluntary Arbitrator erred in modifying his decision by
finding petitioner to be liable to its locally hired members in the sum of
P800 per month as wage adjustment effective October 1999; and (3)
whether or not the Voluntary Arbitrator erred in failing to grant 10 percent
attorney's fees on the total awards.
On March 2, 2000, petitioners filed a Manifestation of Compliance with the
Voluntary Arbitrator alleging that on account of its payment to respondent
union members of monetary benefits (in the amount of P1,000) provided
by the Amendments and Supplement to the CBA, it has complied with the
Resolution dated February 29, 2000.
In a Resolution dated April 4, 2000, the Voluntary Arbitrator denied 7 said
Manifestation of Compliance for lack of merit.
While CA-G.R. SP No. 57701 was pending, respondent Union filed on April
8, 2000 a Motion for Issuance of Writ of Execution of the Resolution dated
February 29, 2000.
In an Order dated June 27, 2000, the Voluntary Arbitrator issued a Writ of
Execution enforcing the Resolution dated February 29, 2000.
On June 29, 2000, Philex Gold filed a Motion to Lift Writ of Execution,
which was not acted upon by the Voluntary Arbitrator.
On July 10, 2000, Philex Gold filed a petition for review before the Court of
Appeals, docketed as CA-G.R. SP No. 60065, questioning the propriety
and validity of the Voluntary Arbitrator's Order granting execution
pending appeal. Said petition was denied for lack of merit.
On April 23, 2001, the Court of Appeals rendered the assailed Decision, in
CA-G.R. SP No. 57701, finding that petitioners failed to prove that they did
not discriminate against the locally hired supervisors in paying them
lower salaries than the ex-Padcal supervisors. It held, thus:

Philex Gold's attempt to explain the disparity in the salary rates between
"ex-Padcal" supervisors and the local-hires failed to convince Us. It
presented a salary structure for supervisors classified into five categories,
namely: "S-1, S-2, S-3, S-4, and S-5" with different rates of pay. Each
classification is further divided in terms of wage rates into minimum,
medium, and maximum. While the "ex-Padcal" supervisors received the
maximum for each category, presumably because of seniority in
employment, longer work experience in gold mining, specialized skills,
and the "dislocation factor", the local-hires received the minimum.
This explanation is fraught with inconsistencies. First, the CBA between
the parties did not disclose this multi-tiered classification of supervisors
(Rollo, pp. 36-37, 46-74). Second, as found by the voluntary arbitrator in
his original decision, the local-hires actually received salaries less than
those they were supposed to be entitled (Rollo, p. 41). Third, the
minimum wage rate for a higher category happened to be lesser than the
maximum rate of a lower category such that a supervisor with a rank of
"S-1" maximum would get less upon his promotion to "S-2" minimum
(Rollo, pp. 38-39, 90). And finally, this pay structure was kept from the
knowledge of the union and was only revealed in the course of the
proceedings before the voluntary arbitrator. These factors only
accentuate the fact which Philex Gold tried to hide, that is, it unduly
favored the "ex-Padcal" supervisors over the local-hires through a system
of confidential salary structure.
The long honored legal truism of "equal pay for equal work," meaning,
"persons who work with substantially equal qualification, skill, effort and
responsibility, under similar conditions, should be paid similar salaries,"
has been institutionalized in our jurisdiction. Such that "if an employer
accords employees the same position and rank, the presumption is that
these employees perform equal work" as "borne by logic and human
experience." The ramification is that "(i)f the employer pays one
employee less than the rest, it is not for that employee to explain why he
receives less or why the others receive more. That would be adding insult
to injury. The employer has discriminated against that employee; it is for
the employer to explain why the employee is treated unfairly."
(International School Alliance of Educators v. Quisumbing, et al., G.R. No.
128845, June 1, 2000).
Philex Gold having failed to discharge this burden, We opt therefore to
reinstate, albeit with modification, the original decision dated 14 January

2000 of the voluntary arbitrator as the same is duly supported by the

pleadings filed before Us. 8
The dispositive portion of the Decision reads:
WHEREFORE, premises considered, the assailed resolution of 29 February
2000 is REVERSED and SET ASIDE and a new one entered REINSTATING
the 14 January 2000 decision subject to the MODIFICATION that the
readjustment of the monthly rates of pay of locally hired supervisors as
well as their wage differential pay be made effective 1 August 1997 up to
the finality of this decision. This case is REMANDED to the voluntary
arbitrator for the proper computation of wage differential and attorney's
fees. No costs.
SO ORDERED. 9
Petitioners' motion for reconsideration was denied by the appellate court
in its Resolution dated August 29, 2001.
Petitioners thus filed this petition with a prayer for the issuance of a
temporary restraining order. The Court issued a temporary restraining
order enjoining the execution of the Decision of the Court of Appeals
dated April 23, 2001 and its Resolution dated August 29, 2001 after
petitioners posted a cash bond.
Petitioners raise the following issues:
1.
Section 4, Rule 43 and Luzon Development Bank [v. Association of
Luzon Development Bank Employees, 249 SCRA 162 (1995)] provide that
the decision of a voluntary arbitrator becomes final after 15 days from
notice of the award. Assuming the validity of service on Philex Gold's
liaison office, instead of its counsel's address on record, did the Court of
Appeals commit an error in law by stating that the Decision dated 14
January 2000 of VA Sitjar became "final and executory" after eleven days
from notice?
2.
Granting arguendo that Philex Gold had only a period of 10 days
within which to seek reconsideration of the Sitjar Decision, did the period
begin to run upon service of said Decision at an address which is not the
address on record or upon the actual receipt thereof by Philex Gold's
counsel?
3.
VA Sitjar found petitioners Brimo, Josef and Jose B. Anievas, in their
capacity as corporate officers, jointly and severally liable for the alleged
obligation of Philex Gold to pay wage differentials to PBSU. Did the Court

of Appeals commit an error in law in affirming VA Sitjar when the latter

disposed of an issue not submitted to him for arbitration and in directing
solidary liability between Philex Gold and its top officers despite the
absence of any finding of malice, bad faith, or gross negligence?

4.
In leveling the wages of the Padcal Supervisors and the Locally-Hired
Supervisors, the Court of Appeals applied the egalitarian doctrine of
"equal pay for equal work" in International School Alliance of Educators v.
Quisumbing. Does "equal pay for equal work" unqualifiedly remove
management prerogative to institute qualitative difference in pay and
benefits on the basis of seniority, skill, experience and other valid factors
in the same class of workers doing the same kind of work? 10
The relevant issues in this case are as follows:
(1) Whether the notice sent through petitioner company's Liaison Office
can be considered as notice to counsel;
(2) Whether the petitioners-corporate officers are solidarily liable with
Philex Gold in any liability to respondent Union;
(3) Whether the doctrine of "equal pay for equal work" should not
remove management prerogative to institute difference in salary on the
basis of seniority, skill, experience and the dislocation factor in the same
class of supervisory workers doing the same kind of work.
First Issue:
Whether the notice sent through petitioner company's
Liaison Office can be considered as notice to counsel
Petitioners contend that the Court of Appeals erred in holding that their
motion for reconsideration of the Decision of the Voluntary Arbitrator
dated January 14, 2000 was filed out of time.
Indeed, the Court of Appeals found that "[b]ased on the certification
issued by the voluntary arbitrator himself, the decision was received by
the respondents (petitioners herein) on 14 January 2000 (Rollo, p. 123),
and they filed their motion for reconsideration on 25 January 2000, or on
the eleventh day from receipt of the decision." The appellate court ruled
that the late filing rendered the decision final and executory as regards
the petitioners, and that the Voluntary Arbitrator erred in admitting
petitioners' motion for reconsideration.

Petitioners argue that the service of the Voluntary Arbitrator's Decision on

Philex Gold's Liaison Office at Libertad St., Bacolod City on January 14,
2000 was improper since their counsel's address of record was at Vista
Alegre, Nabulao, Sipalay, Negros Occidental 6113. Petitioners state that
Philex Gold's Liaison Office forwarded said Decision to their counsel only
the next day or on January 15, 2000, which should be the date of notice
to counsel and the basis for computation of the period to file a motion for
reconsideration of said Decision.
The contention is meritorious.
Section 4, Rule III of the NCMB Procedural Guidelines in the Conduct of
Voluntary Arbitration Proceedings states:
Section 4. Service of Pleadings, Notices and Awards. Copies of
pleadings, notices or copies of [an] award may be served through
personal service or by registered mails on the parties to the dispute:
Provided, that where a party is represented by counsel or authorized
representative, service shall be made on the latter. Service by registered
mail is complete upon receipt by the addressee or his agents. 11
In this case, petitioners were represented before the Voluntary Arbitrator
by Attys. Deogracias G. Contreras Jr. and Weldy U. Manlong. Hence, under
the NCMB Guidelines, service of pleadings, notices and awards should be
made on petitioners' counsel.
The Court noted that in petitioners' Position Paper and Supplemental
Position Paper filed with the Voluntary Arbitrator, the address of
petitioners' counsel was indicated as Vista Alegre, Nabulao, Sipalay,
Negros Occidental, 6113. However, the Decision of the Voluntary
Arbitrator dated January 14, 2000 was sent through the Liaison Office of
Philex Gold, thus:
ATTY. WENDY U. MANLONG
Counsel for the Respondents
PHILEX GOLD PHILIPPINES, INC.
GERARDO BRIMO, LEONARD P. JOSEF,
JOSE B. ANIEVAS
C/O Liaison Office, Libertad St.
Bacolod City

Even the Court of Appeals stated that "based on the certification issued
by the voluntary arbitrator himself, the decision was received by the
respondents on 14 January 2000. . . ." Said service on Philex Gold's
Liaison Office or on the petitioners themselves cannot be considered as
notice in law to petitioners' counsel.
Under the circumstances, reliance may be placed on the assertion of
petitioners that a copy of the Decision of the Voluntary Arbitrator dated
January 14, 2000 was delivered to their counsel the next day or on
January 15, 2000, which must be deemed as the date of notice to counsel
of said Decision. 12
Hence, when petitioners' motion for reconsideration was filed on January
25, 2000, it was filed within the 10-day reglementary period under Article
262-A of the Labor Code. The Court of Appeals, therefore, erred in holding
that said motion for reconsideration was filed out of time.
Second Issue: Whether the petitioners-corporate officers are solidarily
liable with Philex Gold in any liability to respondent Union
Petitioners officers contend that they should not be adjudged solidarily
liable with Philex Gold.
The contention is meritorious.
A corporation is a juridical entity with legal personality separate and
distinct from those acting for and in its behalf and, in general, from the
people comprising it. 13 The rule is that obligations incurred by the
corporation, acting through its directors, officers and employees, are its
sole liabilities. 14 However, it is possible for a corporate director, trustee
or officer to be held solidarily liable with the corporation in the following
instances:
1.
When directors and trustees or, in appropriate cases, the officers of
a corporation
(a)

vote for or assent to patently unlawful acts of the corporation;

(b) act in bad faith or with gross negligence in directing the corporate
affairs;
(c) are guilty of conflict of interest to the prejudice of the corporation, its
stockholders or members, and other persons.

2.
When a director or officer has consented to the issuance of watered
stocks or who, having knowledge thereof, did not forthwith file with the
corporate secretary his written objection thereto.
3.
When a director, trustee or officer has contractually agreed or
stipulated to hold himself personally and solidarily liable with the
Corporation.
4.
When a director, trustee or officer is made, by specific provision of
law, personally liable for his corporate action. 15
The corporate officers in this case have not been proven to fall under any
of the aforecited instances; hence, they cannot be held solidarily liable
with the company in the payment of any liability.
Third Issue:
Whether the doctrine of "equal pay for equal work" should
not remove management prerogative to institute difference in salary
within the same supervisory level
Petitioners submit that the "equal pay for equal work" doctrine in
International School Alliance of Educators v. Quisumbing, 16 which the
Court of Appeals cited to support its Decision should be narrowly
construed to apply to a situation where invidious discrimination exists by
reason of race or ethnicity, but not where valid factors exist to justify
distinctive treatment of employees even if they do the same work.
Petitioners explained that the ex-Padcal supervisors were paid higher
because of their longer years of service, experience, their training and
skill in the underground mining method wanting in the local supervisors,
and their relocation to Bulawan, Negros Occidental. They assert that the
differential treatment of the ex-Padcal supervisors is not arbitrary,
malicious or discriminatory but justified by the circumstances of their
relocation and integration in the new mining operation in Bulawan.
HEIcDT
The Court is not persuaded by petitioners' contention.
Petitioners admit that the "same class of workers [are] doing the same
kind of work." This means that an ex-Padcal supervisor and a locally hired
supervisor of equal rank do the same kind of work. If an employer accords
employees the same position and rank, the presumption is that these
employees perform equal work. 17 Hence, the doctrine of "equal pay for
equal work" in International School Alliance of Educators was correctly
applied by the Court of Appeals.

Petitioners now contend that the doctrine of "equal pay for equal work"
should not remove management prerogative to institute difference in
salary on the basis of seniority, skill, experience and the dislocation factor
in the same class of supervisory workers doing the same kind of work. 18
In this case, the Court cannot agree because petitioners failed to adduce
evidence to show that an ex-Padcal supervisor and a locally hired
supervisor of the same rank are initially paid the same basic salary for
doing the same kind of work. They failed to differentiate this basic salary
from any kind of salary increase or additional benefit which may have
been given to the ex-Padcal supervisors due to their seniority, experience
and other factors.
The records only show that an ex-Padcal supervisor is paid a higher salary
than a locally hired supervisor of the same rank. Therefore, petitioner
failed to prove with satisfactory evidence that it has not discriminated
against the locally hired supervisor in view of the unequal salary.
To reiterate the ruling of Philippine-Singapore Transport Services, Inc. v.
NLRC, 19 which was cited by the Court of Appeals in its Decision:
xxx

xxx

xxx

It is noteworthy to state that an employer is free to manage and regulate,

according to his own discretion and judgment, all phases of employment,
which includes hiring, work assignments, working methods, time, place
and manner of work, supervision of workers, working regulations, transfer
of employees, lay-off of workers, and the discipline, dismissal and recall of
work. While the law recognizes and safeguards this right of an employer
to exercise what are clearly management prerogatives, such right should
not be abused and used as a tool of oppression against labor. The
company's prerogative must be exercised in good faith and with due
regard to the rights of labor. A priori, they are not absolute prerogatives
but are subject to legal limits, collective bargaining agreements and the
general principles of fair play and justice. 20 (Emphasis supplied.)
WHEREFORE, the petition is hereby DENIED. No reversible error was
committed by the Court of Appeals in its Decision in CA-G.R. SP No. 57701
and in its Resolution promulgated on August 29, 2001. The Temporary
Restraining Order issued by the Court is LIFTED.
No costs.
SO ORDERED.

Davide, Jr., C.J., Quisumbing, Ynares-Santiago and Carpio, JJ., concur.

SECOND DIVISION
[G.R. No. 157634. May 16, 2005.]
MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO LAM,
petitioners, vs. ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE,
EDUARDO ALAMARES, AMADO ALAMARES, EDGARDO TORREFRANCA,
LOURDES CAMIGLA, TEODORO LAURENARIA, WENEFREDO LOVERES, LUIS
GUADES, AMADO MACANDOG, PATERNO LLARENA, GREGORIO NICERIO,
JOSE ATRACTIVO, MIGUEL TORREFRANCA, and SANTOS BROOLA,
respondents.
J.P. Villanueva & Associates for petitioners.
Public Attorney's Office for respondents.
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATION; LABOR RELATIONS; A
DISHARMONY BETWEEN THE FACTUAL FINDINGS OF THE LABOR ARBITER
AND THOSE OF THE NATIONAL LABOR RELATIONS COMMISSION OPENS
THE DOOR TO A REVIEW BY THE COURT. There is no denying that it is
within the NLRC's competence, as an appellate agency reviewing
decisions of Labor Arbiters, to disagree with and set aside the latter's
findings. But it stands to reason that the NLRC should state an acceptable
cause therefore, otherwise it would be a whimsical, capricious,
oppressive, illogical, unreasonable exercise of quasi-judicial prerogative,
subject to invalidation by the extraordinary writ of certiorari. And when
the factual findings of the Labor Arbiter and the NLRC are diametrically
opposed and this disparity of findings is called into question, there is,
necessarily, a re-examination of the factual findings to ascertain which
opinion should be sustained. As ruled in Asuncion v. NLRC, although, it is
a legal tenet that factual findings of administrative bodies are entitled to
great weight and respect, we are constrained to take a second look at the
facts before us because of the diversity in the opinions of the Labor
Arbiter and the NLRC. A disharmony between the factual findings of the
Labor Arbiter and those of the NLRC opens the door to a review thereof by
this Court. The CA, therefore, did not err in reviewing the records to
determine which opinion was supported by substantial evidence.
ACSaHc
2.
ID.; ID.; TERMINATION OF EMPLOYMENT; RECORDS BELIE
PETITIONER'S CLAIM THAT SHE IS MERELY AN OVERSEER; FINDINGS OF
LABOR ARBITER ON THE QUESTION WERE BASED ON CREDIBLE,

COMPETENT AND SUBSTANTIAL EVIDENCE. The records of the case

belie petitioner Josefa Po Lam's claim that she is merely an overseer. The
findings of the Labor Arbiter on this question were based on credible,
competent and substantial evidence. We again quote the Joint Decision
on this matter: Mayon Hotel and Restaurant is a [business name] of an
enterprise. While [petitioner] Josefa Po Lam claims that it is her daughter,
Pacita Po, who owns the hotel and restaurant when the latter purchased
the same from one Palanos in 1981, Josefa failed to submit the document
of sale from said Palanos to Pacita as allegedly the sale was only verbal
although the license to operate said hotel and restaurant is in the name
of Pacita which, despite our Order to Josefa to present the same, she
failed to comply (p. 38, tsn. August 13, 1998). While several documentary
evidences were submitted by Josefa wherein Pacita was named therein as
owner of the hotel and restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,]
there were documentary evidences also that were submitted by Josefa
showing her ownership of said enterprise (pp. 468 to 469; vol. II, rollo).
While Josefa explained her participation and interest in the business as
merely to help and assist her daughter as the hotel and restaurant was
near the former's store, the testimonies of [respondents] and Josefa as
well as her demeanor during the trial in these cases proves (sic) that
Josefa Po Lam owns Mayon Hotel and Restaurant. [Respondents] testified
that it was Josefa who exercises all the acts and manifestation of
ownership of the hotel and restaurant like transferring employees from
the Greatwall Palace Restaurant which she and her husband Roy Po Lam
previously owned; it is Josefa to whom the employees submits (sic)
reports, draws money for payment of payables and for marketing,
attending (sic) to Labor Inspectors during ocular inspections. Except for
documents whereby Pacita Po appears as the owner of Mayon Hotel and
Restaurant, nothing in the record shows any circumstance or
manifestation that Pacita Po is the owner of Mayon Hotel and Restaurant.
The least that can be said is that it is absurd for a person to purchase a
hotel and restaurant in the very heart of the City of Legazpi verbally.
Assuming this to be true, when [petitioners], particularly Josefa, was
directed to submit evidence as to the ownership of Pacita of the hotel and
restaurant, considering the testimonies of [respondents], the former
should [have] submitted the lease contract between the owner of the
building where Mayon Hotel and Restaurant was located at Rizal St.,
Legazpi City and Pacita Po to clearly establish ownership by the latter of
said enterprise. Josefa failed. We are not surprised why some employers
employ schemes to mislead Us in order to evade liabilities. We therefore

consider and hold Josefa Po Lam as the owner/proprietor of Mayon Hotel

and Restaurant and the proper respondent in these cases.
3.
ID.; ID.; ID.; PETITIONER'S RELIANCE ON THE RULES OF EVIDENCE IS
MISPLACED; TECHNICAL RULES OF EVIDENCE ARE NOT BINDING AND THE
APPLICATION THEREOF MAY BE RELAXED IN LABOR CASES TO SERVE THE
DEMAND OF SUBSTANTIAL JUSTICE. Petitioners' reliance on the rules of
evidence, i.e., the certificate of registration being the best proof of
ownership, is misplaced. Notwithstanding the certificate of registration,
doubts were cast as to the true nature of petitioner Josefa Po Lam's
involvement in the enterprise, and the Labor Arbiter had the authority to
resolve this issue. It was therefore within his jurisdiction to require the
additional documents to ascertain who was the real owner of petitioner
Mayon Hotel & Restaurant. Article 221 of the Labor Code is clear:
technical rules are not binding, and the application of technical rules of
procedure may be relaxed in labor cases to serve the demand of
substantial justice. The rule of evidence prevailing in court of law or
equity shall not be controlling in labor cases and it is the spirit and
intention of the Labor Code that the Labor Arbiter shall use every and all
reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in
the interest of due process. Labor laws mandate the speedy
administration of justice, with least attention to technicalities but without
sacrificing the fundamental requisites of due process. STECAc
4.
ID.; ID.; ID.; TO APPLY THE CONCEPT OF JUDICIAL ADMISSIONS TO
RESPONDENTS WHO ARE BUT LOWLY EMPLOYEES WOULD BE TO EXACT
TECHNICALITIES OF LAW THAT IS CONTRARY TO THE DEMANDS OF
SUBSTANTIAL JUSTICE. The fact that the respondents' complaints
contained no allegation that petitioner Josefa Po Lam is the owner is of no
moment. To apply the concept of judicial admissions to respondents
who are but lowly employees would be to exact compliance with
technicalities of law that is contrary to the demands of substantial justice.
Moreover, the issue of ownership was an issue that arose only during the
course of the proceedings with the Labor Arbiter, as an incident of
determining respondents' claims, and was well within his jurisdiction.
5.
ID.; ID.; ID.; NO DENIAL OF DUE PROCESS; THE CHOICE NOT TO
PRESENT EVIDENCE WAS MADE BY PETITIONERS THEMSELVES.
Petitioners were also not denied due process, as they were given
sufficient opportunity to be heard on the issue of ownership. The essence
of due process in administrative proceedings is simply an opportunity to

explain one's side or an opportunity to seek reconsideration of the action

or ruling complained of. And there is nothing in the records which would
suggest that petitioners had absolute lack of opportunity to be heard.
Obviously, the choice not to present evidence was made by petitioners
themselves.
6.
ID.; ID.; ID.; FAILURE TO SUBMIT EVIDENCE OF OWNERSHIP COULD
ONLY MEAN THAT IF PRODUCED, IT WOULD HAVE BEEN ADVERSE TO
PETITIONERS' CASE. We sustain the Labor Arbiter and the CA because
even when the case was on appeal with the NLRC, nothing was submitted
to negate the Labor Arbiter's finding that Pacita Po is not the real owner of
the subject hotel and restaurant. Indeed, no such evidence was submitted
in the proceedings with the CA nor with this Court. Considering that
petitioners vehemently deny ownership by petitioner Josefa Po Lam, it is
most telling that they continue to withhold evidence which would shed
more light on this issue. We therefore agree with the CA that the failure to
submit could only mean that if produced, it would have been adverse to
petitioners' case. Thus, we find that there is substantial evidence to rule
that petitioner Josefa Po Lam is the owner of petitioner Mayon Hotel &
Restaurant. ATcaEH
7.
ID.; ID.; ID.; IT WAS SERIOUS ERROR FOR THE NATIONAL LABOR
RELATIONS COMMISSION IN NOT INQUIRING INTO THE LEGALITY OF THE
CESSATION OF EMPLOYMENT CONSIDERING THAT UNDER THE LABOR
CODE THERE IS TERMINATION OF EMPLOYMENT WHEN AN OTHERWISE
BONA FIDE SUSPENSION EXCEEDS SIX (6) MONTHS. The factual finding
of the Labor Arbiter was never refuted by petitioners in their appeal with
the NLRC. It confounds us, therefore, how the NLRC could have so
cavalierly treated this uncontroverted factual finding by ruling that
respondents have not introduced any evidence to show that they were
illegally dismissed, and that the Labor Arbiter's finding was based on
conjecture. It was a serious error that the NLRC did not inquire as to the
legality of the cessation of employment. Article 286 of the Labor Code is
clear there is termination of employment when an otherwise bona fide
suspension of work exceeds six (6) months. The cessation of employment
for more than six months was patent and the employer has the burden of
proving that the termination was for a just or authorized cause.
8.
ID.; ID.; ID.; PETITIONERS' ARGUMENTS REFLECT THEIR LACK OF
CANDOR AND BLATANT ATTEMPT TO USE TECHNICALITIES TO MUDDLE
THE ISSUES AND DEFEAT THE LAWFUL CLAIMS OF THEIR EMPLOYEES.
Petitioners' arguments reflect their lack of candor and the blatant attempt

to use technicalities to muddle the issues and defeat the lawful claims of
their employees. First, petitioners admit that since April 1997, when hotel
operations were suspended due to the termination of the lease of the old
premises, respondents Loveres, Macandog, Llarena, Nicerio and Guades
have not been permitted to work. Second, even after six months of what
should have been just a temporary lay-off, the same respondents were
still not recalled to work. As a matter of fact, the Labor Arbiter even found
that as of the time when he rendered his Joint Decision on July 2000 or
more than three (3) years after the supposed "temporary lay-off," the
employment of all of the respondents with petitioners had ceased,
notwithstanding that the new premises had been completed and the
same operated as a hotel with bar and restaurant. This is clearly dismissal
or the permanent severance or complete separation of the worker from
the service on the initiative of the employer regardless of the reasons
therefor. cDCaHA
9.
ID.; ID.; ID.; EVIDENCE ON RECORD BELIE CLAIM THAT THE LAY OFF
WAS MERELY TEMPORARY. While the closure of the hotel operations in
April of 1997 may have been temporary, we hold that the evidence on
record belie any claim of petitioners that the lay-off of respondents on
that same date was merely temporary. On the contrary, we find
substantial evidence that petitioners intended the termination to be
permanent. Respondents Loveres, Macandog, Llarena, Guades, Nicerio
and Alamares filed the complaint for illegal dismissal immediately after
the closure of the hotel operations in Rizal Street, notwithstanding the
alleged temporary nature of the closure of the hotel operations, and
petitioners' allegations that the employees assigned to the hotel
operations knew about this beforehand. In their position paper submitted
to the Labor Arbiter, petitioners invoked Article 286 of the Labor Code to
assert that the employer-employee relationship was merely suspended,
and therefore the claim for separation pay was premature and without
legal or factual basis. But they made no mention of any intent to recall
these respondents to work upon completion of the new premises. The
various pleadings on record show that petitioners held respondents,
particularly Loveres, as responsible for mismanagement of the
establishment and for abuse of trust and confidence. Petitioner Josefa Po
Lam's affidavit on July 21, 1998, for example, squarely blamed
respondents, specifically Loveres, Bumalay and Camigla, for abusing her
leniency and causing petitioner Mayon Hotel & Restaurant to sustain
"continuous losses until it is closed." She then asserts that respondents
"are not entitled to separation pay for they were not terminated and if

ever the business ceased to operate it was because of losses." Again,

petitioners make the same allegation in their memorandum on appeal
with the NLRC, where they alleged that three (3) years prior to the
expiration of the lease in 1997, the operation of the Hotel had been
sustaining consistent losses, and these were solely attributed to
respondents, but most especially due to Loveres's mismanagement and
abuse of petitioners' trust and confidence. Even the petition filed in this
court made reference to the separation of the respondents due to "severe
financial losses and reverses," again imputing it to respondents'
mismanagement. The vehemence of petitioners' accusation of
mismanagement against respondents, especially against Loveres, is
inconsistent with the desire to recall them to work. TIAEac
10. ID.; ID.; ID.; SERIOUS BUSINESS LOSSES DO NOT EXCUSE THE
EMPLOYER FROM COMPLYING WITH THE LABOR CODE AND ITS
IMPLEMENTING RULES; FAILURE TO OBSERVE PROCEDURAL RULES TAINTS
PETITIONER'S ACTUATIONS WITH BAD FAITH. We are not impressed by
petitioners' claim that severe business losses justified their failure to
reinstate respondents. The evidence to prove this fact is inconclusive. But
more important, serious business losses do not excuse the employer from
complying with the clearance or report required under Article 283 of the
Labor Code and its implementing rules before terminating the
employment of its workers. In the absence of justifying circumstances,
the failure of petitioners to observe the procedural requirements set out
under Article 284, taints their actuations with bad faith, especially since
they claimed that they have been experiencing losses in the three years
before 1997. To say the least, if it were true that the lay-off was
temporary but then serious business losses prevented the reinstatement
of respondents, then petitioners should have complied with the
requirements of written notice. The requirement of law mandating the
giving of notices was intended not only to enable the employees to look
for another employment and therefore ease the impact of the loss of their
jobs and the corresponding income, but more importantly, to give the
Department of Labor and Employment (DOLE) the opportunity to
ascertain the verity of the alleged authorized cause of termination. And
even assuming that the closure was due to a reason beyond the control of
the employer, it still has to accord its employees some relief in the form
of severance pay. AEIHaS
11. ID.; ID.; ID.; AWARD OF MORAL DAMAGES IS PROPER; DISMISSAL OF
RESPONDENTS WAS ATTENDED BY BAD FAITH AND MEANT TO EVADE THE
LAWFUL OBLIGATIONS IMPOSED UPON AN EMPLOYER. While we

recognize the right of the employer to terminate the services of an

employee for a just or authorized cause, the dismissal of employees must
be made within the parameters of law and pursuant to the tenets of fair
play. And in termination disputes, the burden of proof is always on the
employer to prove that the dismissal was for a just or authorized cause.
Where there is no showing of a clear, valid and legal cause for
termination of employment, the law considers the case a matter of illegal
dismissal. Under these circumstances, the award of damages was proper.
As a rule, moral damages are recoverable where the dismissal of the
employee was attended by bad faith or fraud or constituted an act
oppressive to labor, or was done in a manner contrary to morals, good
customs or public policy. We believe that the dismissal of the respondents
was attended with bad faith and meant to evade the lawful obligations
imposed upon an employer. To rule otherwise would lead to the anomaly
of respondents being terminated from employment in 1997 as a matter of
fact, but without legal redress. This runs counter to notions of fair play,
substantial justice and the constitutional mandate that labor rights should
be respected. If doubts exist between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor
of the latter the employer must affirmatively show rationally adequate
evidence that the dismissal was for a justifiable cause. It is a timehonored rule that in controversies between a laborer and his master,
doubts reasonably arising from the evidence, or in the interpretation of
agreements and writing should be resolved in the former's favor. The
policy is to extend the doctrine to a greater number of employees who
can avail of the benefits under the law, which is in consonance with the
avowed policy of the State to give maximum aid and protection of labor.
12. ID.; ID.; ID.; ENTITLEMENT TO LABOR STANDARD BENEFITS IS A
SEPARATE AND DISTINCT CONCEPT FROM PAYMENT OF SEPARATION PAY
ARISING FROM ILLEGAL DISMISSAL, AND ARE GOVERNED BY DIFFERENT
PROVISIONS OF THE LABOR CODE. Petitioners assail this ruling by
repeating their long and convoluted argument that as there was no illegal
dismissal, then respondents are not entitled to their monetary claims or
separation pay and damages. Petitioners' arguments are not only tiring,
repetitive and unconvincing, but confusing and confused entitlement to
labor standard benefits is a separate and distinct concept from payment
of separation pay arising from illegal dismissal, and are governed by
different provisions of the Labor Code. We agree with the CA and the
Labor Arbiter. Respondents have set out with particularity in their
complaint, position paper, affidavits and other documents the labor

standard benefits they are entitled to, and which they alleged that
petitioners have failed to pay them. It was therefore petitioners' burden to
prove that they have paid these money claims. One who pleads payment
has the burden of proving it, and even where the employees must allege
nonpayment, the general rule is that the burden rests on the defendant to
prove nonpayment, rather than on the plaintiff to prove non payment.
This petitioners failed to do. aTEScI
13. ID.; ID.; ID.; COST OF MEALS AND SNACKS PURPORTEDLY PROVIDED
TO RESPONDENTS CANNOT BE DEDUCTED AS PART OF THEIR MINIMUM
WAGE DUE TO PETITIONER'S FAILURE TO COMPLY WITH CERTAIN LEGAL
REQUIREMENTS; MERE AVAILMENT IS NOT SUFFICIENT TO ALLOW
DEDUCTIONS FROM EMPLOYEE'S WAGES. The cost of meals and snacks
purportedly provided to respondents cannot be deducted as part of
respondents' minimum wage. Even granting that meals and snacks were
provided and indeed constituted facilities, such facilities could not be
deducted without compliance with certain legal requirements. As stated
in Mabeza v. NLRC, the employer simply cannot deduct the value from the
employee's wages without satisfying the following: (a) proof that such
facilities are customarily furnished by the trade; (b) the provision of
deductible facilities is voluntarily accepted in writing by the employee;
and (c) the facilities are charged at fair and reasonable value. The records
are clear that petitioners failed to comply with these requirements. There
was no proof of respondents' written authorization. Indeed, the Labor
Arbiter found that while the respondents admitted that they were given
meals and merienda, the quality of food served to them was not what was
provided for in the Facility Evaluation Orders and it was only when they
filed the cases that they came to know of this supposed Facility
Evaluation Orders. Petitioner Josefa Po Lam herself admitted that she did
not inform the respondents of the facilities she had applied for.
Considering the failure to comply with the above-mentioned legal
requirements, the Labor Arbiter therefore erred when he ruled that the
cost of the meals actually provided to respondents should be deducted as
part of their salaries, on the ground that respondents have availed
themselves of the food given by petitioners. The law is clear that mere
availment is not sufficient to allow deductions from employees' wages.
HCTaAS
14. ID.; ID.; ID.; FOOD OR SNACKS OR OTHER CONVENIENCE PROVIDED
BY EMPLOYERS ARE DEEMED AS SUPPLEMENTS IF THEY ARE GRANTED
FOR THE CONVENIENCE OF THE EMPLOYER. We note the
uncontroverted testimony of respondents on record that they were

required to eat in the hotel and restaurant so that they will not go home
and there is no interruption in the services of Mayon Hotel & Restaurant.
As ruled in Mabeza, food or snacks or other convenience provided by the
employers are deemed as supplements if they are granted for the
convenience of the employer. The criterion in making a distinction
between a supplement and a facility does not so much lie in the kind
(food, lodging) but the purpose. Considering, therefore, that hotel workers
are required to work different shifts and are expected to be available at
various odd hours, their ready availability is a necessary matter in the
operations of a small hotel, such as petitioners' business. The deduction
of the cost of meals from respondents' wages, therefore, should be
removed.
15. ID.; ID.; ID.; AN EMPLOYER CANNOT EXEMPT HIMSELF FROM
LIABILITY TO PAY MINIMUM WAGES BECAUSE OF POOR FINANCIAL
CONDITION OF THE COMPANY; PAYMENT OF MINIMUM WAGES IS NOT
DEPENDENT ON THE EMPLOYER'S ABILITY TO PAY. On the issue of the
proper minimum wage applicable to respondents, we sustain the Labor
Arbiter. We note that petitioners themselves have admitted that the
establishment employs "more or less sixteen (16) employees," therefore
they are estopped from claiming that the applicable minimum wage
should be for service establishments employing 15 employees or less. As
for petitioners repeated invocation of serious business losses, suffice to
say that this is not a defense to payment of labor standard benefits. The
employer cannot exempt himself from liability to pay minimum wages
because of poor financial condition of the company. The payment of
minimum wages is not dependent on the employer's ability to pay. Thus,
we reinstate the award of monetary claims granted by the Labor Arbiter.
AHacIS
DECISION
PUNO, J p:
This is a petition for certiorari to reverse and set aside the Decision issued
by the Court of Appeals (CA) 1 in CA-G.R. SP No. 68642, entitled "Rolando
Adana, Wenefredo Loveres, et. al. vs. National Labor Relations
Commission (NLRC), Mayon Hotel & Restaurant/Pacita O. Po, et al.," and
the Resolution 2 denying petitioners' motion for reconsideration. The
assailed CA decision reversed the NLRC Decision which had dismissed all
of respondents' complaints, 3 and reinstated the Joint Decision of the
Labor Arbiter 4 which ruled that respondents were illegally dismissed and
entitled to their money claims. AIHaCc

The facts, culled from the records, are as follows: 5

Petitioner Mayon Hotel & Restaurant is a single proprietor business
registered in the name of petitioner Pacita O. Po, 6 whose mother,
petitioner Josefa Po Lam, manages the establishment. 7 The hotel and
restaurant employed about sixteen (16) employees.
Records show that on various dates starting in 1981, petitioner hotel and
restaurant hired the following people, all respondents in this case, with
the following jobs: 8
1.

Wenefredo Loveres Accountant and Officer-in-charge

2.

Paterno Llarena

Front Desk Clerk

3.

Gregorio Nicerio

Supervisory Waiter

4.

Amado Macandog

Roomboy

5.

Luis Guades

6.

Santos Broola Roomboy

7.

Teodoro Laurenaria Waiter

8.

Eduardo Alamares

Roomboy/Waiter

9.

Lourdes Camigla

Cashier

Utility/Maintenance Worker

10. Chona Bumalay

Cashier

11. Jose Atractivo Technician

12. Amado Alamares
13. Roger Burce

Dishwasher and Kitchen Helper

Cook

14. Rolando Adana Waiter

15. Miguel Torrefranca

Cook

16. Edgardo Torrefranca Cook

Due to the expiration and non-renewal of the lease contract for the rented
space occupied by the said hotel and restaurant at Rizal Street, the hotel
operations of the business were suspended on March 31, 1997. 9 The
operation of the restaurant was continued in its new location at Elizondo
Street, Legazpi City, while waiting for the construction of a new Mayon
Hotel & Restaurant at Pearanda Street, Legazpi City. 10 Only nine (9) of

the sixteen (16) employees continued working in the Mayon Restaurant at

its new site. 11
On various dates of April and May 1997, the 16 employees filed
complaints for underpayment of wages and other money claims against
petitioners, as follows: 12
Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for
illegal dismissal, underpayment of wages, nonpayment of holiday and
rest day pay; service incentive leave pay (SILP) and claims for separation
pay plus damages;
Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for
underpayment of wages; nonpayment of cost of living allowance (COLA)
and overtime pay; premium pay for holiday and rest day; SILP; nightshift
differential pay and separation pay plus damages;
Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for
underpayment of wages; nonpayment of holiday and rest day pay and
SILP; ITScAE
Rolando Adana, Roger Burce and Amado Alamares for underpayment of
wages; nonpayment of COLA, overtime, holiday, rest day, SILP and
nightshift differential pay;
Eduardo Alamares for underpayment of wages, nonpayment of holiday,
rest day and SILP and night shift differential pay;
Santos Broola for illegal dismissal, underpayment of wages, overtime
pay, rest day pay, holiday pay, SILP, and damages; 13 and
Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and
overtime pay; premium pay for holiday and rest day, and SILP.
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a
Joint Decision in favor of the employees. The Labor Arbiter awarded
substantially all of respondents' money claims, and held that respondents
Loveres, Macandog and Llarena were entitled to separation pay, while
respondents Guades, Nicerio and Alamares were entitled to their
retirement pay. The Labor Arbiter also held that based on the evidence
presented, Josefa Po Lam is the owner/proprietor of Mayon Hotel &
Restaurant and the proper respondent in these cases.
On appeal to the NLRC, the decision of the Labor Arbiter was reversed,
and all the complaints were dismissed.

Respondents filed a motion for reconsideration with the NLRC and when
this was denied, they filed a petition for certiorari with the CA which
rendered the now assailed decision.
After their motion for reconsideration was denied, petitioners now come
to this Court, seeking the reversal of the CA decision on the following
grounds:
I.
THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE
DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION (SECOND
DIVISION) BY HOLDING THAT THE FINDINGS OF FACT OF THE NLRC WERE
NOT SUPPORTED BY SUBSTANTIAL EVIDENCE DESPITE AMPLE AND
SUFFICIENT EVIDENCE SHOWING THAT THE NLRC DECISION IS INDEED
SUPPORTED BY SUBSTANTIAL EVIDENCE;
II.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE
JOINT DECISION OF THE LABOR ARBITER WHICH RULED THAT PRIVATE
RESPONDENTS WERE ILLEGALLY DISMISSED FROM THEIR EMPLOYMENT,
DESPITE THE FACT THAT THE REASON WHY PRIVATE RESPONDENTS WERE
OUT OF WORK WAS NOT DUE TO THE FAULT OF PETITIONERS BUT TO
CAUSES BEYOND THE CONTROL OF PETITIONERS.
III. THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE
AWARD OF MONETARY BENEFITS BY THE LABOR ARBITER IN HIS JOINT
DECISION IN FAVOR OF THE PRIVATE RESPONDENTS, INCLUDING THE
AWARD OF DAMAGES TO SIX (6) OF THE PRIVATE RESPONDENTS, DESPITE
THE FACT THAT THE PRIVATE RESPONDENTS HAVE NOT PROVEN BY
SUBSTANTIAL EVIDENCE THEIR ENTITLEMENT THERETO AND ESPECIALLY
THE FACT THAT THEY WERE NOT ILLEGALLY DISMISSED BY THE
PETITIONERS. DHAcET
IV. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
PACITA ONG PO IS THE OWNER OF THE BUSINESS ESTABLISHMENT,
PETITIONER MAYON HOTEL AND RESTAURANT, THUS DISREGARDING THE
CERTIFICATE OF REGISTRATION OF THE BUSINESS ESTABLISHMENT
ISSUED BY THE LOCAL GOVERNMENT, WHICH IS A PUBLIC DOCUMENT,
AND THE UNQUALIFIED ADMISSIONS OF COMPLAINANTS-PRIVATE
RESPONDENTS. 14
In essence, the petition calls for a review of the following issues:
1.
Was it correct for petitioner Josefa Po Lam to be held liable as the
owner of petitioner Mayon Hotel & Restaurant, and the proper respondent
in this case?

2.
Were respondents Loveres, Guades, Macandog, Atractivo, Llarena
and Nicerio illegally dismissed?
3.
Are respondents entitled to their money claims due to
underpayment of wages, and nonpayment of holiday pay, rest day
premium, SILP, COLA, overtime pay, and night shift differential pay?
It is petitioners' contention that the above issues have already been
threshed out sufficiently and definitively by the NLRC. They therefore
assail the CA's reversal of the NLRC decision, claiming that based on the
ruling in Castillo v. NLRC, 15 it is non sequitur that the CA should reexamine the factual findings of both the NLRC and the Labor Arbiter,
especially as in this case the NLRC's findings are allegedly supported by
substantial evidence.
We do not agree.
There is no denying that it is within the NLRC's competence, as an
appellate agency reviewing decisions of Labor Arbiters, to disagree with
and set aside the latter's findings. 16 But it stands to reason that the
NLRC should state an acceptable cause therefore, otherwise it would be a
whimsical, capricious, oppressive, illogical, unreasonable exercise of
quasi-judicial prerogative, subject to invalidation by the extraordinary writ
of certiorari. 17 And when the factual findings of the Labor Arbiter and the
NLRC are diametrically opposed and this disparity of findings is called into
question, there is, necessarily, a re-examination of the factual findings to
ascertain which opinion should be sustained. 18 As ruled in Asuncion v.
NLRC, 19
Although, it is a legal tenet that factual findings of administrative bodies
are entitled to great weight and respect, we are constrained to take a
second look at the facts before us because of the diversity in the opinions
of the Labor Arbiter and the NLRC. A disharmony between the factual
findings of the Labor Arbiter and those of the NLRC opens the door to a
review thereof by this Court. 20
The CA, therefore, did not err in reviewing the records to determine which
opinion was supported by substantial evidence. DHCSTa
Moreover, it is explicit in Castillo v. NLRC 21 that factual findings of
administrative bodies like the NLRC are affirmed only if they are
supported by substantial evidence that is manifest in the decision and on
the records. As stated in Castillo:

[A]buse of discretion does not necessarily follow from a reversal by the

NLRC of a decision of a Labor Arbiter. Mere variance in evidentiary
assessment between the NLRC and the Labor Arbiter does not
automatically call for a full review of the facts by this Court. The NLRC's
decision, so long as it is not bereft of substantial support from the
records, deserves respect from this Court. As a rule, the original and
exclusive jurisdiction to review a decision or resolution of respondent
NLRC in a petition for certiorari under Rule 65 of the Rules of Court does
not include a correction of its evaluation of the evidence but is confined to
issues of jurisdiction or grave abuse of discretion. Thus, the NLRC's factual
findings, if supported by substantial evidence, are entitled to great
respect and even finality, unless petitioner is able to show that it simply
and arbitrarily disregarded the evidence before it or had misappreciated
the evidence to such an extent as to compel a contrary conclusion if such
evidence had been properly appreciated. (citations omitted) 22
After careful review, we find that the reversal of the NLRC's decision was
in order precisely because it was not supported by substantial evidence.
1.

Ownership by Josefa Po Lam

The Labor Arbiter ruled that as regards the claims of the employees,
petitioner Josefa Po Lam is, in fact, the owner of Mayon Hotel &
Restaurant. Although the NLRC reversed this decision, the CA, on review,
agreed with the Labor Arbiter that notwithstanding the certificate of
registration in the name of Pacita Po, it is Josefa Po Lam who is the
owner/proprietor of Mayon Hotel & Restaurant, and the proper respondent
in the complaints filed by the employees. The CA decision states in part:
[Despite] the existence of the Certificate of Registration in the name of
Pacita Po, we cannot fault the labor arbiter in ruling that Josefa Po Lam is
the owner of the subject hotel and restaurant. There were conflicting
documents submitted by Josefa herself. She was ordered to submit
additional documents to clearly establish ownership of the hotel and
restaurant, considering the testimonies given by the [respondents] and
the non-appearance and failure to submit her own position paper by
Pacita Po. But Josefa did not comply with the directive of the Labor Arbiter.
The ruling of the Supreme Court in Metropolitan Bank and Trust Company
v. Court of Appeals applies to Josefa Po Lam which is stated in this wise:
When the evidence tends to prove a material fact which imposes a
liability on a party, and he has it in his power to produce evidence which
from its very nature must overthrow the case made against him if it is not

founded on fact, and he refuses to produce such evidence, the

presumption arises that the evidence[,] if produced, would operate to his
prejudice, and support the case of his adversary. EAIcCS
Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel
and restaurant, the labor arbiter relied also on the testimonies of the
witnesses, during the hearing of the instant case. When the conclusions
of the labor arbiter are sufficiently corroborated by evidence on record,
the same should be respected by appellate tribunals, since he is in a
better position to assess and evaluate the credibility of the contending
parties. 23 (citations omitted)
Petitioners insist that it was error for the Labor Arbiter and the CA to have
ruled that petitioner Josefa Po Lam is the owner of Mayon Hotel &
Restaurant. They allege that the documents they submitted to the Labor
Arbiter sufficiently and clearly establish the fact of ownership by
petitioner Pacita Po, and not her mother, petitioner Josefa Po Lam. They
contend that petitioner Josefa Po Lam's participation was limited to
merely (a) being the overseer; (b) receiving the month-to-month and/or
year-to-year financial reports prepared and submitted by respondent
Loveres; and (c) visitation of the premises. 24 They also put emphasis on
the admission of the respondents in their position paper submitted to the
Labor Arbiter, identifying petitioner Josefa Po Lam as the manager, and
Pacita Po as the owner. 25 This, they claim, is a judicial admission and is
binding on respondents. They protest the reliance the Labor Arbiter and
the CA placed on their failure to submit additional documents to clearly
establish ownership of the hotel and restaurant, claiming that there was
no need for petitioner Josefa Po Lam to submit additional documents
considering that the Certificate of Registration is the best and primary
evidence of ownership.
We disagree with petitioners. We have scrutinized the records and find
the claim that petitioner Josefa Po Lam is merely the overseer is not borne
out by the evidence.
First. It is significant that only Josefa Po Lam appeared in the proceedings
with the Labor Arbiter. Despite receipt of the Labor Arbiter's notice and
summons, other notices and Orders, petitioner Pacita Po failed to appear
in any of the proceedings with the Labor Arbiter in these cases, nor file
her position paper. 26 It was only on appeal with the NLRC that Pacita Po
signed the pleadings. 27 The apathy shown by petitioner Pacita Po is
contrary to human experience as one would think that the owner of an

establishment would naturally be concerned when ALL her employees file

complaints against her.
Second. The records of the case belie petitioner Josefa Po Lam's claim
that she is merely an overseer. The findings of the Labor Arbiter on this
question were based on credible, competent and substantial evidence.
We again quote the Joint Decision on this matter:
Mayon Hotel and Restaurant is a [business name] of an enterprise. While
[petitioner] Josefa Po Lam claims that it is her daughter, Pacita Po, who
owns the hotel and restaurant when the latter purchased the same from
one Palanos in 1981, Josefa failed to submit the document of sale from
said Palanos to Pacita as allegedly the sale was only verbal although the
license to operate said hotel and restaurant is in the name of Pacita
which, despite our Order to Josefa to present the same, she failed to
comply (p. 38, tsn. August 13, 1998). While several documentary
evidences were submitted by Josefa wherein Pacita was named therein as
owner of the hotel and restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,]
there were documentary evidences also that were submitted by Josefa
showing her ownership of said enterprise (pp. 468 to 469; vol. II, rollo).
While Josefa explained her participation and interest in the business as
merely to help and assist her daughter as the hotel and restaurant was
near the former's store, the testimonies of [respondents] and Josefa as
well as her demeanor during the trial in these cases proves (sic) that
Josefa Po Lam owns Mayon Hotel and Restaurant. [Respondents] testified
that it was Josefa who exercises all the acts and manifestation of
ownership of the hotel and restaurant like transferring employees from
the Greatwall Palace Restaurant which she and her husband Roy Po Lam
previously owned; it is Josefa to whom the employees submits (sic)
reports, draws money for payment of payables and for marketing,
attending (sic) to Labor Inspectors during ocular inspections. Except for
documents whereby Pacita Po appears as the owner of Mayon Hotel and
Restaurant, nothing in the record shows any circumstance or
manifestation that Pacita Po is the owner of Mayon Hotel and Restaurant.
The least that can be said is that it is absurd for a person to purchase a
hotel and restaurant in the very heart of the City of Legazpi verbally.
Assuming this to be true, when [petitioners], particularly Josefa, was
directed to submit evidence as to the ownership of Pacita of the hotel and
restaurant, considering the testimonies of [respondents], the former
should [have] submitted the lease contract between the owner of the
building where Mayon Hotel and Restaurant was located at Rizal St.,
Legazpi City and Pacita Po to clearly establish ownership by the latter of

said enterprise. Josefa failed. We are not surprised why some employers
employ schemes to mislead Us in order to evade liabilities. We therefore
consider and hold Josefa Po Lam as the owner/proprietor of Mayon Hotel
and Restaurant and the proper respondent in these cases. 28
Petitioners' reliance on the rules of evidence, i.e., the certificate of
registration being the best proof of ownership, is misplaced.
Notwithstanding the certificate of registration, doubts were cast as to the
true nature of petitioner Josefa Po Lam's involvement in the enterprise,
and the Labor Arbiter had the authority to resolve this issue. It was
therefore within his jurisdiction to require the additional documents to
ascertain who was the real owner of petitioner Mayon Hotel & Restaurant.
AIDcTE
Article 221 of the Labor Code is clear: technical rules are not binding, and
the application of technical rules of procedure may be relaxed in labor
cases to serve the demand of substantial justice. 29 The rule of evidence
prevailing in court of law or equity shall not be controlling in labor cases
and it is the spirit and intention of the Labor Code that the Labor Arbiter
shall use every and all reasonable means to ascertain the facts in each
case speedily and objectively and without regard to technicalities of law
or procedure, all in the interest of due process. 30 Labor laws mandate
the speedy administration of justice, with least attention to technicalities
but without sacrificing the fundamental requisites of due process. 31
Similarly, the fact that the respondents' complaints contained no
allegation that petitioner Josefa Po Lam is the owner is of no moment. To
apply the concept of judicial admissions to respondents who are but
lowly employees would be to exact compliance with technicalities of
law that is contrary to the demands of substantial justice. Moreover, the
issue of ownership was an issue that arose only during the course of the
proceedings with the Labor Arbiter, as an incident of determining
respondents' claims, and was well within his jurisdiction. 32
Petitioners were also not denied due process, as they were given
sufficient opportunity to be heard on the issue of ownership. 33 The
essence of due process in administrative proceedings is simply an
opportunity to explain one's side or an opportunity to seek
reconsideration of the action or ruling complained of. 34 And there is
nothing in the records which would suggest that petitioners had absolute
lack of opportunity to be heard. 35 Obviously, the choice not to present
evidence was made by petitioners themselves. 36

But more significantly, we sustain the Labor Arbiter and the CA because
even when the case was on appeal with the NLRC, nothing was submitted
to negate the Labor Arbiter's finding that Pacita Po is not the real owner of
the subject hotel and restaurant. Indeed, no such evidence was submitted
in the proceedings with the CA nor with this Court. Considering that
petitioners vehemently deny ownership by petitioner Josefa Po Lam, it is
most telling that they continue to withhold evidence which would shed
more light on this issue. We therefore agree with the CA that the failure to
submit could only mean that if produced, it would have been adverse to
petitioners' case. 37
Thus, we find that there is substantial evidence to rule that petitioner
Josefa Po Lam is the owner of petitioner Mayon Hotel & Restaurant.
2.

Illegal Dismissal: claim for separation pay

Of the sixteen employees, only the following filed a case for illegal
dismissal: respondents Loveres, Llarena, Nicerio, Macandog, Guades,
Atractivo and Broola. 38
The Labor Arbiter found that there was illegal dismissal, and granted
separation pay to respondents Loveres, Macandog and Llarena. As
respondents Guades, Nicerio and Alamares were already 79, 66 and 65
years old respectively at the time of the dismissal, the Labor Arbiter
granted retirement benefits pursuant to Article 287 of the Labor Code as
amended. 39 The Labor Arbiter ruled that respondent Atractivo was not
entitled to separation pay because he had been transferred to work in the
restaurant operations in Elizondo Street, but awarded him damages.
Respondents Loveres, Llarena, Nicerio, Macandog and Guades were also
awarded damages. 40
The NLRC reversed the Labor Arbiter, finding that "no clear act of
termination is attendant in the case at bar" and that respondents "did not
submit any evidence to that effect, but the finding and conclusion of the
Labor Arbiter [are] merely based on his own surmises and conjectures."
41 In turn, the NLRC was reversed by the CA. SHADcT
It is petitioners contention that the CA should have sustained the NLRC
finding that none of the above-named respondents were illegally
dismissed, or entitled to separation or retirement pay. According to
petitioners, even the Labor Arbiter and the CA admit that when the illegal
dismissal case was filed by respondents on April 1997, they had as yet no
cause of action. Petitioners therefore conclude that the filing by
respondents of the illegal dismissal case was premature and should have

been dismissed outright by the Labor Arbiter. 42 Petitioners also claim

that since the validity of respondents' dismissal is a factual question, it is
not for the reviewing court to weigh the conflicting evidence. 43
We do not agree. Whether respondents are still working for petitioners IS
a factual question. And the records are unequivocal that since April 1997,
when petitioner Mayon Hotel & Restaurant suspended its hotel operations
and transferred its restaurant operations in Elizondo Street, respondents
Loveres, Macandog, Llarena, Guades and Nicerio have not been permitted
to work for petitioners. Respondent Alamares, on the other hand, was also
laid-off when the Elizondo Street operations closed, as were all the other
respondents. Since then, respondents have not been permitted to work
nor recalled, even after the construction of the new premises at
Pearanda Street and the reopening of the hotel operations with the
restaurant in this new site. As stated by the Joint Decision of the Labor
Arbiter on July 2000, or more than three (3) years after the complaint was
filed: 44
[F]rom the records, more than six months had lapsed without [petitioner]
having resumed operation of the hotel. After more than one year from the
temporary closure of Mayon Hotel and the temporary transfer to another
site of Mayon Restaurant, the building which [petitioner] Josefa allege[d]
w[h]ere the hotel and restaurant will be transferred has been finally
constructed and the same is operated as a hotel with bar and restaurant
nevertheless, none of [respondents] herein who were employed at Mayon
Hotel and Restaurant which was also closed on April 30, 1998 was/were
recalled by [petitioner] to continue their services. . . .
Parenthetically, the Labor Arbiter did not grant separation pay to the
other respondents as they had not filed an amended complaint to
question the cessation of their employment after the closure of Mayon
Hotel & Restaurant on March 31, 1997. 45
The above factual finding of the Labor Arbiter was never refuted by
petitioners in their appeal with the NLRC. It confounds us, therefore, how
the NLRC could have so cavalierly treated this uncontroverted factual
finding by ruling that respondents have not introduced any evidence to
show that they were illegally dismissed, and that the Labor Arbiter's
finding was based on conjecture. 46 It was a serious error that the NLRC
did not inquire as to the legality of the cessation of employment. Article
286 of the Labor Code is clear there is termination of employment
when an otherwise bona fide suspension of work exceeds six (6) months.
47 The cessation of employment for more than six months was patent

and the employer has the burden of proving that the termination was for
a just or authorized cause. 48
Moreover, we are not impressed by any of petitioners' attempts to
exculpate themselves from the charges. First, in the proceedings with the
Labor Arbiter, they claimed that it could not be illegal dismissal because
the lay-off was merely temporary (and due to the expiration of the lease
contract over the old premises of the hotel). They specifically invoked
Article 286 of the Labor Code to argue that the claim for separation pay
was premature and without legal and factual basis. 49 Then, because the
Labor Arbiter had ruled that there was already illegal dismissal when the
lay-off had exceeded the six-month period provided for in Article 286,
petitioners raise this novel argument, to wit:
It is the firm but respectful submission of petitioners that reliance on
Article 286 of the Labor Code is misplaced, considering that the reason
why private respondents were out of work was not due to the fault of
petitioners. The failure of petitioners to reinstate the private respondents
to their former positions should not likewise be attributable to said
petitioners as the private respondents did not submit any evidence to
prove their alleged illegal dismissal. The petitioners cannot discern why
they should be made liable to the private respondents for their failure to
be reinstated considering that the fact that they were out of work was not
due to the fault of petitioners but due to circumstances beyond the
control of petitioners, which are the termination and non-renewal of the
lease contract over the subject premises. Private respondents, however,
argue in their Comment that petitioners themselves sought the
application of Article 286 of the Labor Code in their case in their Position
Paper filed before the Labor Arbiter. In refutation, petitioners humbly
submit that even if they invoke Article 286 of the Labor Code, still the fact
remains, and this bears stress and emphasis, that the temporary
suspension of the operations of the establishment arising from the nonrenewal of the lease contract did not result in the termination of
employment of private respondents and, therefore, the petitioners cannot
be faulted if said private respondents were out of work, and consequently,
they are not entitled to their money claims against the petitioners. 50
It is confounding how petitioners have fashioned their arguments. After
having admitted, in effect, that respondents have been laid-off since April
1997, they would have this Court excuse their refusal to reinstate
respondents or grant them separation pay because these same

respondents purportedly have not proven the illegality of their dismissal.

cEITCA
Petitioners' arguments reflect their lack of candor and the blatant attempt
to use technicalities to muddle the issues and defeat the lawful claims of
their employees. First, petitioners admit that since April 1997, when hotel
operations were suspended due to the termination of the lease of the old
premises, respondents Loveres, Macandog, Llarena, Nicerio and Guades
have not been permitted to work. Second, even after six months of what
should have been just a temporary lay-off, the same respondents were
still not recalled to work. As a matter of fact, the Labor Arbiter even found
that as of the time when he rendered his Joint Decision on July 2000 or
more than three (3) years after the supposed "temporary lay-off," the
employment of all of the respondents with petitioners had ceased,
notwithstanding that the new premises had been completed and the
same operated as a hotel with bar and restaurant. This is clearly dismissal
or the permanent severance or complete separation of the worker from
the service on the initiative of the employer regardless of the reasons
therefor. 51
On this point, we note that the Labor Arbiter and the CA are in accord that
at the time of the filing of the complaint, respondents had no cause of
action to file the case for illegal dismissal. According to the CA and the
Labor Arbiter, the lay-off of the respondents was merely temporary,
pending construction of the new building at Pearanda Street. 52
While the closure of the hotel operations in April of 1997 may have been
temporary, we hold that the evidence on record belie any claim of
petitioners that the lay-off of respondents on that same date was merely
temporary. On the contrary, we find substantial evidence that petitioners
intended the termination to be permanent. First, respondents Loveres,
Macandog, Llarena, Guades, Nicerio and Alamares filed the complaint for
illegal dismissal immediately after the closure of the hotel operations in
Rizal Street, notwithstanding the alleged temporary nature of the closure
of the hotel operations, and petitioners' allegations that the employees
assigned to the hotel operations knew about this beforehand. Second, in
their position paper submitted to the Labor Arbiter, petitioners invoked
Article 286 of the Labor Code to assert that the employer-employee
relationship was merely suspended, and therefore the claim for
separation pay was premature and without legal or factual basis. 53 But
they made no mention of any intent to recall these respondents to work
upon completion of the new premises. Third, the various pleadings on

record show that petitioners held respondents, particularly Loveres, as

responsible for mismanagement of the establishment and for abuse of
trust and confidence. Petitioner Josefa Po Lam's affidavit on July 21, 1998,
for example, squarely blamed respondents, specifically Loveres, Bumalay
and Camigla, for abusing her leniency and causing petitioner Mayon Hotel
& Restaurant to sustain "continuous losses until it is closed." She then
asserts that respondents "are not entitled to separation pay for they were
not terminated and if ever the business ceased to operate it was because
of losses." 54 Again, petitioners make the same allegation in their
memorandum on appeal with the NLRC, where they alleged that three (3)
years prior to the expiration of the lease in 1997, the operation of the
Hotel had been sustaining consistent losses, and these were solely
attributed to respondents, but most especially due to Loveres's
mismanagement and abuse of petitioners' trust and confidence. 55 Even
the petition filed in this court made reference to the separation of the
respondents due to "severe financial losses and reverses," again imputing
it to respondents' mismanagement. 56 The vehemence of petitioners'
accusation of mismanagement against respondents, especially against
Loveres, is inconsistent with the desire to recall them to work. Fourth,
petitioners' memorandum on appeal also averred that the case was filed
"not because of the business being operated by them or that they were
supposedly not receiving benefits from the Labor Code which is true, but
because of the fact that the source of their livelihood, whether legal or
immoral, was stopped on March 31, 1997, when the owner of the building
terminated the Lease Contract." 57 Fifth, petitioners had inconsistencies
in their pleadings (with the NLRC, CA and with this Court) in referring to
the closure, 58 i.e., in the petition filed with this court, they assert that
there is no illegal dismissal because there was "only a temporary
cessation or suspension of operations of the hotel and restaurant due to
circumstances beyond the control of petitioners, and that is, the nonrenewal of the lease contract. . . . " 59 And yet, in the same petition, they
also assert that: (a) the separation of respondents was due to severe
financial losses and reverses leading to the closure of the business; and
(b) petitioner Pacita Po had to close shop and was bankrupt and has no
liquidity to put up her own building to house Mayon Hotel & Restaurant.
60 Sixth, and finally, the uncontroverted finding of the Labor Arbiter that
petitioners terminated all the other respondents, by not employing them
when the Hotel and Restaurant transferred to its new site on Pearanda
Street. 61 Indeed, in this same memorandum, petitioners referred to all
respondents as "former employees of Mayon Hotel & Restaurant." 62

These factors may be inconclusive individually, but when taken together,

they lead us to conclude that petitioners really intended to dismiss all
respondents and merely used the termination of the lease (on Rizal Street
premises) as a means by which they could terminate their employees.
DcTAIH
Moreover, even assuming arguendo that the cessation of employment on
April 1997 was merely temporary, it became dismissal by operation of law
when petitioners failed to reinstate respondents after the lapse of six (6)
months, pursuant to Article 286 of the Labor Code.
We are not impressed by petitioners' claim that severe business losses
justified their failure to reinstate respondents. The evidence to prove this
fact is inconclusive. But more important, serious business losses do not
excuse the employer from complying with the clearance or report
required under Article 283 of the Labor Code and its implementing rules
before terminating the employment of its workers. 63 In the absence of
justifying circumstances, the failure of petitioners to observe the
procedural requirements set out under Article 284, taints their actuations
with bad faith, especially since they claimed that they have been
experiencing losses in the three years before 1997. To say the least, if it
were true that the lay-off was temporary but then serious business losses
prevented the reinstatement of respondents, then petitioners should have
complied with the requirements of written notice. The requirement of law
mandating the giving of notices was intended not only to enable the
employees to look for another employment and therefore ease the impact
of the loss of their jobs and the corresponding income, but more
importantly, to give the Department of Labor and Employment (DOLE) the
opportunity to ascertain the verity of the alleged authorized cause of
termination. 64
And even assuming that the closure was due to a reason beyond the
control of the employer, it still has to accord its employees some relief in
the form of severance pay. 65
While we recognize the right of the employer to terminate the services of
an employee for a just or authorized cause, the dismissal of employees
must be made within the parameters of law and pursuant to the tenets of
fair play. 66 And in termination disputes, the burden of proof is always on
the employer to prove that the dismissal was for a just or authorized
cause. 67 Where there is no showing of a clear, valid and legal cause for
termination of employment, the law considers the case a matter of illegal
dismissal. 68

Under these circumstances, the award of damages was proper. As a rule,

moral damages are recoverable where the dismissal of the employee was
attended by bad faith or fraud or constituted an act oppressive to labor,
or was done in a manner contrary to morals, good customs or public
policy. 69 We believe that the dismissal of the respondents was attended
with bad faith and meant to evade the lawful obligations imposed upon
an employer. cSITDa
To rule otherwise would lead to the anomaly of respondents being
terminated from employment in 1997 as a matter of fact, but without
legal redress. This runs counter to notions of fair play, substantial justice
and the constitutional mandate that labor rights should be respected. If
doubts exist between the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of the latter the
employer must affirmatively show rationally adequate evidence that the
dismissal was for a justifiable cause. 70 It is a time-honored rule that in
controversies between a laborer and his master, doubts reasonably
arising from the evidence, or in the interpretation of agreements and
writing should be resolved in the former's favor. 71 The policy is to extend
the doctrine to a greater number of employees who can avail of the
benefits under the law, which is in consonance with the avowed policy of
the State to give maximum aid and protection of labor. 72
We therefore reinstate the Labor Arbiter's decision with the following
modifications:
(a) Separation pay for the illegal dismissal of respondents Loveres,
Macandog and Llarena; (Santos Broola cannot be granted separation pay
as he made no such claim);
(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who
at the time of dismissal were entitled to their retirement benefits
pursuant to Article 287 of the Labor Code as amended; 73 and
(c) Damages for respondents Loveres, Macandog, Llarena, Guades,
Nicerio, Atractivo, and Broola.
3.

Money claims

The CA held that contrary to the NLRC's ruling, petitioners had not
discharged the burden of proving that the monetary claims of the
respondents have been paid. 74 The CA thus reinstated the Labor
Arbiter's grant of respondents' monetary claims, including damages.

Petitioners assail this ruling by repeating their long and convoluted

argument that as there was no illegal dismissal, then respondents are not
entitled to their monetary claims or separation pay and damages.
Petitioners' arguments are not only tiring, repetitive and unconvincing,
but confusing and confused entitlement to labor standard benefits is a
separate and distinct concept from payment of separation pay arising
from illegal dismissal, and are governed by different provisions of the
Labor Code.
We agree with the CA and the Labor Arbiter. Respondents have set out
with particularity in their complaint, position paper, affidavits and other
documents the labor standard benefits they are entitled to, and which
they alleged that petitioners have failed to pay them. It was therefore
petitioners' burden to prove that they have paid these money claims. One
who pleads payment has the burden of proving it, and even where the
employees must allege nonpayment, the general rule is that the burden
rests on the defendant to prove nonpayment, rather than on the plaintiff
to prove non payment. 75 This petitioners failed to do. IaHSCc
We also agree with the Labor Arbiter and the CA that the documents
petitioners submitted, i.e., affidavits executed by some of respondents
during an ocular inspection conducted by an inspector of the DOLE;
notices of inspection result and Facility Evaluation Orders issued by DOLE,
are not sufficient to prove payment. 76 Despite repeated orders from the
Labor Arbiter, 77 petitioners failed to submit the pertinent employee files,
payrolls, records, remittances and other similar documents which would
show that respondents rendered work entitling them to payment for
overtime work, night shift differential, premium pay for work on holidays
and rest day, and payment of these as well as the COLA and the SILP
documents which are not in respondents' possession but in the custody
and absolute control of petitioners. 78 By choosing not to fully and
completely disclose information and present the necessary documents to
prove payment of labor standard benefits due to respondents, petitioners
failed to discharge the burden of proof. 79 Indeed, petitioners' failure to
submit the necessary documents which as employers are in their
possession, inspite of orders to do so, gives rise to the presumption that
their presentation is prejudicial to its cause. 80 As aptly quoted by the CA:
[W]hen the evidence tends to prove a material fact which imposes a
liability on a party, and he has it in his power to produce evidence which
from its very nature must overthrow the case made against him if it is not
founded on fact, and he refuses to produce such evidence, the

presumption arises that the evidence, if produced, would operate to his

prejudice, and support the case of his adversary. 81
Petitioners next claim that the cost of the food and snacks provided to
respondents as facilities should have been included in reckoning the
payment of respondents' wages. They state that although on the surface
respondents appeared to receive minimal wages, petitioners had granted
respondents other benefits which are considered part and parcel of their
wages and are allowed under existing laws. 82 They claim that these
benefits make up for whatever inadequacies there may be in
compensation. 83 Specifically, they invoked Sections 5 and 6, Rule VII-A,
which allow the deduction of facilities provided by the employer through
an appropriate Facility Evaluation Order issued by the Regional Director of
the DOLE. 84 Petitioners also aver that they give five (5) percent of the
gross income each month as incentives. As proof of compliance of
payment of minimum wages, petitioners submitted the Notice of
Inspection Results issued in 1995 and 1997 by the DOLE Regional Office.
85
The cost of meals and snacks purportedly provided to respondents cannot
be deducted as part of respondents' minimum wage. As stated in the
Labor Arbiter's decision: 86
While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol.
II, rollo) issued by the DOLE Regional Office whereby the cost of meals
given by [petitioners] to [respondents] were specified for purposes of
considering the same as part of their wages, We cannot consider the cost
of meals in the Orders as applicable to [respondents]. [Respondents] were
not interviewed by the DOLE as to the quality and quantity of food
appearing in the applications of [petitioners] for facility evaluation prior to
its approval to determine whether or not [respondents] were indeed given
such kind and quantity of food. Also, there was no evidence that the
quality and quantity of food in the Orders were voluntarily accepted by
[respondents]. On the contrary; while some [of the respondents] admitted
that they were given meals and merienda, the quality of food serve[d] to
them were not what were provided for in the Orders and that it was only
when they filed these cases that they came to know about said Facility
Evaluation Orders (pp. 100; 379[,] vol. II, rollo; p. 40, tsn[,] June 19,
1998). [Petitioner] Josefa herself, who applied for evaluation of the facility
(food) given to [respondents], testified that she did not inform
[respondents] concerning said Facility Evaluation Orders (p. 34, tsn[,]
August 13, 1998). HTCaAD

Even granting that meals and snacks were provided and indeed
constituted facilities, such facilities could not be deducted without
compliance with certain legal requirements. As stated in Mabeza v. NLRC,
87 the employer simply cannot deduct the value from the employee's
wages without satisfying the following: (a) proof that such facilities are
customarily furnished by the trade; (b) the provision of deductible
facilities is voluntarily accepted in writing by the employee; and (c) the
facilities are charged at fair and reasonable value. The records are clear
that petitioners failed to comply with these requirements. There was no
proof of respondents' written authorization. Indeed, the Labor Arbiter
found that while the respondents admitted that they were given meals
and merienda, the quality of food served to them was not what was
provided for in the Facility Evaluation Orders and it was only when they
filed the cases that they came to know of this supposed Facility
Evaluation Orders. 88 Petitioner Josefa Po Lam herself admitted that she
did not inform the respondents of the facilities she had applied for. 89
Considering the failure to comply with the above-mentioned legal
requirements, the Labor Arbiter therefore erred when he ruled that the
cost of the meals actually provided to respondents should be deducted as
part of their salaries, on the ground that respondents have availed
themselves of the food given by petitioners. 90 The law is clear that mere
availment is not sufficient to allow deductions from employees' wages.
More important, we note the uncontroverted testimony of respondents on
record that they were required to eat in the hotel and restaurant so that
they will not go home and there is no interruption in the services of
Mayon Hotel & Restaurant. As ruled in Mabeza, food or snacks or other
convenience provided by the employers are deemed as supplements if
they are granted for the convenience of the employer. The criterion in
making a distinction between a supplement and a facility does not so
much lie in the kind (food, lodging) but the purpose. 91 Considering,
therefore, that hotel workers are required to work different shifts and are
expected to be available at various odd hours, their ready availability is a
necessary matter in the operations of a small hotel, such as petitioners'
business. 92 The deduction of the cost of meals from respondents' wages,
therefore, should be removed. SaHcAC
We also do not agree with petitioners that the five (5) percent of the gross
income of the establishment can be considered as part of the
respondents' wages. We quote with approval the Labor Arbiter on this
matter, to wit:

While complainants, who were employed in the hotel, receive[d] various

amounts as profit share, the same cannot be considered as part of their
wages in determining their claims for violation of labor standard benefits.
Although called profit share[,] such is in the nature of share from service
charges charged by the hotel. This is more explained by [respondents]
when they testified that what they received are not fixed amounts and
the same are paid not on a monthly basis (pp. 55, 93, 94, 103, 104; vol. II,
rollo). Also, [petitioners] failed to submit evidence that the amounts
received by [respondents] as profit share are to be considered part of
their wages and had been agreed by them prior to their employment.
Further, how can the amounts receive[d] by [respondents] be considered
as profit share when the same [are] based on the gross receipt of the
hotel[?] No profit can as yet be determined out of the gross receipt of an
enterprise. Profits are realized after expenses are deducted from the
gross income.
On the issue of the proper minimum wage applicable to respondents, we
sustain the Labor Arbiter. We note that petitioners themselves have
admitted that the establishment employs "more or less sixteen (16)
employees," 93 therefore they are estopped from claiming that the
applicable minimum wage should be for service establishments
employing 15 employees or less.
As for petitioners repeated invocation of serious business losses, suffice
to say that this is not a defense to payment of labor standard benefits.
The employer cannot exempt himself from liability to pay minimum wages
because of poor financial condition of the company. The payment of
minimum wages is not dependent on the employer's ability to pay. 94
Thus, we reinstate the award of monetary claims granted by the Labor
Arbiter.
4.

Conclusion

There is no denying that the actuations of petitioners in this case have

been reprehensible. They have terminated the respondents' employment
in an underhanded manner, and have used and abused the quasi-judicial
and judicial processes to resist payment of their employees' rightful
claims, thereby protracting this case and causing the unnecessary
clogging of dockets of the Court. They have also forced respondents to
unnecessary hardship and financial expense. Indeed, the circumstances
of this case would have called for exemplary damages, as the dismissal
was effected in a wanton, oppressive or malevolent manner, 95 and

public policy requires

discouraged. 96

that

these

acts

must

be

suppressed

and

Nevertheless, we cannot agree with the Labor Arbiter in granting

exemplary damages of P10,000.00 each to all respondents. While it is
true that other forms of damages under the Civil Code may be awarded to
illegally dismissed employees, 97 any award of moral damages by the
Labor Arbiter cannot be based on the Labor Code but should be grounded
on the Civil Code. 98 And the law is clear that exemplary damages can
only be awarded if plaintiff shows proof that he is entitled to moral,
temperate or compensatory damages. 99
As only respondents Loveres, Guades, Macandog, Llarena, Nicerio,
Atractivo and Broola specifically claimed damages from petitioners, then
only they are entitled to exemplary damages. sjgs1
Finally, we rule that attorney's fees in the amount to P10,000.00 should
be granted to each respondent. It is settled that in actions for recovery of
wages or where an employee was forced to litigate and incur expenses to
protect his rights and interest, he is entitled to an award of attorney's
fees. 100 This case undoubtedly falls within this rule. EHaDIC
IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January
17, 2003 of the Court of Appeals in CA-G.R. SP No. 68642 upholding the
Joint Decision of July 14, 2000 of the Labor Arbiter in RAB V Case Nos. 0400079-97 and 04-00080-97 is AFFIRMED, with the following
MODIFICATIONS:
(1) Granting separation pay of one-half (1/2) month for every year of
service to respondents Loveres, Macandog and Llarena;
(2) Granting retirement pay for respondents Guades, Nicerio, and
Alamares;
(3) Removing the deductions for food facility from the amounts due to
all respondents;
(4) Awarding moral damages of P20,000.00 each for respondents
Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broola;
(5) Deleting the award of exemplary damages of P10,000.00 from all
respondents except Loveres, Macandog, Llarena, Guades, Nicerio,
Atractivo, and Broola; and TAEcCS
(6)

Granting attorney's fees of P10,000.00 each to all respondents.

The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of

the total monetary benefits awarded and due to the employees
concerned in accordance with the decision. The Labor Arbiter is ORDERED
to submit his compliance thereon within thirty (30) days from notice of
this decision, with copies furnished to the parties.
SO ORDERED.
Austria-Martinez, Callejo, Sr., Tinga and Chico-Nazario, JJ., concur.

SECOND DIVISION
[G.R. No. 122827. March 29, 1999.]
LIDUVINO M. MILLARES, J. CAPISTRANO CORDITA, SHIRLEY P. UY, DIONISIO
J. REQUINA, GABRIEL A. DEJERO, NELSON T. GOMONIT, IMELDA
IMPEYNADO, SULPICIO B. SUMILE, MA. CONSUELO AVIEL, SILVINO S.
GUEVARRA, FIDEL DUMANHOG, NELFA T. POLOTAN, LEMUEL C. RISMA,
JUANITO M. GONZALES, ROGELIO B. CABATUAN, EPIFANCIO E. GANANCIAL,
DOMINADOR D. ATOK, CONRADO U. SERRANO, ISIDRO J. BARNAJA, ROMEO
VIRTUDAZO, AVELINO NABLE, EDGAR TAMPOS, ERNESTO ORIAS,
DALMACIO LEGARAY, ROMEO R. BULA, ROBERTO G. GARCIA, RUDOLFO
SUZON, JERRY S. DANO, AUGUST G. ESCUDERO, OSCAR B. CATBAGAN,
TEOFILO C. SISON, NARCISO BULASA, ALBERTO CORTEZ, LILIA C.
CABRERA, NESTOR A. ACASO, BIENVENIDO MOZO, ISIDORO A.
ALMENDAREZ, VICENTE M. PILONGO, ROBERTO N. LUMPOT, PATRICIO
BANDOLA, MANUEL S. ESPINA, ISIDRO K. BALCITA, JR., EMMANUEL O.
ABRAHAM, OLEGARIO A. EPIS, NESTOR D. PEREGRINO, RAMON A.
USANAGA, PRESTO BARTOLOME, BRADY EMPEYNADO, PORFERIO N.
CONDADO, AQUILLO V. CORDOVA, LEONARDO ESTOSI, PACIFICO B.
DACORINA, PABLITO B. LLUBIT, ANTONIO DOZA, LEONITO LABADIA,
EDGARDO BELLIZA, FEDENCIO P. GEBERTAS, VIRGILIO D. GULBE, MANUEL
A. LERIO, JR., ROGELIO B. OCAMIA, RODOLFO A. CASTILLO, EDMUNDO L.
PLAZA, ROBERTO D. YAGONIA, JR., PETRONIO ESTELA, JR., CRISOLOGO A.
LOGRONIO, ERNESTO T. MORIO, ROGELIO M. DAVID, BENJAMIN U.
ARLIGUE, APOLONIO MUNDO, JR., NENE M. ESPINOSA, NILO B. BALAORO,
GERONIMO S. CONVI, VICENTE R. TARAGOZA, YOLANDO A. SALAZAR,
MANUEL A. NERI, ROGELIO C. TICAR, ROBERTO A. MACALAM, MIGUEL
MACARIOLA, WALTERIO DAPADAP, SILVERIO CUAMAG, EUPARQUIO
PLANOS, GILBERTO M. MIRA, REYNALDO BACSARSA, DIOSDADO B. ABING,
ARISTARCO V. SALON, TOMAS N. CATACTE, RODOLFO MEMORIA,
PAPENIANO CURIAS, JOSE S. CANDIA, DESIDERIO C. NAVARRO, EMMANUEL
O. ABRAHAM, JOSELITO D. ARLAN, FRANCISCO S. SANCHEZ, MANSUETO B.
LINGGO, ISIDRO BARNAJA, ROMEO S. CABRERA, LEODEGARIO CAINTIC,
NESTOR G. BLANDO, FLORENCIO B. DELIZO, MILAN M. ETES, GONZALO C.
PADILLO, LEONARDO CAGAKIT, JOSEFINO E. DULGUIME, PEPITO G.
ARREZA, AMADOR G. CAGALAWAN, GAUDENCIO C. SARMIENTO,
FLORENTINO J. BRACAMONTE, DOMINADOR H. TY, LEOPOLDO T. SUPIL,
JOSE A. DOHINOG, ANIANO T. REYES, CARLITO G. UY, PLACIDO D. PADILLO,
TERESITA C. ADRIANO, CANDIDO S. ADRIANO, and AVELINO G.
VENERACION, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,

(FIFTH DIVISION), and PAPER INDUSTRIES

PHILIPPINES (PICOP), respondents.

CORPORATION

OF

THE

Gonzales Batiller Bilog and Associates for petitioners.

The Solicitor General for public respondent.
Ricardo B. Fabiosa and De la Rosa Tejero & Nograles for private
respondent.
SYNOPSIS
Petitioners numbering one hundred sixteen (116) occupied technical,
managerial and even a Vice Presidential positions in the mill site of
respondent Paper Industries Corporation of the Philippines (PICOP) in
Bislig, Surigao del Sur. They were retrenched by respondent when it
suffered a major financial setback brought about by the joint impact of
restrictive government regulations on logging and the economic crisis.
Accordingly, petitioners were given separation pay. Believing that the
allowances they regularly received on a monthly basis during their
employment should have been included in the computation thereof, they
lodged a complaint for separation pay differentials. The Executive LaborArbiter concluded that the allowances should be included in the
petitioners' basic pay. The NLRC set aside the Labor Arbiter's decision. It
decreed that the allowances did not form part of the salary base in
computing separation pay. cdasia
The Supreme Court held that when an employer customarily furnishes his
employee board, lodging or other facilities, the fair and reasonable value
thereof, as determined by the Secretary of Labor and Employment is
included in "wage." "Customary" as founded on long-established and
constant practice connoting regularity. The receipt of an allowance on a
monthly basis does not ipso facto characterize it as regular and forming
part of a salary because the nature of the grant is a factor worth
considering. The subject allowance were temporarily, not regularly
received by petitioners.
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATION; LABOR CODE; EMPLOYMENT;
SEPARATION PAY; OBLIGATION OF EMPLOYER TO GRANT SEPARATION PAY
TO AFFECTED EMPLOYEES. In case of retrenchment to prevent losses,
Art. 283 of the Labor Code imposes on the employer an obligation to
grant to the affected employees separation pay equivalent to one (1)

month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher.
2.
ID.; ID.; ID.; WAGE; INCLUDES BOARD, LODGING OR OTHER
FACILITIES CUSTOMARILY FURNISHED BY EMPLOYER INCLUDED THEREIN.
When an employer customarily furnishes his employee board, lodging
or other facilities, the fair and reasonable value thereof, as determined by
the Secretary of Labor and Employment, is included in "wage."
3.
ID.; ID.; ID.; ID.; ID.; RECEIPT OF ALLOWANCE ON MONTHLY BASIS
DOES NOT IPSO FACTO CHARACTERIZE IT AS REGULAR AND FORMING
PART OF SALARY; CASE AT BAR. The receipt of an allowance on a
monthly basis does not ipso facto characterize it as regular and forming
part of salary because the nature of the grant is a factor worth
considering. In the case at bar, the subject allowances were temporarily,
not regularly, received by petitioners. In the case of the housing
allowance, once a vacancy occurs in the company-provided housing
accommodations, the employee concerned transfers to the company
premises and his housing allowance is discontinued . . . . On the other
hand, the transportation allowance is in the form of advances for actual
transportation expenses subject to liquidation . . . given to employees
who have personal cars. The Bislig allowance is given to Division
Managers and corporate officers assigned in Bislig, Surigao del Norte.
Once the officer is transferred outside Bislig, the allowance stops.
IaCHTS
4.
ID.; ID.; ID.; ID.; IN DETERMINING WHETHER PRIVILEGE IS FACILITY,
THE CRITERION IS NOT SO MUCH ITS KIND BUT ITS PURPOSE; CASE AT
BAR. Although it is quite easy to comprehend "board" and "lodging," it
is not so with "facilities." Thus, Sec. 5, Rule VII, Book III, of the Rules
Implementing the Labor Code gives meaning to the term as including
articles or services for the benefit of the employee or his family but
excluding tools of the trade or articles or service primarily for the benefit
of the employer or necessary to the conduct of the employer's business.
The Staff/Manager's allowance may fall under "lodging" but the
transportation and Bislig allowances are not embraced in "facilities" on
the main consideration that they are granted as well as the
Staff/Manager's allowance for respondent PICOP's benefit and
convenience, i.e., to insure that petitioners render quality performance. In
determining whether a privilege is a facility, the criterion is not so much
its kind but its purpose. That the assailed allowances were for the benefit

and convenience of respondent company was supported by

circumstance that they were not subjected to withholding tax.

the

5.
ID.; ID.; SECRETARY OF LABOR AND EMPLOYMENT; POWER THEREOF
TO FIX FAIR AND REASONABLE VALUE OF BOARD, LODGING AND OTHER
FACILITIES CUSTOMARILY FURNISHED BY AN EMPLOYER TO EMPLOYEES;
CASE AT BAR. The Secretary of Labor and Employment under Sec. 6,
Rule VII, Book III, of the Rules Implementing the Labor Code may from
time to time fix in appropriate issuances the "fair and reasonable value of
board, lodging and other facilities customarily furnished by an employer
to his employees." Petitioners' allowances do not represent such fair and
reasonable value as determined by the proper authority simply because
the Staff/Manager's allowance and transportation allowance were
amounts given by respondent company in lieu of actual provisions for
housing and transportation needs whereas the Bislig allowance was given
in consideration of being assigned to the hostile environment then
prevailing in Bislig.
6.
ID.; ID.; EMPLOYMENT; SEPARATION PAY; SANTOS, SORIANO AND
INSULAR CASES NOT APPLICABLE IN CASE AT BAR. In Santos the Court
decreed that in the computation of separation pay awarded in lieu of
reinstatement, account must be taken not only of the basic salary but
also of transportation and emergency living allowances. Later, the Court
in Soriano, citing Santos, was general in its holding that the salary base
properly used in computing separation pay where reinstatement was no
longer feasible should include not just the basic salary but also the
regular allowances that the employee had been receiving. Insular merely
reiterated the aforementioned rulings. The rationale is not difficult to
discern. It is the obligation of the employer to pay an illegally dismissed
employee the whole amount of his salaries plus all other benefits,
bonuses and general increases to which he would have been normally
entitled had he not been dismissed and had not stopped working. The
same holds true in case of retrenched employees. And thus we applied
Insular and Soriano in Planters in the computation of separation pay of
retrenched employees. Songco likewise involved retrenchment and was
relied upon in Planters, Soriano and Santos in the proper amount of
separation pay. As culled from the foregoing jurisprudence, separation
pay when awarded to an illegally dismissed employee in lieu of
reinstatement or to a retrenched employee should be computed based
not only on the basic salary but also on the regular allowances that the
employee had been receiving. But in view of the previous discussion that

the disputed allowances were not regularly received by petitioners herein,

there was no reason at all for petitioners to resort to the above cases.
7.
ID.; ID.; ID.; ID.; NEITHER IS KNEEBONE CASE APPLICABLE. Neither
is Kneebone applicable, contrary to the finding of the NLRC, because of
the difference in factual circumstances. In Kneebone, the Court was
tasked to resolve the issue whether the representation and transportation
allowances formed part of salary as to be considered in the computation
of retirement benefits. The ruling was in the negative on the main ground
that the retirement plan of the company expressly excluded such
allowances from salary. IECcaA
DECISION
BELLOSILLO, J p:
Petitioners numbering one hundred sixteen (116) 1 occupied the positions
of Technical Staff, Unit Manager, Section Manager, Department Manager,
Division Manager and Vice President in the mill site of respondent Paper
Industries Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur.
In 1992 PICOP suffered a major financial setback allegedly brought about
by the joint impact of restrictive government regulations on logging and
the economic crisis. To avert further losses, it undertook a retrenchment
program and terminated the services of petitioners. Accordingly,
petitioners received separation pay computed at the rate of one (1)
month basic pay for every year of service. Believing however that the
allowances they allegedly regularly received on a monthly basis during
their employment should have been included in the computation thereof
they lodged a complaint for separation pay differentials.
The allowances in question pertained to the following
1.

Staff/Manager's Allowance

Respondent PICOP provides free housing facilities to supervisory and

managerial employees assigned in Bislig. The privilege includes free
water and electric consumption. Owing however to shortage of such
facilities, it was constrained to grant Staff allowance instead to those who
live in rented houses outside but near the vicinity of the mill site. But the
allowance ceases whenever a vacancy occurs in the company's housing
facilities. The former grantee is then directed to fill the vacancy. For Unit,
Section and Department Managers, respondent PICOP gives an additional
amount to meet the same kind of expenses called Manager's allowance.
2.

Transportation Allowance

To relieve respondent PICOP's motor pool in Bislig from a barrage of

requests for company vehicles and to stabilize company vehicle
requirements it grants transportation allowance to key officers and
Managers assigned in the mill site who use their own vehicles in the
performance of their duties. It is a conditional grant such that when the
conditions no longer obtain, the privilege is discontinued. The recipients
of this kind of allowance are required to liquidate it by submitting a report
with a detailed enumeration of expenses incurred.
3.

Bislig Allowance

The Bislig Allowance is given to Division Managers and corporate officers

assigned in Bislig on account of the hostile environment prevailing
therein. But once the recipient is transferred elsewhere outside Bislig, the
allowance ceases.
Applying Art. 97, par. (f), of the Labor Code which defines "wage," the
Executive Labor Arbiter opined that the subject allowances, being
customarily furnished by respondent PICOP and regularly received by
petitioners, formed part of the latter's wages. Resolving the controversy
from another angle, on the strength of the ruling in Santos v. NLRC 2 and
Soriano v. NLRC 3 that in the computation of separation pay account
should be taken not just of the basic salary but also of the regular
allowances that the employee had been receiving, he concluded that the
allowances should be included in petitioners' base pay. Thus respondent
PICOP was ordered on 28 April 1994 to pay petitioners Four Million Four
Hundred Eighty-One Thousand Pesos (P4,481,000.00) representing
separation pay differentials plus ten per cent (10%) thereof as attorney's
fees. 4
The National Labor Relations Commission (NLRC) did not share the view of
the Executive Labor Arbiter. On 7 October 1994 it set aside the assailed
decision by decreeing that the allowances did not form part of the salary
base used in computing separation pay. 5 Its ruling was based on the
finding that the cases relied upon by the Executive Labor Arbiter were
inapplicable since they involved illegal dismissal where separation pay
was granted in lieu of reinstatement which was no longer feasible.
Instead, what it considered in point was Estate of the late Eugene J.
Kneebone v. NLRC 6 where the Court held that representation and
transportation allowances were deemed not part of salary and should
therefore be excluded in the computation of separation benefits. Relating
the present case with Art. 97, par. (f), of the Labor Code, the NLRC
likewise found that petitioners' allowances were contingency-based and

thus not included in their salaries. On 26 September 1995 reconsideration

was denied. 7
In this petition for certiorari, petitioners submit that their allowances are
included in the definition of "facilities" in Art. 97, par. (f), of the Labor
Code, being necessary and indispensable for their existence and
subsistence. Furthermore they claim that their availment of the monetary
equivalent of those "facilities" on a monthly basis was characterized by
permanency, regularity and customariness. And to fortify their arguments
they insist on the applicability of Santos, 8 Soriano, 9 The Insular Life
Assurance Company, 10 Planters Products, Inc. 11 and Songco 12 which
are all against the NLRC holding that the salary base in computing
separation pay includes not just the basic salary but also the regular
allowances. cdasia
There is no showing of grave abuse of discretion on the part of the NLRC.
In case of retrenchment to prevent losses, Art. 283 of the Labor Code
imposes on the employer an obligation to grant to the affected
employees separation pay equivalent to one (1) month pay or at least
one-half (1/2) month pay for every year of service, whichever is higher.
Since the law speaks of "pay," the question arises, "What exactly does the
term connote?" We correlate Art. 283 with Art. 97 of the same Code on
definition of terms. "Pay" is not defined therein but "wage." In Songco the
Court explained that both words (as well as salary) generally refer to one
and the same meaning, i.e., a reward or recompense for services
performed. Specifically, "wage" is defined in letter (f) as the remuneration
or earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services
rendered or to be rendered and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee.
We invite attention to the above-underlined clause. Stated differently,
when an employer customarily furnishes his employee board, lodging or
other facilities, the fair and reasonable value thereof, as determined by
the Secretary of Labor and Employment, is included in "wage." In order to
ascertain whether the subject allowances form part of petitioner's
"wages," we divide the discussion on the following "customarily

furnished;" "board, lodging or other facilities;" and, "fair and reasonable

value as determined by the Secretary of Labor."
"Customary" is founded on long-established and constant practice 13
connoting regularity. 14 The receipt of an allowance on a monthly basis
does not ipso facto characterize it as regular and forming part of salary
15 because the nature of the grant is a factor worth considering. We
agree with the observation of the Office of the Solicitor General that the
subject allowances were temporarily, not regularly, received by
petitioners because
In the case of the housing allowance, once a vacancy occurs in the
company-provided housing accommodations, the employee concerned
transfers to the company premises and his housing allowance is
discontinued . . . .
On the other hand, the transportation allowance is in the form of
advances for actual transportation expenses subject to liquidation . . .
given only to employees who have personal cars.
The Bislig allowance is given to Division Managers and corporate officers
assigned in Bislig, Surigao del Norte. Once the officer is transferred
outside Bislig, the allowance stops. 16
We add that in the availment of the transportation allowance, respondent
PICOP set another requirement that the personal cars be used by the
employees in the performance of their duties. When the conditions for
availment ceased to exist, the allowance reached the cutoff point. The
finding of the NLRC along the same line likewise merits concurrence, i.e.,
petitioners' continuous enjoyment of the disputed allowances was based
on contingencies the occurrence of which wrote finis to such enjoyment.
Although it is quite easy to comprehend "board" and "lodging," it is not so
with "facilities." Thus Sec. 5, Rule VII, Book III, of the Rules Implementing
the Labor Code gives meaning to the term as including articles or services
for the benefit of the employee or his family but excluding tools of the
trade or articles or service primarily for the benefit of the employer or
necessary to the conduct of the employer's business. The Staff/Manager's
allowance may fall under "lodging" but the transportation and Bislig
allowances are not embraced in "facilities" on the main consideration that
they are granted as well as the Staff/Manager's allowance for respondent
PICOP's benefit and convenience, i.e., to insure that petitioners render
quality performance. In determining whether a privilege is a facility, the
criterion is not so much its kind but its purpose. 17 That the assailed

allowances were for the benefit and convenience of respondent company

was supported by the circumstance that they were not subjected to
withholding tax. Revenue Audit Memo Order No. 1-87 pertinently provides

3.2 . . . transportation, representation or entertainment expenses shall

not constitute taxable compensation if:
(a) It is for necessary travelling and representation or entertainment
expenses paid or incurred by the employee in the pursuit of the trade or
business of the employer, and
(b) The
employee
is
required
to,
and
does,
make
an
accounting/liquidation for such expense in accordance with the specific
requirements of substantiation for such category or expense.
Board and lodging allowances furnished to an employee not in excess of
the latter's needs and given free of charge, constitute income to the latter
except if such allowances or benefits are furnished to the employee for
the convenience of the employer and as necessary incident to proper
performance of his duties in which case such benefits or allowances do
not constitute taxable income. 18
The Secretary of Labor and Employment under Sec. 6, Rule VII, Book III, of
the Rules Implementing the Labor Code may from time to time fix in
appropriate issuances the "fair and reasonable value of board, lodging
and other facilities customarily furnished by an employer to his
employees." Petitioners' allowances do not represent such fair and
reasonable value as determined by the proper authority simply because
the Staff/Manager's allowance and transportation allowance were
amounts given by respondent company in lieu of actual provisions for
housing and transportation needs whereas the Bislig allowance was given
in consideration of being assigned to the hostile environment then
prevailing in Bislig. cdll
The inevitable conclusion is that, as reached by the NLRC, subject
allowances did not form part of petitioners' wages.
In Santos 19 the Court decreed that in the computation of separation pay
awarded in lieu of reinstatement, account must be taken not only of the
basic salary but also of transportation and emergency living allowances.
Later, the Court in Soriano, citing Santos, was general in its holding that
the salary base properly used in computing separation pay where
reinstatement was no longer feasible should include not just the basic

salary but also the regular allowances that the employee had been
receiving. Insular merely reiterated the aforementioned rulings. The
rationale is not difficult to discern. It is the obligation of the employer to
pay an illegally dismissed employee the whole amount of his salaries plus
all other benefits, bonuses and general increases to which he would have
been normally entitled had he not been dismissed and had not stopped
working. 20 The same holds true in case of retrenched employees. And
thus we applied Insular and Soriano in Planters in the computation of
separation pay of retrenched employees. Songco likewise involved
retrenchment and was relied upon in Planters, Soriano and Santos in
determining the proper amount of separation pay. As culled from the
foregoing jurisprudence, separation pay when awarded to an illegally
dismissed employee in lieu of reinstatement or to a retrenched employee
should be computed based not only on the basic salary but also on the
regular allowances that the employee had been receiving. But in view of
the previous discussion that the disputed allowances were not regularly
received by petitioners herein, there was no reason at all for petitioners to
resort to the above cases.
Neither is Kneebone applicable, contrary to the finding of the NLRC,
because of the difference in factual circumstances. In Kneebone, the
Court was tasked to resolve the issue whether the representation and
transportation allowances formed part of salary as to be considered in the
computation of retirement benefits. The ruling was in the negative on the
main ground that the retirement plan of the company expressly excluded
such allowances from salary.
WHEREFORE, the petition is DISMISSED. The resolution of public
respondent National Labor Relations Commission dated 7 October 1994
holding that the Staff/Manager's, transportation and Bislig allowances did
not form part of the salary base used in computing the separation pay of
petitioners, as well as its resolution dated 26 September 1995 denying
reconsideration, is AFFIRMED. No costs.
SO ORDERED.
Puno, Mendoza, Quisumbing and Buena, JJ., concur.

FIRST DIVISION
[G.R. Nos. 50999-51000. March 23, 1990.]
JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR
ARBITER FLAVIO AGUAS, and F.E. ZUELLIG (M), INC., respondents.
Raul E. Espinosa for petitioners.
Lucas Emmanuel B. Canilao for petitioner A. Manuel.
Atienza, Tabara, Del Rosario & Castillo for private respondent.
SYLLABUS
1.
LABOR
LAW;
NATIONAL
LABOR
RELATIONS
COMMISSION;
SEPARATION PAY; ALLOWANCES AND EARNED COMMISSIONS INCLUDED IN
THE MONTHLY SALARY IN THE COMPUTATION THEREOF. Insofar as the
issues of whether or not allowances should be included in the monthly
salary of petitioners for the purpose of computation of their separation
pay is concerned, this has been settled in the case of Santos v. NLRC, et
al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where We ruled
that "in the computation of backwages and separation pay, account must
be taken not only of the basic salary of petitioner but also of her
transportation and emergency living allowances." This ruling was
reiterated in Soriano v. NLRC, et al., G.R. No. 75510, October 27, 1987,
155 SCRA 124 and recently, in Planters Products, Inc. v. NLRC, et al., G.R.
No. 78524, January 20, 1989. Inasmuch as the words "wages", "pay" and
"salary" have the same meaning, and commission is included in the
definition of "wage", the logical conclusion, therefore, is, in the
computation of the separation pay of petitioners, their salary base should
include also their earned sales commissions.
2.
ID.; ID.; TERM "WAGES" INCLUDE COMMISSIONS. Article 97(f) by
itself is explicit that commission is included in the definition of the term
"wage". It has been repeatedly declared by the courts that where the law
speaks in clear and categorical language, there is no room for
interpretation or construction; there is only room for application (Cebu
Portland Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August
22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals, G.R. No. L-27455,
June 28, 1973, 51 SCRA 381). A plain and unambiguous statute speaks for
itself, and any attempt to make it clearer is vain labor and tends only to
obscurity.

3.
ID.; ID.; SYNONYMOUS TO "SALARY" AND "PAY". The ambiguity
between Article 97(f), which defines the term 'wage' and Article XIV of the
Collective Bargaining Agreement, Article 284 of the Labor Code and
Sections 9(b) and 10 of the Implementing Rules, which mention the terms
"pay" and "salary", is more apparent than real. Broadly, the word "salary"
means a recompense or consideration made to a person for his pains or
industry in another man's business. Whether it be derived from
"salarium," or more fancifully from "sal," the pay of the Roman soldier, it
carries with it the fundamental idea of compensation for services
rendered. Indeed, there is eminent authority for holding that the words
"wages" and "salary" are in essence synonymous (Words and Phrases,
Vol. 38 Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S.
839, 841, 89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of
which is the Latin word "salarium," is often used interchangeably with
"wage", the etymology of which is the Middle English word "wagen". Both
words generally refer to one and the same meaning, that is, a reward or
recompense for services performed. Likewise, "pay" is the synonym of
"wages" and "salary" (Black's Law Dictionary, 5th Ed.).
4.
ID.; ID.; ID.; COMMISSION; DEFINED. We agree with the Solicitor
General that granting, in gratia argumenti, that the commissions were in
the form of incentives or encouragement, so that the petitioners would be
inspired to put a little more industry on the jobs particularly assigned to
them, still these commissions are direct remunerations for services
rendered which contributed to the increase of income of Zuellig.
Commission is the recompense, compensation or reward of an agent,
salesman, executor, trustees, receiver, factor, broker or bailee, when the
same is calculated as a percentage on the amount of his transactions or
on the profit to the principal (Black's Law Dictionary, 5th Ed., citing
Weiner v. Swales, 217 Md. 123, 141 A. 2d 749, 750). The nature of the
work of a salesman and the reason for such type of remuneration for
services rendered demonstrate clearly that commissions are part of
petitioners' wage or salary.
5.
ID.; ID.; ID.; ID.; BASIS IN THE COMPUTATION THEREOF. In Soriano
v. NLRC, et al., supra, in resolving the issue of the salary base that should
be used in computing the separation pay, We held that: "The
commissions also claimed by petitioner ('override commission' plus 'net
deposit incentive') are not properly includible in such base figure since
such commissions must be earned by actual market transactions
attributable to petitioner." Applying this by analogy, since the
commissions in the present case were earned by actual market

transactions attributable to petitioners, these should be included in their

separation pay. In the computation thereof, what should be taken into
account is the average commissions earned during their last year of
employment.

6.
ID.; INTERPRETATION OF THE LABOR CODE AND ITS IMPLEMENTING
RULES AND REGULATIONS; SHALL BE RESOLVED IN FAVOR OF THE
WORKINGMEN. In carrying out and interpreting the Labor Code's
provisions and its implementing regulations, the workingman's welfare
should be the primordial and paramount consideration. This kind of
interpretation gives meaning and substance to the liberal and
compassionate spirit of the law as provided for in Article 4 of the Labor
Code which states that "all doubts in the implementation and
interpretation of the provisions of the Labor Code including its
implementing rules and regulations shall be resolved in favor of labor"
(Abella v. NLRC, G.R. No. 71812, July 30, 1987, 152 SCRA 140; Manila
Electric Company v. NLRC, et al., G.R. No. 78763, July 12, 1989), and
Article 1702 of the Civil Code which provides that "in case of doubt, all
labor legislation and all labor contracts shall be construed in favor of the
safety and decent living for the laborer.
DECISION
MEDIALDEA, J p:
This is a petition for certiorari seeking to modify the decision of the
National Labor Relations Commission in NLRC Case No. RB-IV-20840-78-T
entitled, "Jose Songco and Romeo Cipres, Complainants-Appellants, v. F.E.
Zuellig (M), Inc., Respondent-Appellee" and NLRC Case No. RN-IV-2085578-T entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M),
Inc., Respondent-Appellee," which dismissed the appeal of petitioners
herein and in effect affirmed the decision of the Labor Arbiter ordering
private respondent to pay petitioners separation pay equivalent to their
one month salary (exclusive of commissions, allowances, etc.) for every
year of service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig)
filed with the Department of Labor (Regional Office No. 4) an application
seeking clearance to terminate the services of petitioners Jose Songco,
Romeo Cipres, and Amancio Manuel (hereinafter referred to as

petitioners) allegedly on the ground of retrenchment due to financial

losses. This application was seasonably opposed by petitioners alleging
that the company is not suffering from any losses. They alleged further
that they are being dismissed because of their membership in the union.
At the last hearing of the case, however, petitioners manifested that they
are no longer contesting their dismissal. The parties then agreed that the
sole issue to be resolved is the basis of the separation pay due to
petitioners. Petitioners, who were in the sales force of Zuellig received
monthly salaries of at least P400.00. In addition, they received
commissions for every sale they made. LibLex
The Collective Bargaining Agreement entered into between Zuellig and
F.E. Zuellig Employees Association, of which petitioners are members,
contains the following provision (p. 71, Rollo):
"ARTICLE XIV Retirement Gratuity.
"Section 1(a) Any employee, who is separated from employment due to
old age, sickness, death or permanent lay-off not due to the fault of said
employee shall receive from the company a retirement gratuity in an
amount equivalent to one (1) month's salary per year of service. One
month of salary as used in this paragraph shall be deemed equivalent to
the salary at date of retirement; years of service shall be deemed
equivalent to total service credits, a fraction of at least six months being
considered one year, including probationary employment. (Emphasis
supplied).
On the other hand, Article 284 of the Labor Code then prevailing provides:
"Art. 284. Reduction of personnel. The termination of employment of
any employee due to the installation of labor saving-devices, redundancy,
retrenchment to prevent losses, and other similar causes, shall entitle the
employee affected thereby to separation pay. In case of termination due
to the installation of labor-saving devices or redundancy, the separation
pay shall be equivalent to one (1) month pay or to at least one (1) month
pay for every year of service, whichever is higher. In case of retrenchment
to prevent losses and other similar causes, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year." (Emphasis supplied) llcd
In addition, Sections 9 (b) and 10, Rule 1, Book VI of the Rules
Implementing the Labor Code provide:

xxx

xxx

xxx

"Sec. 9(b).
Where the termination of employment is due to
retrenchment initiated by the employer to prevent losses or other similar
causes, or where the employee suffers from a disease and his continued
employment is prohibited by law or is prejudicial to his health or to the
health of his co-employees, the employee shall be entitled to termination
pay equivalent at least to his one month salary, or to one-half month pay
for every year of service, whichever is higher, a fraction of at least six (6)
months being considered as one whole year.
xxx

xxx

xxx

"Sec. 10. Basis of termination pay. The computation of the termination

pay of an employee as provided herein shall be based on his latest salary
rate, unless the same was reduced by the employer to defeat the
intention of the Code, in which case the basis of computation shall be the
rate before its deduction." (Emphasis supplied)
On June 26, 1978, the Labor Arbiter rendered a decision, the dispositive
portion of which reads (p. 78, Rollo):
"RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby,
ordered to pay the complainants separation pay equivalent to their one
month salary (exclusive of commissions, allowances, etc.) for every year
of service that they have worked with the company.
"SO ORDERED."
The appeal by petitioners to the National Labor Relations Commission was
dismissed for lack of merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified "Notice of Voluntary
Abandonment and Withdrawal of Petition" dated April 7, 1980 filed by
petitioner Romeo Cipres, based on the ground that he wants "to abide by
the decision appealed from" since he had "received, to his full and
complete satisfaction, his separation pay," resolved to dismiss the
petition as to him.
The issue is whether or not earned sales commissions and allowances
should be included in the monthly salary of petitioners for the purpose of
computation of their separation pay.
The petition is impressed with merit.

Petitioners' position was that in arriving at the correct and legal amount of
separation pay due them, whether under the Labor Code or the CBA, their
basic salary, earned sales commissions and allowances should be added
together. They cited Article 97(f) of the Labor Code which includes
commission as part of one's salary, to wit: LibLex
"(f) 'Wage' paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services
rendered or to be rendered, and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. 'Fair and
reasonable value' shall not include any profit to the employer or to any
person affiliated with the employer."
Zuellig argues that if it were really the intention of the Labor Code as well
as its implementing rules to include commission in the computation of
separation pay, it could have explicitly said so in clear and unequivocal
terms. Furthermore, in the definition of the term "wage", "commission" is
used only as one of the features or designations attached to the word
remuneration or earnings.
Insofar as the issue of whether or not allowances should be included in
the monthly salary of petitioners for the purpose of computation of their
separation pay is concerned, this has been settled in the case of Santos v.
NLRC, et al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where
We ruled that "in the computation of backwages and separation pay,
account must be taken not only of the basic salary of petitioner but also
of her transportation and emergency living allowances." This ruling was
reiterated in Soriano v. NLRC, et al., G.R. No. 75510, October 27, 1987,
155 SCRA 124 and recently, in Planters Products, Inc. v. NLRC, et al., G.R.
No. 78524, January 20, 1989. cdphil
We shall concern ourselves now with the issue of whether or not earned
sales commissions should be included in the monthly salary of petitioners
for the purpose of computation of their separation pay.
Article 97(f) by itself is explicit that commission is included in the
definition of the term "wage". It has been repeatedly declared by the
courts that where the law speaks in clear and categorical language, there

is no room for interpretation or construction; there is only room for

application (Cebu Portland Cement Co. v. Municipality of Naga, G.R. Nos.
24116-17, August 22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals,
G.R. No. L-27455, June 28, 1973, 51 SCRA 381). A plain and unambiguous
statute speaks for itself, and any attempt to make it clearer is vain labor
and tends only to obscurity. However, it may be argued that if We
correlate Article 97(f) with Article XIV of the Collective Bargaining
Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the
Implementing Rules, there appears to be an ambiguity. In this regard, the
Labor Arbiter rationalized his decision in this manner (pp. 74-76, Rollo):
'The definition of 'wage' provided in Article 96 (sic) of the Code can be
correctly be (sic) stated as a general definition. It is 'wage' in its generic
sense. A careful perusal of the same does not show any indication that
commission is part of salary. We can say that commission by itself may be
considered a wage. This is not something novel for it cannot be gain said
that certain types of employees like agents, field personnel and salesmen
do not earn any regular daily, weekly or monthly salaries, but rely mainly
on commission earned. LibLex
"Upon the other hand, the provisions of Section 10, Rule I, Book VI of the
implementing rules in conjunction with Articles 273 and 274 (sic) of the
Code specifically states that the basis of the termination pay due to one
who is sought to be legally separated from the service is 'his latest salary
rates.'
xxx

xxx

xxx

"Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly
salary.'
"The above terms found in those Articles and the particular Rules were
intentionally used to express the intent of the framers of the law that for
purposes of separation pay they mean to be specifically referring to
salary only.
". . . . Each particular benefit provided in the Code and other Decrees on
Labor has its own peculiarities and nuances and should be interpreted in
that light. Thus, for a specific provision, a specific meaning is attached to
simplify matters that may arise therefrom. The general guidelines in (sic)
the formation of specific rules for particular purpose. Thus, that what
should be controlling in matters concerning termination pay should be the
specific provisions of both Book VI of the Code and the Rules. At any rate,
settled is the rule that in matters of conflict between the general

provision of law and that of a particular or specific provision, the latter

should prevail."
On its part, the NLRC ruled (p. 110, Rollo):
"From the aforequoted provisions of the law and the implementing rules,
it could be deduced that wage is used in its generic sense and obviously
refers to the basic wage rate to be ascertained on a time, task, piece or
commission basis or other method of calculating the same. It does not,
however, mean that commission, allowances or analogous income
necessarily forms part of the employee's salary because to do so would
lead to anomaleas (sic), if not absurd, construction of the word "salary."
For what will prevent the employee from insisting that emergency living
allowance, 13th month pay, overtime and premium pay, and other fringe
benefits should be added to the computation of their separation pay. This
situation, to our mind, is not the real intent of the Code and its rules."
We rule otherwise. The ambiguity between Article 97(f), which defines the
term 'wage' and Article XIV of the Collective Bargaining Agreement,
Article 284 of the Labor Code and Sections 9(b) and 10 of the
Implementing Rules, which mention the terms "pay" and "salary", is more
apparent than real. Broadly, the word "salary" means a recompense or
consideration made to a person for his pains or industry in another man's
business. Whether it be derived from "salarium," or more fancifully from
"sal," the pay of the Roman soldier, it carries with it the fundamental idea
of compensation for services rendered. Indeed, there is eminent authority
for holding that the words "wages" and "salary" are in essence
synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing
Hopkins vs. Cromwell, 85 N.Y.S. 839, 841, 89 App. Div. 481; 38 Am. Jur.
496). "Salary," the etymology of which is the Latin word "salarium," is
often used interchangeably with "wage", the etymology of which is the
Middle English word "wagen". Both words generally refer to one and the
same meaning, that is, a reward or recompense for services performed.
Likewise, "pay" is the synonym of "wages" and "salary" (Black's Law
Dictionary, 5th Ed.). Inasmuch as the words "wages", "pay" and "salary"
have the same meaning, and commission is included in the definition of
"wage", the logical conclusion, therefore, is, in the computation of the
separation pay of petitioners, their salary base should include also their
earned sales commissions. LibLex
The aforequoted provisions are not the only consideration for deciding the
petition in favor of the petitioners.

We agree with the Solicitor General that granting, in gratia argumenti,

that the commissions were in the form of incentives or encouragement,
so that the petitioners would be inspired to put a little more industry on
the jobs particularly assigned to them, still these commissions are direct
remunerations for services rendered which contributed to the increase of
income of Zuellig. Commission is the recompense, compensation or
reward of an agent, salesman, executor, trustees, receiver, factor, broker
or bailee, when the same is calculated as a percentage on the amount of
his transactions or on the profit to the principal (Black's Law Dictionary,
5th Ed., citing Weiner v. Swales, 217 Md. 123, 141 A.2d 749, 750). The
nature of the work of a salesman and the reason for such type of
remuneration for services rendered demonstrate clearly that commissions
are part of petitioners' wage or salary. We take judicial notice of the fact
that some salesmen do not receive any basic salary but depend on
commissions and allowances or commissions alone, although an
employer-employee relationship exists. Bearing in mind the preceding
discussions, if We adopt the opposite view that commissions do not form
part of wage or salary, then, in effect, We will be saying that this kind of
salesmen do not receive any salary and therefore, not entitled to
separation pay in the event of discharge from employment. Will this not
be absurd? This narrow interpretation is not in accord with the liberal
spirit of our labor laws and considering the purpose of separation pay
which is, to alleviate the difficulties which confront a dismissed employee
thrown to the streets to face the harsh necessities of life. LexLib
Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the
salary base that should be used in computing the separation pay, We held
that:.
"The commissions also claimed by petitioner ('override commission' plus
'net deposit incentive') are not properly includible in such base figure
since such commissions must be earned by actual market transactions
attributable to petitioner."
Applying this by analogy, since the commissions in the present case were
earned by actual market transactions attributable to petitioners, these
should be included in their separation pay. In the computation thereof,
what should be taken into account is the average commissions earned
during their last year of employment.
The final consideration is, in carrying out and interpreting the Labor
Code's provisions and its implementing regulations, the workingman's
welfare should be the primordial and paramount consideration. This kind

of interpretation gives meaning and substance to the liberal and

compassionate spirit of the law as provided for in Article 4 of the Labor
Code which states that "all doubts in the implementation and
interpretation of the provisions of the Labor Code including its
implementing rules and regulations shall be resolved in favor of labor"
(Abella v. NLRC, G.R. No. 71812, July 30, 1987, 152 SCRA 140; Manila
Electric Company v. NLRC, et al., G.R. No. 78763, July 12, 1989), and
Article 1702 of the Civil Code which provides that "in case of doubt, all
labor legislation and all labor contracts shall be construed in favor of the
safety and decent living for the laborer. LLphil
ACCORDINGLY, the petition is hereby GRANTED. The decision of the
respondent National Labor Relations Commission is MODIFIED by
including allowances and commissions in the separation pay of petitioners
Jose Songco and Amancio Manuel. The case is remanded to the Labor
Arbiter for the proper computation of said separation pay.
SO ORDERED.
Narvasa, Cruz, Gancayco and Grio-Aquino, JJ., concur.

EN BANC
[G.R. No. L-30279. July 30, 1982.]
PHILIPPINE NATIONAL BANK, petitioner, vs. PHILIPPINE NATIONAL BANK
EMPLOYEES ASSOCIATION (PEMA) and COURT OF INDUSTRIAL RELATIONS,
respondents.
Conrado E. Medina, Edgardo M. Magtalas and Nestor Kalaw for petitioner.
Leon O. Ty, Gesmundo Fernandez & Zulueta Oliver B. Gesmundo and
Israel Bocobo for respondents.
SYNOPSIS
In connection with an industrial dispute certified by the President of the
Philippines, respondent Court of Industrial Relations (CIR) ruled, that
petitioner Philippine National Bank (PNB) should include cost-of-living
allowances (equity pay) and longevity pay to the sum total of every
employee's basic salary or wage as basis for computation of the overtime
pay of its employees. Respondent CIR's decision was based on its
interpretation of the applicable law, the Eight-Hour Labor Law
(Commonwealth Act No. 444), in the light of its own impression of the
Supreme Court's opinion in NAWASA vs. NAWASA Consolidated Unions (G.
R. No. L-18938, promulgated August 31, 1964, 11 SCRA 766) wherein it
was held that in computing the daily wage of employees and workers who
worked seven days a week their 25% Sunday differential pay should be
included; and the computation should not be based exclusively on the
basic wage.
On review, the Supreme Court held that: (a) longevity pay cannot be
included in the computation of overtime pay since the contrary is
expressly stipulated in the collective bargaining agreement which
constitutes the law between the parties; (b) notwithstanding the portions
of the NAWASA opinion relied upon by respondent PEMA, there is nothing
in the Eight- Hour Labor Law that could justify its posture that the cost of
living allowance should be added to the regular wage in computing
overtime pay; (c) the NAWASA ruling relied upon by respondent PEMA was
obiter dictum, the only issue therein being whether or not "in computing
the daily wage, the additional compensation for Sunday should be
included"; and (d) in the absence of any specific provision in a collective
bargaining agreement, what are decisive in determining the basis for
computation of overtime pay are two germane considerations, namely:
(1) whether or not the additional pay is for extra work done or service

rendered; and (2) whether or not the same is intended to be permanent

and regular, not contingent nor temporary and given only to remedy a
situation which can change any time.
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATIONS; EIGHT-HOUR LABOR LAW
(COMMONWEALTH ACT NO. 444); OVERTIME PAY; RATIONALE OF. Why is
a laborer or employee who works beyond the regular hours of work
entitled to extra compensation called in this enlightened time, overtime
pay? Verily, there can be no other reason than that he is made to work
longer than what is commensurate with his agreed compensation for the
statutorily fixed or voluntarily agreed hours of labor he is supposed to do.
When he thus spends additional time to his work, the effect upon him is
multi-faceted: he puts in more effort, physical and/or mental; he is
delayed in going home to his family to enjoy the comforts thereof; he
might have no time for relaxation, amusement or sports; he might miss
important pre-arranged engagements; etc., etc. It is thus the additional
work, labor or service employed and the adverse effects just mentioned
of his longer stay in his place of work that justify and is the real reason for
the extra compensation that he called overtime pay.
2.
ID.; ID.; OVERTIME WORK, MEANING OF. Overtime work is actually
the lengthening of hours devoted to the interests of the employer and the
requirements of his enterprise.
3.
ID.; ID.; WAGE; MEANING OF. Wage under the Minimum Wage Law
(Republic Act No. 602), in whatever means or form it is given to the
worker, is "for work done or to be done or for services rendered or to be
rendered" and logically "includes (only) the fair and reasonable value as
determined by the Secretary of Labor, of board, lodging or other facilities
customarily furnished by the employer to the employee."
4.
ID.; ID.; LONGEVITY PAY; CANNOT BE INCLUDED IN COMPUTATION OF
OVERTIME PAY WHERE THE CONTRARY IS EXPRESSLY STIPULATED IN THE
COLLECTIVE BARGAINING AGREEMENT; CASE AT BAR. In the instant
case, longevity pay cannot be included in the computation of overtime
pay for the very simple reason that the contrary is expressly stipulated in
the collective bargaining agreement and, as should be the case, it is
settled that the terms and conditions of a collective bargaining
agreement constitute the law between the parties. (Mactan Workers
Union vs. Aboitiz, 45 SCRA 577; See also Shell Oil Workers Union, et al. vs.
Shell Company of the Philippines, 70 SCRA 242-243.)

5.
ID.; ID.; COST-OF-LIVING ALLOWANCES; GRANT THEREOF NOT
JUSTIFIED IN CASE AT BAR. Notwithstanding the portions of NAWASA's
opinion relied upon by PEMA, there is nothing in CA 444 that could justify
its posture that cost-of-living allowance should be added to the regular
wage in computing overtime pay.
6.
ID.; ID.; ID.; OPINION IN NAWASA vs. NAWASA CONSOLIDATED
UNIONS, ET AL. NOT CONTROLLING IN CASE AT BAR. True it is that in
the opinion in the case of NAWASA vs. NAWASA Consolidated Unions, et
al., it is there stated that "for purposes of computing overtime
compensation, regular wage includes all payments which the parties have
agreed shall be received during the work week, including differential
payments for working at undesirable times, such as at night and the
board and lodging customarily furnished the employee . . . The 'regular
rate' of pay also ordinarily includes incentive bonus or profit-sharing
payments made in addition to the normal basic pay (56 C.J.S., pp. 704705), and it was also held that the higher rate for night, Sunday and
holiday work is just as much a regular rate as the lower rate for daytime
work. The higher rate is merely an inducement to accept employment at
times which are not as desirable from a workman's standpoint
(International L. Ass'n. vs. National Terminals Corp. C.C. Wise, 50 F. Supp.
26, affirmed C.C.A. Carbunao vs. National Terminals Corp. 139 F. 2d 853)."
(11 SCRA 783) But nowhere did NAWASA refer to extra, temporary and
contingent compensation unrelated to work done or service rendered,
which is the very nature of cost-of-living allowance. Withal, in strict sense,
the cited NAWASA ruling was obiter dictum, since the only issue before
the Court there was whether or not "in computing the daily wage,
(whether) the additional compensation for Sunday should be included."
7.
ID.; ID.; OVERTIME PAY; BASIS OF COMPUTATION BEYOND THAT
PROVIDED BY LAW SHOULD BE THE COLLECTIVE BARGAINING
AGREEMENT. The basis of computation of overtime pay beyond that
required by Commonwealth Act No. 444 must be the collective bargaining
agreement (Shell Oil Workers Union vs. Shell Company of the Philippines,
L-30658-59, March 31, 1976, 70 SCRA 238), for, it is not for the court to
impose upon the parties anything beyond what they have agreed upon
which is not tainted with illegality (Bisig ng Manggagawa case). On the
other hand, where the parties fail to come to an agreement, on a matter
not legally required, the court abuses its discretion when it obliges any of
them to do more than what is legally obliged.

8.
ID.; ID.; ID.; BASIS THEREFOR ABSENT ANY SPECIFIC PROVISION IN
THE COLLECTIVE BARGAINING AGREEMENT. Doctrinally, We hold that,
in the absence of any specific provision on the matter in a collective
bargaining agreement, what are decisive in determining the basis for the
computation of overtime pay are two very germane considerations,
namely, (1) whether or not the additional pay is for extra work done or
service rendered and (2) whether or not the same is intended to be
permanent and regular. not contingent nor temporary and given only to
remedy a situation which can change any time. We reiterate, overtime
pay is for extra effort beyond that contemplated in the employment
contract, hence when additional pay is given for any other purpose, it is
illogical to include the same in the basis for the computation of overtime
pay. This holding supersedes the ruling in NAWASA vs. NAWASA
Consolidated Unions. et al., G.R. No. L-18938, August 31, 1964.
AQUINO, J., concurring:
LABOR AND SOCIAL LEGISLATIONS; COMMONWEALTH ACT NO. 444
(EIGHT-HOUR LABOR LAW); OVERTIME PAY; SHOULD BE BASED ON THE
REGULAR WAGES OR SALARY; DOES NOT INCLUDE COST-OF-LIVING
ALLOWANCE, LONGEVITY PAY OR OTHER FRINGE BENEFITS. Sections 3
and 4 of the Eight-Hour Labor Law,. Commonwealth Act No. 444, provide
that the overtime pay of workers should be based on the "regular wages
or salary" or "regular remuneration" of the laborers and employees. These
terms should be given their ordinary meaning. Hence, they do not include
the cost-of-living allowance, longevity pay or other fringe benefits, which
items constitute extra pay or additions to the regular or basic pay. In Shell
Oil Workers Union vs. Shell Company of the Philippines, L-30658-59,
March 31, 1976, 70 SCRA 238, this Court held that, notwithstanding the
ruling in NAWASA Consolidated Unions, et al. (130 Phil. 736, 754), the
fringe benefits should not be added to the basic pay in computing the
overtime pay. Consequently, the Industrial Court erred in including the
cost-of-living allowance and the longevity pay as part of the employee's
basic salary or wage on which the overtime pay should be based.
DECISION
BARREDO, J p:
Appeal by the Philippine National Bank from the decision of the trial court
of the Court of Industrial Relations in Case No. IPA-53 dated August 5,
1967 and affirmed en banc by said court on January 15, 1968.

This case started on January 28,1965 in consequence of the certification

of the President of the Philippines of an industrial dispute between the
Philippine National Bank Employees Association (PEMA, for short), on the
one hand, and the Philippine National Bank (PNB, for short), on the other,
which arose from no more than the alleged failure of the PNB to comply
with its commitment of organizing a Committee on Personnel Affairs to
take charge of screening and deliberating on the promotion of employees
covered by the collective bargaining agreement then in force between the
said parties. On January 28, 1965, the Industrial Court issued an order
aimed at settling the dispute temporarily between the parties, which way
certified by the President. Pertinent portions of the order read thus:
"xxx

xxx

xxx

"1. That in order to settle the strike and for the employees to return to
work immediately starting January 29, 1965, the Committee on Personnel
Affairs is hereby created to start functioning on February 1, 1965;
"xxx

xxx

xxx

"f.
That in return for this concession, an injunction against future strikes
or lockouts shall be issued by the Court to last for a period of six months
but which shall terminate even before that period should all disputes of
the parties be already resolve;" (Page 84, Record.)
According to the very decision now on appeal, "on May 22, 1965,
petitioner (private respondent herein) filed another pleading submitting to
this Court for determination certain matters which it claims cannot be
resolved by the parties, which are as follows:
'First Cause of Action
'a. In a Resolution No. 1162 dated September 16, 1957, the
Respondent's Board of Directors approved a revision of the computation
of overtime pay retroactive as of July 1, 1954, and authorized a
recomputation of the regular one-hour and extra overtime already
rendered by all officers and employees of the Respondent Bank.
'The details of the benefits involved in said Resolution are contained in a
Memorandum of the Respondent Bank dated September 18, 1957.
'b. Since the grant of the benefits in question, the employees of the
Respondent, represented by the petitioner, have always considered them
to be a part of their salaries and/or fringe benefits; nevertheless, the
Respondent, in 1963, without just cause, withdrew said benefits and in

spite of repeated demands refused, and still refuses to reinstate the same
up to the present.
'Second Cause of Action
'c. After the promulgation of the Decision in National Waterworks and
Sewerage Authority vs. NAWASA Consolidated Unions, et al., G.R. No. L18938, Aug. 31,1964, the Petitioner has repeatedly requested Respondent
that the cost of living allowance and longevity pay be taken into account
in the computation of overtime pay, effective as of the grant of said
benefits on January 1, 1958, in accordance with the ruling in said Decision
of the Supreme Court.
'd. Until now Respondent has not taken any concrete steps toward the
payment of the differential overtime and nighttime pays arising from the
cost of living allowance and longevity pay.
'xxx

xxx

xxx

Respondent in its answer of June 7, 1965 took exception to this

mentioned petition on several grounds, namely, (1) the said alleged
causes of action were not disputes existing between the parties, (2) the
same are mere money claims and therefore not within this Court's
jurisdiction, and (3) that the parties have not so stipulated under the
collective bargaining agreement between them, or the same is premature
as the pertinent collective bargaining agreement has not yet expired."
(Pp. 84-86, Record.) 1
Resolving the issues of jurisdiction and prematurity thus raised by PNB,
the court held:
"As to the first ground, it is well to note that this Court in its Order of
January 28, 1965 has enjoined the parties not to strike or lockout for a
period of six (6) months starting from said date. In a very definite sense
the labor disputes between the parties have been given a specific period
for the settlement of their differences. The fact that thereafter the
question of the manner of payment of overtime pay is being put in issue,
appears to indicate that this was a part of the labor dispute. If we are to
consider that this question, particularly the second cause of action, has in
fact existed as early as 1958, shows the necessity of resolving the same
now. And the same would indeed be an existing issue considering that the
present certification came only in 1965.
"It is further to be noted that the presidential certification has not limited
specific areas of the labor dispute embraced within the said certification.

It speaks of the existence of a labor dispute between the parties and of a

strike declared by the PEMA, for which the Court has been requested to
take immediate steps in the exercise of its powers under the law. prcd
"Even on the assumption that the present issue is not one embraced by
the presidential certification or it is an issue presented by one party on a
cause arising subsequent to the certification, the same would still be
subject to the jurisdiction of this Court. In 'Apo Cement Workers Union
versus Cebu Portland Cement', Case No. 11-IPA (G.R. No. L-12451, July 10,
1957), the Court en banc (where this Sala has taken an opposite view)
upheld its jurisdiction under the circumstances just enumerated. It would
seem that this question has been further settled by our Supreme Court in
'National Waterworks & Sewerage Authority vs. NAWASA Consolidated
Unions, et al.' (supra), which we quote in part:
"xxx

xxx

xxx

'4. Petitioner's claim that the issue of overtime compensation not

having been raised in the original case but merely dragged into it by
intervenors, respondent Court cannot take cognizance thereof under
Section 1, Rule 13 of the Rules of Court.
'xxx

xxx

xxx

'. . . The fact that the question of overtime payment is not included in the
principal case in the sense that it is not one of the items of dispute
certified to by the President is of no moment, for it comes within the
sound discretion of the Court of Industrial Relations. Moreover, in Labor
disputes technicalities of procedure should as much as possible be
avoided not only in the interest of labor but to avoid multiplicity of action.
This claim has no merit.
'xxx

xxx

xxx

"As to the objection posed that the issues are mere money claims, there
appears to be no ground for the same. In the first place, although the
same involves a claim for additional compensation it is also a part of the
Labor dispute existing between the parties and subject to the compulsory
arbitration powers of the Court, pursuant to Section 10 of Rep. Act No.
875. In the second place, on the basis of the so-called PRISCO doctrine
(G.R. No. L-13806, May 23, 1960), there is an existing and current
employer-employee relationship between the respondent and the
members of petitioner union, for whom the additional overtime
compensation is claimed. prcd

"With respect to ground three of the answer on which objection is based,

on C.A. 444, as amended, Section 6 thereof, provides as follows:
'Any agreement or contract between the employer and the laborer or
employee contrary to the provisions of this Act shall be null and void ab
initio'.
"The instant action is partially subject to the provisions of Commonwealth
Act 444, as amended. Even if, the parties have stipulated to the extent
that overtime will not be paid, the same will not be binding. More so
under the present circumstances, where the only question is the
correctness of the computation of the overtime payments.
"While the Court notes that the first cause of action has become moot
and academic in view of the compliance by respondent, hence there is no
further need to resolve the same (t.s.n., pp. 5-7, August 16, 1965), the
settlement of said first cause of action further strengthens the view that
the second cause of action is indeed an existing dispute between the
parties. Both causes of action involve overtime questions. Both stem from
dates well beyond and before the presidential certification of the present
proceedings. If respondent has been fit to take steps to expedite and
resolve, without court intervention, the first cause of action, it cannot
deny the existence of the second cause of action as the first and second
appear to be interrelated matters." (Pp. 86-89, Record)
And We agree that the foregoing holding is well taken. It would be more
worthwhile to proceed to the basic issues immediately than to add
anything more of Our own discourse to the sufficiently based disposition
of the court a quo of the above-mentioned preliminary questions.
After discussing the pros and cons on the issue involved in the second
cause of action as to whether or not the cost-of-living allowance otherwise
denominated as equity pay and longevity pay granted by the bank, the
first beginning January 1, 1958 and the latter effective July 1, 1961,
should be included in the computation of overtime pay, the court granted
the demands of PEMA, except the additional rate of work for night pay,
and rendered the following judgment:
"WHEREFORE, in view of the foregoing, this Court hereby promulgates the
following:
"1. The respondent Philippine National Bank is hereby required to pay
overtime and nighttime rates to its employees from January 28, 1962;
and such overtime compensation shall be based on the sum total of the

employee's basic salary or wage plus cost of living allowance and

longevity pay under the following schedule:
'a. Overtime services rendered shall be paid at the rate of time and
one-third, but overtime work performed between 6:00 P.M. and 6:00 A.M.
shall be paid at the rate of 150% or 50% beyond the regular rate;
'b. The rate for work performed in the night shift, or during the period
from 6:00 P.M. to 6:00 A.M. shall be compensated at the rate of 150% or
60% beyond the regular rate, provided the work performed involved a
definite night shift and not merely a continuation by way of overtime of
the regular and established hours of the respondent Bank.
"2. The Chief of the Examining Division of the Court or any of his duly
designated representatives is hereby ordered to compute the overtime
rates due each employee of the respondent Bank from January 28, 1962,
in accordance with the above determination; and to complete the same
within a period of sixty (60) days from receipt of this Order. However,
considering that the Philippine National Bank is a government depository,
and renders and performs functions distinct and unique; and, while it may
be a banking institution, its relationship with other government agencies
and the public is such that it has no basis for comparison with other
banking institutions organized under the corporation law or special
charter. To require it to pay immediately the liability after the exact
amount shall have been determined by the Court Examiner and duly
approved by the Court, as in other cases, would work undue hardship to
the whole government machinery, not to mention the outstanding foreign
liabilities and outside commitments, if any. Moreover, the records show
that this case was initiated long before the taking over of the incumbent
bank officials.
"Accordingly, the Court feels that the payment shall be subject to the
negotiations by the parties as to time, amount, and duration.
"The Court may intervene in said negotiations for the purpose of settling
once and for all this case to maintain industrial peace pursuant to Section
13 of Commonwealth Act 103, as amended, if desired, however by the
parties.
"After all, this is not an unfair labor practice case.
"SO ORDERED." (Pp. 98-100, Record.)
In connection with the above decision, two interesting points appear at
once to be of determinative relevance:

The first is that in upholding its jurisdiction to take cognizance of the

demand in question about cost-of-living allowance and longevity pay, the
Industrial Court carefully noted that it was not resolving a petition for
declaratory relief in the light of the decision of this Court in NAWASA vs.
NAWASA Consolidated Unions, G.R. No. L-18938, August 31, 1964, 11
SCRA 766. Thus the decision under review states: cdll
"Incidentally, the present action is not one for declaratory relief as to the
applicability of a judicial decision to the herein parties. A careful perusal
of the pleadings indicates that what is being sought is the payment of
differential overtime and nighttime pay based on existing law and
jurisprudence. The cause of action is not anchored on any decision of any
court but on provisions of the law which have been in effect at the time of
the occurrence of the cause of the action in relation to a labor dispute.
Hence, this is not a petition for declaratory relief." (Pp. 94-95, Record.)
The second refers to a subsequent decision of the same Industrial Court
in Shell Oil Workers Union vs. Shell Co., et al., Case No. 2410-V and Shell
& Affiliates Supervisors Union vs. Shell Company of the Philippines, et al.,
Case No. 2411-V, in which the court made an explanatory discourse of its
understanding of the NAWASA ruling, supra, and on that basis rejected
the claim of the workers. In brief, it held that (1) NAWASA does not apply
where the collective bargaining agreement does not provide for the
method of computation of overtime pay herein insisted upon by private
respondent PEMA and (2) the fact-situation in the Shell cases differed
from that of NAWASA, since the sole and definite ratio decidendi in
NAWASA was merely that inasmuch as Republic Act 1880 merely fixed a
40-hour 5-day work for all workers, laborers and employees including
government-owned corporations like NAWASA, the weekly pay of NAWASA
workers working more than five days a week should remain intact; with
overtime pay in excess of eight hours work and 25% additional
compensation on Sundays. There was no pronouncement at all therein
regarding the basis of the computation of overtime pay in regard to
bonuses and other fringe benefits.
For being commendably lucid and comprehensive, We deem it justified to
quote from that Shell decision:
"The main issue:
"The Unions appear to have read the NAWASA case very broadly. They
would want it held that in view of the said ruling of the Supreme Court,
employers and employees must, even in the face of existing bargaining

contracts providing otherwise, determine the daily and hourly rates of

employees in this manner: Add to basic pay all the money value of all
fringe benefits agreed upon or already received by the workers
individually and overtime pay shall be computed thus
"Basic yearly Rate plus Value of all Fringe Benefits divided by number of
days worked during the year equals daily wage; Daily wage divided by 8
equals hourly rate. Hourly rate plus premium rate equals hourly overtime
rate.
"The NAWASA case must be viewed to determine whether it is that broad.
NAWASA case must be understood in its setting. The words used by the
Supreme Court in its reasoning should not be disengaged from the factsituation with which it was confronted and the specific question which it
was there required to decide. Above all, care should be taken not to lose
sight of the truth that the facts obtaining, the issue settled, and the law
applied in the said case, and these, though extractable from the records
thereof as material in the resolution herein, were, as they are, primarily
declarative of the rights and liabilities of the parties involved therein.
"Recourse to the Records of the NAWASA case shows that the factsituation, as far as can be materially connected with the instant case, is
as follows:
'In view of the enactment of Rep. Act 1880, providing that the legal hours
of work for government employees, (including those in governmentowned or controlled corporations) shall be eight (8) hours a day for five
(5) days a week or forty (40) hours a week, its implementation by
NAWASA was disputed by the Union. The workers affected were those
who, for a period of three (3) months prior to or immediately preceding
the implementation of Rep. Act 1880, were working seven (7) days a
week and were continuously receiving 25% Sunday differential pay. The
manner of computing or determining the daily rate of monthly salaried
employees.
"And the Supreme Court, specifically laid out the issue to be decided, as it
did decide, in the NAWASA, as follows:
'7. and 8. How is a daily wage of a weekly employee computed in the
light of Republic Act 1880?' (G.R. L-18938)
"Resolving the above issue, it was held:
'According to petitioner, the daily wage should be computed exclusively
on the basic wage without including the automatic increase of 25%

corresponding to the Sunday differential. To include said Sunday

differential would be to increase the basic pay which is not contemplated
by said Act. Respondent court disagrees with this manner of computation.
It holds that Republic Act 1880 requires that the basic weekly wage and
the basic monthly salary should not be diminished notwithstanding the
reduction in the number of working days a week. If the automatic
increase corresponding to the salary differential should not be included
there would be a diminution of the weekly wage of the laborer concerned.
Of course, this should only benefit those who have been working seven
days a week and had been regularly receiving 25% additional
compensation for Sunday work before the effectivity of the Act.'
"It is thus necessary to analyze the Court's rationale in the said NAWASA
case, 'in the light of Rep. Act 1880', and the 'specific corollaries' discussed
preparatory to arriving at a final conclusion on the main issue. What was
required to be done, by way of implementing R.A. 1880? The statute
directs that working hours and days of government employees (including
those of government owned and controlled proprietary corporations) shall
be reduced to five days - forty hours a week. But, the same law carried
the specific proviso, designed to guard against diminution of salaries or
earnings of affected employees. The Supreme Court itself clearly spelled
this out in the following language: 'It is evident that Republic Act 1880
does not in tend to raise the wages of the employees over what they are
actually receiving. Rather, its purpose is to limit the working days in a
week to five days, or to 40 hours without however permitting any
reduction in the weekly or daily wage of the compensation which was
previously received . . .'
"If the object of the law was to keep intact, (not either to increase it or
decrease it) it is but natural that the Court should concern itself, as it did,
with the corollary, what is the weekly wage of worker who, prior to R.A.
1880, had been working seven (7) days a week and regularly receiving
differential payments for work on Sundays or at night? It seems clear that
the Court was only concerned in implementing correctly R.A. 1880 by
ensuring that in diminishing the working days and hours of workers in one
week, no diminution should result in the worker's weekly or daily wage.
And, the conclusion reached by the Supreme Court was to affirm or
recognize the correctness of the action taken by the industrial court
including such differential pay in computing the weekly wages of these
employees and laborers who worked seven days a week and were
continuously receiving 25% Sunday differential for a period of three
months immediately preceding the implementation of R.A. 1880.' Nothing

was said about adding the money value of some other bonuses or
allowances or money value of other fringe benefits, received outside the
week or at some other periods. That was not within the scope of the issue
before the Court. In fact, the limited application of the decision is
expressed in the decision itself. The resolution of this particular issue was
for the benefit of only a segment of the NAWASA employees. Said the
Court 'Of course, this should only benefit those who have been working
seven days a week and had been regularly receiving 25% additional
compensation for Sunday work before the effectivity of the Act.'
"Unions make capital of the following pronouncement of the Supreme
Court in the NAWASA case:
'It has been held that for purposes of computing overtime compensation a
regular wage includes all payments which the parties have agreed shall
be received during the work week, including piece-work wages,
differential payments for working at undesirable times, such as at night or
on Sundays and holidays, and the cost of board and lodging customarily
furnished the employee (Walling v. Yangermah-Reynolds Hardwook Co.,
325 U.S. 419; Walling v. Harischfeger Corp. 325 U.S. 427). The 'Regular
rate' of pay also ordinarily includes incentive bonus or profit-sharing
payments made in addition to the normal basic pay (56 C.J.S., pp. 704705), and it was also held that the higher rate for night, Sunday and
holiday work is just as much as regular rate as the lower rate for daytime
work. The higher rate is merely an inducement to accept employment at
times which are not at desirable form a workman's standpoint
(International L. Ass'n. Wise 50 F. Supp. 26, affirmed C.C.A. Carbunao v.
National Terminals Corp. 139 F. 853).'

But this paragraph in the decision appears to have been used and cited
by the Court to sustain the action of the court a quo: that it was correct to
include the 25% Sunday premium for the purpose of setting the weekly
wage of specified workers whose weekly earnings before the passage of
R.A. 1880 would be diminished, if said premium pay regularly received for
three months were not included. It is significant that the citations therein
used by the Supreme Court are excerpts from American decisions whose
legislation on overtime is at variance with the law in this jurisdiction in
this respect: the U.S. legislation considers work in excess of forty hours a
week as overtime; whereas, what is generally considered overtime in the
Philippines is work in excess of the regular 8-hours a day. It is
understandably material to refer to precedents in the U.S. for purposes of

computing weekly wages under a 40-hour a week rule, since the

particular issue involved in NAWASA is the conversion of prior weekly
regular earnings into daily rates without allowing diminution or addition.
llcd
"No rule of universal application to other cases may, therefore, be
justifiably extracted from the NAWASA case. Let it be enough that in
arriving at just solution and correct application of R.A. 1880, an inference
was drawn from other decisions that a regular wage includes payments
'agreed by the parties as to be received during the week.' But to use this
analogy in another fact-situation would unmitigatingly stretch its value as
basis for legal reasoning, for analogies are not perfect and can bring a
collapse if stretched far beyond their logical and reasoned efficacy.
Neither would it be far to ascribe to the Supreme Court's citation of
foreign jurisprudence, which was used for purposes of analogy, the force
of statute law, for this would be the consequence if it were allowed to be
used as authority for all fact-situations, even if different from the NAWASA
case. This, because courts do not legislate. All they do is apply the law.
"The above discussions impel the objective analyst to reject the
proposition that the NAWASA decision is all embracing and can be used
with the authority of a statute's effects on existing contracts.
"It appears that the answer to dispute lies, not in the text of the NAWASA
case but in the terms and conditions and practice in the implementation
of, the agreement, an area which makes resolution of the issue
dependent on the relation of the terms and conditions of the contract to
the phraseology and purpose of the Eight-Hour Labor Law (Act 444).
"The more we read the NAWASA case, the more we are convinced that the
overtime computation set therein cannot apply to the cases at bar. For to
do so would lead to unjust results, inequities between and among the
employees themselves and absurd situations. To apply the NAWASA
computation would require a different formula for each and every
employee, would require reference to and continued use of individual
earnings in the past, thus multiplying the administrative difficulties of the
Company. It would be cumbersome and tedious a process to compute
overtime pay and this may again cause delays in payments, which in turn
could lead to serious disputes. To apply this mode of computation would
retard and stifle the growth of unions themselves as Companies would be
irresistibly drawn into denying, new and additional fringe benefits, if not
those already existing, for fear of bloating their overhead expenses

through overtime which, by reason of being unfixed, becomes instead a

veritable source of irritant in labor relations.
"One other reason why application of the NAWASA case should be
rejected is that this Court is not prepared to accept that it can lay down a
less cumbersome formula for a company-wide overtime pay other than
that which is already provided in the collective bargaining agreement.
Courts cannot make contracts for the parties themselves.
"Commonwealth Act 444 prescribes that overtime work shall be paid 'at
the same rate as their regular wages or salary, plus at least twenty-five
per centum additional' (Secs. 4 & 5). The law did not define what is a
'regular wage or salary'. What the law emphasized by way of repeated
expression is that in addition to 'regular wage', there must be paid an
additional 25% of that 'regular wage' to constitute overtime rate of pay.
The parties were thus allowed to agree on what shall be mutually
considered regular pay from or upon which a 25% premium shall be
based and added to make up overtime compensation. This the parties did
by agreeing and accepting for a very long period to a basic hourly rate to
which a premium shall be added for purposes of overtime.
"Also significant is the fact that Commonwealth Act 444 merely sets a
minimum, a least premium rate for purposes of overtime. In this case, the
parties agreed to premium rates four (4) or even six (6) times than that
fixed by the Act. Far from being against the law, therefore, the agreement
provided for rates 'commensurate with the Company's reputation of being
among the leading employers in the Philippines' (Art. 1, Sec. 2, Coll. Barg.
Agreement) at the same time that the Company is maintained in a
competitive position in the market (Coll. Barg. Agreement, Ibid).
"Since the agreed rates are way above prevailing statutory wages and
premiums, fixed by themselves bona fide through negotiations favored by
law, there appears no compelling reason nor basis for declaring the same
illegal. A basic principle forming an important foundation of R.A. 875 is
the encouragement given to parties to resort to peaceful settlement of
industrial problems through collective bargaining. It behooves this Court,
therefore, to help develop respect for those agreements which do not
exhibit features of illegality. This is the only way to build confidence in the
democratic process of collective bargaining. Parties cannot be permitted
to avoid the implications and ramifications of the agreement.
"Although this Court has gone very far in resolving all doubts and in
giving great weight to evidence and presumptions in favor of labor, it may

not go as far as reconstruct the law to fit particular cases." (Pp. 174-181,
Record)
Proof of the correctness of the aforequoted considerations, the appeal of
the workers from the Industrial Court's decision did not prosper. Affirming
the appealed decision, We held:
"The theory, therefore, of the petitioners is to the effect that,
notwithstanding the terms and conditions of their existing collective
bargaining agreement with respondent Shell Company, particularly
Exhibit 'A-1' for the Petitioners and Exhibit '1-A' for the Respondent (which
is Appendix 'B' of the Collective Bargaining Agreement of the parties),
considering the ruling in the NAWASA case, a recomputation should be
made of their basic wage by adding the money value of the fringe
benefits enjoyed by them from whence the premium rates agreed upon
shall be computed in order to arrive at the correct computation of their
overtime compensation from the Company. On the other hand,
respondent Shell Company maintains that the NAWASA case should not
be utilized as the basis for the alteration of their mode of computing
overtime rate of pay as set forth in their collective Bargaining Agreement.
It insists that their collective bargaining agreement should be the law
between them.
"After a careful and thorough re-examination of the NAWASA case, supra,
and a minute examination of the facts and the evidence of the case now
before Us, We rule that the NAWASA case is not in point and, therefore, is
inapplicable to the case at bar.
"The ruling of this Court in the NAWASA case contemplates the regularity
and continuity of the benefits enjoyed by the employees or workers (for at
least three (3) months) as the condition precedent before such additional
payments or benefits are taken into account. This is evident in the
aforequoted ruling of this Court in the NAWASA case as well as in the
hereinbelow cited authorities, to wit:
'The 'regular rate' of pay on the basis of which overtime must be
computed must reflect all payments which parties have agreed shall be
received regularly during the work week, exclusive of overtime
payments.' Walling v. Garlock Packing Co. C.C.A.N.Y., 159 F. 2d 44, 45.
(Page 289, WORDS And PHRASES, Permanent Edition, Vol. 36A; Italics
supplied); and
'As a general rule the words 'regular rate' mean the hourly rate actually
paid for the normal, non-overtime work week, and an employee's regular

compensation is the compensation which regularly and actually reaches

him, . . .' (56 C.J.S. 704; Italics supplied).
"Even in the definition of wage under the Minimum Wage Law, the words
'customarily furnished' are used in referring to the additional payments or
benefits, thus,
" 'Wage' paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, commission basis, or
other method of calculating the same, which is payable by an employer to
an employee under a written or unwritten contract of employment for
work done or to be done or for services rendered or to be rendered, and
includes the fair and reasonable value, as determined by the Secretary of
Labor, of board, lodging or other facilities customarily furnished by the
employer to the employee.' (Sec. 2 (g), R.A. No. 602).
"Having been stipulated by the parties that '. . . the Tin Factory Incentive
Pay has ceased in view of the closure of the factory in May 1966 the
fringe benefits as described show that they are occasionally not regularly
enjoyed and that not all employees are entitled to them', herein
petitioners failed to meet the test laid down by this Court in the NAWASA
case. Further, the collective bargaining agreement resorted to by the
parties being in accordance with R.A. 875, with its provision on overtime
pay far way beyond the premium rate provided for in Sections 4 and 5 of
Commonwealth Act 444, the same should govern their relationship. Since
this is their contract entered into by them pursuant to bargaining
negotiations under existing laws, they are bound to respect it. It is the
duty of this Court to see to it that contracts between parties, not tainted
with infirmity or irregularity or illegality, be strictly complied with by the
parties themselves. This is the only way by which unity and order can be
properly attained in our society.
"It should be noted in passing that Commonwealth Act 444 prescribes
only a minimum of at least 25% in addition to the regular wage or salary
of an employee to constitute his overtime rate of pay, whereas, under
Appendix 'B', (Exhs. 'A-1', Petitioners and '1-A', Respondent) of the
Collective Bargaining Agreement of the parties, the premium rate of
overtime pay is as high as 150% on regular working days up to 250% on
Sundays and recognized national holidays." (Shell Oil Workers Union vs.
Shell Company of the Philippines, G.R. No. L-30658-59, March 31, 1976,
70 SCRA 242-243.)

In the instant case, on May 22, 1965 PEMA alleged in the court below the
following cause of action as amended on June 7, 1965: prcd
"Since the start of the giving of cost of living allowance and longevity pay
and reiterated, after the promulgation of the Decision in National
Waterworks and Sewerage Authority vs. NAWASA Consolidated Unions et
al., G.R. No. L-18938, August 31, 1964, the petitioner has repeatedly
requested respondent that the cost of living allowance and longevity pay
be taken into account in the computation of overtime pay, effective as of
the grant of said benefits on January 1, 1958, in accordance with the
ruling in said Decision of the Supreme Court." (Page 14, PNB's Brief.)
To be sure, there could be some plausibility in PNB's pose regarding the
jurisdiction of the Industrial Court over the above cause of action. But, as
We have already stated, We agree with the broader view adopted by the
court a quo on said point, and We find that it is in the best interests of all
concerned that this almost 25-year dispute be settled once and for all
without the need of going through other forums only for the matter to
ultimately come back to this Court probably years later, taking particular
note as We do, in this regard, of the cases cited on pages 9-10 of PEMA's
original memo, as follows:
"Realizing its error before in not considering the present case a certified
labor dispute, the Bank now concedes that the case at bar 'belongs to
compulsory arbitration'. Hence, the lawful powers of the CIR over the
same. However, the Bank says 'overtime differential is but a money claim,
(and) respondent court does not have jurisdiction to take cognizance of
the same'.
"But this is not a pure money claim (pp. 10-11, Opposition) because other
factors are involved certification by the President, the matter may
likely cause a strike, the dispute concerns national interest and comes
within the CIR's injunction against striking, and the employer-employee
relationship between the Bank and the employees has not been severed.
Besides, 'money claim' is embraced within the term 'compensation' and
therefore falls squarely under the jurisdiction of the CIR in the exercise of
its arbitration power (Sec. 4, CA 103; Please see also Republic vs. CIR, L21303, Sept. 23/68; Makalintal, J., NWSA Case, L-26894-96, Feb. 28/69;
Fernando, J.).
"What confers jurisdiction on the Industrial Court, says Justice J.B.L.
Reyes, is not the form or manner of certification by the President, but the
referral to said court of the industrial dispute between the employer and

the employees. (Liberation Steamship vs. CIR, etc., L-25389 & 25390,
June 27/68).
"In Phil. Postal Savings Bank, et al. vs. CIR, et al., L-24572, Dec. 20/67,
this Honorable Court, speaking through Chief Justice Concepcion, held
that the certification of the issue 'as a dispute affecting an industry
indispensable to the national interest' leaves 'no room for doubt on the
jurisdiction of the CIR to settle such dispute.'
Relatedly, however, it is to be noted that it is clear from the holding of the
Industrial Court's decision We have earlier quoted, "the cause of action
(here) is not on any decision of any court but on the provisions of the Law
which have been in effect at the time of the occurrence of the cause of
action in relation to a labor dispute". Viewed from such perspective laid
by the lower court itself, it can hardly be said that it indeed exercised
purely its power of arbitration, which means laying down the terms and
conditions that should govern the relationship between the employer and
employees of an enterprise following its own appreciation of the relevant
circumstances rather empirically. More accurately understood, the court
in fact indulged in an interpretation of the applicable law, namely, CA
444, in the light of its own impression of the opinion of this Court in
NAWASA and based its decision thereon. Cdpr
Accordingly, upon the fact-situation of this case hereunder to be set forth,
the fundamental question for Us to decide is whether or not the decision
under appeal is in accordance with that law and the cited jurisprudence.
In brief, as PEMA posits, is NAWASA four-square with this case? And even
assuming, for a while, that in a sense what is before Us is an arbitration
decision, private respondent itself admits in its above-mentioned
memorandum that this Court is not without power and authority to
determine whether or not such arbitration decision is against the law or
jurisprudence or constitutes a grave abuse of discretion. Thus, in PEMA's
memorandum, it makes the observation that "(F)urthermore, in the Shell
cases, the unions are using the NAWASA decision as a source of right for
recomputation, while in the PNB, the Union merely cites the NAWASA
doctrine, not as a source of right, but as a legal authority or reference by
both parties so the Union demand may be granted." (Motion to Dismiss,
p. 3.)
Obviously, therefore, the polestar to which Our mental vision must be
focused in order that We may arrive at a correct legal and equitable
determination of this controversy and, in the process make NAWASA
better understood as We believe it should be, is none other than Sections

3 and 4 of Com. Act No. 444, the Eight Hour Labor Law, which pertinently
provide thus:
"SEC. 3. Work may be performed beyond eight hours a day in case of
actual or impending emergencies caused by serious accidents, fire, flood,
typhoon, earthquake, epidemic, or other disaster or calamity in order to
prevent loss to life and property or imminent danger to public safety; or in
case of urgent work to be performed on the machines, equipment, or
installations in order to avoid a serious loss which the employer would
otherwise suffer, or some other just cause of a similar nature; but in all
such cases the laborers and employees shall be entitled to receive
compensation for the overtime work performed at the same rate as their
regular wages or salary, plus at least twenty-five per centum additional.
"In case of national emergency the Government is empowered to
establish rules and regulations for the operation of the plants and
factories and to determine the wages to be paid the laborers.
xxx

xxx

xxx

"SEC. 4. No person, firm, or corporation, business establishment or

place or center of labor shall compel an employee or laborer to work
during Sundays and legal holidays, unless he is paid an additional sum of
at least twenty-five per centum of his regular remuneration: Provided,
however, that this prohibition shall not apply to public utilities performing
some public service such as supplying gas, electricity, power, water, or
providing means of transportation or communication."
The vital question is, what does "regular wage or salary" mean or connote
in the light of the demand of PEMA?
In Our considered opinion, the answer to such question lies in the basic
rationale of overtime pay. Why is a laborer or employee who works
beyond the regular hours of work entitled to extra compensation called in
this enlightened time, overtime pay? Verily, there can be no other reason
than that he is made to work longer than what is commensurate with his
agreed compensation for the statutorily fixed or voluntarily agreed hours
of labor he is supposed to do. When he thus spends additional time to his
work, the effect upon him is multi-faceted: he puts in more effort, physical
and/or mental; he is delayed in going home to his family to enjoy the
comforts thereof; he might have no time for relaxation, amusement or
sports; he might miss important pre-arranged engagements; etc., etc. It is
thus the additional work, labor or service employed and the adverse
effects just mentioned of his longer stay in his place of work that justify

and is the real reason for the extra compensation that he called overtime
pay. prcd
Overtime work is actually the lengthening of hours developed to the
interests of the employer and the requirements of his enterprise. It
follows that the wage or salary to be received must likewise be increased,
and more than that, a special additional amount must be added to serve
either as encouragement or inducement or to make up for the things he
loses which We have a ready referred to. And on this score, it must always
be borne in mind that wage is indisputably intended as payment for work
done or services rendered. Thus, in the definition of wage for purposes of
the Minimum Wage Law, Republic Act No. 602, it is stated:
" 'Wage' paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time task, piece, commission basis or
other method of calculating the same, which is payable by an employer to
an employee under a written or unwritten contract of employment for
work done or to be done or for services rendered or to be rendered and
includes the fair and reasonable value as determined by the Secretary of
Labor, of board, lodging or other facilities customarily furnished by the
employer to the employee. 'Fair and reasonable value' shall not include a
profit to the employer which reduces the wage received by the employee
below the minimum wage applicable to the employee under this Act, nor
shall any transaction between an employer or any person affiliated with
the employer and the employee of the employer include any profit to the
employer or affiliated person which reduces the employee's wage below
the minimum wage applicable to the employee under this Act.' 2 (Italics
supplied)."
As can be seen, wage under said law, in whatever means or form it is
given to the worker, is "for work done or to be done or for services
rendered or to be rendered" and logically "includes (only) the fair and
reasonable value as determined by the Secretary of Labor, of board,
lodging or other facilities customarily furnished by the employer to the
employee"
Indeed, for the purpose of avoiding any misunderstanding or
misinterpretation of the word "wage" used in the law and to differentiate
it from "supplement", the Wage Administration Service to implement the
Minimum Wage Law, defined the latter as:

"extra remuneration or benefits received by wage earners from their

employers and include but are not restricted to pay for vacation and
holidays not worked; paid sick leave or maternity leave; overtime rate in
excess of what is required by law; pension, retirement, and death
benefits; profit-sharing; family allowances; Christmas, war risk and costof-living bonuses; or other bonuses other than those paid as a reward for
extra output or time spent on the job. (Italics ours)."
In these times when humane and dignified treatment of labor is steadily
becoming universally an obsession of society, we, in our country, have
reached a point in employer-employee relationship wherein employers
themselves realize the indispensability of at least making the
compensation of workers equal to the worth of their efforts as much as
this case can be statistically determined. Thus, in order to meet the
effects of uncertain economic conditions affecting adversely the living
conditions of wage earners, employers, whenever the financial conditions
of the enterprise permit, grant them what has been called as cost-ofliving allowance. In other words, instead of leaving the workers to assume
the risks of or drift by themselves amidst the cross-currents of countrywide economic dislocation, employers try their best to help them tide
over the hardships and difficulties of the situation. Sometimes, such
allowances are voluntarily agreed upon in collective bargaining
agreements. At other times, it is imposed by the government as in the
instances of Presidential Decrees Nos. 525, 928, 1123, 1389, 1614, 1678,
1751 and 1790; Letters of Instructions No. 1056 and Wage Order No. 1.
Notably, Presidential Decree No. 1751 increased the statutory minimum
wage at all levels by P400 in addition to integrating the mandatory
emergency living allowances under Presidential Decree No. 525 and
Presidential Decree No. 1123 into the basic pay of all covered workers.
LexLib
Going over these laws, one readily notices two distinctive features: First,
it is evidently gratifying that the government, in keeping with the
humanitarian trend of the times, always makes every effort to keep
wages abreast with increased cost of living conditions, doing it as soon as
the necessity for it arises. However, obviously, in order not to overdo
things, except when otherwise provided, it spares from such obligation
employers who by mutual agreement with their workers are already
paying what the corresponding law provides (See Sec. 4 of P.D. No. 525;
Section 2 of P.D. No. 851 until P.D. 1684 abolished all exemptions under
P.D. No. 525, P.D. No. 1123, P.D. No. 851 and P.D. No. 928 among

distressed employers who even though given sufficient lapse of time to

make the necessary adjustment have not done so.) 3
In the case at bar, as already related earlier, the cost-of-living allowance
began to be granted in 1958 and the longevity pay in 1981. In other
words, they were granted by PNB upon realizing the difficult plight of its
labor force in the face of the unusual inflationary situation in the economy
of the country, which, however acute, was nevertheless expected to
improve. There was thus evident an inherently contingent character in
said allowances. They were not intended to be regular, much less
permanent additional part of the compensation of the employees and
workers. To such effect were the testimonies of the witnesses at the trial.
For instance, Mr. Ladislao Yuzon declared:
"ATTORNEY GESMUNDO
Questioning . . .
Q. Calling your attention to paragraph No. 1, entitled monthly living
allowance, which has been marked as Exhibit 'A-1', will you kindly tell us
the history of this benefit monthly living allowance, why the same has
been granted?
A.
Well, in view of the increasing standard of living, we decided to
demand from management in our set of demands . . . included in our set
of demands in 1957-1958 a monthly living allowance in addition to our
basic salary. This benefit was agreed upon and granted to take effect as
of January 1, 1958. That was the first time it was enjoyed by the
employees of the Philippine National Bank. It started on a lesser amount
but year after year we have been demanding for increases on this living
allowance until we have attained the present amount of P150.00 a month,
starting with P40.00 when it was first granted. The same is still being
enjoyed by the employees on a much higher amount. There were a few
variations to that. (t.s.n., pp. 18-19, Hearing of August 16, 1965)
which testimony was affirmed by Mr. Panfilo Domingo, on crossexamination by counsel for the respondent, reading as follows:
"ATTORNEY GESMUNDO:
"Q. Do you recall Mr. Domingo, that in denying the cost of living
allowance and longevity pay for incorporation with the basic salary, the
reason given by the management was that as according to you, it will
mean an added cost and furthermore it will increase the contribution of
the Philippine National Bank to the GSIS, is that correct?

"A. This is one of the reasons, of the objections for the inclusion of the
living allowance and longevity pay to form part of the basic pay, I mean
among others, because the basic reason why management would object
is the cost of living allowance is temporary in nature, the philosophy
behind the grant of this benefit. Nonetheless, it was the understanding if I
recall right that in the event that cost of living should go down, then there
should be a corresponding decrease in the cost of living allowance being
granted. I have to mention this because this is the fundamental
philosophy in the grant of cost of living allowance." (Pp. 19-20, Record.)
Much less were they dependent on extra or special work done or service
rendered by the corresponding recipient. Rather, they were based on the
needs of their families as the conditions of the economy warranted. Such
is the inexorable import of the pertinent provisions of the collective
bargaining agreement:
"MONTHLY LIVING ALLOWANCE
"All employees of the Bank shall be granted a monthly living allowance of
P140, plus P10 for each minor dependent child below 21 years of age, but
in no case shall the total allowance exceed P200 or 25% of the monthly
salary, whichever is higher, subject to the following conditions:
"a) That this new basic allowance shall be applicable to all employees,
irrespective of their civil status;
"b) That a widow or widower shall also enjoy the basic allowance of
P140 a month, plus the additional benefit of P10 for each minor
dependent child but not to exceed P200 or 25% of basic salary whichever
is higher.
"c) That in case the husband and wife are both employees in the Bank
both shall enjoy this new basic monthly living allowance of P140 but only
one of spouses shall be entitled to claim the additional benefit of P10 for
each minor legitimate or acknowledged child." (Pp. 30-31, PNB's memo.)
So also with the longevity pay; manifestly, this was not based on the daily
or monthly amount of work done or service rendered it was more of a
gratuity for their loyalty, or their having been in the bank's employment
for consideration periods of time. Indeed, with particular reference to the
longevity pay, the then existing collective bargaining contract expressly
provided: ". . . That this benefit shall not form part of the basic salaries of
the officers so affected."

PEMA may contend that the express exclusion of the longevity pay,
means that the cost-of-living allowance was not intended to be excluded.
Considering, however, the contingent nature of the allowances and their
lack of relation to work done or service rendered, which in a sense may
be otherwise in respect to longevity pay PEMA's contention is untenable.
The rule of exclusio unius, exclusio alterius would not apply here, if only
because in the very nature of the two benefits in question, considerations
and conclusions as to one of them could be non-sequitur as to the other.
prcd
Withal, there is the indisputable significant fact that after 1958, everytime
a collective bargaining agreement was being entered into, the union
always demanded the integration of the cost-of-living allowances and
longevity pay, and as many times, upon opposition of the bank, no
stipulation to such effect has ever been included in any of said
agreements. And the express exclusion of longevity pay was continued to
be maintained.
On this point, the respondent court held that under its broad jurisdiction,
it was within the ambit of its authority to provide for what the parties
could not agree upon. We are not persuaded to view the matter that way.
We are not convinced that the government, thru the Industrial Court,
then, could impose upon the parties in an employer-employee conflict,
terms and conditions which are inconsistent with the existing law and
jurisprudence, particularly where the remedy is sought by the actors more
on such legal basis and not purely on the court's arbitration powers.
As pointed out earlier in this opinion, Our task here is twofold: First,
reviewing the decision under scrutiny as based on law and jurisprudence,
the question is whether or not the rulings therein are correct. And second,
reading such judgment as an arbitration decision, did the court a quo
gravely abuse its discretion in holding, as it did, that cost-of-living
allowance and longevity pay should be included in the computation of
overtime pay?
In regard to the first question, We have already pointed out to start with,
that as far as longevity pay is concerned, it is beyond question that the
same cannot be included in the computation of overtime pay for the very
simple reason that the contrary is expressly stipulated in the collective
bargaining agreement and, as should be the case, it is settled that the
terms and conditions of a collective bargaining agreement constitute the
law between the parties. (Mactan Workers Union vs. Aboitiz, 45 SCRA 577,
See also Shell Oil Workers Union et al. vs. Shell Company of the

Philippines, supra.) The contention of PEMA that the express provision in

the collective bargaining agreement that "this benefit (longevity pay)
shall not form part of the basic salaries of the officers so affected" cannot
imply the same idea insofar as the computation of the overtime pay is
concerned defies the rules of logic and mathematics. If the basic pay
cannot be deemed increased, how could the overtime pay be based on
any increased amount at all? LLphil
However, the matter of the cost-of-living allowance has to be examined
from another perspective, namely, that while PEMA had been always
demanding for its integration into the basic pay, it never succeeded in
getting the conformity of PNB thereto, and so, all collective bargaining
agreements entered into periodically by the said parties did not provide
therefor. And it would appear that PEMA took the non-agreement of the
bank in good grace, for the record does not show that any remedial
measure was ever taken by it in connection therewith. In other words, the
parties seemed to be mutually satisfied that the matter could be better
left for settlement on the bargaining table sooner or later, pursuant to the
spirit of free bargaining underlying Republic Act 875, the Industrial Peace
Act then in force. Or, as observed by PEMA in its memorandum, (page
23), the parties "agreed to let the question remain open pending
decision of authorities that would justify the demand of the Union."
Indeed, on pages 23-24 of said memorandum, the following position of
PEMA is stated thus:
"Thus the following proceeding took place at the Court a quo:
"ATTY. GESMUNDO:
That is our position, Your Honor, because apparently there was an
understanding reached between the parties as to their having to wait for
authorities and considering that the issue or one of the issues then
involved in the NAWASA case pending in the CIR supports the stand of the
union, that the principle enunciated in connection with that issue is
applicable to this case.
xxx

xxx

xxx

"Q Do we understand from you, Mister Yuson, that it was because of the
management asking you for authorities in allowing the integration of the
cost of living allowance with your basic salary and your failure to produce
at the time such authorities that the union then did not bring any case to
the Court?

"A. Well, in the first place, it is not really my idea to be bringing matters
to the Court during my time but I would much prefer that we agree on the
issue. Well, insofar as you said that the management was asking me, well,
I would say that they were invoking (on) authorities that we can show in
order to become as a basis for granting or for agreeing with us although
we were aware of the existence of a pending case which is very closely
similar to our demand, yet we decided to wait until this case should be
decided by the Court so that we can avail of the decision to present to
management as what they are asking for. (t.s.n., pp. 31-32, 35-36, Aug.
28, 1965.)"
Now, to complete proper understanding of the character of the
controversy before Us, and lest it be felt by those concerned that We have
overlooked a point precisely related to the matter touched in the above
immediately preceding paragraph, it should be relevant to quote a portion
of the "Stipulation of Facts" of the parties hereto: LLphil
"1. This particular demand was among those submitted by PetitionerUnion in the current collective bargaining negotiations to the Respondent
Bank. However, since this case was already filed in court on May 22,
1965, the parties agreed not to include this particular demand in the
discussion, leaving the matter to the discretion and final judicial
determination of the courts of justice." (Page 81, Rec.)
In fine, what the parties commonly desire is for thus Court to construe CA
444 in the light of NAWASA, considering the fact-situation of the instant
case.
In this respect, it is Our considered opinion, after mature deliberation,
that notwithstanding the portions of the NAWASA's opinion relied upon by
PEMA, there is nothing in CA 444 that could justify its possible that costof-living allowance should be added to the regular wage in computing
overtime pay.
After all, what was said in NAWASA that could be controlling here? True, it
is there stated that "for purposes of computing overtime compensation,
regular wage includes all payments which the parties have agreed shall
be received during the work week, including differential payments for
working at undesirable times, such as at night and the board and lodging
customarily furnished the employee . . . The 'regular rate' of pay also
ordinarily includes incentive bonus or profit-sharing payments made in
addition to the normal basic pay (56 C.J.S., pp. 704-705), and it was also
held that the higher rate for night, Sunday and holiday work is just as

much a regular rate as the lower rate for daytime work. The higher rate is
merely an inducement to accept employment at times which are not as
desirable from a workmen's standpoint (International L. Ass'n vs. National
Terminals Corp. C.C. Wise, 50 F. Supp. 26, affirmed C.C.A. Carbunoa v.
National Terminals Corp. 139 F. 2d 853)." (11 SCRA, p. 783)
But nowhere did NAWASA refer to extra, temporary and contingent
compensation unrelated to work done or service rendered, which as
explained earlier is the very nature of cost-of-living allowance. Withal, in
strict sense, what We have just quoted from NAWASA was obiter dictum,
since the only issue before the Court there was whether or not "in
computing the daily wage, (whether) the additional compensation for
Sunday should be included." (See No. 7 of Record)
In any event, as stressed by Us in the Shell cases, the basis of
computation of overtime pay beyond that required by CA 444 must be the
collective bargaining agreement, 4 for, to reiterate Our postulation
therein and in Bisig ng Manggagawa, supra, it is not for the court to
impose upon the parties anything beyond what they have agreed upon
which is not tainted with illegality. On the other hand, where the parties
fail to come to an agreement, on a matter not legally required, the court
abuses its discretion when it obliges any of them to do more than what is
legally obliged.
Doctrinally, We hold that, in the absence of any specific provision on the
matter in a collective bargaining agreement, what are decisive in
determining the basis for the computation of overtime pay are two very
germane considerations, namely, (1) whether or not the additional pay is
for extra work done or service rendered and (2) whether or not the same
is intended to be permanent and regular, not contingent nor temporary
and given only to remedy a situation which can change any time. We
reiterate, overtime pay is for extra effort beyond that contemplated in the
employment contract, hence when additional pay is given for any other
purpose, it is illogical to include the same in the basis for the computation
of overtime pay. This holding supersedes NAWASA. LLphil
Having arrived at the foregoing conclusions, We deem it unnecessary to
discuss any of the other issues raised by the parties.
WHEREFORE, judgment is hereby rendered reversing the decision
appealed from, without costs.
Guerrero, De Castro, Plana, Escolin, Vasquez, Relova, and Gutierrez, Jr., JJ.,
concur.

Melencio-Herrera J., in the result.

Fernando, C.J., Concepcion, Jr., and Abad Santos, JJ., took no part.
Teehankee and Makasiar, JJ., reserve their votes.

FIRST DIVISION
[G.R. No. 107994. August 14, 1995.]
PHILIPPINE AGRICULTURAL COMMERCIAL AND INDUSTRIAL WORKERS
UNION (PACIWU)-TUCP, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION AND VALLACAR TRANSIT, INC., respondents.
Raul E. Espinosa for petitioner.
Geocadin & Sabig Law Office for private respondent.
The Solicitor General for public respondent.
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATION; 13TH MONTH PAY LAW;
EMPLOYEES RECEIVING COMMISSIONS IN ADDITION TO FIXED OR
GUARANTEED WAGES OR SALARIES ENTITLED THERETO; CASE AT BAR.
From the foregoing legal milieu, it is clear that every employee receiving
a commission in addition to a fixed or guaranteed wage or salary, is
entitled to a 13th month pay. For purposes of entitling rank and file
employees a 13th month pay, it is immaterial whether the employees
concerned are paid a guaranteed wage plus commission or a commission
with guaranteed wage inasmuch as the bottom line is that they receive a
guaranteed wage. This is correctly construed in the MOLE Explanatory
Bulletin No. 86-12. In the case at bench, while the bus drivers and
conductors of respondent company are considered by the latter as being
compensated on a commission basis, they are not paid purely by what
they receive as commission. As admitted by respondent company, the
said bus drivers and conductors are automatically entitled to the basic
minimum pay mandated by law in case the commissions they earned be
less than their basic minimum for eight (8) hours work. Evidently
therefore, the commissions form part of the wage or salary of the bus
drivers and conductors. A contrary interpretation would allow an
employer to skirt the law and would result in an absurd situation where an
employee who receives a guaranteed minimum basic pay cannot be
entitled to a 13th month pay simply, because he is technically referred to
by his employer per the CBA as an employee compensated on a purely
commission basis. Such would be a narrow interpretation of the law,
certainly not in accord with the liberal spirit of our labor laws. Moreover,
what is controlling is not the label attached to the remuneration that the
employee receives but the nature of the remuneration and the purpose
for which the 13th month pay was given to alleviate the plight of the

working masses who are receiving low wages. This is extant from the
"WHEREASES" of PD 851, to wit: WHEREAS, it is necessary to further
protect the level of real wages from the ravage of world-wide inflation.
WHEREAS, there has been no increase in the legal minimum wage since
1970. WHEREAS, the Christmas season is an opportune time for society to
show its concern for the plight of the working masses so they may
properly celebrate Christmas and New Year. Misplaced legal hermeneutics
cannot be countenanced to evade paying the rank and file what is due to
them under the law.
2.
ID.; COMMISSION; DEFINED; CASE AT BAR. Commission is the
recompense, compensation, reward of an employee, agent, salesman,
executor, trustee, receiver, factor, broker or bailee, when the same is
calculated as a percentage on the amount of his transactions or on the
profit of the principal.
3.
ID.; ID.; PART OF EMPLOYEES' SALARY OR WAGE. While said
commissions may be in the form of incentives or encouragement to
inspire said bus drivers and conductors to put a little more zeal and
industry on their jobs, still, it is safe to say that the same are direct
remunerations for services rendered, given the small remuneration they
receive for the services they render, which is precisely the reason why
private respondent allowed the drivers and conductors a guaranteed
minimum wage. The conclusion is ineluctable that said commissions are
part of their salary.
DECISION
KAPUNAN, J p:
This is a petition for certiorari seeking to reverse the decision of the
National Labor Relations Commission (NLRC) in NLRC Case No. V-0159-92
which dismissed the appeal of petitioner union and in effect, affirmed the
decision of the Labor Arbiter ordering the dismissal of the complaint of
petitioner for payment of 13th month pay to the drivers and conductors of
respondent company.
Petitioner Philippine Agricultural Commercial and Industrial Workers
Union-TUCP is the exclusive bargaining agent of the rank and file
employees of respondent Vallacar Transit, Inc. Petitioner union instituted a
complaint with NLRC Regional Arbitration Branch No. VI, Bacolod City, for
payment of 13th month pay in behalf of the drivers and conductors of
respondent company's Visayan operation on the ground that although
said drivers and conductors are compensated on a "purely commission"

basis as described in their Collective Bargaining Agreement (CBA), they

are automatically entitled to the basic minimum pay mandated by law
should said commission be less than their basic minimum for eight (8)
hours work. 1
In its position paper, respondent Vallacar Transit, Inc. contended that
since said drivers and conductors are compensated on a purely
commission basis, they are not entitled to 13th month pay pursuant to
the exempting provisions enumerated in paragraph 2 of the Revised
Guidelines on the Implementation of the Thirteenth Month Pay Law. 2 It
further contended that Section 2 of Article XIV of the Collective
Bargaining Agreement (CBA) concluded on October 17, 1988 expressly
provided that "drivers and conductors paid on a purely commission are
not legally entitled to 13th month pay." Said CBA, being the law between
the parties, must be respected, respondent opined.
On May 22, 1992, Labor Arbiter Reynaldo Gulmatico rendered a decision
dismissing the complaint. 3
The appeal of the petitioner to the National Labor Relations Commission
was likewise dismissed; 4 so was the motion for reconsideration of the
said decision. 5
Hence, the present petition.
The principal issue posed for consideration is whether or not the bus
drivers and conductors of respondent Vallacar Transit, Inc. are entitled to
13th month pay.
We rule in the affirmative.
It may be recalled that on December 16, 1975, P.D. 851, otherwise known
as the "13th Month Pay" Law, was promulgated. The same prescribed
payment of 13th month pay in the following terms:
Sec. 1.
All employers are hereby required to pay all their employees
receiving a basic salary of not more than P1,000.00 a month, regardless
of the nature of the employment, a 13th month pay not later than
December 24 of every year.
Sec. 2.
Employers already paying their employees a 13th month pay or
its equivalent are not covered by this Decree.

The Rules and Regulations Implementing P.D. No. 851, issued by the then
Secretary of Labor and Employment on December 22, 1975, defined the
following basic terms:
xxx

xxx

xxx

(a) 13th 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.
xxx

xxx

xxx

On August 13, 1986, then President Corazon C. Aquino, exercising both

executive and legislative authority, issued Memorandum Order No. 28
which provided as follows:
xxx

xxx

xxx

Sec. 1 of Presidential Decree No. 851 is hereby modified to the extent that
all employers are hereby required to pay all their rank-and-file employees
a 13th month pay not later than December 24 of every year.
xxx

xxx

xxx

In connection with and in implementation of Memorandum Order No. 28,

the then Minister of Labor and Employment issued MOLE Explanatory
Bulletin No. 86-12 on November 24, 1986. Item No. 5(a) of the said
issuance reads:
xxx

xxx

xxx

Employees who are paid a fixed or guaranteed wage plus commission are
also entitled to the mandated 13th month pay, based on their total
earning(s) during the calendar year, i.e., on both their fixed and
guaranteed wage and commission.
xxx

xxx

xxx. (Emphasis supplied)

From the foregoing legal milieu, it is clear that every employee receiving
a commission in addition to a fixed or guaranteed wage or salary, is

entitled to a 13th month pay. For purposes of entitling rank and file
employees a 13th month pay, it is immaterial whether the employees
concerned are paid a guaranteed wage plus commission or a commission
with guaranteed wage inasmuch as the bottom line is that they receive a
guaranteed wage. This is correctly construed in the MOLE Explanatory
Bulletin No. 86-12.
In the case at bench, while the bus drivers and conductors of respondent
company are considered by the latter as being compensated on a
commission basis, they are not paid purely by what they receive as
commission. As admitted by respondent company, the said bus drivers
and conductors are automatically entitled to the basic minimum pay
mandated by law in case the commissions they earned be less than their
basic minimum for eight (8) hours work. 6 Evidently therefore, the
commissions form part of the wage or salary of the bus drivers and
conductors. A contrary interpretation would allow an employer to skirt the
law and would result in an absurd situation where an employee who
receives a guaranteed minimum basic pay cannot be entitled to a 13th
month pay simply because he is technically referred to by his employer
per the CBA as an employee compensated on a purely commission basis.
Such would be a narrow interpretation of the law, certainly not in accord
with the liberal spirit of our labor laws. Moreover, what is controlling is not
the label attached to the remuneration that the employee receives but
the nature of the remuneration 7 and the purpose for which the 13th
month pay was given to alleviate the plight of the working masses who
are receiving low wages. This is extant from the "WHEREASES" of PD 851,
to wit:
WHEREAS, it is necessary to further protect the level of real wages from
the ravage of world-wide inflation.
WHEREAS, there has been no increase in the legal minimum wage since
1970.
WHEREAS, the Christmas season is an opportune time for society to show
its concern for the plight of the working masses so they may properly
celebrate Christmas and New Year.
Misplaced legal hermeneutics cannot be countenanced to evade paying
the rank and file what is due to them under the law.
Commission is the recompense, compensation, reward of an employee,
agent, salesman, executor, trustee, receiver, factor, broker or bailee,
when the same is calculated as a percentage on the amount of his

transactions or on the profit of the principal. 8 While said commissions

may be in the form of incentives or encouragement to inspire said bus
drivers and conductors to put a little more zeal and industry on their jobs,
still, it is safe to say that the same are direct remunerations for services
rendered, given the small remuneration they receive for the services they
render, 9 which is precisely the reason why private respondent allowed
the drivers and conductors a guaranteed minimum wage. The conclusion
is ineluctable that said commissions are part of their salary. In Philippine
Duplicators, Inc. v. National Labor Relations Commission, 10 we had the
occasion to state that:
. . . Article 97 (f) of the Labor Code defines the term 'wage' (which is
equivalent to 'salary,' as used in P.D. No. 851 and Memorandum Order No.
28) in the following terms:
(f) 'Wage' paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services
rendered or to be rendered, and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. 'Fair and
reasonable value' shall not include any profit to the employer or to any
person affiliated with the employer.
In the instant case, there is no question that the sales commissions
earned by salesmen who make or close a sale of duplicating machines
distributed by petitioner corporation, constitute part of the compensation
or remuneration paid to salesmen for serving as salesmen, and hence as
part of the 'wage' or 'salary' of petitioner's salesmen. Indeed, it appears
that petitioner pays its salesmen a small fixed or guaranteed wage; the
greater part of the salesmen's wages or salaries being composed of the
sales or incentive commissions earned on actual sales closed by them. No
doubt this particular salary structure was intended for the benefit of
petitioner corporation, on the apparent assumption that thereby its
salesmen would be moved to greater enterprise and diligence and close
more sales in the expectation of increasing their sales commission. This,
however, does not detract from the character of such commissions as
part of the salary or wage paid to each of its salesmen for rendering
services to petitioner corporation. 11

In sum, the 13th month pay of the bus drivers and conductors who are
paid a fixed or guaranteed minimum wage in case their commissions be
less than the statutory minimum, and commissions only in case where the
same is over and above the statutory minimum, must be equivalent to
one-twelfth (1/12) of their total earnings during the calendar year.
WHEREFORE, the petition is hereby GRANTED. The decision of respondent
National Labor Relations Commission is hereby REVERSED and SET ASIDE.
The case is remanded to the Labor Arbiter for the proper computation of
13th month pay.
SO ORDERED.
Padilla, Davide, Jr., Bellosillo and Hermosisima, Jr., JJ., concur.