DONALD

KWOK, petitioner,
vs. PHILIPPINE
CORPORATION, respondent.

CARPET

MANUFACTURING

DECISION
CALLEJO, SR., J.:
This is a petition for review of the Decision[1] of the Court of Appeals (CA) in CA-G.R. SP
No. 60232 dismissing Donald Kwoks petition for review on certiorari and affirming the majority
Decision of the National Labor Relations Commission (NLRC), as well as its resolution in
NLRC NCR Case No. 00-12-07454-96 dismissing the motion for reconsideration of the said
decision.

The Antecedents
In 1965, petitioner Donald Kwok and his father-in-law Patricio L. Lim, along with some
other stockholders, established a corporation, the respondent Philippine Carpet Manufacturing
Corporation (PCMC). The petitioner became its general manager, executive vice-president and
chief operations officer. Lim, on the other hand, was its president and chairman of the board of
directors. When the petitioner retired 36 years later or on October 31, 1996, he was receiving a
monthly salary of P160,000.00.[2] He demanded the cash equivalent of what he believed to be his
accumulated vacation and sick leave credits during the entire length of his service with the
respondent corporation, i.e., from November 16, 1965 to October 31, 1996, in the total amount
of P7,080,546.00 plus interest.[3] However, the respondent corporation refused to accede to the
petitioners demands, claiming that the latter was not entitled thereto.[4]
The petitioner filed a complaint against the respondent corporation for the payment of his
accumulated vacation and sick leave credits before the NLRC. He claimed that Lim made a
verbal promise to give him unlimited sick leave and vacation leave benefits and its cash
conversion upon his retirement or resignation without the need for any application therefor. In
addition, Lim also promised to grant him other benefits, such as golf and country club
membership; the privilege to charge the respondent corporations account; 6% profit-sharing in
the net income of the respondent corporation (while Lim got 4%); and other corporate
perquisites. According to the petitioner, all of these promises were complied with, except for the
grant of the cash equivalent of his accumulated vacation and sick leave credits upon his
retirement.[5]
The respondent corporation denied all these, claiming that upon the petitioners retirement,
he received the amount of P6,902,387.19 representing all the benefits due him. Despite this, the
petitioner again demanded P7,080,546.00, which demand was without factual and legal basis.
The respondent corporation asserted that the chairman of its board of directors and its
president/vice-president had unlimited discretion in the use of their time, and had never been
required to file applications for vacation and sick leaves; as such, the said officers were not
entitled to vacation and sick leave benefits. The respondent corporation, likewise, pointed out
that even if the petitioner was entitled to the said additional benefits, his claim had already

prescribed. It further averred that it had no policy to grant vacation and sick leave credits to the
petitioner.[6]
In his Affidavit[7] dated May 19, 1998, Lim denied making any such verbal promise to his
son-in-law on the grant of unlimited vacation and sick leave credits and the cash conversion
thereof. Lim averred that the petitioner had received vacation and sick leave benefits from 1994
to 1996. Moreover, assuming that he did make such promise to the petitioner, the same had not
been confirmed or approved via resolution of the respondent corporations board of directors.
It was further pointed out that as per the Memorandum dated November 6, 1981, only
regular employees and managerial and confidential employees falling under Category I were
entitled to vacation and sick leave credits. The petitioner, whose position did not fall under
Category I, was, thus, not entitled to the benefits under the said memorandum. The respondent
corporation alleged that this was admitted by the petitioner himself and affirmed by Raoul
Rodrigo, its incumbent executive vice-president and general manager.
In a Decision[8] dated November 27, 1998, the Labor Arbiter ruled in favor of the petitioner.
The fallo of the decision reads:
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered
ordering the respondent company to pay complainant the sum of P7,080,546.00, plus ten percent
(10%) thereof as and for attorneys fees.
SO ORDERED.[9]
Undaunted, the respondent corporation appealed the decision to the NLRC, alleging that:
I. THE LABOR ARBITER ERRED IN CONCLUDING THAT KWOK WAS
COVERED BY THE NOVEMBER 6, 1981 MEMORANDUM ON VACATION
AND SICK LEAVE CREDITS.[10]
II. THE LABOR ARBITER ERRED IN CONCLUDING THAT IT WAS
DISCRIMINATORY NOT TO GRANT KWOK THESE BENEFITS.[11]
III. KWOKS CLAIMS ARE BASELESS.[12]
IV. KWOKS CLAIMS FOR BENEFITS ACCRUING FROM 1966 ARE BARRED BY
PRESCRIPTION.[13]
V. THERE IS NO BASIS FOR THE AWARD OF P7,080,546.00.[14]
The respondent corporation averred that based on the petitioners memorandum, his
admissions and the contract of employment, the petitioner was not entitled to the cash conversion
of his sick and vacation leave credits. While the respondent corporation conceded that the
petitioner may have been entitled to unlimited sick and vacation leave benefits during his
employment, it maintained that no such promise was made by Lim to convert the same; even
assuming that such verbal promise was made, the respondent corporation was not bound thereby
since the petitioner failed to adduce the written conformity of its board of directors. The
respondent corporation insisted that the claims of the petitioner were barred under Article 291 of
the Labor Code.

For his part, the petitioner made the following averments in his memorandum:
The non-performance by PCMC of this particular promise to convert in cash all of his unused
cash (sic) and sick leave credits was precipitated by the falling out of the marriage between Mr.
Kwok and his wife, the daughter of Mr. Lim. In fact, even while Mr. Kwok was still the
Executive Vice-President and General Manager of PCMC, when the falling out of the said
marriage became apparent, the other benefits or perquisites which Mr. Kwok used to enjoy were
immediately curtailed by Mr. Lim to the prejudice of Mr. Kwok.[15]
On November 29, 1999, the NLRC, by majority vote, rendered judgment granting the
appeal, reversing and setting aside the decision of the Labor Arbiter.[16] The NLRC ordered the
dismissal of the complaint. Commissioner Angelita A. Gacutan filed a dissenting opinion.[17]
Aggrieved, the petitioner filed a petition for review with the CA, on the following grounds:
I
THE COMMISSION ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION OR WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT DECLARED THAT THE VERBAL PROMISE OF MR. LIM TO
PETITIONER WAS UNENFORCEABLE.
II
THE COMMISSION ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION OR WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT RULED THAT THE VERBAL PROMISE BY MR. LIM TO
PETITIONER WAS NOT BINDING AS IT WAS NOT APPROVED BY THE BOARD OF
DIRECTORS.
III
THE COMMISSION ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION OR WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT IGNORED STRONG EVIDENCE THAT PCMC CLOTHED MR.
LIM WITH AWESOME POWERS TO GRANT BENEFITS TO ITS EMPLOYEES
INCLUDING PETITIONER AND RATIFIED THE SAME BY ITS SILENCE AND WHEN IT
IGNORED TOO EXISTING JURISPRUDENCE ON THE MATTER.
IV
THE COMMISSION ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION OR WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT IGNORED STRONG AND CLEAR EVIDENCE THAT IN PCMC
THE GIVING OF BENEFITS TO PETITIONER, THOUGH NOT IN WRITING, WAS A
PREVALENT PRACTICE.

V
THE COMMISSION ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION OR WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT RULED THAT THE MEMORANDUM DATED APRIL 26, 1997
APPLICABLE TO MR. RAOUL RODRIGO WAS ALSO APPLICABLE TO PETITIONER.[18]
On February 28, 2001, the CA rendered judgment affirming the decision of the NLRC and
dismissing the petition.[19] The petitioners motion for reconsideration thereof was denied by the
appellate court, per its Resolution[20] dated July 17, 2001.
The petitioner, thus, filed the instant petition for review on certiorari with this Court,
assailing the decision and resolution of the CA on the following claims:
I
The Hon. Court of Appeals, contrary to law, gravely erred and disregarded established
jurisprudence in ruling that petitioner has not adduced sufficient evidence to support his claim
that he was, indeed, promised the cash conversion of his unused vacation and sick leave credits
upon retirement.[21]
II
The Hon. Court of Appeals gravely erred in ruling that even if private respondents (sic) Mr. Lim
did make him such promise, the same cannot be enforced.[22]
III
The Hon. Court of Appeals gravely erred and disregarded clear jurisprudence on the matter when
it ruled that there is no showing that private respondent, thru its board of directors either
recognized, approved or ratified the promise made by Mr. Lim to petitioner.[23]
As gleaned from his Memorandum, the petitioner posits that he had adduced substantial
evidence to prove that Lim, as president and chairman of the respondent corporations board of
directors, made a verbal promise to give him the cash conversion of his accumulated vacation
and sick leave credits upon his retirement (that is, benefits at par with the number of days to
which the officer next in rank to him was entitled). According to the petitioner, his claim is
fortified by the fact that his successor, Raoul Rodrigo, has unlimited vacation and sick leave
credits. The petitioner further asserts that he would not have accepted the positions in the
respondent corporation without such benefit, especially since his subordinates were also enjoying
the same. He posits that he was entitled to the said privilege because of his rank. He, likewise,
claims that, in contrast to the evidence he has presented, the respondent corporation failed to
adduce proof of its affirmative allegations.
The petitioner further argues that his complaint was not time-barred since he filed it on
December 5, 1996. Even if this were so, he is, nevertheless, entitled to the cash value of his
vacation and sick leave credits for three years before his retirement. Moreover, the evidence on

record shows that officers belonging to Category I had been granted the cash conversion of their
earned leave credits after the lapse of three years.
The respondent corporation, for its part, asserts that the petitioner failed to adduce
substantial evidence to the claims in his complaint. Even if Lim had made such verbal promise to
the petitioner, the same is not binding on the respondent corporation absent its conformity
through board resolution. Moreover, the petitioner is not covered by the Memorandum dated
November 6, 1981 because he had unlimited leave credits; hence, it cannot be gainsaid that he
still had unused leave credits to be converted. According to the respondent corporation, the
petitioner himself admitted that he was not included in the Memorandum dated November 6,
1981; and even assuming that he was covered by the said memorandum, the fact that his
complaint was filed only in 1996 precludes him from claiming the cash conversion of such leave
credits for the years 1966 to 1993.

The Courts Ruling

The petition has no merit.
The threshold issue in this case is factual whether or not the petitioner is entitled, based on
the documentary and testimonial evidence on record, to the cash value of his vacation and sick
leave credits in the total amount of P7,080,546.00. The resolution of the issue is riveted to our
resolution of whether the petitioners mainly testimonial evidence of an alleged verbal promise
made by a corporate officer to grant him the privilege of converting accumulated vacation and
sick leave credits after retirement or separation from employment is entitled to probative weight.
Under Rule 45 of the Rules of Court, only questions of law may be raised under a petition
for review on certiorari. The Court, not being a trier of facts, is not wont to reexamine and
reevaluate the evidence of the parties, whether testimonial or documentary. Moreover, the
findings of facts of the CA on appeal from the NLRC are, more often than not, given conclusive
effect by the Court. The Court may delve into and resolve factual issues only in exceptional
circumstances, such as when the findings of facts of the Labor Arbiter, on one hand, and those of
the NLRC and the CA, on the other, are capricious and arbitrary; or when the CA has reached an
erroneous conclusion based on arbitrary findings of fact; and when substantial justice so requires.
In this case, however, the petitioner failed to convince the Court that the factual findings of the
CA which affirmed the findings of the NLRC on appeal, as well as its conclusions based on the
said findings, are capricious and arbitrary.
While the petitioner was unequivocal in claiming that the respondent corporation, through
its president and chairman of the board of directors, obliged itself, as a matter of policy, to grant
him the cash value of his vacation and sick leave credits upon his retirement, he was burdened to
prove his claim by substantial evidence.[24] The petitioner failed to discharge this burden.
We agree with the petitioners contention that for a contract to be binding on the parties
thereto, it need not be in writing unless the law requires that such contract be in some form in
order that it may be valid or enforceable or that it be executed in a certain way, in which case
that requirement is absolute and independent.[25] Indeed, corporate policies need not be in
writing. Contracts entered into by a corporate officer or obligations or prestations assumed by

such officer for and in behalf of such corporation are binding on the said corporation only if such
officer acted within the scope of his authority or if such officer exceeded the limits of his
authority, the corporation has ratified such contracts or obligations.
In the present case, the petitioner relied principally on his testimony to prove that Lim made
a verbal promise to give him vacation and sick leave credits, as well as the privilege of
converting the same into cash upon retirement. The Court agrees that those who belong to the
upper corporate echelons would have more privileges. However, the Court cannot presume the
existence of such privileges or benefits. The petitioner was burdened to prove not only the
existence of such benefits but also that he is entitled to the same, especially considering that such
privileges are not inherent to the positions occupied by the petitioner in the respondent
corporation, son-in-law of its president or not.
In dismissing the petition before it, the CA disbelieved the petitioners testimony and gave
credence and probative weight to the collective testimonies of the respondent corporations
witnesses, who were its employees and officers, including Lim, whom the petitioner presented as
a hostile witness. We agree with the appellate courts encompassing synthesis and analysis of the
evidence on record:
Except for his bare assertions, petitioner has not adduced sufficient evidence to support his claim
that he was, indeed, promised the cash conversion of his unused vacation and sick leaves upon
retirement. Petitioner harps on what he calls the prevalent practice in PCMC of giving him
benefits, such as the use of golf and country club facilities, salary increases, the use of the
company vehicle and driver, and sharing in PCMCs annual net income, without either a written
contract or a Board resolution to back it up. Respondent PCMC denies all these, however.
According to respondent, petitioners share in the income of the company is actually part of the
consultancy fee which PCMC pays DK Management Services, Inc., a firm owned by petitioners
company. PCMC adds that the yearly salary increases of corporate officers were always with the
prior approval of the Board.
Nevertheless, assuming that petitioner was, indeed, given the benefits which he so claimed, it
does not necessarily follow that among those is the cash conversion of his accumulated leaves. It
is a basic rule in evidence that each party must prove his affirmative allegation. Since the burden
of proof lies with the party who asserts an affirmative allegation, the plaintiff or complainant has
to prove his affirmative allegations in the complaint and the defendant or respondent has to prove
the affirmative allegations in his affirmative defenses and counterclaim. Petitioner, in the case at
bar, has failed to discharge this burden.[26]
The CA made short shift of the claim of the petitioner that per Memorandum dated
November 6, 1981, he was not entitled to the benefits of the company policy of commutation of
leave credits. Indeed, the company policy of conversion into equivalent cash of unused vacation
and sick leave credits applied only to its regular employees. The petitioner failed to offer
evidence to rebut the testimony of Nel Gopez, Chief Accountant of the respondent, that the
petitioner was not among the regular employees covered by the policy for the simple reason that
he had unlimited vacation leave benefits. As stated by the CA, the petitioner no less corroborated
the testimony of Gopez, thus:

ATTY. PIMENTEL
And, so you mention[ed] earlier that the policy on vacation leave benefits apply for
category one employee(s) and rank-and-file employee(s)?
WITNESS (Mr. Nel Gopez)
Yes.
ATTY. PIMENTEL
And who are considered category one employee(s)?
WITNESS
Category One employees are from the rank and of Senior Vice-President and
Assistant General Manager and below, up to the level of department managers.
ATTY. PIMENTEL
How about the complainant, Mr. Kwok, does he falling (sic) to the category one?
WITNESS
As far as I can remember, he is (sic) not belong to category one employee.
ATTY. PIMENTEL
Therefore, he is not entitled to the lump sum benefit?
WITNESS
Yes, Maam.
ATTY. PIMENTEL
And would you know, Mr. Witness, why he is (sic) not given the conversion of the
vacation leave benefits at the time category one employees sectors (sic) are given?
WITNESS
Because he has, as far as I can remember, he has unlimited vacation leave.
This was corroborated by petitioner himself when he testified in this wise:
ATTY. PIMENTEL

Mr. Witness, you occupied the position of Executive Vice-President and General
Manager. You agree with me that this position or this office of Executive VicePresident and General Manager are not covered by this policy.
WITNESS (Donald Kwok)
Yes, it is not covered by this policy.
ATTY. PIMENTEL
So this policy applies to persons below you and your father-in-law?
WITNESS
Yes, right.
ATTY. PIMENTEL
And this policy does not apply to you?
WITNESS
As far as Im concerned, it does not apply for (sic) me.
In all respects, therefore, petitioner, by virtue of his position as Executive Vice-President, is not
covered by the November 6, 1981 Memorandum granting PCMC employees the conversion of
their unused vacation and sick leaves into cash.[27]
We have reviewed the records and found no evidence to controvert the following findings of
the CA and its ratiocinations on its resolution of the petitioners submissions:
Second, even assuming that petitioner is included among the regular employees of PCMC
referred to in said memorandum, there is no evidence that he complied with the cut-off dates for
the filing of the cash conversion of vacation and sick leaves. This being so, we find merit in
respondents argument that petitioners money claims have already been barred by the three-year
prescriptive period under Article 291 of the Labor Code, as amended.
Third, and this is of primordial importance, there is no proof that petitioner has filed vacation and
sick leaves with PCMCs personnel department. Without a record of petitioners absences, there is
no way to determine the actual number of leave credits he is entitled to. The P7,080,546.00
figure arrived at by petitioner supposedly representing the cash equivalent of his earned sick and
vacation leaves is thus totally baseless.
And, fourth, even assuming that PCMC President Patricio Lim did promise petitioner the cash
conversion of his leaves, we agree with respondent that this cannot bind the company in the
absence of any Board resolution to that effect. We must stress that the personal act of the

company president cannot bind the corporation. As explicitly stated by the Supreme Court
in Peoples Aircargo and Warehousing Co., Inc. v. Court of Appeals:
The general rule is that, in the absence of authority from the board of directors, no person, not
even its officers, can validly bind a corporation. A corporation is a juridical person, separate and
distinct from its stockholders and members, having xxx powers, attributes and properties
expressly authorized by law or incident to its existence.
the power and the responsibility to decide whether the corporation should enter into a contract
that will bind the corporation is lodged in the board, subject to the articles of incorporation, bylaws, or relevant provisions of law.
Anent the third assigned error, petitioner maintains that the PCMC Board of Directors has
granted its President, Patricio Lim, awesome powers to grant benefits to its employees, adding
that the Board has always given its consent to the way Lim ran the affairs of the company
especially on matters relating to the benefits that its corporate officers enjoyed.
True, jurisprudence holds that the president of a corporation possesses the power to enter into a
contract for the corporation when the conduct on the part of both the president and corporation
[shows] that he had been in the habit of acting in similar matters on behalf of the company and
that the company had authorized him so to act and had recognized, approved and ratified his
former and similar actions.
In the case at bar, however, there is no showing that PCMC had either recognized, approved or
ratified the cash conversion of petitioners leave credits as purportedly promised to him by Lim.
On the contrary, PCMC has steadfastly maintained that the Company, through the Board, has
long adopted the policy of granting its earlier mentioned corporate officers unlimited leave
benefits denying them the privilege of converting their unused vacation or sick leave benefits
into their cash equivalent.
As to the last assigned error, petitioner faults the NLRC for holding as applicable to petitioner,
the April 26, 1997 Memorandum issued by PCMC to Raoul Rodrigo, Donald Kwoks successor
as company executive vice-president. The said memo granted Rodrigo unlimited sick and
vacation leave credits but disallowed the cash conversion thereof. Before he became executive
vice-president, Rodrigo was senior vice-president and enjoyed the commutation of his unused
vacation and sick leaves.
We note that the April 26, 1997 memo was issued to Rodrigo when petitioner was already retired
from PCMC. While said memorandum was particularly directed to Rodrigo, however, this does
not necessarily mean that petitioner, as former executive vice-president, was then not prohibited
from converting his earned vacation and sick leaves into cash since he was not issued a similar
memo. On the contrary, the memo simply affirms the long-standing company practice of
excluding PCMCs top two positions, that of president and executive vice-president, from the
commutation of leaves. As heretofore discussed, among the perks of those occupying these posts
is the privilege of having unlimited leaves, which is totally incompatible with the concept of
converting unused leave credits into their cash equivalents.[28]

We are not convinced by the petitioners claim that Lim capriciously deprived him of his
entitlement to the cash conversion of his accumulated vacation and sick leave credits simply
because of his estrangement from his wife, who happens to be Lims daughter. The petitioner did
not adduce any evidence to show that he appealed to the respondent corporations board of
directors for the implementation of the said privilege which was allegedly granted to him. Even
if Lim was the president and chairman of the respondent corporations board of directors, the rest
of the membership of the board could have overruled him and granted to the petitioner his claim
if, indeed, the latter was entitled thereto. Indeed, even the petitioner admitted that, after his
retirement, the board of directors granted to him salary increase for two years prior to his
retirement. If the claim of the petitioner had been approved by the board of directors, for sure, it
would have approved the same despite his falling out with the daughter of Lim.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs
against the petitioner.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

LINTON COMMERCIAL CO., INC. G.R. No. 163147

and DESIREE ONG,
Petitioners,
Present:
QUISUMBING, J.,
Chairperson,
-versus- CARPIO,
CARPIO MORALES,
TINGA, and VELASCO, JR., JJ.
ALEX A. HELLERA, FRANCISCO
RACASA, DANTE ESCARLAN,
DONATO SASA, RODOLFO OLINAR, Promulgated:
DANIEL CUSTODIO, ARTURO POLLO,
ROBERT OPELIA, B. PILAPIL,
WINIFREG BLANDO, JUANITO October 10, 2007
GUILLERMO, DONATO BONETE,
ISAGANI YAP, CESAR RAGONON, BENEDICTO
ILAGAN, REXTE SOLANOY, RODOLFO
LIM, ERNESTO ALCANTARA, DANTE
DUMAPE, FELIPE CAGOCO, JR., JOSE
NARCE, NELIO CANTIGA, QUIRINO C.
ADA, MANUEL BANZON, JOEL F. ADA,
SATPARAM ELMER, ROMEO BALAIS,
CLAUDIO S. MORALES, DANILO NORLE,
LEONCIO RACASA, NOEL LEONCIO
RACASA, NOEL ACEDILLA, ELPIDIO E.
VERGABINIA, JR., CONRADO CAGOCO,
ROY BORAGOY, EDUARDO GULTIA,
REYNALDO SANTOS, LINO VALENCIA,
ROY DURANO, LEO VALENCIA, ROBERTO
BLANDO, JAYOMA A., NOMER ALTAREJOS,
RAMON OLINAR III, SATURNINO C. EBAYA,
FERNANDO R. REBUCAS, NICANOR L. DE
CASTRO, EDUARDO GONZALES, ISAGANI
GONZALES, THOMAS ANDRAB, JR., MINIETO
DURANO, ERNESTO VALLENTE, NONITO I.
DULA, NESTOR M. BONETE, JOSE SALONOY,
ALBERTO LAGMAN, ROLANDO TORRES,
ROLANDO TOLDO, ROLINDO CUALQUIERA,
ARMANDO LIMA, FELIX D. DUMARE, ALFREDO
SELAPIO, MARTIN V. VILLACAMPA, JR., CARLITO
PABLE, DANTE ESCARLAN, M. DURANO, RAMON
ROSO, LORETA RAFAEL, and ELEZAR MELLEJOR,
Respondents.

x-------------------------------------------------------------------------------------x

DECISION
TINGA, J.:

This is a petition for review under Rule 45 of the Rules of Civil Procedure seeking the
reversal of the Decision[1] of the Court of Appeals promulgated on 12 December 2003 as well as
its Resolution[2] promulgated on 2 April 2004 denying petitioners motion for reconsideration.
This case originated from a labor complaint filed before the National Labor Relations
Commission (NLRC) in which herein respondents contended that petitioner Linton Commercial
Company, Inc. (Linton) had committed illegal reduction of work when it imposed a reduction of
work hours thereby affecting its employees.

Linton is a domestic corporation engaged in the business of importation, wholesale, retail

and fabrication of steel and its by-products.[3] Petitioner Desiree Ong is Lintons vice
president.[4] On17 December 1997, Linton issued a memorandum[5] addressed to its employees
informing them of the companys decision to suspend its operations from 18 December 1997 to 5
January 1998 due to the currency crisis that affected its business operations. Linton submitted an
establishment termination report[6] to the Department of Labor and Employment (DOLE)
regarding the temporary closure of the establishment covering the said period. The companys
operation was to resume on 6 January 1998.
On 7 January 1997,[7] Linton issued another memorandum[8] informing them that
effective 12 January 1998, it would implement a new compressed workweek of three (3) days on
a rotation basis. In other words, each worker would be working on a rotation basis for three
working days only instead for six days a week. On the same day, Linton submitted an
establishment termination report[9] concerning the rotation of its workers. Linton proceeded with
the implementation of the new policy without waiting for its approval by DOLE.
Aggrieved, sixty-eight (68) workers (workers) filed a Complaint for illegal reduction of
workdays with the Arbitration Branch of the NLRC on 17 July 1998.

On the other hand, the workers pointed out that Linton implemented the reduction of
work hours without observing Article 283 of the Labor Code, which required submission of
notice thereof to DOLE one month prior to the implementation of reduction of personnel, since
Linton filed only the establishment termination report enacting the compressed workweek on the
very date of its implementation.[10]
Petitioners, on the other hand, contended that the devaluation of the peso created a
negative impact in international trade and affected their business because a majority of their raw
materials were imported. They claimed that their business suffered a net loss of P3,569,706.57
primarily due to currency devaluation and the slump in the market. Consequently, Linton
decided to reduce the working days of its employees to three (3) days on a rotation basis as a
cost-cutting measure. Further, petitioners alleged that the compressed workweek was actually
implemented on 12 January 1998 and not on 7 January 1998, and that Article 283 was not
applicable to the instant case.[11]

Pending decision of the Labor Arbiter, twenty-one (21) of the workers signed individual
release and quitclaim documents stating that they had voluntarily tendered their resignation as
employees of Linton and that they had been fully paid of all monetary compensation due
them.[12]
On 28 January 2000, the Labor Arbiter rendered a Decision[13] finding petitioners guilty
of illegal reduction of work hours and directing them to pay each of the workers their three (3)
days/weeks worth of work compensation from 12 January 1998 to 13 July 1998.
Petitioners appealed to the National Labor Relations Commission (NLRC). In a
Resolution[14] promulgated on 29 June 2001, the NLRC reversed the decision of the Labor
Arbiter. The NLRC held that an employer has the prerogative to control all aspects of
employment in its business organization, including the supervision of workers, work regulation,
lay-off of workers, dismissal and recall of workers. The NLRC took judicial notice of the Asian
currency crisis in 1997 and 1998 thus finding Lintons decision to implement a compressed
workweek as a valid exercise of management prerogative. Moreover, the NLRC ruled that
Article 283 of the Labor Code, which requires an employer to submit a written notice to DOLE

one (1) month prior to the closure or reduction of personnel, is not applicable to the instant case
because no closure was undertaken and no reduction of employees was implemented by Linton.
Lastly, the NLRC took note that there were twenty-one (21) complainants-workers[15] who had
already resigned and executed individual waivers and quitclaims. Consequently, the NRLC
considered them as dropped from the list of complainants. The workers motion for
reconsideration was denied in a Resolution[16] dated 24 September 2001.
The workers then filed before the Court of Appeals[17] a petition for certiorari under Rule
65 of the Rules of Civil Procedure assailing the decision[18] of the NLRC and its
resolution[19] that denied their Motion for Reconsideration. In the petition, the workers claimed
that the NLRC erred in finding that the one (1) month notice requirement under Article 283 of
the Labor Code did not apply to the instant case; that Linton did not exceed the limits of its
business prerogatives; and that Linton was able to establish a factual basis on record to justify the
reduction of work days.

In its Comment,[20] Linton highlighted the fact that the caption, the body as well as the
verification of the petition submitted by complainants-workers indicated solely Alex Hellera, et
al. as petitioners. Linton argued that the petition was defective and did not necessarily include
the other workers in the proceedings before the NLRC. Linton also mentioned that 21 out of the
68 complainants-workers executed individual resignation letters and individual waivers and
quitclaims.[21] With these waivers and quitclaims, Linton raised in issue whether the petition still
included the signatories of said documents. Moreover, Linton pointed out that the caption of the
petition did not include the NLRC as party respondent, which made for another jurisdictional
defect. The rest of its arguments were merely a reiteration of its arguments before the NLRC.
In reversing the NLRC, the Court of Appeals, in its Decision[22] dated 12 December 2003
ruled that the failure to indicate all the names of petitioners in the caption of the petition was not
violative of the Rules of Court because the records of the case showed that there were sixty-eight
(68) original complainants who filed the complaint before the Arbitration Branch of the NLRC.
The appellate court likewise considered the quitclaims and release documents as ready
documents which did not change the fact that the 21 workers were impelled to sign the same.
The appellate court gave no credence to the said quitclaims, considering the economic

disadvantage that would be suffered by the employees. The appellate court also noted that the
records did not show that the 21 workers desisted from pursuing the petition and that the waivers
and quitclaims would not bar the 21 complainants from continuing the action.[23]
On the failure to include the NLRC as party respondent, the appellate court treated the
NLRC as a nominal party which ought to be joined as party to the petition simply because the
technical rules require its presence on record. The inclusion of the NLRC in the body of the
petition was deemed by the appellate court as substantial compliance with the rules.
On the main issues, the Court of Appeals ruled that the employees were constructively
dismissed because the short period of time between the submission of the establishment
termination report informing DOLE of its intention to observe a compressed workweek and the
actual implementation thereat was a manifestation of Lintons intention to eventually retrench the
employees. It found that Linton had failed to observe the substantive and procedural
requirements of a valid dismissal or retrenchment to avoid or minimize business losses since it
had failed to present adequate, credible and persuasive evidence that it was indeed suffering, or
would imminently suffer, from drastic business losses. Lintons financial statements for 19971998 showed no indication of financial losses, and the alleged loss of P3,645,422.00 in 1997 was
considered insubstantial considering its total asset of P1,065,948,601.00.Hence, the appellate
court considered Lintons losses as de minimis.[24]
Lastly, the appellate court found Linton to have failed to adopt a more sensible means of
cutting the costs of its operations in less drastic measures not grossly unfavorable to labor.
Hence, Linton failed to establish enough factual basis to justify the necessity of a reduced
workweek.[25]
Petitioners filed a motion for reconsideration[26] which the appellate court denied through
a Resolution[27] dated 2 April 2004.
In filing the instant petition for review, petitioners allege that the Court of Appeals erred
when it considered the petition as having been filed by all sixty (68) workers, in disregard of the
fact that only Alex Hellera, et al. was indicated as petitioner in the caption, body and verification
of the petition and twenty-one (21) of the workers executed waivers and quitclaims. Petitioners
further argue that the Court of Appeals erred in annulling the release and quitclaim documents
signed by 21 employees because no such relief was prayed for in the petition. The validity of the
release and quitclaim was also not raised as an issue before the labor arbiter nor the NLRC.

Neither was it raised in the very petition filed before the Court of Appeals. Petitioners conclude
that the Court of Appeals, therefore, had invalidated the waivers and quitclaims motu proprio.
Petitioners also allege that the Court of Appeals erred when it held that the reduction of
workdays is equivalent to constructive dismissal. They posit that there was no reduction of salary
but instead only a reduction of working days from six to three days per week. Petitioners add that
the reduction of workdays, while not expressly covered by any of the provisions of the Labor
Code, is analogous to the situation contemplated in Article 286[28] of the Labor Code because the
company implemented the reduction of workdays to address its financial losses. Lastly, they note
that since there was no retrenchment, the one-month notice requirement under Article 283 of the
Labor Code is not applicable.
First, we resolve the procedural issues of the case. Rule 7, Section 1 of the Rules of Court
states that the names of the parties shall be indicated in the title of the original complaint or
petition.However, the rules itself endorses its liberal construction if it promotes the objective of
securing a just, speedy and inexpensive disposition of the action or proceeding.[29] Pleadings
shall be construed liberally so as to render substantial justice to the parties and to determine
speedily and inexpensively the actual merits of the controversy with the least regard to
technicalities.[30]
In Vlason Enterprises Corporation v. Court of Appeals[31] the Court pronounced that,
while the general rule requires the inclusion of the names of all the parties in the title of a
complaint, the non-inclusion of one or some of them is not fatal to the cause of action of a
plaintiff, provided there is a statement in the body of the petition indicating that a defendant was
made a party to such action. If in Vlason the Court found that the absence of defendants name in
the caption would not cause the dismissal of the action, more so in this case where only the
names of some of petitioners were not reflected. This is consistent with the general rule that mere
failure to include the name of a party in the title of a complaint is not fatal by itself.[32]
Petitioners likewise challenge the absence of the names of the other workers in the body
and verification of the petition. The workers petition shows that the petition stipulated as partiespetitioners Alex A. Hellera, et al. as employees of Linton, meaning that there were more than
one petitioner who were all workers of Linton. The petition also attached the resolution [33] of the
NLRC where the names of the workers clearly appear. As documents attached to a complaint
form part thereof,[34] the petition, therefore has sufficiently indicated that the rest of the workers
were parties to the petition.

With respect to the absence of the workers signatures in the verification, the verification
requirement is deemed substantially complied with when some of the parties who undoubtedly
have sufficient knowledge and belief to swear to the truth of the allegations in the petition had
signed the same. Such verification is deemed a sufficient assurance that the matters alleged in
the petition have been made in good faith or are true and correct, and not merely
speculative.[35] The verification in the instant petition states that Hellera, the affiant, is the
president of the union of which complainants are all members and officers.[36] As the matter at
hand is a labor dispute between Linton and its employees, the union president undoubtedly has
sufficient knowledge to swear to the truth of the allegations in the petition. Helleras verification
sufficiently meets the purpose of the requirements set by the rules.
Moreover, the Court has ruled that the absence of a verification is not jurisdictional, but
only a formal defect.[37] Indeed, the Court has ruled in the past that a pleading required by the
Rules of Court to be verified may be given due course even without a verification if the
circumstances warrant the suspension of the rules in the interest of justice.[38]
We turn to the propriety of the Court of Appeals ruling on the invalidity of the waivers
and quitclaims executed by the 21 workers. It must be remembered that the petition filed before
the Court of Appeals was a petition for certiorari under Rule 65 in which, as a rule, only
jurisdictional questions may be raised, including matters of grave abuse of discretion which are
equivalent to lack of jurisdiction.[39] The issue on the validity or invalidity of the waivers and
quitclaims was not raised as an issue in the petition. Neither was it raised in the NLRC. There is
no point of reference from which one can determine whether or not the NLRC committed grave
abuse of discretion in its finding on the validity and binding effect of the waivers and quitclaims
since this matter was never raised in issue in the first place.
In addition, petitioners never had the opportunity to support or reinforce the validity of
the waivers and quitclaims because the authenticity and binding effect thereof were never
challenged. In the interest of fair play, justice and due process, the documents should not have
been unilaterally evaluated by the Court of Appeals. Thus, the corresponding modification of its
Decision should be ordained.
After resolving the technical aspects of this case, we now proceed to the merits
thereof. The main issue in this labor dispute is whether or not there was an illegal reduction of

work when Linton implemented a compressed workweek by reducing from six to three the
number of working days with the employees working on a rotation basis.
In Philippine Graphic Arts, Inc. v. NLRC,[40] the Court upheld for the validity of the
reduction of working hours, taking into consideration the following: the arrangement was
temporary, it was a more humane solution instead of a retrenchment of personnel, there was
notice and consultations with the workers and supervisors, a consensus were reached on how to
deal with deteriorating economic conditions and it was sufficiently proven that the company was
suffering from losses.
The Bureau of Working Conditions of the DOLE, moreover, released a
bulletin[41] providing for in determining when an employer can validly reduce the regular number
of working days. The said bulletin states that a reduction of the number of regular working days
is valid where the arrangement is resorted to by the employer to prevent serious losses due to
causes beyond his control, such as when there is a substantial slump in the demand for his goods
or services or when there is lack of raw materials.

Although the bulletin stands more as a set of directory guidelines than a binding set of
implementing rules, it has one main consideration, consistent with the ruling in Philippine
Graphic Arts Inc., in determining the validity of reduction of working hoursthat the company
was suffering from losses.
Petitioners attempt to justify their action by alleging that the company was suffering from
financial losses owing to the Asian currency crisis. Was petitioners claim of financial losses
supported by evidence?
The lower courts did not give credence to the income statement submitted by Linton
because the same was not audited by an independent auditor.[42] The NLRC, on the other hand,
took judicial notice of the Asian currency crisis which resulted in the devaluation of the peso and
a slump in market demand.[43] The Court of Appeals for its part held that Linton failed to present
adequate, credible and persuasive evidence to show that it was in dire straits and indeed
suffering, or would imminently suffer, from drastic business losses. It did not find the reduction

of work hours justifiable, considering that the alleged loss of P3,645,422.00 in 1997 is
insubstantial compared to Lintons total asset of P1, 065,948,601.76.[44]

A close examination of petitioners financial reports for 1997-1998 shows that, while the
company suffered a loss of P3,645,422.00 in 1997, it retained a considerable amount of
earnings[45]and operating income.[46] Clearly then, while Linton suffered from losses for that
year, there remained enough earnings to sufficiently sustain its operations. In business, sustained
operations in the black is the ideal but being in the red is a cruel reality. However, a year of
financial losses would not warrant the immolation of the welfare of the employees, which in this
case was done through a reduced workweek that resulted in an unsettling diminution of the
periodic pay for a protracted period. Permitting reduction of work and pay at the slightest
indication of losses would be contrary to the States policy to afford protection to labor and
provide full employment.[47]
Certainly, management has the prerogative to come up with measures to ensure
profitability or loss minimization. However, such privilege is not absolute. Management
prerogative must be exercised in good faith and with due regard to the rights of labor.[48]

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

retrenchment is reasonably necessary and is likely to be effective in preventing the expected

losses; and (4) the alleged losses, if already incurred, or the expected imminent losses sought to
be forestalled, are proven by sufficient and convincing evidence.[50] Linton failed to comply with
these standards.
All taken into account, the compressed workweek arrangement was unjustified and
illegal. Thus, petitioners committed illegal reduction of work hours.
In assessing the monetary award in favor of respondents, the Court has taken the
following factors into account:
(1) The compressed workweek arrangement was lifted after six (6) months, or on 13 July
1998.[51] Thus, Linton resumed its regular operations and discontinued the emergency measure;
(2) The claims of the workers, as reflected in their pleadings, were narrowed to petitioners illegal
reduction of their work hours and the non-payment of their compensation for three (3) days a
week from 12 January 1998 to 13 July 1998. They did not assert any other claims;
(3) As found by the NLRC, 21 of the workers are no longer entitled to any monetary award since
they had already executed their respective waivers and quitclaims. We give weight to the finding
and exclude the 21 workers as recipients of the award to be granted in this case. Consequently,
only the following workers are entitled to the award, with the amounts respectively due them
stated opposite their names:
1. Alex A. Hellera - P16,368.30
2. Francisco Racasa - 16,458.00
3. Dante Escarlan - 15,912.00
4. Donato Sasa - 15,580.50
5. Rodolfo Olinar - 15,912.00
6. Daniel Custodio - 15,912.00
7. Arturo Pollo - 16,660.80
8. B. Pilapil - 16,075.80
9. Donato Bonete - 15,600.00
10. Isagani Yap - 15,678.00
11. Cesar Ragonon - 16,068.00
12. Benedicto Bagan - 15,775.50
13. Rexte Solanoy - 15,678.00
14. Felipe Cagoco, Jr. - 15,990.00
15. Jose Narce - 16,348.80
16. Quirino C. Ada - 15,990.00

17. Salfaram Elmer - 16,302.00

18. Romeo Balais - 16,302.00
19. Claudio S. Morales - 15,947.10
20. Elpidio E. Vergabinia - 15,561.00
21. Conrado Cagoco - 15,990.00
22. Roy Boragoy - 15,892.50
23. Reynaldo Santos - 16,200.60
24. Lino Valencia - 15,678.00
25. Roy Durano - 15,678.00
26. Leo Valencia - 15,678.00
27. Jayoma A. - 15,561.00
28. Ramon Olinar III - 15,678.00
29. Saturnino C. Ebaya - 15,919.80
30. Nicanor L. de Castro - 16,614.00
31. Eduardo Gonzales - 15,678.00
32. Isagani Gonzales - 16,469.70
33. Thomas Andrab, Jr. - 15,912.00
34. Minieto Durano - 16,660.80
35. Ernesto Vallente - 15,997.80
36. Nestor M. Bonete - 15,705.30
37. Jose Salonoy - 16,458.00
38. Alberto Lagman - 16,660.80
39. Rolando Torres - 15,678.00
40. Rolindo Cualquiera - 16,068.00
41. Armando Lima - 16,426.80
42. Alfredo Selapio - 16,060.20
43. Martin V. Villacampa - 15,939.30
44. Carlito Pable - 16,263.00
45. Dante Escarlan - 15,912.00
46. M. Durano - 16,614.00
47. Ramon Roso - 16,302.00[52]
(4) The Labor Arbiters decision in favor of respondents was reversed by the NLRC. Considering
that there is no provision for appeal from the decision of the NLRC,[53] petitioners should not be
deemed at fault in not paying the award as ordered by the Labor Arbiter. Petitioners liability only
gained a measure of certainty only when the Court of Appeals reversed the NLRC decision. In
the interest of justice, the 6% legal interest on the award should commence only from the date of
promulgation of the Court of Appeals Decision on 12 December 2003.
WHEREFORE, the Petition is GRANTED IN PART. The decision of the Court of Appeals
reinstating the decision of the Labor Arbiter is AFFIRMED with MODIFICATION to the effect
that the 21 workers who executed waivers and quitclaims are no longer entitled to back
payments. Petitioners are ORDERED TO PAY respondents, except the aforementioned 21

workers, the monetary award as computed,[54] pursuant to the decision of the Labor
Arbiter[55] with interest at the rate of 6% per annum from 12 December 2003, the date of
promulgation of the Court of Appeals decision, until the finality of this decision, and thereafter at
the rate of 12% per annum until full payment.
SO ORDERED.

BISIG MANGGAGAWA SA TRYCO and/or

FRANCISCO SIQUIG, as Union President,
JOSELITO LARIO, VIVENCIO B. BARTE,
SATURNINO EGERA and SIMPLICIO AYAAY,
Petitioners,

G.R. No. 151309

Present:

PUNO, C.J.,*
YNARES-SANTIAGO, J.,
Chairperson,
- versus CHICO-NAZARIO,
NACHURA, and
NATIONAL
LABOR
RELATIONS REYES, JJ.
COMMISSION,
TRYCO
PHARMA
CORPORATION, and/or WILFREDO C. Promulgated:
RIVERA,
Respondents.
October 15, 2008
x------------------------------------------------------------------------------------x

DECISION
NACHURA, J.:

This petition seeks a review of the Decision[1] of the Court of Appeals (CA) dated July
24, 2001 and Resolution dated December 20, 2001, which affirmed the finding of the National
Labor Relations Commission (NLRC) that the petitioners transfer to another workplace did not
amount to a constructive dismissal and an unfair labor practice.
The pertinent factual antecedents are as follows:
Tryco Pharma Corporation (Tryco) is a manufacturer of veterinary medicines and its
principal office is located in Caloocan City. Petitioners Joselito Lario, Vivencio Barte, Saturnino
Egera and Simplicio Aya-ay are its regular employees, occupying the positions of helper,
shipment helper and factory workers, respectively, assigned to the Production Department. They
are members of Bisig Manggagawa sa Tryco (BMT), the exclusive bargaining representative of
the rank-and-file employees.
Tryco and the petitioners signed separate Memorand[a] of Agreement[2] (MOA),
providing for a compressed workweek schedule to be implemented in the company

effective May 20, 1996. The MOA was entered into pursuant to Department of Labor and
Employment Department Order (D.O.) No. 21, Series of 1990, Guidelines on the Implementation
of Compressed Workweek. As provided in the MOA, 8:00 a.m. to 6:12 p.m., from Monday to
Friday, shall be considered as the regular working hours, and no overtime pay shall be due and
payable to the employee for work rendered during those hours. The MOA specifically stated that
the employee waives the right to claim overtime pay for work rendered after 5:00 p.m. until 6:12
p.m. from Monday to Friday considering that the compressed workweek schedule is adopted in
lieu of the regular workweek schedule which also consists of 46 hours. However, should an
employee be permitted or required to work beyond 6:12 p.m., such employee shall be entitled to
overtime pay.
Tryco informed the Bureau of Working Conditions of the Department of Labor and
Employment of the implementation of a compressed workweek in the company.[3]
In January 1997, BMT and Tryco negotiated for the renewal of their collective bargaining
agreement (CBA) but failed to arrive at a new agreement.
Meantime, Tryco received the Letter dated March 26, 1997 from the Bureau of Animal
Industry of the Department of Agriculture reminding it that its production should be conducted
in San Rafael, Bulacan, not in Caloocan City:
MR. WILFREDO C. RIVERA
President, Tryco Pharma Corporation
San Rafael, Bulacan
Subject: LTO as VDAP Manufacturer at San Rafael, Bulacan
Dear Mr. Rivera:
This is to remind you that your License to Operate as Veterinary Drug and
Product Manufacturer is addressed at San Rafael, Bulacan, and so, therefore, your
production should be done at the above mentioned address only. Further,
production of a drug includes propagation, processing, compounding, finishing,
filling, repacking, labeling, advertising, storage, distribution or sale of the
veterinary drug product. In no instance, therefore, should any of the above be
done at your business office at 117 M. Ponce St., EDSA, Caloocan City.
Please be guided accordingly.
Thank you.

Very truly yours,

(sgd.)
EDNA ZENAIDA V. VILLACORTE, D.V.M.
Chief, Animal Feeds Standard Division[4]

Accordingly, Tryco issued a Memorandum[5] dated April 7, 1997 which directed

petitioner Aya-ay to report to the companys plant site in Bulacan. When petitioner Aya-ay
refused to obey, Tryco reiterated the order on April 18, 1997.[6] Subsequently, through a
Memorandum[7] dated May 9, 1997, Tryco also directed petitioners Egera, Lario and Barte to
report to the companys plant site in Bulacan.
BMT opposed the transfer of its members to San Rafael, Bulacan, contending that it
constitutes unfair labor practice. In protest, BMT declared a strike on May 26, 1997.
In August 1997, petitioners filed their separate complaints[8] for illegal dismissal,
underpayment of wages, nonpayment of overtime pay and service incentive leave, and refusal to
bargain against Tryco and its President, Wilfredo C. Rivera. In their Position Paper, [9] petitioners
alleged that the company acted in bad faith during the CBA negotiations because it sent
representatives without authority to bind the company, and this was the reason why the
negotiations failed. They added that the management transferred petitioners Lario, Barte, Egera
and Aya-ay from Caloocan toSan Rafael, Bulacan to paralyze the union. They prayed for the
company to pay them their salaries from May 26 to 31, 1997, service incentive leave, and
overtime pay, and to implement Wage Order No. 4.
In their defense, respondents averred that the petitioners were not dismissed but they
refused to comply with the managements directive for them to report to the companys plant
in San Rafael, Bulacan. They denied the allegation that they negotiated in bad faith, stating that,
in fact, they sent the Executive Vice-President and Legal Counsel as the companys
representatives to the CBA negotiations. They claim that the failure to arrive at an agreement
was due to the stubbornness of the union panel.
Respondents further averred that, long before the start of the negotiations, the company
had already been planning to decongest the Caloocan office to comply with the government
policy to shift the concentration of manufacturing activities from the metropolis to the

countryside. The decision to transfer the companys production activities to San Rafael, Bulacan
was precipitated by the letter-reminder of the Bureau of Animal Industry.
On February 27, 1998, the Labor Arbiter dismissed the case for lack of merit.[10] The
Labor Arbiter held that the transfer of the petitioners would not paralyze or render the union
ineffective for the following reasons: (1) complainants are not members of the negotiating panel;
and (2) the transfer was made pursuant to the directive of the Department of Agriculture.
The Labor Arbiter also denied the money claims, ratiocinating that the nonpayment of
wages was justified because the petitioners did not render work from May 26 to 31, 1997;
overtime pay is not due because of the compressed workweek agreement between the union and
management; and service incentive leave pay cannot be claimed by the complainants because
they are already enjoying vacation leave with pay for at least five days. As for the claim of
noncompliance with Wage Order No. 4, the Labor Arbiter held that the issue should be left to the
grievance machinery or voluntary arbitrator.
On October 29, 1999, the NLRC affirmed the Labor Arbiters Decision, dismissing the
case, thus:
PREMISES CONSIDERED, the Decision of February 27, 1998 is hereby
AFFIRMED and complainants appeal therefrom DISMISSED for lack of merit.
Complainants Joselito Lario, Vivencio Barte, Saturnino Egera and Simplicio Ayaay are directed to report to work at respondents San Rafael Plant, Bulacan but
without backwages. Respondents are directed to accept the complainants back to
work.
SO ORDERED.[11]

On December 22, 1999, the NLRC denied the petitioners motion for reconsideration for
lack of merit.[12]
Left with no recourse, petitioners filed a petition for certiorari with the CA.
On July 24, 2001, the CA dismissed the petition for certiorari and ruled that the transfer
order was a management prerogative not amounting to a constructive dismissal or an unfair labor
practice. The CA further sustained the enforceability of the MOA, particularly the waiver of
overtime pay in light of this Courts rulings upholding a waiver of benefits in exchange of other
valuable privileges. The dispositive portion of the said CA decision reads:

WHEREFORE, the instant petition is DISMISSED. The Decision of the

Labor Arbiter dated February 27, 1998 and the Decision and Resolution of the
NLRC promulgated on October 29, 1999 and December 22, 1999, respectively, in
NLRC-NCR Case Nos. 08-05715-97, 08-06115-97 and 08-05920-97, are
AFFIRMED.
SO ORDERED.[13]

The CA denied the petitioners motion for reconsideration on December 20, 2001.[14]
Dissatisfied, petitioners filed this petition for review raising the following issues:
-ATHE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE
PATENTLY ERRONEOUS RULING OF THE LABOR ARBITER AND THE
COMMISSION THAT THERE WAS NO DISMISSAL, MUCH LESS
ILLEGAL DISMISSAL, OF THE INDIVIDUAL PETITIONERS.
-BTHE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING AND
CONCLUDING THAT PRIVATE RESPONDENTS COMMITTED ACTS OF
UNFAIR LABOR PRACTICE.
-CTHE COURT OF APPEALS ERRED IN NOT FINDING AND CONCLUDING
THAT PETITIONERS ARE ENTITLED TO THEIR MONEY CLAIMS AND
TO DAMAGES, AS WELL AS LITIGATION COSTS AND ATTORNEYS
FEES.[15]

The petition has no merit.

We have no reason to deviate from the well-entrenched rule that findings of fact of labor
officials, who are deemed to have acquired expertise in matters within their respective
jurisdiction, are generally accorded not only respect but even finality, and bind us when
supported by substantial evidence.[16] This is particularly true when the findings of the Labor
Arbiter, the NLRC and the CA are in absolute agreement.[17] In this case, the Labor Arbiter, the
NLRC, and the CA uniformly agreed that the petitioners were not constructively dismissed and

that the transfer orders did not amount to an unfair labor practice. But if only to disabuse the
minds of the petitioners who have persistently pursued this case on the mistaken belief that the
labor tribunals and the appellate court committed grievous errors, this Court will go over the
issues raised in this petition.
Petitioners mainly contend that the transfer orders amount to a constructive dismissal.
They maintain that the letter of the Bureau of Animal Industry is not credible because it is not
authenticated; it is only a ploy, solicited by respondents to give them an excuse to effect a
massive transfer of employees. They point out that the Caloocan City office is still engaged in
production activities until now and respondents even hired new employees to replace them.
We do not agree.
We refuse to accept the petitioners wild and reckless imputation that the Bureau of
Animal Industry conspired with the respondents just to effect the transfer of the
petitioners. There is not an iota of proof to support this outlandish claim. Absent any evidence,
the allegation is not only highly irresponsible but is grossly unfair to the government agency
concerned. Even as this Court has given litigants and counsel a relatively wide latitude to present
arguments in support of their cause, we will not tolerate outright misrepresentation or baseless
accusation. Let this be fair warning to counsel for the petitioners.
Furthermore, Trycos decision to transfer its production activities to San Rafael, Bulacan,
regardless of whether it was made pursuant to the letter of the Bureau of Animal Industry, was
within the scope of its inherent right to control and manage its enterprise effectively. While the
law is solicitous of the welfare of 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.[18]
This prerogative extends to the managements right to regulate, according to its own
discretion and judgment, all aspects of employment, including the freedom to transfer and
reassign employees according to the requirements of its business.[19] Managements prerogative of
transferring and reassigning employees from one area of operation to another in order to meet the
requirements of the business is, therefore, generally not constitutive of constructive
dismissal.[20] Thus, the consequent transfer of Trycos personnel, assigned to the Production
Department was well within the scope of its management prerogative.

When the transfer is not unreasonable, or inconvenient, or prejudicial to the employee,

and it does not involve a demotion in rank or diminution of salaries, benefits, and other
privileges, the employee may not complain that it amounts to a constructive
dismissal.[21] However, the employer has the burden of proving that the transfer of an employee
is for valid and legitimate grounds. The employer must show that the transfer is not
unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a demotion in
rank or a diminution of his salaries, privileges and other benefits.[22]
Indisputably, in the instant case, the transfer orders do not entail a demotion in rank or
diminution of salaries, benefits and other privileges of the petitioners. Petitioners, therefore,
anchor their objection solely on the ground that it would cause them great inconvenience since
they are all residents of Metro Manila and they would incur additional expenses to travel daily
from Manila to Bulacan.
The Court has previously declared that mere incidental inconvenience is not sufficient to
warrant a claim of constructive dismissal.[23] Objection to a transfer that is grounded solely upon
the personal inconvenience or hardship that will be caused to the employee by reason of the
transfer is not a valid reason to disobey an order of transfer.[24]
Incidentally, petitioners cite Escobin v. NLRC[25] where the Court held that the transfer of the
employees therein was unreasonable. However, the distance of the workplace to which the
employees were being transferred can hardly compare to that of the present case. In that case, the
employees were being transferred from Basilan to Manila; hence, the Court noted that the
transfer would have entailed the separation of the employees from their families who were
residing in Basilan and accrual of additional expenses for living accommodations in Manila. In
contrast, the distance fromCaloocan to San Rafael, Bulacan is not considerably great so as to
compel petitioners to seek living accommodations in the area and prevent them from commuting
to Metro Manila daily to be with their families.
Petitioners, however, went further and argued that the transfer orders amounted to unfair
labor practice because it would paralyze and render the union ineffective.
To begin with, we cannot see how the mere transfer of its members can paralyze the
union. The union was not deprived of the membership of the petitioners whose work assignments
were only transferred to another location.

More importantly, there was no showing or any indication that the transfer orders were
motivated by an intention to interfere with the petitioners right to organize. Unfair labor
practice refers to acts that violate the workers right to organize. With the exception of Article
248(f) of the Labor Code of the Philippines, the prohibited acts are related to the workers right to
self-organization and to the observance of a CBA. Without that element, the acts, no matter how
unfair, are not unfair labor practices.[26]
Finally, we do not agree with the petitioners assertion that the MOA is not enforceable as
it is contrary to law. The MOA is enforceable and binding against the petitioners. Where it is
shown that the person making the waiver did so voluntarily, with full understanding of what he
was doing, and the consideration for the quitclaim is credible and reasonable, the transaction
must be recognized as a valid and binding undertaking.[27]
D.O. No. 21 sanctions the waiver of overtime pay in consideration of the benefits that the
employees will derive from the adoption of a compressed workweek scheme, thus:
The compressed workweek scheme was originally conceived for
establishments wishing to save on energy costs, promote greater work efficiency
and lower the rate of employee absenteeism, among others. Workers favor the
scheme considering that it would mean savings on the increasing cost of
transportation fares for at least one (1) day a week; savings on meal and snack
expenses; longer weekends, or an additional 52 off-days a year, that can be
devoted to rest, leisure, family responsibilities, studies and other personal matters,
and that it will spare them for at least another day in a week from certain
inconveniences that are the normal incidents of employment, such as commuting
to and from the workplace, travel time spent, exposure to dust and motor vehicle
fumes, dressing up for work, etc. Thus, under this scheme, the generally observed
workweek of six (6) days is shortened to five (5) days but prolonging the working
hours from Monday to Friday without the employer being obliged for pay
overtime premium compensation for work performed in excess of eight (8) hours
on weekdays, in exchange for the benefits abovecited that will accrue to the
employees.

Moreover, the adoption of a compressed workweek scheme in the company will help
temper any inconvenience that will be caused the petitioners by their transfer to a farther
workplace.

Notably, the MOA complied with the following conditions set by the DOLE, under D.O.
No. 21, to protect the interest of the employees in the implementation of a compressed workweek
scheme:
1.

The employees voluntarily agree to work more than eight (8) hours a
day the total in a week of which shall not exceed their normal weekly
hours of work prior to adoption of the compressed workweek
arrangement;

2.

There will not be any diminution whatsoever in the weekly or

monthly take-home pay and fringe benefits of the employees;

3.

If an employee is permitted or required to work in excess of his

normal weekly hours of work prior to the adoption of the compressed
workweek scheme, all such excess hours shall be considered overtime
work and shall be compensated in accordance with the provisions of the
Labor Code or applicable Collective Bargaining Agreement (CBA);

4.

Appropriate waivers with respect to overtime premium pay for work

performed in excess of eight (8) hours a day may be devised by the parties
to the agreement.

5.

The effectivity and implementation of the new working time

arrangement shall be by agreement of the parties.

PESALA v. NLRC,[28] cited by the petitioners, is not applicable to the present case. In that
case, an employment contract provided that the workday consists of 12 hours and the employee
will be paid a fixed monthly salary rate that was above the legal minimum wage. However,
unlike the present MOA which specifically states that the employee waives his right to claim
overtime pay for work rendered beyond eight hours, the employment contract in that case was
silent on whether overtime pay was included in the payment of the fixed monthly salary. This
necessitated the interpretation by the Court as to whether the fixed monthly rate provided under
the employment contract included overtime pay. The Court noted that if the employee is paid
only the minimum wage but with overtime pay, the amount is still greater than the fixed monthly
rate as provided in the employment contract. It, therefore, held that overtime pay was not
included in the agreed fixed monthly rate.
Considering that the MOA clearly states that the employee waives the payment of
overtime pay in exchange of a five-day workweek, there is no room for interpretation and its
terms should be implemented as they are written.

WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated July 24,
2001 and Resolution dated December 20, 2001 are AFFIRMED.
SO ORDERED.

G.R. No. 153511

July 18, 2012

LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION, and/or, NELSON

NAPUD, in his capacity as the President of Petitioner Corporation, Petitioner,
vs.
HERNANI S. REALUYO, also known as JOEY ROA, Respondent.
DECISION
BERSAMIN, J.:

This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a
hotel. On August 9, 1999, respondent, whose stage name was Joey R. Roa, filed a complaint for
alleged unfair labor practice, constructive illegal dismissal, and the underpayment/nonpayment
of his premium pay for holidays, separation pay, service incentive leave pay, and 13111 month
pay. He prayed for attorney's fees, moral damages off P100,000.00 and exemplary damages for
P100,000.00.1
Respondent averred that he had worked as a pianist at the Legend Hotels Tanglaw Restaurant
from September 1992 with an initial rate of P400.00/night that was given to him after each
nights performance; that his rate had increased to P750.00/night; and that during his
employment, he could not choose the time of performance, which had been fixed from 7:00 pm
to 10:00 pm for three to six times/week. He added that the Legend Hotels restaurant manager
had required him to conform with the venues motif; that he had been subjected to the rules on
employees representation checks and chits, a privilege granted to other employees; that on July
9, 1999, the management had notified him that as a cost-cutting measure his services as a pianist
would no longer be required effective July 30, 1999; that he disputed the excuse, insisting that
Legend Hotel had been lucratively operating as of the filing of his complaint; and that the loss of
his employment made him bring his complaint.2
In its defense, petitioner denied the existence of an employer-employee relationship with
respondent, insisting that he had been only a talent engaged to provide live music at Legend
Hotels Madison Coffee Shop for three hours/day on two days each week; and stated that the
economic crisis that had hit the country constrained management to dispense with his services.
On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of merit upon
finding that the parties had no employer-employee relationship.3 The LA explained thusly:
xxx
On the pivotal issue of whether or not there existed an employer-employee relationship between
the parties, our finding is in the negative. The finding finds support in the service contract dated
September 1, 1992 xxx.
xxx
Even if we grant the initial non-existence of the service contract, as complainant suggests in his
reply (third paragraph, page 4), the picture would not change because of the admission by
complainant in his letter dated October 8, 1996 (Annex "C") that what he was receiving was
talent fee and not salary.
This is reinforced by the undisputed fact that complainant received his talent fee nightly, unlike
the regular employees of the hotel who are paid by monthly xxx.
xxx

And thus, absent the power to control with respect to the means and methods by which his work
was to be accomplished, there is no employer-employee relationship between the parties xxx.
xxx
WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of merit.
SO ORDERED.4
Respondent appealed, but the National Labor Relations Commission (NLRC) affirmed the LA
on May 31, 2001.5
Respondent assailed the decision of the NLRC in the Court of Appeals (CA) on certiorari.
On February 11, 2002, the CA set aside the decision of the NLRC,6 holding:
xxx
Applying the above-enumerated elements of the employee-employer relationship in this case, the
question to be asked is, are those elements present in this case?
The answer to this question is in the affirmative.
xxx
Well settled is the rule that of the four (4) elements of employer-employee relationship, it is the
power of control that is more decisive.
In this regard, public respondent failed to take into consideration that in petitioners line of work,
he was supervised and controlled by respondents restaurant manager who at certain times would
require him to perform only tagalog songs or music, or wear barong tagalog to conform with
Filipiniana motif of the place and the time of his performance is fixed by the respondents from
7:00 pm to 10:00 pm, three to six times a week. Petitioner could not choose the time of his
performance. xxx.
As to the status of petitioner, he is considered a regular employee of private respondents since
the job of the petitioner was in furtherance of the restaurant business of respondent hotel.
Granting that petitioner was initially a contractual employee, by the sheer length of service he
had rendered for private respondents, he had been converted into a regular employee xxx.
xxx
xxx In other words, the dismissal was due to retrenchment in order to avoid or minimize business
losses, which is recognized by law under Article 283 of the Labor Code, xxx.
xxx

WHEREFORE, foregoing premises considered, this petition is GRANTED. xxx.7

Issues
In this appeal, petitioner contends that the CA erred:
I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF EMPLOYEREMPLOYEE RELATIONSHIP BETWEEN THE PETITIONER HOTEL AND
RESPONDENT ROA.
II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND THAT THE
TERMINATION OF HIS SERVICES WAS ILLEGAL. THE CA LIKEWISE ERRED
WHEN IT DECLARED THE REINSTATEMENT OF ROA TO HIS FORMER
POSITION OR BE GIVEN A SEPARATION PAY EQUIVALENT TO ONE MONTH
FOR EVERY YEAR OF SERVICE FROM SEPTEMBER 1999 UNTIL JULY 30, 1999
CONSIDERING THE ABSENCE OF AN EMPLOYMENT RELATIONSHIP
BETWEEN THE PARTIES.
III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO BACKWAGES,
SERVICE INCENTIVE LEAVE AND OTHER BENEFITS CONSIDERING THAT
THERE IS NO EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE
PARTIES.
IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31, 2001 IN NLRC
NCR CA NO. 023404-2000 OF THE NLRC AS WELL AS ITS RESOLUTION DATED
JUNE 29, 2001 IN FAVOR OF HEREIN PETITIONER HOTEL WHEN HEREIN
RESPONDENT ROA FAILED TO SHOW PROOF THAT THE NLRC AND THE
LABOR ARBITER HAVE COMMITTED GRAVE ABUSE OF DISCRETION OR
LACK OF JURISDICTION IN THEIR RESPECTIVE DECISIONS.
V. XXX WHEN IT OVERLOOKED THE FACT THAT THE PETITION WHICH ROA
FILED IS IMPROPER SINCE IT RAISED QUESTIONS OF FACT.
VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION FILED BY ROA
WHEN IT IS CLEARLY IMPROPER AND SHOULD HAVE BEEN DISMISSED
OUTRIGHT CONSIDERING THAT A PETITION FOR CERTIORARI UNDER RULE
65 IS LIMITED ONLY TO QUESTIONS OR ISSUES OF GRAVE ABUSE OF
DISCRETION OR LACK OF JURISDICTION COMMITTED BY THE NLRC OR THE
LABOR ARBITER, WHICH ISSUES ARE NOT PRESENT IN THE CASE AT BAR.
The assigned errors are divided into the procedural issue of whether or not the petition for
certiorari filed in the CA was the proper recourse; and into two substantive issues, namely: (a)
whether or not respondent was an employee of petitioner; and (b) if respondent was petitioners
employee, whether he was validly terminated.
Ruling

The appeal fails.

Procedural Issue:
Certiorari was a proper recourse
Petitioner contends that respondents petition for certiorari was improper as a remedy against the
NLRC due to its raising mainly questions of fact and because it did not demonstrate that the
NLRC was guilty of grave abuse of discretion.
The contention is unwarranted. There is no longer any doubt that a petition for certiorari brought
to assail the decision of the NLRC may raise factual issues, and the CA may then review the
decision of the NLRC and pass upon such factual issues in the process.8 The power of the CA to
review factual issues in the exercise of its original jurisdiction to issue writs of certiorari is based
on Section 9 of Batas Pambansa Blg. 129, which pertinently provides that the CA "shall have the
power to try cases and conduct hearings, receive evidence and perform any and all acts necessary
to resolve factual issues raised in cases falling within its original and appellate jurisdiction,
including the power to grant and conduct new trials or further proceedings."
Substantive Issue No. 1:
Employer-employee relationship existed between the parties
We next ascertain if the CA correctly found that an employer-employee relationship existed
between the parties.
The issue of whether or not an employer-employee relationship existed between petitioner and
respondent is essentially a question of fact.9 The factors that determine the issue include who has
the power to select the employee, who pays the employees wages, who has the power to dismiss
the employee, and who exercises control of the methods and results by which the work of the
employee is accomplished.10 Although no particular form of evidence is required to prove the
existence of the relationship, and any competent and relevant evidence to prove the relationship
may be admitted,11 a finding that the relationship exists must nonetheless rest on substantial
evidence, which is that amount of relevant evidence that a reasonable mind might accept as
adequate to justify a conclusion.12
Generally, the Court does not review factual questions, primarily because the Court is not a trier
of facts. However, where, like here, there is a conflict between the factual findings of the Labor
Arbiter and the NLRC, on the one hand, and those of the CA, on the other hand, it becomes
proper for the Court, in the exercise of its equity jurisdiction, to review and re-evaluate the
factual issues and to look into the records of the case and re-examine the questioned findings.13
A review of the circumstances reveals that respondent was, indeed, petitioners employee. He
was undeniably employed as a pianist in petitioners Madison Coffee Shop/Tanglaw Restaurant
from September 1992 until his services were terminated on July 9, 1999.

First of all, petitioner actually wielded the power of selection at the time it entered into the
service contract dated September 1, 1992 with respondent. This is true, notwithstanding
petitioners insistence that respondent had only offered his services to provide live music at
petitioners Tanglaw Restaurant, and despite petitioners position that what had really transpired
was a negotiation of his rate and time of availability. The power of selection was firmly
evidenced by, among others, the express written recommendation dated January 12, 1998 by
Christine Velazco, petitioners restaurant manager, for the increase of his remuneration.14
Petitioner could not seek refuge behind the service contract entered into with respondent. It is the
law that defines and governs an employment relationship, whose terms are not restricted to those
fixed in the written contract, for other factors, like the nature of the work the employee has been
called upon to perform, are also considered. The law affords protection to an employee, and does
not countenance any attempt to subvert its spirit and intent. Any stipulation in writing can be
ignored when the employer utilizes the stipulation to deprive the employee of his security of
tenure. The inequality that characterizes employer-employee relations generally tips the scales in
favor of the employer, such that the employee is often scarcely provided real and better
options.15
Secondly, petitioner argues that whatever remuneration was given to respondent were only his
talent fees that were not included in the definition of wage under the Labor Code; and that such
talent fees were but the consideration for the service contract entered into between them.
The argument is baseless.
Respondent was paid P400.00 per three hours of performance from 7:00 pm to 10:00 pm, three
to six nights a week. Such rate of remuneration was later increased to P750.00 upon restaurant
manager Velazcos recommendation. There is no denying that the remuneration denominated as
talent fees was fixed on the basis of his talent and skill and the quality of the music he played
during the hours of performance each night, taking into account the prevailing rate for similar
talents in the entertainment industry.16
Respondents remuneration, albeit denominated as talent fees, was still considered as included in
the term wage in the sense and context of the Labor Code, regardless of how petitioner chose to
designate the remuneration. Anent this, Article 97(f) of the Labor Code clearly states:
xxx 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.
Clearly, respondent received compensation for the services he rendered as a pianist in
petitioners hotel. Petitioner cannot use the service contract to rid itself of the consequences of its

employment of respondent. There is no denying that whatever amounts he received for his
performance, howsoever designated by petitioner, were his wages.
It is notable that under the Rules Implementing the Labor Code and as held in Tan v.
Lagrama,17 every employer is required to pay his employees by means of a payroll, which should
show in each case, among others, the employees rate of pay, deductions made from such pay,
and the amounts actually paid to the employee. Yet, petitioner did not present the payroll of its
employees to bolster its insistence of respondent not being its employee.
That respondent worked for less than eight hours/day was of no consequence and did not detract
from the CAs finding on the existence of the employer-employee relationship. In providing that
the " normal hours of work of any employee shall not exceed eight (8) hours a day," Article 83 of
the Labor Code only set a maximum of number of hours as "normal hours of work" but did not
prohibit work of less than eight hours.
Thirdly, the power of the employer to control the work of the employee is considered the most
significant determinant of the existence of an employer-employee relationship.18 This is the socalled control test, and is premised on whether the person for whom the services are performed
reserves the right to control both the end achieved and the manner and means used to achieve
that end.19
Petitioner submits that it did not exercise the power of control over respondent and cites the
following to buttress its submission, namely: (a) respondent could beg off from his nightly
performances in the restaurant for other engagements; (b) he had the sole prerogative to play and
perform any musical arrangements that he wished; (c) although petitioner, through its manager,
required him to play at certain times a particular music or song, the music, songs, or
arrangements, including the beat or tempo, were under his discretion, control and direction; (d)
the requirement for him to wear barong Tagalog to conform with the Filipiniana motif of the
venue whenever he performed was by no means evidence of control; (e) petitioner could not
require him to do any other work in the restaurant or to play the piano in any other places, areas,
or establishments, whether or not owned or operated by petitioner, during the three hour period
from 7:00 pm to 10:00 pm, three to six times a week; and (f) respondent could not be required to
sing, dance or play another musical instrument.
A review of the records shows, however, that respondent performed his work as a pianist under
petitioners supervision and control. Specifically, petitioners control of both the end achieved
and the manner and means used to achieve that end was demonstrated by the following, to wit:
a. He could not choose the time of his performance, which petitioners had fixed from
7:00 pm to 10:00 pm, three to six times a week;
b. He could not choose the place of his performance;
c. The restaurants manager required him at certain times to perform only Tagalog songs
or music, or to wear barong Tagalog to conform to the Filipiniana motif; and

d. He was subjected to the rules on employees representation check and chits, a privilege
granted to other employees.
Relevantly, it is worth remembering that the employer need not actually supervise the
performance of duties by the employee, for it sufficed that the employer has the right to wield
that power.
Lastly, petitioner claims that it had no power to dismiss respondent due to his not being even
subject to its Code of Discipline, and that the power to terminate the working relationship was
mutually vested in the parties, in that either party might terminate at will, with or without cause.
The claim is contrary to the records. Indeed, the memorandum informing respondent of the
discontinuance of his service because of the present business or financial condition of
petitioner20 showed that the latter had the power to dismiss him from employment.21
Substantive Issue No. 2:
Validity of the Termination
Having established that respondent was an employee whom petitioner terminated to prevent
losses, the conclusion that his termination was by reason of retrenchment due to an authorized
cause under the Labor Code is inevitable.
Retrenchment is one of the authorized causes for the dismissal of employees recognized by the
Labor Code. It is a management prerogative resorted to by employers to avoid or to minimize
business losses. On this matter, Article 283 of the Labor Code states:
Article 283. Closure of establishment and reduction of personnel. The employer may also
terminate the employment of any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof. xxx. In case of
retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (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.
The Court has laid down the following standards that an employer should meet to justify
retrenchment and to foil abuse, namely:
(a) The expected losses should be substantial and not merely de minimis in extent;
(b) The substantial losses apprehended must be reasonably imminent;

(c) The retrenchment must be reasonably necessary and likely to effectively prevent the
expected losses; and
(d) The alleged losses, if already incurred, and the expected imminent losses sought to be
forestalled must be proved by sufficient and convincing evidence.22
Anent the last standard of sufficient and convincing evidence, it ought to be pointed out that a
less exacting standard of proof would render too easy the abuse of retrenchment as a ground for
termination of services of employees.23
Was the retrenchment of respondent valid?
In termination cases, the burden of proving that the dismissal was for a valid or authorized cause
rests upon the employer. Here, petitioner did not submit evidence of the losses to its business
operations and the economic havoc it would thereby imminently sustain. It only claimed that
respondents termination was due to its "present business/financial condition." This bare
statement fell short of the norm to show a valid retrenchment. Hence, we hold that there was no
valid cause for the retrenchment of respondent.
Indeed, not every loss incurred or expected to be incurred by an employer can justify
retrenchment.1wphi1 The employer must prove, among others, that the losses are substantial
and that the retrenchment is reasonably necessary to avert such losses. Thus, by its failure to
present sufficient and convincing evidence to prove that retrenchment was necessary,
respondents termination due to retrenchment is not allowed.
The Court realizes that the lapse of time since the retrenchment might have rendered respondent's
reinstatement to his former job no longer feasible. If that should be true, then petitioner should
instead pay to him separation pay at the rate of one. month pay for every year of service
computed from September 1992 (when he commenced to work for the petitioners) until the
finality of this decision, and full backwages from the time his compensation was withheld until
the finality of this decision.
WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision of the
Court of Appeals promulgated on February 11, 2002, subject to the modification that should
reinstatement be no longer feasible, petitioner shall pay to respondent separation pay of one
month for every year of service computed from September 1992 until the finality of this
decision, and full backwages from the time his compensation was withheld until the finality of
this decision.
Costs of suit to be paid by the petitioners.
SO ORDERED.

G.R. No. 96078 January 9, 1992

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

REGALADO, J.:
In this special civil action for certiorari, petitioner Rada seeks to annul the decision of
respondent National Labor Relations Commission (NLRC), dated November 19, 1990, reversing
the decision of the labor arbiter which ordered the reinstatement of petitioner with backwages
and awarded him overtime pay. 1
The facts, as stated in the Comment of private respondent Philnor Consultants and Planners, Inc.
(Philnor), are as follows:
Petitioner's initial employment with this Respondent was under a "Contract of
Employment for a Definite Period" dated July 7, 1977, copy of which is hereto
attached and made an integral part hereof as Annex A whereby Petitioner was
hired as "Driver" for the construction supervision phase of the Manila North
Expressway Extension, Second Stage (hereinafter referred to as MNEE Stage 2)
for a term of "about 24 months effective July 1, 1977.
xxx xxx xxx
Highlighting the nature of Petitioner's employment, Annex A specifically provides
as follows:
It is hereby understood that the Employer does not have a
continuing need for the services of the Employee beyond the
termination date of this contract and that the Employee's services
shall automatically, and without notice, terminate upon the
completion of the above specified phase of the project; and that it
is further understood that the engagement of his/her services is

coterminus with the same and not with the whole project or other
phases thereof wherein other employees of similar position as
he/she have been hired. (Par. 7, emphasis supplied)
Petitioner's first contract of employment expired on June 30, 1979. Meanwhile,
the main project, MNEE Stage 2, was not finished on account of various
constraints, not the least of which was inadequate funding, and the same was
extended and remained in progress beyond the original period of 2.3 years.
Fortunately for the Petitioner, at the time the first contract of employment expired,
Respondent was in need of Driver for the extended project. Since Petitioner had
the necessary experience and his performance under the first contract of
employment was found satisfactory, the position of Driver was offered to
Petitioner, which he accepted. Hence a second Contract of Employment for a
Definite Period of 10 months, that is, from July 1, 1979 to April 30, 1980 was
executed between Petitioner and Respondent on July 7, 1979. . . .
In March 1980 some of the areas or phases of the project were completed, but the
bulk of the project was yet to be finished. By that time some of those project
employees whose contracts of employment expired or were about to expire
because of the completion of portions of the project were offered another
employment in the remaining portion of the project. Petitioner was among those
whose contract was about to expire, and since his service performance was
satisfactory, respondent renewed his contract of employment in April 1980, after
Petitioner agreed to the offer. Accordingly, a third contract of employment for a
definite period was executed by and between the Petitioner and the Respondent
whereby the Petitioner was again employed as Driver for 19 months, from May 1,
1980 to November 30, 1981, . . .
This third contract of employment was subsequently extended for a number of
times, the last extension being for a period of 3 months, that is, from October 1,
1985 to December 31, 1985, . . .
The last extension, from October 1, 1985 to December 31, 1985 (Annex E)
covered by an "Amendment to the Contract of Employment with a Definite
Period," was not extended any further because Petitioner had no more work to do
in the project. This last extension was confirmed by a notice on November 28,
1985 duly acknowledged by the Petitioner the very next day, . . .
Sometime in the 2nd week of December 1985, Petitioner applied for "Personnel
Clearance" with Respondent dated December 9, 1985 and acknowledged having
received the amount of P3,796.20 representing conversion to cash of unused leave
credits and financial assistance. Petitioner also released Respondent from all
obligations and/or claims, etc. in a "Release, Waiver and Quitclaim" . . .2
Culled from the records, it appears that on May 20, 1987, petitioner filed before the NLRC,
National Capital Region, Department of Labor and Employment, a Complaint for non-payment

of separation pay and overtime pay. On June 3, 1987, Philnor filed its Position Paper
alleging, inter alia, that petitioner was not illegally terminated since the project for which he was
hired was completed; that he was hired under three distinct contracts of employment, each of
which was for a definite period, all within the estimated period of MNEE Stage 2 Project,
covering different phases or areas of the said project; that his work was strictly confined to the
MNEE Stage 2 Project and that he was never assigned to any other project of Philnor; that he did
not render overtime services and that there was no demand or claim for him for such overtime
pay; that he signed a "Release, Waiver and Quitclaim" releasing Philnor from all obligations and
claims; and that Philnor's business is to provide engineering consultancy services, including
supervision of construction services, such that it hires employees according to the requirements
of the project manning schedule of a particular contract. 3
On July 2, 1987, petitioner filed an Amended Complaint alleging that he was illegally dismissed
and that he was not paid overtime pay although he was made to render three hours overtime
work form Monday to Saturday for a period of three years.
On July 7, 1987, petitioner filed his Position Paper claiming that he was illegally dismissed since
he was a regular employee entitled to security of tenure; that he was not a project employee since
Philnor is not engaged in the construction business as to be covered by Policy Instructions No.
20; that the contract of employment for a definite period executed between him and Philnor is
against public policy and a clear circumvention of the law designed merely to evade any benefits
or liabilities under the statute; that his position as driver was essential, necessary and desirable to
the conduct of the business of Philnor; that he rendered overtime work until 6:00 p.m. daily
except Sundays and holidays and, therefore, he was entitled to overtime pay. 4
In his Reply to Respondent's Position Paper, petitioner claimed that he was a regular employee
pursuant to Article 278(c) of the Labor Code and, thus, he cannot be terminated except for a just
cause under Article 280 of the Code; and that the public respondent's ruling in Quiwa vs. Philnor
Consultants and Planners, Inc. 5 is not applicable to his case since he was an administrative
employee working as a company driver, which position still exists and is essential to the conduct
of the business of Philnor even after the completion of his contract of employment. 6 Petitioner
likewise avers that the contract of employment for a definite period entered into between him
and Philnor was a ploy to defeat the intent of Article 280 of the Labor Code.
On July 28, 1987, Philnor filed its Respondent's Supplemental Position Paper, alleging therein
that petitioner was not a company driver since his job was to drive the employees hired to work
at the MNEE Stage 2 Project to and from the filed office at Sto. Domingo Interchange,
Pampanga; that the office hours observed in the project were from 7:00 a.m. to 4:00 p.m.
Mondays through Saturdays; that Philnor adopted the policy of allowing certain employees, not
necessarily the project driver, to bring home project vehicles to afford fast and free transportation
to and from the project field office considering the distance between the project site and the
employees' residence, to avoid project delays and inefficiency due to employee tardiness caused
by transportation problem; that petitioner was allowed to use a project vehicle which he used to
pick up and drop off some ten employees along Epifanio de los Santos Avenue (EDSA), on his
way home to Marikina, Metro Manila; that when he was absent or on leave, another employee
living in Metro Manila used the same vehicle in transporting the same employees; that the time

used by petitioner to and from his residence to the project site from 5:30 a.m. to 7:00 a.m. and
from 4:00 p.m. to 6:00 p.m., or about three hours daily, was not overtime work as he was merely
enjoying the benefit and convenience of free transportation provided by Philnor, otherwise
without such vehicle he would have used at least four hours by using public transportation and
spent P12.00 daily fare; that in the case ofQuiwa vs. Philnor Consultants and Planners, Inc.,
supra, the NLRC upheld Philnor's position that Quiwa was a project employee and he was not
entitled to termination pay under Policy Instructions No. 20 since his employment was
coterminous with the completion of the project.
On August 25, 1987, Philnor filed its Respondent's Reply/Comments to Complainant's Rejoinder
and Reply, submitting therewith two letters dated January 5, 1985 and February 6, 1985, signed
by MNEE Stage 2 Project employees, including herein petitioner, where they asked what
termination benefits could be given to them as the MNEE Stage 2 Project was nearing
completion, and Philnor's letter-reply dated February 22, 1985 informing them that they are not
entitled to termination benefits as they are contractual/project employees.
On August 31, 1989, Labor Arbiter Dominador M. Cruz rendered a decision 7 with the following
dispositive portion:
WHEREFORE, in view of all the foregoing considerations, judgment is hereby
rendered:
(1) Ordering the respondent company to reinstate the complainant to his former
position without loss of seniority rights and other privileges with full backwages
from the time of his dismissal to his actual reinstatement;
(2) Directing the respondent company to pay the complainant overtime pay for the
three excess hours of work performed during working days from January 1983 to
December 1985; and
(3) Dismissing all other claims for lack of merit.
SO ORDERED.
Acting on Philnor's appeal, the NLRC rendered its assailed decision dated November 19, 1990,
setting aside the labor arbiter's aforequoted decision and dismissing petitioner's complaint.
Hence this petition wherein petitioner charges respondent NLRC with grave abuse of discretion
amounting to lack of jurisdiction for the following reasons:
1. The decision of the labor arbiter, dated August 31, 1989, has already become final and
executory;
2. The case of Quiwa vs. Philnor Consultants and Planners, Inc. is not binding nor is it
applicable to this case;

3. The petitioner is a regular employee with eight years and five months of continuous services
for his employer, private respondent Philnor;
4. The claims for overtime services, reinstatement and full backwages are valid and meritorious
and should have been sustained; and
5. The decision of the labor arbiter should be reinstated as it is more in accord with the facts, the
law and evidence.
The petition is devoid of merit.
1. Petitioner questions the jurisdiction of respondent NLRC in taking cognizance of the appeal
filed by Philnor in spite of the latter's failure to file a supersedeas bond within ten days from
receipt of the labor arbiter's decision, by reason of which the appeal should be deemed to have
been filed out of time. It will be noted, however, that Philnor was able to file a bond although it
was made beyond the 10-day reglementary period.
While it is true that the payment of the supersedeas bond is an essential requirement in the
perfection of an appeal, however, where the fee had been paid although payment was delayed,
the broader interests of justice and the desired objective of resolving controversies on the merits
demands that the appeal be given due course. Besides, it was within the inherent power of the
NLRC to have allowed late payment of the bond, considering that the aforesaid decision of the
labor arbiter was received by private respondent on October 3, 1989 and its appeal was duly filed
on October 13, 1989. However, said decision did not state the amount awarded as backwages and
overtime pay, hence the amount of the supersedeas bond could not be determined. It was only in
the order of the NLRC of February 16, 1990 that the amount of the supersedeas bond was
specified and which bond, after an extension granted by the NLRC, was timely filed by private
respondent.
Moreover, as provided by Article 221 of the Labor Code, "in any proceeding before the
Commission or any of the Labor Arbiters, the rules of evidence prevailing in Courts of law or
equity shall not be controlling and it is the spirit and intention of this Code that the Commission
and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the
facts in each case speedily and objectively without regard to technicalities of law or procedure,
all in the interest of due process. 8 Finally, the issue of timeliness of the appeal being an entirely
new and unpleaded matter in the proceedings below it may not now be raised for the first time
before this Court. 9
2. Petitioner postulates that as a regular employee, he is entitled to security of tenure, hence he
cannot be terminated without cause. Private respondent Philnor believes otherwise and asserts
that petitioner is merely a project employee who was terminated upon the completion of the
project for which he was employed.
In holding that petitioner is a regular employee, the labor arbiter found that:

. . . There is no question that the complainant was employed as driver in the

respondent company continuously from July 1, 1977 to December 31, 1985 under
various contracts of employment. Similarly, there is no dispute that respondent
Philnor Consultant & Planner, Inc., as its business name connotes, has been
engaged in providing to its client(e)le engineering consultancy services. The
record shows that while the different labor contracts executed by the parties
stipulated definite periods of engaging the services of the complainant, yet the
latter was suffered to continue performing his job upon the expiration of one
contract and the renewal of another. Under these circumstances, the complaint has
obtained the status of regular employee, it appearing that he has worked without
fail for almost eight years, a fraction of six months considered as one whole year,
and that his assigned task as driver was necessary and desirable in the usual
trade/business of the respondent employer. Assuming to be true, as spelled out in
the employment contract, that the Employer has no "continuing need for the
services of the Employe(e) beyond the termination date of this contract and that
the Employee's services shall automatically, and without notice, terminate upon
completion of the above specified phase of the project," still we cannot see our
way clear why the complainant was hired and his services engaged contract after
contract straight from 1977 to 1985 which, to our considered view, lends credence
to the contention that he worked as regular driver ferrying early in the morning
office personnel to the company main office in Pampanga and bringing back late
in the afternoon to Manila, and driving company executives for inspection of
construction workers to the jobsites. All told, we believe that the complainant,
under the environmental facts obtaining in the case at bar, is a regular employee,
the
provisions
of
written
agreement
to
the
contrary notwithstanding and regardless of the oral understanding of the parties . .
. 10
On the other hand, respondent NLRC declared that, as between the uncorroborated and
unsupported assertions of petitioners and those of private respondent which are supported by
documents, greater credence should be given the latter. It further held that:
Complainant was hired in a specific project or undertaking as driver. While such
project was still on-going he was hired several times with his employment period
fixed every time his contract was renewed. At the completion of the specific
project or undertaking his employment contract was not renewed.
We reiterate our ruling in the case of (Quiwa) vs. Philnor Consultants and
Planners, Inc., NLRC RAB III 5-1738-84, it is being applicable in this case, viz.:
. . . While it is true that the activities performed by him were
necessary or desirable in the usual business or trade of the
respondent as consultants, planners, contractor and while it is also
true that the duration of his employment was for a period of about
seven years, these circumstances did not make him a

regular employee in contemplation of Article 281 of (the) Labor

Code. . . . 11
Our ruling in Sandoval Shipyards, Inc. vs. National Labor Relations Commission, et al. 12 is
applicable to the case at bar. Thus:
We hold that private respondents were project employees whose work was
coterminous with the project or which they were hired. Project employees, as
distinguished from regular or non-project employees, are mentioned in section
281 of the Labor Code as those "where the employment has been fixed for a
specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee."
Policy Instructions No. 20 of the Secretary of Labor, which was issued to stabilize
employer-employee relations in the construction industry, provides:
Project employees are those employed in connection with a
particular construction project. Non-project (regular) employees
are those employed by a construction company without reference
to any particular project.
Project employees are not entitled to termination pay if they are
terminated as a result of the completion of the project or any phase
thereof in which they are employed, regardless of the number of
projects in which they have been employed by a particular
construction company. Moreover, the company is not required to
obtain clearance from the Secretary of Labor in connection with
such termination.
The petitioner cited three of its own cases wherein the National Labor Relations
Commission, Deputy Minister of Labor and Employment Inciong and the
Director of the National Capital Region held that the layoff of its project
employees was lawful. Deputy Minister Inciong in TFU Case No. 1530, In Re
Sandoval Shipyards, Inc. Application for Clearance to Terminate Employees,
rendered the following ruling on February 26, 1979;
We feel that there is merit in the contention of the applicant
corporation. To our mind, the employment of the employees
concerned were fixed for a specific project or undertaking. For the
nature of the business the corporation is engaged into is one which
will not allow it to employ workers for an indefinite period.
It is significant to note that the corporation does not construct
vessels for sale or otherwise which will demand continuous
productions of ships and will need permanent or regular workers. It
merely accepts contracts for shipbuilding or for repair of vessels

form third parties and, only, on occasion when it has work contract
of this nature that it hires workers to do the job which, needless to
say, lasts only for less than a year or longer.
The completion of their work or project automatically terminates
their employment, in which case, the employer is, under the law,
only obliged to render a report on the termination of the
employment. (139-140, Rollo of G.R. No. 65689) (Emphasis
supplied)
In Cartagenas, et al. vs. Romago Electric Company, Inc., et al., 13 we likewise held that:
As an electrical contractor, the private respondent depends for its business on the
contracts it is able to obtain from real estate developers and builders of buildings.
Since its work depends on the availability of such contracts or "projects,"
necessarily the duration of the employment's of this work force is not permanent
but co-terminus with the projects to which they are assigned and from whose
payrolls they are paid. It would be extremely burdensome for their employer who,
like them, depends on the availability of projects, if it would have to carry them as
permanent employees and pay them wages even if there are no projects for them
to work on. (Emphasis supplied.)
It must be stressed herein that although petitioner worked with Philnor as a driver for eight years,
the fact that his services were rendered only for a particular project which took that same period
of time to complete categorizes him as a project employee. Petitioner was employed for one
specific project.
A non-project employee is different in that the employee is hired for more than one project. A
non-project employee, vis-a-vis a project employee, is best exemplified in the case of Fegurin, et
al. vs. National Labor Relations Commission, et al. 14 wherein four of the petitioners had been
working with the company for nine years, one for eight years, another for six years, the shortest
term being three years. In holding that petitioners are regular employees, this Court therein
explained:
Considering the nature of the work of petitioners, that of carpenter, laborer or
mason, their respective jobs would actually be continuous and on-going. When a
project to which they are individually assigned is completed, they would be
assigned to the next project or a phase thereof. In other words, they belonged to a
"work pool" from which the company would draw workers for assignment to
other projects at its discretion. They are, therefore, actually "non-project
employees."
From the foregoing, it is clear that petitioner is a project employee considering that he does not
belong to a "work pool" from which the company would draw workers for assignment to other
projects at its discretion. It is likewise apparent from the facts obtaining herein that petitioner
was utilized only for one particular project, the MNEE Stage 2 Project of respondent company.

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

G.R. No. 161713

August 20, 2008

LEPANTO
CONSOLIDATED
MINING
vs.
LEPANTO LOCAL STAFF UNION, respondent.

COMPANY, petitioner,

RESOLUTION
CARPIO, J.:
The Case
Before the Court is a petition for review1 assailing the 22 July 2003 Decision2 and 20 January
2004 Resolution3 of the Court of Appeals in CA-G.R. SP No. 60644.
The Antecedent Facts
Lepanto Consolidated Mining Company4 (petitioner) is a domestic mining corporation. Lepanto
Local Staff Union (respondent) is the duly certified bargaining agent of petitioner's employees
occupying staff positions.
On 28 November 1998, petitioner and respondent entered into their fourth Collective Bargaining
Agreement (4th CBA) for the period from 1 July 1998 to 30 June 2000. The 4th CBA provides:
ARTICLE VIII - NIGHT SHIFT DIFFERENTIAL
Section 3. Night Differential pay. - The Company shall continue to pay nightshift
differential for work during the first and third shifts to all covered employees within the
bargaining unit as follows:
For the First Shift (11:00 p.m. to 7:00 a.m.), the differential pay will be 20% of the basic
rate. For the Third Shift (3:00 p.m. to 11:00 p.m.), the differential pay will be 15% of the
basic rate.
However, for overtime work, which extends beyond the regular day shift (7:00 a.m. to
3:00 p.m.), there [will] be no night differential pay added before the overtime pay is
calculated.
ARTICLE XII - RIGHTS, PRIVILEGES AND OTHER BENEFITS
Section 9. Longevity pay - The company shall grant longevity pay of P30.00 per month
effective July 1, 1998 and every year thereafter.5
On 23 April 2000, respondent filed a complaint with the National Conciliation and Mediation
Board, Cordillera Administrative Region (NCMB-CAR) alleging that petitioner failed to pay the
night shift differential and longevity pay of respondent's members as provided in the 4th CBA.

Petitioner and respondent failed to amicably settle the dispute. They agreed to submit the issues
to Voluntary Arbitrator Norma B. Advincula (Voluntary Arbitrator) for resolution.
The Ruling of the Voluntary Arbitrator
In a Decision dated 26 May 2000,6 the Voluntary Arbitrator ruled in favor of respondent as
follows:
WHEREFORE, foregoing considered, this Office holds and so orders respondent Lepanto
Consolidated Mining Corporation (LCMC) to grant complainant Lepanto Local Staff
Union (LLSU) the following benefits:
Longevity pay of P30.00 per month which shall be reckoned form July 1, 1998 and every
year thereafter in consonance with their contract; and
Night shift differential pay of 15% of the basic rate for hours of work rendered beyond
3:00 p.m. for the following shifts: 7:00 A.M. to 4:00 P.M., 7:30 A.M. to 4:30 P.M. and
8:00 A.M. to 5:00 P.M. to be reckoned from the date of the effectivity of the 4th CBA
which was on July 1, 1998.
SO ORDERED.7
The Voluntary Arbitrator ruled that petitioner had the legal obligation to pay longevity pay
of P30 per month effective 1 July 1998. The Voluntary Arbitrator rejected petitioner's contention
that "effective" should be understood as the reckoning period from which the employees start
earning their right to longevity pay, and that the longevity pay should be paid only on 1 July
1999. The Voluntary Arbitrator ruled that 1 July 1998 was the reckoning date that indicated
when the amounts due were to be given.
The Voluntary Arbitrator agreed with respondent that surface workers on the second shift who
performed work after 3:00 p.m. should be given an additional night shift differential pay
equivalent to 15% of their basic rate. Interpreting paragraph 3, Section 3, Article VIII of the
4th CBA, the Voluntary Arbitrator ruled that it only meant that an employee who extends work
beyond the second shift shall receive overtime pay which shall be computed before the night
shift differential pay. In other words, it excludes the night shift differential in the computation of
overtime pay.
The Voluntary Arbitrator ruled that the inclusion of paragraph 3, Section 3, Article VIII of the
4th CBA disclosed the intent of the parties to grant night shift differential benefits to employees
who rendered work beyond the regular day shift. The Voluntary Arbitrator ruled that if the
intention were otherwise, paragraph 3 would have been deleted.
Finally, the Voluntary Arbitrator ruled that the respondent's claim for night shift differential
arising from the 1st, 2nd, and 3rd CBAs had already prescribed.

Petitioner filed a motion for reconsideration. In her Resolution dated 5 August 2000,8 the
Voluntary Arbitrator denied the motion for reconsideration for lack of merit.
Petitioner filed a petition for review before the Court of Appeals.
The Ruling of the Court of Appeals
In its 22 July 2003 Decision, the Court of Appeals affirmed the Voluntary Arbitrator's Decision.
The Court of Appeals ruled that paragraph 3, Section 3, Article VIII was clear and unequivocal.
It grants night shift differential pay to employees of the second shift for work rendered beyond
their regular day shift. However, the night shift differential was excluded in the computation of
the overtime pay.
The Court of Appeals further ruled that the records of the case revealed that during the effectivity
of the 4th CBA, petitioner voluntarily complied with paragraph 3, Section 3, Article VIII by
paying night shift differential to employees for hours worked beyond 3:00 p.m. Petitioner's act
disclosed the parties' intent to include employees in the second shift in the payment of night shift
differential. The Court of Appeals rejected petitioner's claim that the payment was due to error
and mere inadvertence on the part of petitioner's accounting employees. The Court of Appeals
noted that the records revealed that petitioner still continued to pay night shift differential for
hours worked beyond 3:00 p.m. after the Voluntary Arbitrator rendered the 26 May 2000
Decision. Thus, petitioner is estopped from claiming erroneous payment.
Petitioner filed a motion for reconsideration. In its 20 January 2004 Resolution, the Court of
Appeals denied the motion for lack of merit.
Hence, the petition before this Court.
The Issue
The sole issue in this case is whether the Court of Appeals erred in affirming the Voluntary
Arbitrator's interpretation of the 4th CBA that the employees in the second shift are entitled to
night shift differential.
The Ruling of this Court
The petition has no merit.
The terms and conditions of a collective bargaining contract constitute the law between the
parties.9 If the terms of the CBA are clear and have no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall prevail.10
The disputed provision of the 4th CBA provides:
ARTICLE VIII - NIGHT SHIFT DIFFERENTIAL

Section 3. Night Differential pay. - The Company shall continue to pay nightshift
differential for work during the first and third shifts to all covered employees within the
bargaining unit as follows:
For the First Shift (11:00 p.m. to 7:00 a.m.), the differential pay will be 20% of the basic
rate. For the Third Shift (3:00 p.m. to 11:00 p.m.), the differential pay will be 15% of the
basic rate.
However, for overtime work, which extends beyond the regular day shift (7:00 a.m. to 3:00
p.m.), there [will] be no night differential pay added before the overtime pay is calculated.
There is no question that workers are entitled to night shift differential of 20% of the basic rate
for work performed during the first shift from 11:00 p.m. to 7:00 a.m. Workers are also entitled
to night shift differential of 15% of the basic rate for work performed during the third shift from
3:00 p.m. to 11:00 p.m. The issue is whether workers are entitled to night shift differential for
work performed beyond the regular day shift, from 7:00 a.m. to 3:00 p.m.
We sustain the interpretation of both the Voluntary Arbitrator and the Court of Appeals. The first
paragraph of Section 3 provides that petitioner shall continue to pay night shift differential to
workers of the first and third shifts. It does not provide that workers who performed work
beyond the second shift shall not be entitled to night shift differential. The inclusion of the third
paragraph is not intended to exclude the regular day shift workers from receiving night shift
differential for work performed beyond 3:00 p.m. It only provides that the night shift differential
pay shall be excluded in the computation of the overtime pay.
It is settled that in order to ascertain the intention of the contracting parties, the Voluntary
Arbitrator shall principally consider their contemporaneous and subsequent acts as well as their
negotiating and contractual history and evidence of past practices.11 In this case, the Voluntary
Arbitrator and the Court of Appeals both found that the provision in question was contained in
the 1st, 2nd, and 3rd CBAs between petitioner and respondent. During the effectivity of the first
three CBAs, petitioner paid night shift differentials to other workers who were members of
respondent for work performed beyond 3:00 p.m. Petitioner also paid night shift differential for
work beyond 3:00 p.m. during the effectivity of the 4th CBA. Petitioner alleges that the payment
of night shift differential for work performed beyond 3:00 p.m. during the 4th CBA was a
mistake on the part of its accounting department. However, the Court of Appeals correctly ruled
that petitioner failed to present any convincing evidence to prove that the payment was
erroneous. In fact, the Court of Appeals found that even after the promulgation of the Voluntary
Arbitrator's decision and while the case was pending appeal, petitioner still paid night shift
differential for work performed beyond 3:00 p.m. It affirms the intention of the parties to the
CBA to grant night shift differential for work performed beyond 3:00 p.m.
WHEREFORE, we DENY the petition. We AFFIRM the 22 July 2003 Decision and 20
January 2004 Resolution of the Court of Appeals in CA-G.R. SP No. 60644. Costs against
petitioner.
SO ORDERED.

AUTO

BUS
TRANSPORT
BAUTISTA, respondent.

SYSTEMS,

INC.,

petitioner,

vs. ANTONIO

DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari assailing the Decision[1] and
Resolution[2] of the Court of Appeals affirming the Decision[3] of the National Labor Relations
Commission (NLRC). The NLRC ruling modified the Decision of the Labor Arbiter (finding
respondent entitled to the award of 13th month pay and service incentive leave pay) by deleting
the award of 13th month pay to respondent.

THE FACTS
Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus
Transport Systems, Inc. (Autobus), as driver-conductor with travel routes Manila-Tuguegarao
via Baguio, Baguio- Tuguegarao via Manila and Manila-Tabuk via Baguio. Respondent was paid
on commission basis, seven percent (7%) of the total gross income per travel, on a twice a month
basis.
On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva
Vizcaya, the bus he was driving accidentally bumped the rear portion of Autobus No. 124, as the
latter vehicle suddenly stopped at a sharp curve without giving any warning.
Respondent averred that the accident happened because he was compelled by the
management to go back to Roxas, Isabela, although he had not slept for almost twenty-four (24)
hours, as he had just arrived in Manila from Roxas, Isabela. Respondent further alleged that he
was not allowed to work until he fully paid the amount of P75,551.50, representing thirty percent
(30%) of the cost of repair of the damaged buses and that despite respondents pleas for

reconsideration, the same was ignored by management. After a month, management sent him a
letter of termination.
Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with
Money Claims for nonpayment of 13th month pay and service incentive leave pay against
Autobus.
Petitioner, on the other hand, maintained that respondents employment was replete with
offenses involving reckless imprudence, gross negligence, and dishonesty. To support its claim,
petitioner presented copies of letters, memos, irregularity reports, and warrants of arrest
pertaining to several incidents wherein respondent was involved.
Furthermore, petitioner avers that in the exercise of its management prerogative, respondents
employment was terminated only after the latter was provided with an opportunity to explain his
side regarding the accident on 03 January 2000.
On 29 September 2000, based on the pleadings and supporting evidence presented by the
parties, Labor Arbiter Monroe C. Tabingan promulgated a Decision,[4] the dispositive portion of
which reads:
WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal
Dismissal has no leg to stand on. It is hereby ordered DISMISSED, as it is hereby DISMISSED.
However, still based on the above-discussed premises, the respondent must pay to the
complainant the following:
a. his 13th month pay from the date of his hiring to the date of his dismissal,
presently computed at P78,117.87;
b. his service incentive leave pay for all the years he had been in service with the
respondent, presently computed at P13,788.05.
All other claims of both complainant and respondent are hereby dismissed for lack of merit.[5]
Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to the
NLRC which rendered its decision on 28 September 2001, the decretal portion of which reads:
[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec. 3
provides:
Section 3. Employers covered. The Decree shall apply to all employers except to:
xxx xxx xxx
e) employers of those who are paid on purely commission, boundary, or task basis, performing a
specific work, irrespective of the time consumed in the performance thereof. xxx.

Records show that complainant, in his position paper, admitted that he was paid on a commission
basis.
In view of the foregoing, we deem it just and equitable to modify the assailed Decision by
deleting the award of 13th month pay to the complainant.
WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the award of
13th month pay. The other findings are AFFIRMED.[6]
In other words, the award of service incentive leave pay was maintained. Petitioner thus
sought a reconsideration of this aspect, which was subsequently denied in a Resolution by the
NLRC dated 31 October 2001.
Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the
review of said decision with the Court of Appeals which was subsequently denied by the
appellate court in a Decision dated 06 May 2002, the dispositive portion of which reads:
WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and the
assailed Decision of respondent Commission in NLRC NCR CA No. 026584-2000 is hereby
AFFIRMED in toto. No costs.[7]
Hence, the instant petition.

ISSUES
1. Whether or not respondent is entitled to service incentive leave;
2. Whether or not the three (3)-year prescriptive period provided under Article 291 of the
Labor Code, as amended, is applicable to respondents claim of service incentive leave
pay.

RULING OF THE COURT

The disposition of the first issue revolves around the proper interpretation of Article 95 of
the Labor Code vis--vis Section 1(D), Rule V, Book III of the Implementing Rules and
Regulations of the Labor Code which provides:
Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE
(a) Every employee who has rendered at least one year of service shall be entitled to a
yearly service incentive leave of five days with pay.
Book III, Rule V: SERVICE INCENTIVE LEAVE

SECTION 1. Coverage. This rule shall apply to all employees except:

(d) Field personnel and other employees whose performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely
commission basis, or those who are paid in a fixed amount for performing work
irrespective of the time consumed in the performance thereof; . . .
A careful perusal of said provisions of law will result in the conclusion that the grant of
service incentive leave has been delimited by the Implementing Rules and Regulations of the
Labor Code to apply only to those employees not explicitly excluded by Section 1 of Rule V.
According to the Implementing Rules, Service Incentive Leave shall not apply to employees
classified as field personnel. The phrase other employees whose performance is unsupervised by
the employer must not be understood as a separate classification of employees to which service
incentive leave shall not be granted. Rather, it serves as an amplification of the interpretation of
the definition of field personnel under the Labor Code as those whose actual hours of work in the
field cannot be determined with reasonable certainty.[8]
The same is true with respect to the phrase those who are engaged on task or contract basis,
purely commission basis. Said phrase should be related with field personnel, applying the rule
on ejusdem generis that general and unlimited terms are restrained and limited by the particular
terms that they follow.[9] Hence, employees engaged on task or contract basis or paid on purely
commission basis are not automatically exempted from the grant of service incentive leave,
unless, they fall under the classification of field personnel.
Therefore, petitioners contention that respondent is not entitled to the grant of service
incentive leave just because he was paid on purely commission basis is misplaced. What must be
ascertained in order to resolve the issue of propriety of the grant of service incentive leave to
respondent is whether or not he is a field personnel.
According to Article 82 of the Labor Code, field personnel shall refer to non-agricultural
employees who regularly perform their duties away from the principal place of business or
branch office of the employer and whose actual hours of work in the field cannot be determined
with reasonable certainty. This definition is further elaborated in the Bureau of Working
Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical Commercial Employees
Association[10] which states that:
As a general rule, [field personnel] are those whose performance of their job/service is not
supervised by the employer or his representative, the workplace being away from the principal
office and whose hours and days of work cannot be determined with reasonable certainty; hence,
they are paid specific amount for rendering specific service or performing specific work. If
required to be at specific places at specific times, employees including drivers cannot be said to
be field personnel despite the fact that they are performing work away from the principal office
of the employee. [Emphasis ours]
To this discussion by the BWC, the petitioner differs and postulates that under said advisory
opinion, no employee would ever be considered a field personnel because every employer, in one
way or another, exercises control over his employees. Petitioner further argues that the only
criterion that should be considered is the nature of work of the employee in that, if the employees

job requires that he works away from the principal office like that of a messenger or a bus driver,
then he is inevitably a field personnel.
We are not persuaded. At this point, it is necessary to stress that the definition of a field
personnel is not merely concerned with the location where the employee regularly performs his
duties but also with the fact that the employees performance is unsupervised by the employer. As
discussed above, field personnel are those who regularly perform their duties away from the
principal place of business of the employerand whose actual hours of work in the field cannot be
determined with reasonable certainty. Thus, in order to conclude whether an employee is a field
employee, it is also necessary to ascertain if actual hours of work in the field can be determined
with reasonable certainty by the employer. In so doing, an inquiry must be made as to whether or
not the employees time and performance are constantly supervised by the employer.
As observed by the Labor Arbiter and concurred in by the Court of Appeals:
It is of judicial notice that along the routes that are plied by these bus companies, there are its
inspectors assigned at strategic places who board the bus and inspect the passengers, the punched
tickets, and the conductors reports. There is also the mandatory once-a-week car barn or shop
day, where the bus is regularly checked as to its mechanical, electrical, and hydraulic aspects,
whether or not there are problems thereon as reported by the driver and/or conductor. They too,
must be at specific place as [sic] specified time, as they generally observe prompt departure and
arrival from their point of origin to their point of destination. In each and every depot, there is
always the Dispatcher whose function is precisely to see to it that the bus and its crew leave the
premises at specific times and arrive at the estimated proper time. These, are present in the case
at bar. The driver, the complainant herein, was therefore under constant supervision while in the
performance of this work. He cannot be considered a field personnel.[11]
We agree in the above disquisition. Therefore, as correctly concluded by the appellate court,
respondent is not a field personnel but a regular employee who performs tasks usually necessary
and desirable to the usual trade of petitioners business. Accordingly, respondent is entitled to the
grant of service incentive leave.
The question now that must be addressed is up to what amount of service incentive leave
pay respondent is entitled to.
The response to this query inevitably leads us to the correlative issue of whether or not the
three (3)-year prescriptive period under Article 291 of the Labor Code is applicable to
respondents claim of service incentive leave pay.
Article 291 of the Labor Code states that all money claims arising from employer-employee
relationship shall be filed within three (3) years from the time the cause of action accrued;
otherwise, they shall be forever barred.
In the application of this section of the Labor Code, the pivotal question to be answered is
when does the cause of action for money claims accrue in order to determine the reckoning date
of the three-year prescriptive period.
It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor
of the plaintiff by whatever means and under whatever law it arises or is created; (2) an
obligation on the part of the named defendant to respect or not to violate such right; and (3) an

act or omission on the part of such defendant violative of the right of the plaintiff or constituting
a breach of the obligation of the defendant to the plaintiff.[12]
To properly construe Article 291 of the Labor Code, it is essential to ascertain the time when
the third element of a cause of action transpired. Stated differently, in the computation of the
three-year prescriptive period, a determination must be made as to the period when the act
constituting a violation of the workers right to the benefits being claimed was committed. For if
the cause of action accrued more than three (3) years before the filing of the money claim, said
cause of action has already prescribed in accordance with Article 291.[13]
Consequently, in cases of nonpayment of allowances and other monetary benefits, if it is
established that the benefits being claimed have been withheld from the employee for a period
longer than three (3) years, the amount pertaining to the period beyond the three-year
prescriptive period is therefore barred by prescription. The amount that can only be demanded by
the aggrieved employee shall be limited to the amount of the benefits withheld within three (3)
years before the filing of the complaint.[14]
It is essential at this point, however, to recognize that the service incentive leave is a curious
animal in relation to other benefits granted by the law to every employee. In the case of service
incentive leave, the employee may choose to either use his leave credits or commute it to its
monetary equivalent if not exhausted at the end of the year.[15] Furthermore, if the employee
entitled to service incentive leave does not use or commute the same, he is entitled upon his
resignation or separation from work to the commutation of his accrued service incentive leave.
As enunciated by the Court in Fernandez v. NLRC:[16]
The clear policy of the Labor Code is to grant service incentive leave pay to workers in all
establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing
Rules and Regulations provides that [e]very employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of five days with pay. Service
incentive leave is a right which accrues to every employee who has served within 12 months,
whether continuous or broken reckoned from the date the employee started working, including
authorized absences and paid regular holidays unless the working days in the establishment as a
matter of practice or policy, or that provided in the employment contracts, is less than 12 months,
in which case said period shall be considered as one year. It is also commutable to its money
equivalent if not used or exhausted at the end of the year. In other words, an employee who has
served for one year is entitled to it. He may use it as leave days or he may collect its monetary
value. To limit the award to three years, as the solicitor general recommends, is to unduly restrict
such right.[17][Italics supplied]
Correspondingly, it can be conscientiously deduced that the cause of action of an entitled
employee to claim his service incentive leave pay accrues from the moment the employer refuses
to remunerate its monetary equivalent if the employee did not make use of said leave credits but
instead chose to avail of its commutation. Accordingly, if the employee wishes to accumulate his
leave credits and opts for its commutation upon his resignation or separation from employment,
his cause of action to claim the whole amount of his accumulated service incentive leave shall
arise when the employer fails to pay such amount at the time of his resignation or separation
from employment.

Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive
leave, we can conclude that the three (3)-year prescriptive period commences, not at the end of
the year when the employee becomes entitled to the commutation of his service incentive leave,
but from the time when the employer refuses to pay its monetary equivalent after demand of
commutation or upon termination of the employees services, as the case may be.
The above construal of Art. 291, vis--vis the rules on service incentive leave, is in keeping
with the rudimentary principle that in the implementation and interpretation of the provisions of
the Labor Code and its implementing regulations, the workingmans welfare should be the
primordial and paramount consideration.[18] The policy is to extend the applicability of the decree
to a greater number of employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid and protection to labor.[19]
In the case at bar, respondent had not made use of his service incentive leave nor demanded
for its commutation until his employment was terminated by petitioner. Neither did petitioner
compensate his accumulated service incentive leave pay at the time of his dismissal. It was only
upon his filing of a complaint for illegal dismissal, one month from the time of his dismissal, that
respondent demanded from his former employer commutation of his accumulated leave credits.
His cause of action to claim the payment of his accumulated service incentive leave thus accrued
from the time when his employer dismissed him and failed to pay his accumulated leave credits.
Therefore, the prescriptive period with respect to his claim for service incentive leave pay
only commenced from the time the employer failed to compensate his accumulated service
incentive leave pay at the time of his dismissal. Since respondent had filed his money claim after
only one month from the time of his dismissal, necessarily, his money claim was filed within the
prescriptive period provided for by Article 291 of the Labor Code.
WHEREFORE, premises considered, the instant petition is hereby DENIED. The assailed
Decision of the Court of Appeals in CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.
SO ORDERED.

[G.R. No. 122468. September 3, 1998]

SENTINEL SECURITY AGENCY, INC., petitioner, vs. NATIONAL LABOR

RELATIONS COMMISSION, ADRIANO CABANO, JR., VERONICO C.
ZAMBO, HELCIAS ARROYO, RUSTICO ANDOY, and MAXIMO
ORTIZ, respondents.

[G.R. No. 122716. September 3, 1998]

PHILIPIPPINE AMERICAN LIFE INSURANCE COMPANY, petitioner, vs. NATIONAL

LABOR RELATIONS COMMISSION, VERONICO ZAMBO, HELCIAS
ARROYO, ADRIANO CABANO, MAXIMO ORTIZ, and RUSTICO
ANDOY, respondents.
DECISION
PANGANIBAN, J.:
The transfer of an employee involves a lateral movement within the business or operation of
the employer, without demotion in rank, diminution of benefits or, worse, suspension of
employment even if temporary. The recall and transfer of security guards require reassignment to
another post and are not equivalent to their placement on floating status. Off-detailing security
guards for a reasonable period of six months is justified only in bona fide cases of suspension of
operation, business or undertaking.
The Case

This is the rationale used by the Court in dismissing the two consolidated petitions
for certiorari before us, seeking the reversal of the Decision dated August 25, 1995, and the
Resolution date October 24, 1995, both promulgated by the National Labor Relations
Commission[1] in NLRC Case No. V-0317-94 (RAB VII-01-0097-94, RAB VII-020173-94, and
RAB VII-01-0133-94).

In the action for illegal dismissal and payment of salary differential, service incentive leave
pay and separation pay filed by private respondents, Labor Arbiter Dominador A. Almirante
rendered a Decision, which disposed:[2]
WHEREFORE, premises considered[,] judgment is hereby rendered ordering xxx Sentinel
Security Agency, Inc. jointly and severally with xxx Philamlife, Cebu Branch, to pay
complainants the total amount of [s]ixty [t]housand [o]ne [h]undred [t]welve [p]esos and 50/100
(P60,112.50) in the concept of 13th month pay and service incentive leave benefits as computed
by our Labor Arbitration Associate whose computation is hereto attached and forming part
thereof.[3]
On appeal, the NLRC modified the labor arbiters Decision. The dispositive portion of the
NLRC Decision[4]reads:
WHEREFORE, the assailed Decision is hereby MODIFIED in so far as the award of 13 th month
pay for the previous years which is hereby excluded. Further, xxx Sentinel Security Agency, Inc.
is hereby ORDERED to pay complainants separation pay at the rate of month pay for every year
of service and for both xxx Philippine American Life Insurance, Inc. and Sentinel Security
Agency, Inc. and/or Daniel Iway to pay to the [complainants] jointly and severally their
backwages from January 16, 1994 to January 15, 1995 and the corresponding 13th month pay for
the said year. The monetary awards hereby granted are broken down as follows [into separation
pay, back wages, 13thmonth pay and service incentive leave pay]:
x x x x x x x x x.[5]
The challenged Resolution denied reconsideration for lack of merit.[6]
The Facts

The undisputed factual backdrop is narrated by Respondent Commission as follows:[7]

The complainants were employees of Sentinel [Security Agency, Inc. hereafter referred to as the
Agency] since March 1, 1966 in the case of Veronico Zambo; October 27, 1975 in the case of
Helcias Arroyo; September 20, 1985 in the case of Adriano Cabano; February 1, 1990 in the case
of Maximo Ortiz; and Ortiz and November 1, 1967 in the case of Rustico Andoy. They were
assigned to render guard duty at the premises of [Philippine American Life Insurance Company]
at Jones Avenue, Cebu City. On December 16, 1993 Philippine American Life Insurance
Company [the Client, for brevity], through Carlos De Pano, Jr., sent notice to all concerned that
the [Agency] was again awarded the contract of [s]ecurity [s]ervices together with a request to
replace all the security guards in the companys offices at the cities of Cebu, Bacolod, Cagayan de
Oro, Dipolog and Ilagan. In compliance therewith, [the Agency] issued on January 12, 1994, a
Relief and Transfer Order replacing the complainants as guards [of the Client] and for then to be
re-assigned [to] other clients effective January 16, 1994. As ordered, the complainants reported
but were never given new assignments but instead they were told in the vernacular, gui-ilisa mo
kay mga tigulang naman mo which when translated means, you were replace[d] because you are

already old. Precisely, the complainants lost no time but filed the subject illegal dismissal cases
on January 18, January 26 and February 4, 1994 and prayed for payment of separation pay and
other labor standard benefits.
[The Client and the Agency] maintained there was no dismissal on the part of the complainants,
constructive or otherwise, as they were protected by the contract of security services which
allows the recall of security guards from their assigned posts at the will of either party. It also
advanced that the complainants prematurely filed the subject cases without giving the [Agency] a
chance to give them some assignments.
On the part of [the Client], it averred further that there [was] no employer-employee relationship
between it and the complainants as the latter were merely assigned to its Cebu Branch under a
job contract; that [the Agency] ha[d] its own separate corporate personality apart from that of
[the Client]. Besides, it pointed out that the functions of the complainants in providing security
services to [the Clients] property [were] not necessary and desirable to the usual business or
trade of [the Client], as it could still operate and engage in its life insurance business without the
security guards. In fine, [the Client] maintains that the complainants have no cause of action
against it.
Ruling of Respondent Commission

Respondent Commission ruled that the complainants were constructively dismissed, as the
recall of the complainants from their long time post[s] at [the premises of the Client] without any
good reason is a scheme to justify or camouflage illegal dismissal.
It ruled Superstar Security Agency, Inc. vs. National Labor Relations Commission[8] and A
Prime Security Services, Inc. vs. national Labor Relations Commission[9] were not applicable to
the case at bar. In the former, the security guard was placed on temporary off-detail due to his
poor performance and lack of elementary courtesy and tact, and to the cost-cutting program of
the agency. In the latter, the relief of the security guard was due to his sleeping while on duty and
his repeated refusal to resume work despite notice.
In the present case, the complainants case, the complainants were told by the Agency that
they lost their assignment at the Clients premises because they were already old, and not because
they had committed any infraction or irregularity. The NLRC applied RA 7641,[10] which gives
retirement benefits of one-half month pay per year of service to retirable employees, viz.:
xxx As stated earlier xxx, the complainants were in the service of [the Client] for nearly twenty
(20) years in the cases of Helcias Arroyo and for more than twenty (20) years in the cases of
Veronico Zambo and Rustico Andoy, which long years of service [appear] on record to be
unblemished. The complainants were then confronted with an impending sudden loss of earning
for while the order of [the Agency] to immediately report for reassignment momentarily gave
them hope, there was in fact no immediate reinstatement. While it could have been prudent for
the complainants to wait, they were set unstable and were actually threatened by the statement of
the personnel in charge of [the Agency] that they were already old, that was why they were
replaced.

Against these glaring facts is the new Retirement Law, R.A. 7641 which took effect on January
7, 1993 giving retirement benefits of month pay per year of service to an employee upon
reaching retirement age to be paid by the employer, in this case at quiet a sizeable amount and in
not so long due time as some of the complainants were described as already old.
As complainants were illegally dismissed, the NLRC ruled that they were entitled to the
twin remedies of back wages for one (1) year from the time of their dismissal on January 15,
1994, payable by both the Client and the Agency, and separation pay one-half month pay for
every year of service payable only by the Agency. Reinstatement was not granted due to the
resulting antipathy and resentment among the complainants, the Agency and the Client.
Hence, this petition.[11]
The Issues

In their memoranda, the Agency poses this question:[12]

xxx [W]hether xxx Sentinel is guilty of illegal dismissal[,]
On the other hand, the Client raises the following issues:[13]
Whether xxx [the complainants] were illegally dismissed by their employer, Sentinel Security
Agency, Inc., and in holding petitioner to be equally liable therefor.
Whether xxx petitioner is jointly and severally liable with Sentinel Security Agency, Inc., in the
latters payment of backwages, 13th month pay and service incentive leave pay to its employees
xxx.
In sum, the resolution of these consolidated petitions hinges on (1) whether the complainants
were illegally dismissed, and (2) whether the Client is jointly and severally liable for their
thirteenth-month and service incentive leave pays.
The Courts Ruling

The petition is partly meritorious.

First Issue: Illegal Dismissal

The private respondents transfer, according to Respondent Commission, was affected to

circumvent the mandate of Republic Act 7641 (New Retirement Law), which by then had
already taken effect, in view of the fact that the complainants had worked for both the Client and
the Agency for 10 to 20 years and were nearing retirement age. With this premise, the NLRC

concluded that the guards were illegally dismissed. The complainants add that the findings of the
Commission match the remarks of the personnel manager of the Agency, Feliciano Marticion;
that is, that they were being replaced because they were already old. They insist that their service
records are unblemished; hence, they could not have been dismissed by reason of any just cause.
We agree that the security guards were illegally dismissed, but not for the reasons given by
the public respondent. The aforecited contentions of the NLRC are speculative and unsupported
by the evidence on record. As the solicitor general said in his Manifestation in Lieu of Comment,
the relief and transfer order was akin to placing private respondents on temporary off-detail.
Being sidelined temporarily is a standard stipulation in employment contracts, as the
availability of assignment for security guards is primarily dependent on the contracts entered into
by the agency with third parties. Most contracts for security services, as in this case, stipulate
that the client may request the replacement of the guards assigned to it. In security agency
parlance, being placed off detail or on floating status means waiting to be posted.[14]This
circumstance is not equivalent to dismissal, so long as such status does not continue beyond
reasonable time.[15]
In the case at bar, the relief and transfer order per se did not sever the employment
relationship between the complainants and the Agency. Thus, despite the fact that complainants
were no longer assigned to the Client, Article 287 of the Labor Code, as amended by RA 7641,
still binds the Agency to provide them upon their reaching the retirement age of sixty to sixtyfive years retirement pay or whatever else was established in the collective bargaining agreement
or in any other applicable employment contract. On the other hand, the Client is not liable to the
complainants for their retirement pay because of the absence of an employer-employee
relationship between them.
However, the Agency claims that the complainants, after being placed off-detail, abandoned
their employ. The solicitor general, siding with the Agency and the labor arbiter, contends that
while abandonment of employment is inconsistent with the filing of a complaint for illegal
dismissal, such rule is not applicable where [the complainant] expressly rejects this relief and
asks for separation pay instead.
The Court disagrees. Abandonment, as a just and valid cause for termination, requires a
deliberate and unjustified refusal of an employee to resume his work, coupled with a clear
absence of any intention of returning to his or her work.[16] That complainants did not pray for
reinstatement is not sufficient proof of abandonment. A strong indication of the intention of
complainants to resume work is their allegation that on several dates they reported to the Agency
for reassignment, but were not given any. In fact, the contention of complainant is that the
Agency constructively dismissed them. Abandonment has recently been ruled to be incompatible
with constructive dismissal. We, thus, rule that complainants did not abandon their jobs.[17] We
will now demonstrate why we believe complainants were illegally dismissed.
In several cases, the Court has recognized the prerogative of management to transfer an
employee from one office to another within the same business establishment, as the exigency of
the business may require, provided that the said transfer does not result in a demotion in rank or
a diminution in salary, benefits and other privileges of the employee;[18] or is not unreasonable,
inconvenient or prejudicial to the latter;[19] or is not used as a subterfuge by the employer to rid
himself of an undesirable worker.[20]

A transfer means a movement (1) from one position to another of equivalent rank, level or
salary, without a break in the service;[21] and (2) from one office to another within the same
business establishment.[22] It is distinguished from a promotion in the sense that it involves a
lateral change as opposed to a scalar ascent.[23]
In this case, transfer of the complainants implied more than a relief from duty to give them
time to rest a mere changing of the guards. Rather, their transfer connoted a reshuffling or
exchange of their posts, or their reassignment to other posts, such that no security guard would
be without an assignment.
However, this legally recognized concept of transfer was not implemented. The agency
hired new security guards to replace the complainants, resulting in a lack of posts to which the
complainants could have been reassigned.Thus, it refused to reassign Complainant Andoy when
he reported for duty on February 2, 4 and 7, 1994; and merely told the other complainants on
various dates from January 25 to 27, 1994 that they were already too old to be posted anywhere.
The Agency now explains that since, under the law, the Agency is given a period of not
more than six months to retain the complainants on floating status, the complaint for illegal
dismissal is premature. This contention is incorrect.
A floating status requires the dire exigency of the employers bona fide suspension of
operation, business or undertaking. In security services, this happens when the clients that do not
renew their contracts with a security agency are more than those that do and the new ones that
the agency gets. However, in the case at bar, the Agency was awarded a new contract by the
Client. There was no surplus of security guards over available assignments. If there were, it was
because the Agency hired new security guards. Thus, there was no suspension of operation,
business or undertaking, bona fide or not, that would have justified placing the complainants offdetail and making them wait for a period of six months. If indeed they were merely transferred,
there would have been no need to make them wait for six months.
The only logical conclusion from the foregoing discussion is that the Agency illegally
dismissed the complainants. Hence, as a necessary consequence, the complainants are entitled to
reinstatement and back wages.[24] However, reinstatement is no longer feasible in this case. The
Agency cannot reassign them to the Client, as the former has recruited new security guards; the
complainants, on the other hand, refuse to accept other assignments. Verily, complainants do not
pray for reinstatement; in fact, they refused to be reinstated. Such refusal is indicative of strained
relations.[25] Thus, separation pay is awarded in lieu of reinstatement.[26]
Second Issue:
Clients Liability

The Client did not, as it could not, illegally dismiss the complainants. Thus, it should not be
held liable for separation pay and back wages. But even if the Client is not responsible for the
illegal dismissal of the complainants, it is jointly and severally liable with the Agency for the
complainants service incentive leave pay. In Rosewood Processing, Inc. vs. National Labor
Relations Commission,[27] the Court explained that, notwithstanding the service contract between

the client and the security agency, the two are solidarily liable for the proper wages prescribed by
the Labor Code, pursuant to Article 106, 107 and 109 thereof, which we quote hereunder:
ART. 106. Contractor or subcontractor.Whenever an employer enters into a contract with
another person for the performance of the former[s] work, the employees of the contractor and of
the latter[s] subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor
or subcontractor to such employees to the extent of the work performed under the contract, in the
same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting,
he may make appropriate distinctions between labor-only contracting and job contracting as well
as differentiations within these types of contracting and determine who among the parties
involved shall be considered the employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
xxx In such cases [labor-only contracting], the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.
ART. 107. Indirect employer.The provisions of the immediately preceding Article shall likewise
apply to any person, partnership, association or corporation which, not being an employer,
contracts with an independent contractor for the performance of any work, task, job or project.
ART. 109. Solidary liability.The provisions of existing laws to the contrary notwithstanding,
every employer or indirect employer shall be held responsible with his contractor or
subcontractor for any violation of any provision of this Code. For purpose of determining the
extent of their civil liability under this Chapter, they shall be considered as direct employers.
Under these provisions, the indirect employer, who is the Client in the case at bar, is jointly
and severally liable with the contractor for the workers wages, in the same manner and extent
that it is liable to its direct employees.This liability of the Client covers the payment of the
service incentive leave pay of the complainants during the time they were posted at the Cebu
branch of the Client. As service had been rendered, the liability accrued, even if the complainants
were eventually transferred or reassigned.
The service incentive leave is expressly granted by these pertinent provisions of the Labor
Code:
ART. 95. Right to service incentive leave.(a) Every employee who has rendered at least one year
of service shall be entitled to a yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein provided,
those enjoying vacation leave with pay of at least five days and those employed in

establishments regularly employing less than ten employees or in establishments exempted from
granting this benefit by the Secretary of Labor after considering the viability or financial
condition of such establishment.
(c) The grant of benefit in excess of that provided herein shall not be made a subject of
arbitration or any court [or] admnistrative action.
Under the Implementing Rules and Regulations of the Labor Code, an unused service
incentive leave is commutable to its money equivalent, viz.:
Sec. 5. Treatment of Banefit. - The service incentive leave shall be commutable to its money
equivalent if not used or exhausted at the end of the year.
The award of the thirteenth-month pay is deleted in view of the evidence presented by the
Agency that such claim has already been paid to the complainants. Obviously then, the award of
such benefit in the dispositive portion of the assailed Decision is merely an oversight,
considering that Respondent Commission itself deleted it from the main body of the said
Decision.
WHEREFORE, the petition is DISMISSED and the assailed Decision and Resolution are
hereby AFFIRMED, but the award of the thirteenth-month pay is DELETED. Costs against
petitioners.
SO ORDERED.

JPL Marketing PROMOTIONS,

Petitioner, Present:
PUNO, J.,
Chairman,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
COURT OF APPEALS, NATIONAL CHICO-NAZARIO, JJ.
LABOR RELATIONS COMMISSION,
NOEL GONZALES, RAMON ABESA
III and FAUSTINO ANINIPOT,
Respondents. Promulgated:

July 8, 2005
x-------------------------------------------------------------------x

DECISION
TINGA, J.:

This is a petition for review of the Decision[1] of the Court of Appeals in CA-G.R. SP No. 62631
dated 03 October 2001 and its Resolution[2] dated 25 January 2002 denying petitioners Motion
for Reconsideration, affirming the Resolution of the National Labor Relations Commission
(NLRC), Second Division, dated 27 July 2000, awarding separation pay, service incentive leave
pay, and 13th month pay to private respondents.
JPL Marketing and Promotions (hereinafter referred to as JPL) is a domestic corporation
engaged in the business of recruitment and placement of workers. On the other hand, private
respondents Noel Gonzales, Ramon Abesa III and Faustino Aninipot were employed by JPL as
merchandisers on separate dates and assigned at different establishments in Naga City and Daet,
Camarines Norte as attendants to the display of California Marketing Corporation (CMC), one of
petitioners clients.
On 13 August 1996, JPL notified private respondents that CMC would stop its direct
merchandising activity in the Bicol Region, Isabela, and Cagayan Valley effective 15 August
1996.[3] They were advised to wait for further notice as they would be transferred to other clients.
However, on 17 October 1996,[4] private respondents Abesa and Gonzales filed before the
National Labor Relations Commission Regional Arbitration Branch (NLRC) Sub V complaints
for illegal dismissal, praying for separation pay, 13th month pay, service incentive leave pay and
payment for moral damages.[5] Aninipot filed a similar case thereafter.
After the submission of pertinent pleadings by all of the parties and after some clarificatory
hearings, the complaints were consolidated and submitted for resolution. Executive Labor
Arbiter Gelacio L. Rivera, Jr. dismissed the complaints for lack of merit.[6] The Labor Arbiter
found that Gonzales and Abesa applied with and were employed by the store where they were
originally assigned by JPL even before the lapse of the six (6)-month period given by law to JPL
to provide private respondents a new assignment. Thus, they may be considered to have
unilaterally severed their relation with JPL, and cannot charge JPL with illegal dismissal. [7] The

Labor Arbiter held that it was incumbent upon private respondents to wait until they were
reassigned by JPL, and if after six months they were not reassigned, they can file an action for
separation pay but not for illegal dismissal.[8] The claims for 13th month pay and service
incentive leave pay was also denied since private respondents were paid way above the
applicable minimum wage during their employment.[9]
Private respondents appealed to the NLRC. In its Resolution,[10] the Second Division of the
NLRC agreed with the Labor Arbiters finding that when private respondents filed their
complaints, the six-month period had not yet expired, and that CMCs decision to stop its
operations in the areas was beyond the control of JPL, thus, they were not illegally dismissed.
However, it found that despite JPLs effort to look for clients to which private respondents may
be reassigned it was unable to do so, and hence they are entitled to separation pay. [11] Setting
aside the Labor Arbiters decision, the NLRC ordered the payment of:
1. Separation pay, based on their last salary rate and counted from the first
day of their employment with the respondent JPL up to the finality of this
judgment;
2. Service Incentive Leave pay, and 13th month pay, computed as in No.1
hereof.[12]

Aggrieved, JPL filed a petition for certiorari under Rule 65 of the Rules of Court with the Court
of Appeals, imputing grave abuse of discretion on the part of the NLRC. It claimed that private
respondents are not by law entitled to separation pay, service incentive leave pay and 13 th month
pay.
The Court of Appeals dismissed the petition and affirmed in toto the NLRC resolution. While
conceding that there was no illegal dismissal, it justified the award of separation pay on the
grounds of equity and social justice.[13] The Court of Appeals rejected JPLs argument that the
difference in the amounts of private respondents salaries and the minimum wage in the region
should be considered as payment for their service incentive leave and 13th month
pay.[14]Notwithstanding the absence of a contractual agreement on the grant of 13th month pay,
compliance with the same is mandatory under the law. Moreover, JPL failed to show that it was
exempt from paying service incentive leave pay. JPL filed a motion for reconsideration of the
said resolution, but the same was denied on 25 January 2002.[15]
In the instant petition for review, JPL claims that the Court of Appeals committed reversible
error in rendering the assailed Decision and Resolution.[16] The instant case does not fall under

any of the instances where separation pay is due, to wit: installation of labor-saving devices,
redundancy, retrenchment or closing or cessation of business operation,[17] or disease of an
employee whose continued employment is prejudicial to him or co-employees,[18] or illegal
dismissal of an employee but reinstatement is no longer feasible.[19] Meanwhile, an employee
who voluntarily resigns is not entitled to separation unless stipulated in the employment contract,
or the collective bargaining agreement, or is sanctioned by established practice or policy of the
employer.[20] It argues that private respondents good record and length of service, as well as the
social justice precept, are not enough to warrant the award of separation pay. Gonzales and
Aninipot were employed by JPL for more than four (4) years, while Abesa rendered his services
for more than two (2) years, hence, JPL claims that such short period could not have shown their
worth to JPL so as to reward them with payment of separation pay.[21]
In addition, even assuming arguendo that private respondents are entitled to the benefits
awarded, the computation thereof should only be from their first day of employment with JPL up
to 15 August 1996, the date of termination of CMCs contract, and not up to the finality of the 27
July 2000 resolution of the NLRC.[22]To compute separation pay, 13th month pay, and service
incentive leave pay up to 27 July 2000 would negate the findings of both the Court of Appeals
and the NLRC that private respondents were not unlawfully terminated.[23] Additionally, it would
be erroneous to compute service incentive leave pay from the first day of their employment up to
the finality of the NLRC resolution since an employee has to render at least one (1) year of
service before he is entitled to the same. Thus, service incentive leave pay should be counted
from the second year of service.[24]
On the other hand, private respondents maintain that they are entitled to the benefits being
claimed as per the ruling of this Court in Serrano v. NLRC, et al.[25]They claim that their
dismissal, while not illegal, was tainted with bad faith.[26] They allege that they were deprived of
due process because the notice of termination was sent to them only two (2) days before the
actual termination.[27] Likewise, the most that JPL offered to them by way of settlement was the
payment of separation pay of seven (7) days for every year of service.[28]
Replying to private respondents allegations, JPL disagrees that the notice it sent to them was a
notice of actual termination. The said memo merely notified them of the end of merchandising
for CMC, and that they will be transferred to other clients.[29] Moreover, JPL is not bound to
observe the thirty (30)-day notice rule as there was no dismissal to speak of. JPL counters that it
was private respondents who acted in bad faith when they sought employment with another
establishment, without even the courtesy of informing JPL that they were leaving for good, much
less tender their resignation.[30] In addition, the offer of seven (7) days per year of service as

separation pay was merely an act of magnanimity on its part, even if private respondents are not
entitled to a single centavo of separation pay.[31]
The case thus presents two major issues, to wit: whether or not private respondents are entitled to
separation pay, 13th month pay and service incentive leave pay, and granting that they are so
entitled, what should be the reckoning point for computing said awards.
Under Arts. 283 and 284 of the Labor Code, separation pay is authorized only in cases of
dismissals due to any of these reasons: (a) installation of labor saving devices; (b) redundancy;
(c) retrenchment; (d) cessation of the employer's business; and (e) when the employee is
suffering from a disease and his continued employment is prohibited by law or is prejudicial to
his health and to the health of his co-employees. However, separation pay shall be allowed as a
measure of social justice in those cases where the employee is validly dismissed for causes other
than serious misconduct or those reflecting on his moral character, but only when he was
illegally dismissed.[32] In addition, Sec. 4(b), Rule I, Book VI of the Implementing Rules to
Implement the Labor Code provides for the payment of separation pay to an employee entitled to
reinstatement but the establishment where he is to be reinstated has closed or has ceased
operations or his present position no longer exists at the time of reinstatement for reasons not
attributable to the employer.
The common denominator of the instances where payment of separation pay is warranted is that
the employee was dismissed by the employer.[33] In the instant case, there was no dismissal to
speak of. Private respondents were simply not dismissed at all, whether legally or illegally. What
they received from JPL was not a notice of termination of employment, but a memo informing
them of the termination of CMCs contract with JPL. More importantly, they were advised that
they were to be reassigned. At that time, there was no severance of employment to speak of.
Furthermore, Art. 286 of the Labor Code allows the bona fide suspension of the operation of a
business or undertaking for a period not exceeding six (6) months, wherein an
employee/employees are placed on the so-called floating status. When that floating status of an
employee lasts for more than six months, he may be considered to have been illegally dismissed
from the service. Thus, he is entitled to the corresponding benefits for his separation, and this
would apply to suspension either of the entire business or of a specific component thereof.[34]
As clearly borne out by the records of this case, private respondents sought employment from
other establishments even before the expiration of the six (6)-month period provided by law. As
they admitted in their comment, all three of them applied for and were employed by another

establishment after they received the notice from JPL.[35] JPL did not terminate their
employment; they themselves severed their relations with JPL. Thus, they are not entitled to
separation pay.
The Court is not inclined in this case to award separation pay even on the ground of
compassionate justice. The Court of Appeals relied on the cases[36] wherein the Court awarded
separation pay to legally dismissed employees on the grounds of equity and social consideration.
Said cases involved employees who were actually dismissed by their employers, whether for
cause or not. Clearly, the principle applies only when the employee is dismissed by the
employer, which is not the case in this instance. In seeking and obtaining employment elsewhere,
private respondents effectively terminated their employment with JPL.
In addition, the doctrine enunciated in the case of Serrano[37] cited by private respondents has
already been abandoned by our ruling in Agabon v. National Labor Relations
Commission.[38] There we ruled that an employer is liable to pay indemnity in the form of
nominal damages to a dismissed employee if, in effecting such dismissal, the employer failed to
comply with the requirements of due process. However, private respondents are not entitled to
the payment of damages considering that there was no violation of due process in this case. JPLs
memo dated 13 August 1996 to private respondents is not a notice of termination, but a mere
note informing private respondents of the termination of CMCs contract and their re-assignment
to other clients. The thirty (30)-day notice rule does not apply.
Nonetheless, JPL cannot escape the payment of 13th month pay and service incentive leave pay
to private respondents. Said benefits are mandated by law and should be given to employees as a
matter of right.

Presidential Decree No. 851, as amended, requires an employer to pay its rank and file
employees a 13th month pay not later than 24 December of every year. However, employers not
paying their employees a 13th month pay or its equivalent are not covered by said law.[39] The
term its equivalent was defined by the laws implementing guidelines as including Christmas
bonus, mid-year bonus, cash bonuses and other payment amounting to not less than 1/12 of the
basic salary but shall not include cash and stock dividends, cost-of-living-allowances and all
other allowances regularly enjoyed by the employee, as well as non-monetary benefits.[40]
On the other hand, service incentive leave, as provided in Art. 95 of the Labor Code, is a yearly
leave benefit of five (5) days with pay, enjoyed by an employee who has rendered at least one

year of service. Unless specifically excepted, all establishments are required to grant service
incentive leave to their employees. The term at least one year of service shall mean service
within twelve (12) months, whether continuous or broken reckoned from the date the employee
started working.[41]The Court has held in several instances that service incentive leave is clearly
demandable after one year of service.[42]
Admittedly, private respondents were not given their 13th month pay and service incentive leave
pay while they were under the employ of JPL. Instead, JPL provided salaries which were over
and above the minimum wage. The Court rules that the difference between the minimum wage
and the actual salary received by private respondents cannot be deemed as their 13th month pay
and service incentive leave pay as such difference is not equivalent to or of the same import as
the said benefits contemplated by law. Thus, as properly held by the Court of Appeals and by the
NLRC, private respondents are entitled to the 13th month pay and service incentive leave pay.
However, the Court disagrees with the Court of Appeals ruling that the 13th month pay and
service incentive leave pay should be computed from the start of employment up to the finality
of the NLRC resolution. While computation for the 13th month pay should properly begin from
the first day of employment, the service incentive leave pay should start a year after
commencement of service, for it is only then that the employee is entitled to said benefit. On the
other hand, the computation for both benefits should only be up to 15 August 1996, or the last
day that private respondents worked for JPL. To extend the period to the date of finality of the
NLRC resolution would negate the absence of illegal dismissal, or to be more precise, the want
of dismissal in this case. Besides, it would be unfair to require JPL to pay private respondents the
said benefits beyond 15 August 1996 when they did not render any service to JPL beyond that
date. These benefits are given by law on the basis of the service actually rendered by the
employee, and in the particular case of the service incentive leave, is granted as a motivation for
the employee to stay longer with the employer. There is no cause for granting said incentive to
one who has already terminated his relationship with the employer.
The law in protecting the rights of the employees authorizes neither oppression nor selfdestruction of the employer. It should be made clear that when the law tilts the scale of justice in
favor of labor, it is but recognition of the inherent economic inequality between labor and
management. The intent is to balance the scale of justice; to put the two parties on relatively
equal positions. There may be cases where the circumstances warrant favoring labor over the
interests of management but never should the scale be so tilted if the result is an injustice to the
employer. Justitia nemini neganda est (Justice is to be denied to none).[43]

WHEREFORE, the petition is GRANTED IN PART. The Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 62631 are hereby MODIFIED. The award of separation
pay is deleted. Petitioner is ordered to pay private respondents their 13th month pay commencing
from the date of employment up to 15 August 1996, as well as service incentive leave pay from
the second year of employment up to 15 August 1996. No pronouncement as to costs.
SO ORDERED.

G.R. No. L-18939

August 31, 1964

NATIONAL
WATERWORKS
and
SEWERAGE
vs.
NWSA CONSOLIDATED UNIONS, ET AL., respondents.

AUTHORITY, petitioner,

Govt. Corp. Counsel Simeon M. Gopengco and Asst. Govt. Corp. Counsel Arturo B. Santos for
petitioner.
Cipriano
Cid
and
Associates
and
Israel
Bocobo
for
respondents.
Alfredo M. Montesa for intervenor-respondent.
BAUTISTA ANGELO, J.:
Petitioner National Waterworks & Sewerage Authority is a government-owned and controlled
corporation created under Republic Act No. 1383, while respondent NWSA Consolidated
Unions are various labor organizations composed of laborers and employees of the NAWASA.
The other respondents are intervenors Jesus Centeno, et al., hereinafter referred to as intervenors.
Acting on a certification of the President of the Philippines, the Court of Industrial Relations
conducted a hearing on December 5, 1957 on the controversy then existing between petitioner
and respondent unions which the latter embodied in a "Manifesto" dated December 51, 1957,
namely: implementation of the 40-Hour Week Law (Republic Act No. 1880); alleged violations
of the collective bargaining agreement dated December 28, 1956 concerning "distress pay";

minimum wage of P5.25; promotional appointments and filling of vacancies of newly created
positions; additional compensation for night work; wage increases to some laborers and
employees; and strike duration pay. In addition, respondent unions raised the issue of whether
the 25% additional compensation for Sunday work should be included in computing the daily
wage and whether, in determining the daily wage of a monthly-salaried employee, the salary
should be divided by 30 days.
On December 13, 1957, petitioner and respondent unions, conformably to a suggestion of the
Court of Industrial Relations, submitted a joint stipulation of facts on the issues concerning the
40-Hour Week Law, "distress pay," minimum wage of P5.25, filling of vacancies, night
compensation, and salary adjustments, reserving the right to present evidence on matters not
covered therein. On December 4, 1957, respondent intervenors filed a petition in intervention on
the issue for additional compensation for night work. Later, however, they amended their petition
by including a new demand for overtime pay in favor of Jesus Centeno, Cesar Cabrera, Feliciano
Duiguan, Cecilio Remotigue, and other employees receiving P4,200.00 per annum or more.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and
approved by this Honorable Court, without prejudice to the parties adducing other evidence to
prove their case not covered by this stipulation of facts. 1wph1.t
On February 5, 1958, petitioner filed a motion to dismiss the claim for overtime pay alleging that
respondent Court of Industrial Relations was without jurisdiction to pass upon the same because,
as mere intervenors, the latter cannot raise new issues not litigated in the principal case, the same
not being the lis mota therein involved. To this motion the intervenors filed an opposition.
Thereafter, respondent court issued an order allowing the issue to be litigated. Petitioner's motion
to reconsider having been denied, it filed its answer to the petition for intervention. Finally, on
January 16, 1961, respondent court rendered its decision stating substantially as follows:
The NAWASA is an agency not performing governmental functions and, therefore, is liable to
pay additional compensation for work on Sundays and legal holidays conformably to
Commonwealth Act No. 444, known as the Eight-Hour Labor Law, even if said days should be
within the staggered five work days authorized by the President; the intervenors do not fall
within the category of "managerial employees" as contemplated in Republic Act 2377 and so are
not exempt from the coverage of the Eight-Hour Labor Law; even those intervenors attached to
the General Auditing Office and the Bureau of Public Works come within the purview of
Commonwealth Act No. 444; the computation followed by NAWASA in computing overtime
compensation is contrary to Commonwealth Act 444; the undertime of a worker should not be
set-off against the worker in determining whether the latter has rendered service in excess of
eight hours for that day; in computing the daily wage of those employed on daily basis, the
additional 25% compensation for Sunday work should be included; the computation used by the
NAWASA for monthly salaried employees to wit, dividing the monthly basic pay by 30 is
erroneous; the minimum wage awarded by respondent court way back on November 25, 1950 in
Case No. 359-V entitled MWD Workers Union v. Metropolitan Water District, applies even to
those who were employed long after the promulgation of the award and even if their workers are
hired only as temporary, emergency and casual workers for a definite period and for a particular
project; the authority granted to NAWASA by the President to stagger the working days of its

workers should be limited exclusively to those specified in the authorization and should not be
extended to others who are not therein specified; and under the collective bargaining agreement
entered into between the NAWASA and respondent unions on December 28, 1956, as well as
under Resolution No. 29, series of 1957 of the Grievance Committee, even those who work
outside the sewerage chambers should be paid 25% additional compensation as "distress pay."
Its motion for reconsideration having been denied, NAWASA filed the present petition for
review raising merely questions of law. Succinctly, these questions are:
1. Whether NAWASA is performing governmental functions and, therefore, essentially a
service agency of the government;
2. Whether NAWASA is a public utility and, therefore, exempted from paying additional
compensation for work on Sundays and legal holidays;
3. Whether the intervenors are "managerial employees" within the meaning of Republic
Act 2377 and, therefore, not entitled to the benefits of Commonwealth Act No. 444, as
amended;
4. Whether respondent Court of Industrial Relations has jurisdiction to adjudicate
overtime pay considering that this issue was not among the demands of respondent union
in the principal case but was merely dragged into the case by the intervenors;
5. Whether those attached to the General Auditing Office and the Bureau of Public
Works come within the purview of Commonwealth Act No. 444, as amended;
6. In determining whether one has worked in excess of eight hours, whether the
undertime for that day should be set off;
7. In computing the daily wage, whether the additional compensation for Sunday work
should be included;
8. What is the correct method to determine the equivalent daily wage of a monthly
salaried employee, especially in a firm which is a public utility?;
9. Considering that the payment of night compensation is not by virtue of any statutory
provision but emanates only from an award of respondent Court of Industrial Relations,
whether the same can be made retroactive and cover a period prior to the promulgation of
the award;
10. Whether the minimum wage fixed and awarded by respondent Court of Industrial
Relations in another case (MWD Workers Union v. MWD CIR Case No. 359-V) applies
to those employed long after the promulgation thereof, whether hired as temporary,
emergency and casual workers for a definite period and for a specific project;

11. How should the collection bargaining agreement of December 28, 1956 and
Resolution No. 29, series of 1957 of the Grievance Committee be interpreted and
construed insofar as the stipulations therein contained relative to "distress pay" is
concerned?; and
12. Whether, under the first indorsement of the President of the Philippines dated August
12, 1957, which authorizes herein petitioner to stagger the working days of its employees
and laborers, those whose services are indispensably continuous throughout the year may
be staggered in the same manner as the pump, valve, filter and chlorine operators, guards,
watchmen, medical services, and those attached to the recreational facilities.
DISCUSSION OF THE ISSUES
1. Is NAWASA an agency that performs governmental functions and, therefore, essentially a
service agency of the government? Petitioner sustains the affirmative because, under Republic
Act No. 1383, it is a public corporation, and such it exist a an agency independent of the
Department of Public Works of our government. It also contends that under the same Act the
Public Service Commission does not have control, supervision or jurisdiction over it in the fixing
of rates concerning of the operation of the service. It can also incur indebtedness or issue bonds
that are exempt from taxation which circumstance implies that it is essentially a governmentfunction corporation because it enjoys that attribute of sovereignty. Petitioner likewise invokes
the opinion of the Secretary of Justice which holds that the NAWASA being essentially a service
agency of the government can be classified as a corporation performing governmental function.
With this contention, we disagree. While under republic Act No. 1383 the NAWASA is
considered as a public corporation it does not show that it was so created for the government of a
portion of the State. It should be borne in mind that there are two kinds of public corporation,
namely, municipal and non-municipal. A municipal corporation in its strict is the body politic
constituted by the inhabitants of a city or town for the purpose of local government thereof. It is
the body politic established by law particularly as an agency of the State to assist in the civil
government of the country chiefly to regulate the local and internal affairs of the city or town
that is incorporated (62 C.J.S., p. 61). Non- municipal corporations, on the other hand, are public
corporations created as agencies of the State for limited purposes to take charge merely of some
public or state work other than community government (Elliot, Municipal Corporations, 3rd ed.,
p. 7; McQuillin, Mun. Corp., 3rd ed., Vol. 1, p. 476).
The National Waterworks and Sewerage Authority was not created for purposes of local
government. It was created for the "purpose of consolidating and centralizing all waterworks,
sewerage and drainage system in the Philippines under one control and direction and general
supervision." The NAWASA therefore, though a public corporation, is not a municipal
corporation, because it is not an agency of the State to regulate or administer the local affairs of
the town, city, or district which is incorporated.
Moreover, the NAWASA, by its charter, has personality and power separate and distinct from
the government. It is an independent agency of the government although it ids placed, for
administrative purposes, under the Department of Public Works and Communications. It has

continuous succession under its corporate name and sue and be sued in court. It has corporate
power to exercised by its board of directors; it has its own assets and liabilities; and it may
charge rates for its services.
In Bacani vs. National Coconut Corporation, 53 O.G., 2798, we stated: "To recapitulate, we may
mention that the term 'Government of the Republic of the Philippines'... refers only to that
government entity through which the functions of the government are exercised as an attribute of
sovereignty, and in this are included those arms through which political authority is made
effective whether they be provincial, municipal or other form of local government. These are
what we call municipal corporations. They do not include government entities which are given a
corporate personality separate and distinct from the government and which are governed by the
Corporation Law. Their powers, duties and liabilities have to be determined in the light of that
law and of their corporate charter."
The same conclusion may be reached by considering the powers, functions and activities of the
NAWASA which are enumerated in Section 2, Republic Act No. 1383, among others, as
follows:
(e) To construct, maintain and operate mains pipes, water reservoirs, machinery, and
other waterworks for the purpose of supplying water to the inhabitants of its zone, both
domestic and other purposes; to purify the source of supply, regulate the control and use,
and prevent the waste of water; and to fix water rates and provide for the collection of
rents therefor;
(f) To construct, maintain and operate such system of sanitary sewers as may be
necessary for the proper sanitation of the cities and towns comprising the Authority and
to charge and collect such sums for construction and rates for this service as may be
determined by the Board to be equitable and just;
(g) To acquire, purchase, hold, transfer, sell, lease, rent, mortgage, encumber, and
otherwise dispose of real and personal property, including rights and franchises, within
the Philippines, as authorized by the purpose for which the Authority was created and
reasonably and necessarily required of the transaction of the lawful business of the same,
unless otherwise provided in this Act;
The business of providing water supply and sewerage service, as this Court held, "may for all
practical purposes be likened to an industry engaged in by coal companies, gas companies,
power plants, ice plants, and the like" (Metropolitan Water District v. Court of Industrial
Relations, et al., L-4488, August 27, 1952). These are but mere ministrant functions of
government which are aimed at advancing the general interest of society. As such they are
optional (Bacani v. National Coconut Corporation, supra). And it has been held that "although
the state may regulate the service and rates of water plants owned and operated by
municipalities, such property is not employed for governmental purposes and in the ownership
operation thereof the municipality acts in its proprietary capacity, free from legislative
interference" (1 McQuillin, p. 683). In Mendoza v. De Leon, 33 Phil., 508, 509, this Court also
held:

Municipalities of the Philippine Islands organized under the Municipal Code have both
governmental and corporate or business functions. Of the first class are the adoption of
regulations against fire and disease, preservation of the public peace, maintenance of
municipal prisons, establishment of primary schools and post-offices, etc. Of the latter
class are the establishment of municipal waterworks for the use of the inhabitants, the
construction and maintenance of municipal slaughterhouses, markets, stables, bathing
establishments, wharves, ferries, and fisheries. ...
On the strength of the foregoing considerations, our conclusions is that the NAWASA is not an
agency performing governmental functions. Rather, it performs proprietary functions, and as
such comes within the coverage of Commonwealth Act No. 444.
2. We agree with petitioner that the NAWASA is a public utility because its primary function is
to construct, maintain and operate water reservoirs and waterworks for the purpose of supplying
water to the inhabitants, as well as consolidate and centralize all water supplies and drainage
systems in the Philippines. We likewise agree with petitioner that a public utility is exempt from
paying additional compensation for work on Sundays and legal holidays conformably to Section
4 of Commonwealth Act No. 444 which provides that the prohibition, regarding employment of
Sundays and holidays unless an additional sum of 25% of the employee's regular remuneration is
paid shall not apply to public utilities such as those supplying gas, electricity, power, water or
providing means of transportation or communication. In other words, the employees and laborers
of NAWASA can be made to work on Sundays and legal holidays without being required to pay
them an additional compensation of 25%.
It is to be noted, however, that in the case at bar it has been stipulated that prior to the enactment
of Republic Act No. 1880, providing for the implementation of the 40-Hour Week Law, the
Metropolitan Water District had been paying 25% additional compensation for work on Sundays
and legal holidays to its employees and laborers by virtue of Resolution No. 47, series of 1948,
of its board of Directors, which practice was continued by the NAWASA when the latter took
over the service. And in the collective bargaining agreement entered into between the NAWASA
and respondent unions it was agreed that all existing benefits enjoyed by the employees and
laborers prior to its effectivity shall remain in force and shall form part of the agreement, among
which certainly is the 25% additional compensation for work on Sundays and legal holidays
therefore enjoyed by said laborers and employees. It may, therefore, be said that while under
Commonwealth Act No. 444 a public utility is not required to pay additional compensation to its
employees and workers for work done on Sundays and legal holidays, there is, however, no
prohibition for it to pay such additional compensation if it voluntarily agrees to do so. The
NAWASA committed itself to pay this additional compensation. It must pay not because of
compulsion of law but because of contractual obligation.
3. This issue raises the question whether the intervenors are "managerial employees" within the
meaning of Republic Act 2377 and as such are not entitled to the benefits of Commonwealth Act
No. 444, as amended. Section 2 of Republic Act 2377 provides:
Sec. 2. This Act shall apply to all persons employed in any industry or occupation,
whether public or private with the exception of farm laborers, laborers who prefer to be

paid on piece work basis, managerial employees, outside sales personnel, domestic
servants, persons in the personal service of another and members of the family of the
employer working for him.
The term "managerial employee" in this Act shall mean either (a) any person whose
primary duty consists of the management of the establishment in which he is employed or
of a customarily recognized department or subdivision thereof, or (b) ally officer or
member of the managerial staff.
One of the distinguishing characteristics managerial employee may be known as expressed in the
explanatory note of Republic Act No. 2377 is that he is not subject to the rigid observance of
regular office hours. The true worth of his service does not depend so much on the time he
spends in office but more on the results he accomplishes. In fact, he is free to go out of office
anytime.
On the other hand, in the Fair Labor Standards Act of the United States, which was taken into
account by the sponsors of the present Act in defining the degree of work of a managerial
employee, we find interesting the following dissertation of the nature of work o a managerial
employee:
Decisions have consumed and applied a regulation in substance providing that the term
"professional" employee shall mean any employee ... who is engaged in work
predominantly intellectual and varied in character, and requires the consistent exercise of
discretion and judgment in its performance and is of such a character that the output
produced or the result accomplished cannot be standardized in relation to a given period
of time, and whose hours of work of the same nature as that performed by non-exempt
employees do not exceed twenty percent of the hours worked in the work week by the
non-exempt employees, except where such work is necessarily incident to work of a
professional nature; and which requires, first, knowledge of an advanced type in a field of
science or learning customarily acquired by a prolonged course or specialized intellectual
instruction and study, or, second, predominantly original and creative in character in a
recognized field of artistic endeavor. Stranger v. Vocafilm Corp., C.C.A. N.Y., 151 F. 2d
894, 162 A.L.R. 216; Hofer v. Federal Cartridge Corp., D.C. Minn. 71 F. Supp.
243; Aulen v. Triumph Explosive, D.C. Md., 58 P. Supp. 4." (56 C.J.S., p. 666).
Under the provisions of the Fair Labor Standards Act 29 U.S.C.A., Section 23 (a) (1),
executive employees are exempted from the statutory requirements as to minimum wages
and overtime pay. ...
Thus the exemption attaches only where it appears that the employee's primary duty
consists of the management of the establishment or of a customarily recognized
department or subdivision thereof, that he customarily and regularly directs the work of
other employees therein, that he has the authority to hire or discharge other employees or
that his suggestions and recommendations as to the hiring or discharging and as to the
advancement and promotion or any other change of status of other employees are given

particular weight, that he customarily and, regularly exercises discretionary powers, ... .
(56 C.J.S., pp. 666-668.)
The term "administrative employee" ordinarily applies only to an employee who is
compensated for his services at a salary or fee of not less than a prescribed sum per
month, and who regularly and directly assists an employee employed in a bona fide
executive or administrative capacity, where such assistance is nonmanual in nature and
requires the exercise of discretion and independent judgment; or who performs under
only general supervision, responsible non-manual office or field work, directly related to
management policies or general business operations, along specialized or technical lines'
requiring special training experience, or knowledge, and the exercise of discretion and
independent judgment; ... . (56 C.J.S., p. 671.)
The reason underlying each exemption is in reality apparent. Executive, administrative
and professional workers are not usually employed at hourly wages nor is it feasible in
the case of such employees to provide a fixed hourly rate of pay nor maximum hours of
labor, Helena Glendale Perry Co. v. Walling, C.C.A. Ark. 132 F. 2d 616, 619. (56 C.J.S.,
p. 664.)
The philosophy behind the exemption of managerial employees from the 8-Hour Labor Law is
that such workers are not usually employed for every hour of work but their compensation is
determined considering their special training, experience or knowledge which requires the
exercise of discretion and independent judgment, or perform work related to management
policies or general business operations along specialized or technical lines. For these workers it
is not feasible to provide a fixed hourly rate of pay or maximum hours of labor.
The intervenors herein are holding position of responsibility. One of them is the Secretary of the
Board of Directors. Another is the private secretary of the general manager. Another is a public
relations officer, and many other chiefs of divisions or sections and others are supervisors and
overseers. Respondent court, however, after examining carefully their respective functions,
duties and responsibilities found that their primary duties do not bear any direct relation with the
management of the NAWASA, nor do they participate in the formulation of its policies nor in
the hiring and firing of its employees. The chiefs of divisions and sections are given ready
policies to execute and standard practices to observe for their execution. Hence, it concludes,
they have little freedom of action, as their main function is merely to carry out the company's
orders, plans and policies.
To the foregoing comment, we agree. As a matter of fact, they are required to observe working
hours and record their time work and are not free to come and go to their offices, nor move about
at their own discretion. They do not, therefore, come within the category of "managerial
employees" within the meaning of the law.
4. Petitioner's claim is 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.

Intervenors filed a petition for intervention alleging that being employees of petitioner who have
worked at night since 1954 without having been fully compensated they desire to intervene
insofar as the payment of their night work is concerned. Petitioner opposed the petition on the
ground that this matter was not in the original case since it was not included in the dispute
certified by the President of the Philippines to the Court of Industrial Relations. The opposition
was overruled. This is now assigned as error.
There is no dispute that the intervenors were in the employ of petitioner when they intervened
and that their claim refers to the 8-Hour Labor Law and since this Court has held time and again
that disputes that call for the application of the 8-Hour Labor Law are within the jurisdiction of
the Court of Industrial Relations if they arise while the employer-employee relationship still
exists, it is clear that the matter subject of intervention comes within the jurisdiction of
respondent court.1 The fact that the question of overtime payment is not included in the principal
casein 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.
5. It is claimed that some intervenors are occupying positions in the General Auditing Office and
in the Bureau of Public Works for they are appointed either by the Auditor General or by the
Secretary of Public Works and, consequently, they are not officers of the NAWASA but of the
insular government, and as such are not covered by the Eight-Hour Labor Law.
The status of the GAO employees assigned to, and working in, government-controlled
corporations has already been decided by this Court in National Marketing Corporation, et al. v.
Court of Industrial Relations, et al., L-17804, January 31, 1963. In said case, this Court said:
We agree with appellants that members of the auditing force can not be regarded as
employees of the PRISCO in matters relating to their compensation. They are appointed
and supervised by the Auditor General, have an independent tenure, and work subject to
his orders and instructions, and not to those of the management of appellants. Above all,
the nature of their functions and duties, for the purpose of fiscal control of appellants'
operations, imperatively demands, as a matter of policy, that their positions be
completely independent from interference or inducement on the part of the supervised
management, in order to assure a maximum of impartiality in the auditing functions. Both
independence and impartiality require that the employees in question be utterly free from
apprehension as to their tenure and from expectancy of benefits resulting from any action
of the management, since in either case there would be an influence at work that could
possibly lead, if not to positive malfeasance, to, laxity and indifference that would
gradually erode and endanger the critical supervision entrusted to these auditing
employees.
The inclusion of their items in the PRISCO budget should be viewed as no more than a
designation by the national government of the fund or source from which their
emoluments are to be drawn, and does not signify that they are thereby made PRISCO
employees.

The GAO employees assigned to the NAWASA are exactly in the same position regarding their
status, compensation and right to overtime pay as the rest of the GAO employees assigned to the
defunct PRISCO, and following our ruling in the PRISCO case, we hold that the GAO
employees herein are not covered by the 8-Hour Labor Law, but by other pertinent laws on the
matter.
The same thing may be said with regard to the employer of the Bureau of Public Works assigned
to, and working in, the NAWASA. Their position is the same as that of the GAO employees.
Therefore, they are not also covered by the 8-Hour Labor Law.
The respondent court, therefore, erred in considering them as employees of the NAWASA for
the mere reason that they are paid out of its fund and are subject to its administration and
supervision.
6. A worker is entitled to overtime pay only for work in actual service beyond eight hours. If a
worker should incur in undertime during his regular daily work, should said undertime be
deducted in computing his overtime work? Petitioner sustains the affirmative while respondent
unions the negative, and respondent court decided the dispute in favor of the latter. Hence this
error.
There is merit in the decision of respondent court that the method used by petitioner in offsetting
the overtime with the undertime and at the same time charging said undertime to the accrued
leave of the employee is unfair, for under such method the employee is made to pay twice for his
undertime because his leave is reduced to that extent while he was made to pay for it with work
beyond the regular working hours. The proper method should be to deduct the undertime from
the accrued leave but pay the employee the overtime to which he is entitled. This method also
obviates the irregular schedule that would result if the overtime should be set off against the
undertime for that would place the schedule for working hours dependent on the employee.
7. and 8. How is a daily wage of a weekly employee computed in the light of Republic Act
1880?
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 evident that Republic Act 1880 does not intend 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. The question then to be determined is: what is
meant by weekly or daily wage? Does the regular wage include differential payments for work
on Sundays or at nights, or is it the total amount received by the laborer for whatever nature or
concept?
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 profitsharing 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 workman's standpoint (International L. Ass'n v.
National Terminals Corp. C.C. Wise, 50 F. Supp. 26, affirmed C.C.A. Carbunao v. National
Terminals Corp. 139 F. 2d 853).
Respondent court, therefore, correctly included such differential pay in computing the weekly
wages of those 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 Republic Act 1880.
The next issue refers to the method of computing the daily rate of a monthly-salaried employee.
Petitioner in computing this daily rate divides the monthly basic pay of the employee by 30 in
accordance with Section 254 of the Revised Administrative Code which in part provides that "In
making payment for part of a month, the amount to be paid for each day shall be determined by
dividing the monthly pay into as many parts as there are days in the particular month." The
respondent court disagrees with this method and holds that the way to determine the daily rate of
a monthly employee is to divide the monthly salary by the actual number of working hours in the
month. Thus, according to respondent court, Section 8 (g) of Republic Act No. 1161, as amended
by Republic Act 1792, provides that the daily rate of compensation is the total regular
compensation for the customary number of hours worked each day. In other words, according to
respondent court, the correct computation shall be (a) the monthly salary divided by the actual of
working hours in a month or (b) the regular monthly compensation divided by the number of
working days in a month.
This finding of respondent court should be modified insofar as the employees of the General
Auditing Office and of the Bureau of Public Works assigned to work in the NAWASA are
concerned for, as already stated, they are government employees and should be governed by
Section 254 of the Revised Administrative Code. This section provides that in making payments
for part of a month, the amount to be paid for each day shall be determined by dividing the
monthly pay. Into as many parts as there are days in the particular month. With this modification
we find correct the finding of the respondent court on this issue.

9. The Court of Industrial Relations awarded an additional 25% night compensation to some,
workers with retroactive effect, that is, effective even before the presentation of the claim,
provided that they had been given authorization by the general manager to perform night work. It
is petitioner's theory that since there is no statute requiring payment of additional compensation
for night work but it can only be granted either by the voluntary act of the employer or by an
award of the industrial court under its compulsory arbitration power, such grant should only be
prospective in operation, and not retroactive, as authorized by the court.
It is of common occurrence that a working man who has already rendered night time service
takes him a long time before he can muster enough courage to confront his employer with the
demand for payment for it for fear of possible reprisal. It happens that many months or years are
allowed to pass by before he could be made to present such claim against his employer, and so it
is neither fair nor just that he be deprived of what is due him simply because of his silence for
fear of losing the means of his livelihood. Hence, it is not erroneous for the Court of Industrial
Relations to make the payment of such night compensation retroactive to the date when the work
was actually performed.
The power of the Court of Industrial Relations to order the payment of compensation for
overtime service prior to the date of the filing of the claim has been recognized by this Court
(Luzon Stevedoring Co., Inc. v. Luzon Marine Department Union, et al., L-9265, April 29,
1957). The same reasons given therein for the retroactivity of overtime compensation may also
be given for the retroactivity of payment of night compensation, as such reasoning runs along the
line already above-stated.
10. The Court of Industrial Relations in its resolution dated November 25, 1950 issued in Case
No. 359-V entitled MWD Workers Union, et al. v. Metropolitan Water District, fixed the
following rates of minimum daily wage: P5.25 for those working in Manila and suburbs; P4.50
for those working in Quezon City; and P4.00 for those working in Ipo. Montalban and Balara. It
appears that in spite of the notice to terminate said award filed with the court on December 29,
1953, the Metropolitan Water District continued paying the above wages and the NAWASA
which succeeded it adopted the same rates for sometime. In September, 1955, the NAWASA
hired the claimants as temporary workers and it is now contended that said rates cannot apply to
these workers.
The Court of Industrial Relations, however, held that the discontinuance of this minimum wage
rate was improper and ordered the payment of the difference to said workers from the date the
payment of said rates was discontinued, advancing, among others, the following reasons: that the
resolution of November 25, 1950 is applicable not only to those laborers already in the service
but also to those who may be employed thereafter; the notice of determination of said award
given on December 29, 1953 is not legally effective because the same was given without hearing
and the employer continued paying the minimum wages even after the notice of termination; and
there is no showing that the minimum wages violate Civil Service Law or the principles
underlying the WAPCO.
We find no valid reason to disagree with the foregoing finding of the Court of Industrial
Relations considering that the award continued to be valid and effective in spite of the notice of

termination given by the employer. No good reason is seen why such award should not apply to
those who may be employed after its approval by the court there being nothing therein that may
prevent its extension to them. Moreover, the industrial court can at any time during the
effectiveness of an award or reopen any question involved therein under Section 17 of
Commonwealth Act No. 103, and such is what said court has done when it made the award
extensive to the new employees, more so when they are similarly situated. To do otherwise
would be to foster discrimination.
11. This issue has to do with the meaning of "distress pay." Paragraph 3, Article VIII, of the
collective bargaining agreement entered into between the employer and respondent unions,
provides:
Because of the peculiar nature of the function of those employees and laborers of the
Sewerage Division who actually work in the sewerage chambers, causing "unusual
distress" to them, they shall receive extra compensation equivalent to twenty-five (25%)
of their basic wage.
Pursuant to said agreement, a grievance committee was created composed of representatives of
management and labor which adopted the following resolution:
Resolution
Series of 1957

No.

BE IT RESOLVED, That the employees and laborers of the Sewerage Division who
actually work in the sewerage chambers causing unusual distress to them, be paid extra
compensation equivalent to 25% of their basic wage, as embodied in Article VIII,
Paragraph 3 of the Collective Bargaining Agreement; PROVIDED, however, that any
employee who may be required to work actually in the sewerage chambers shall also be
paid 25% extra compensation and, PROVIDED FURTHER, that the term "sewerage
chambers" shall include pits, trenches, and other excavations that are necessary to tap the
sewer line, and PROVIDED FINALLY that this will not prejudice any laborer or
employee who may be included in one way or another in the term "unusual distress"
within the purview of Paragraph 3 of Article VIII, of the Collective Bargaining
Agreement.
And in a conference held between management and labor on November 25, 1957, the following
was agreed upon: "Distress Management agreed to pay effective October 1, 1956 25% additional
compensation for those who actually work in and outside sewerage chambers in accordance with
Resolution No. 9 of the Grievance Committee."
The question that arose in connection with this distress pay is with regard to the meaning of the
phrase "who actually work in and outside sewerage chambers." Petitioner contends that the
distress pay should be given only to those who actually work inside the sewerage chambers
while the union maintains that such pay should be given to all those whose work have to do with
the sewerage chambers, whether inside or outside. The Court of Industrial Relations sustained
the latter view holding that the distress pay should be given to those who actually work in and

outside the sewerage chambers effective October 1, 1956. This view is now disputed by
petitioner.
The solution of the present issue hinges upon the interpretation of paragraph 3, Article VIII of
the collective bargaining agreement, copied above, as explained by Resolution No. 9, and the
agreement of November 25, 1957, also copied above, which stipulation has to be interpreted as a
whole pursuant to Article 1374 of the Civil Code. As thus interpreted, we find that those who are
entitled to the distress pay are those employees and laborers who work in the sewerage chambers
whether they belong to the sewerage division or not, and by sewerage chambers should be
understood to mean as the surroundings where the work is actually done, not necessarily "inside
the sewerage chambers." This is clearly inferred from the conference held in the Department of
Labor on November 25, 1957 where it was agreed that the compensation should be paid to those
who work "in and outside" the sewerage chambers in accordance with the terms of Resolution
No. 9 of the Grievance Committee. It should be noted that according to said resolution, sewerage
chambers include "pits, trenches, and other excavations that are necessary to tap the sewer lines."
And the reason given for this extra compensation is the "unusual distress" that is caused to the
laborers by working in the sewerage chambers in the form and extent above-mentioned.
It is clear then that all the laborers whether of the sewerage division or not assigned to work in
and outside the sewerage chambers and suffer in unusual distress because of the nature of their
work are entitled to the extra compensatory. And this conclusion is further bolstered by the
findings of the industrial court regarding the main activities of the sewerage division.
Thus, the Court of Industrial Relations found that the sewerage division has three main activities,
to wit: (a) cooperation of the sewerage pumping stations; (b) cleaning and maintenance of sewer
mains; and (c) installation and repairs of house sewer connections.
The pump operators and the sewer attendants in the seven pumping stations in Manila, according
to the industrial court, suffer unusual distress. The pump operators have to go to the wet pit to
see how the cleaning of the screen protecting the pump is being performed, and go also to the dry
pit abutting the wet pit to make repairs in the breakdown of the pumps. Although the operators
used to stay near the motor which is but a few meters from the pump, they unavoidably smell the
foul odor emitting from the pit. Thesewerage attendants go down and work in the wet pit
containing sewerage materials in order to clean the screen.
A group assigned to the cleaning and maintenance of the sewer mains which are located in the
middle of the streets of Manila is usually composed of a capataz and four sewerage attendants.
These attendants are rotated in going inside the manholes, operation of the window glass, bailing
out from the main to the manhole and in supplying the water service as necessity demand. These
attendants come into contact with dirt, stink, and smell, darkness and heat inside and near the
sewage pipes. The capataz goes from one manhole to another seeing to it that the work is
properly performed and as such also suffers unusual distress although to a lesser degree.
The group resigned to the third kind of activity is also usually composed of a capataz and four
attendants. Their work is to connect sewer pipes from houses to the sewer mains and to do this
they excavate the trench across the street from the proper line to the sewer main and then they

install the pipe after tapping the sewer main. In the tapping, the sewer pipe is opened and so the
sewerage gets out and fills up the trench and the men have to wade in and work with the
sewerage water. The capataz has to go near the filthy excavations or trenches full of filthy
sewerage, matter to aid the attendants in making pipe connections, especially when these are
complicated.
It cannot therefore be gainsaid that all there laborers suffer unusual distress. The wet pits,
trenches, manholes, which are full of sewage matters, are filthy sources of germs and different
diseases. They emit foul and filthy odor dangerous to health. Those working in such places and
exposed directly to the distress of contamination.
Premises considered, the decision of the Court of Industrial Relations in this respect should be
modified in the sense that all employees and laborers, whether or not they belong to the sewerage
division, who actually work in and outside the sewerage chambers, should be paid the distress
pay or the extra compensation equivalent to 25% of their basic wage effective October 1, 1956.
12. On August 6, 1957, the NAWASA requested the President of the Philippines for exemption
from Executive Order No. 251 which prescribes the office hours to be observed in government
and government-owned or controlled corporations in order that it could stagger the working
hours of its employees and laborers. The request is based on the fact that there are essential and
indispensable phases in the operation of the NAWASA that are required to be attended to
continuously for twenty-four hours for the entire seven days of the week without interruption
some of which being the work performed by pump operators, valve operators, filter operators,
chlorine operators, watchmen and guards, and medical personnel. This request was granted and,
accordingly, the NAWASA staggered the work schedule of the employees and laborers
performing the activities above-mentioned. Respondent unions protested against this staggering
schedule of work and this protest having been unheeded, they brought the matter to the Court of
Industrial Relations.
In resolving this issue, the industrial court justified the staggering of the work days of those
holding positions as pump operators, valve operators, filter operators, chlorine operators,
watchmen and guards, and those in the medical service for the reason that the same was made
pursuant to the authority granted by the President who in the valid exercise of the powers
conferred upon him by Republic Act No. 1880 could prescribe the working days of employees
and laborers in government-owned and controlled corporations depending upon the exigencies of
the service. The court, however, stated that the staggering should not apply to the personnel in
the construction, sewerage, maintenance, machineries and shops because they work below 365
days a year and their services are not continuous to require staggering. From this portion of the
decision, the petitioner appeals.
Considering that respondent court found that the workers in question work less than 365 days a
year and their services are not continuous to require staggering, we see no reason to disturb this
finding. This is contrary to the very essence of the request that the staggering should be made
only with regard to those phases of the operation of the NAWASA that have to be attended to
continuously for twenty-four hours without interruption which certainly cannot apply to the
workers mentioned in the last part of the decision of the respondent court on the matter.

RECAPITULATION
In resume, this Court holds:
(1) The NAWASA, though a public corporation, does not perform governmental
functions. It performs proprietary functions, and hence, it is covered by Commonwealth
Act No. 444;
(2) The NAWASA is a public utility. Although pursuant to Section 4 of Commonwealth
Act 444 it is not obliged to pay an additional sum of 25% to its laborers for work done on
Sundays and legal holidays, yet it must pay said additional compensation by virtue of the
contractual obligation it assumed under the collective bargaining agreement;
(3) The intervenors are not "managerial employees" as defined in Republic Act No. 2377,
hence they are covered by Commonwealth Act No. 444, as amended;
(4) The Court of Industrial Relations has jurisdiction to adjudicate overtime pay in the
case at bar there being an employer-employee relationship existing between intervenors
and petitioner;
(5) The GAO employees assigned to work in the NAWASA cannot be regarded as
employees of the NAWASA on matters relating to compensation. They are employees of
the national government and are not covered by the Eight-Hour Labor Law. The same
may be said of the employees of the Bureau of Public Works assigned to work in the
NAWASA;
(6) The method used by the NAWASA in off-setting the overtime with the undertime and
at the same time charging said undertime to the accrued leave is unfair;
(7) The differential pay for Sundays is a part of the legal wage. Hence, it was correctly
included in computing the weekly wages of those employees and laborers who worked
seven days a week and were regularly receiving the 25% salary differential for a period
of three months prior to the implementation of Republic Act 1880. This is so even if
petitioner is a public utility in view of the contractual obligation it has assumed on the
matter;
(8) In the computation of the daily wages of employees paid by the month distinction
should be made between government employees like the GAO employees and those who
are not. The computation for government employees is governed by Section 254 of the
Revised Administrative Code while for others the correct computation is the monthly
salary divided by the actual number of working hours in the month or the regular monthly
compensation divided by the number of working days in the month;
(9) The Court of Industrial Relations did not err in ordering the payment of night
compensation from the time such services were rendered. The laborer must be
compensated for nighttime work as of the date the same was rendered;

(10) The rates of minimum pay fixed in CIR Case No. 359-V are applicable not only to
those who were already in the service as of the date of the decision but also to those who
were employed subsequent to said date;
(11) All the laborers, whether assigned to the sewerage division or not who are actually
working inside or outside the sewerage chambers are entitled to distress pay; and
(12) There is no valid reason to disturb the finding of the Court of Industrial Relations
that the work of the personnel in the construction, sewerage, maintenance, machineries
and shops of petitioner is not continous as to require staggering.
CONCLUSION
With the modification indicated in the above resume as elaborated in this decision, we hereby
affirm the decision of respondent court in all other respects, without pronouncement as to costs.

[G.R. No. 109156. July 11, 1996]

STOLT-NIELSEN MARINE SERVICES (PHILS.) INC., petitioner, vs. NATIONAL

LABOR
RELATIONS
COMMISSION,
PHILIPPINE
OVERSEAS
EMPLOYMENT
ADMINISTRATION
and
MEYNARDO
J.
HERNANDEZ, respondent.

DECISION
ROMERO, J.:
Private respondent Meynardo J. Hernandez was hired by petitioner Stolt-Nielsen Marine
Services (Phils.) Inc. (STOLT-NIELSEN, for short) as radio officer on board M/T Stolt Condor
for a period of ten months. He boarded the vessel on January 20, 1990.
On April 26, 1990, the ship captain ordered private respondent to carry the baggage of crew
member Lito Loveria who was being repatriated. He refused to obey the order out of fear in view
of the utterance of said crew member "makakasaksak ako" and also because he did not perceive
such task as one of his duties as radio officer. As a result of such refusal, private respondent was
ordered to disembark on April 30, 1990 and was himself repatriated on May 15, 1990. He was
paid his salaries and wages only up to May 16, 1990.
On June 21, 1990, private respondent filed before public respondent POEA a complaint for
illegal dismissal and breach of contract praying for, among other things, payment of salaries,
wages, overtime and other benefits due him for the unexpired portion of the contract which was
six (6) months and three (3) days.
Petitioner STOLT-NIELSEN in its answer alleged that on April 26, 1990, private
respondent refused to follow the "request" of the master of the vessel to explain to Lolito Loveria
the reason for the latter's repatriation and to assist him in carrying his baggage, all in violation of
Article XXIV, Section 1 of the Collective Bargaining Agreement (CBA) and the POEA Standard
Contract. Hence, private respondent, after being afforded the opportunity to explain his side, was
dismissed for gross insubordination and serious misconduct.
In reply, he denied that the master of the vessel requested him to explain to Loveria the
reason for the latter's repatriation.
Thereafter, POEA Administrator Jose N. Sarmiento rendered an award in favor of private
respondent, as follows:
"The issue to be resolved is whether or not complainant was illegally dismissed.
We rule in the affirmative.
Record shows that on April 26, 1990, complainant was directed by the master of the vessel to
carry the luggage of an outgoing seaman offshore. Complainant, however, refused to obey the
said order, hence, his dismissal from his employment.
Evaluating the reason for complainant's dismissal, we find the penalty imposed too severe
considering the violation committed. To our mind, a warning would have been sufficient since
this was the first offense committed. Moreover, as a radio officer, it is not one of his official
duties to carry the luggage of outgoing seaman.
In the light of the foregoing, we hold that complainant's dismissal due to the aforesaid
incident arbitrary, whimsical and contrary to human nature and experience, hence, not
justified. Accordingly, he is entitled to his salaries for the unexpired portion of his contract
computed as follows:

1. Remaining portion of his contract - 6 months & 3 days

2. Basic salary - US$1,024.00
3. Fixed Overtime - 420.00[1]
Total US$1,434.00
4. Salary/day = ($1,434/30 days) = US$47.8/day
5. Salary for 3 days - ($47.8 x 3) = US$143.4
6. Salary for 6 months - ($1,434 x 6) = US$8,604.00
7. Salary
for
the
unexpired
portion
(basic
salary
+
for
6
months
and
(US$8,604 + 143.4) = US$8,747.40

of
fixed

his
3

contract
O.T.)
days

Complainant's claim for day's leave with pay for the unexpired portion of the contract is hereby
denied since the same is only given during actual service.
The claim for damages is hereby denied for want of jurisdiction.
Complainant is however entitled to five (5%) percent of the total award as and by way of
attorney's fees.
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered ordering respondent
to pay complainant the following or its peso equivalent at the time of payment:
1. EIGHT THOUSAND SEVEN HUNDRED FORTY SEVEN & 40/100 US DOLLARS
(US$8,747.40) or its peso equivalent at the time of payment, as salaries for the unexpired portion
of his contract.
2. Five percent (5%) of the total award as and by way of attorney's fees.
All other claims are hereby DENIED for lack of merit.
SO ORDERED."[2]
Aggrieved, petitioner Stolt-Nielsen appealed to the National Labor Relations Commission
(NLRC).
The NLRC, in a resolution[3] dated November 27, 1992, concurred with the POEA
Administrator in ruling that private respondent, having been illegally dismissed, was, therefore,
entitled to the monetary award. It further stated that private respondent's duty as a radio officer or
radio operator does not include the carrying of the luggage of any seaman or explaining to said
seaman the reason for his repatriation.Thus, concluded the NLRC, his termination on this ground
was not proper and, therefore, he had every right to the monetary award. The NLRC likewise
granted private respondent's claim for fixed overtime pay and attorney's fees.

Petitioner, having moved for reconsideration without success, is before this Court
on certiorari.
The issues posed for resolution in this case are: (a) whether private respondent was legally
dismissed on the ground of gross insubordination and serious misconduct; and (b) whether
private respondent was entitled to the award of overtime pay.
With respect to the first issue, petitioner Stolt-Nielsen emphasizes how "(e)mployment on
board ocean-going vessels is totally different from land-based ones in that in the former strict
and faithful compliance of all lawful commands and orders of the master or captain of the vessel
is of paramount and crucial importance." Petitioner then cites Part I, Section A (2) of the POEA
Standard Employment Contract which provides:
"2. The seaman binds himself to the following:
'a. To faithfully comply with and observe the terms and conditions of this contract, violation of
which shall be subject to disciplinary action pursuant to appendix 2 of this crew contract.
xxx xxx xxx
d. To be obedient to the lawful commands of the master or any person who shall succeed him.'"
It likewise adverts to Article XXIV, Section 1 of the CBA, viz:
"Authority of the Master
Section 1. It is understood and agreed that nothing contained in this is intended or shall be
construed so as to restrict in any way the superiority of the Master or prevent the obedience of
any member of the crew to any lawful order of any superior officer." (Underscoring ours)
Petitioner contends that since the captain's order to assist the crew member who was being
repatriated in carrying his baggage is lawful, private respondent's refusal to obey the command is
willful, thus warranting his dismissal.
Article 282 of the Labor Code provides in part:
"Art. 282. Termination by Employer. An employer may terminate an employment for any of the
following causes: a) Serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or representative in connection with his work;
xxx xxx xxx
Willful disobedience of the employer's lawful orders, as a just cause for the dismissal of an
employee, envisages the concurrence of at least two (2) requisites: the employee's assailed
conduct must have been willful or intentional, the willfulness being characterized by a "wrongful
and perverse attitude"; and the order violated must have been reasonable, lawful, made known to
the employee and must pertain to the duties which he had been engaged to discharge.[4]

The Court agrees that by virtue of the aforementioned CBA and POEA Standard Contract
provisions cited by petitioner, private respondent is indeed bound to obey the lawful commands
of the captain of the ship, but only as long as these pertain to his duties. The order to carry the
luggage of a crew member, while being lawful, is not part of the duties of a radio
officer. Assuming arguendo that lawful commands of a ship captain are supposed to be obeyed
by the complement of a ship, private respondent's so-called "act of disobedience" does not
warrant the supreme penalty of dismissal.
In Gold City Integrated Port Services, Inc. v. NLRC,[5] the Court ruled:
"x x x We believe that not every case of insubordination or willful disobedience by an employee
of a lawful work-connected order of the employer or its representative is reasonably penalized
with dismissal. For one thing, Article 282 (a) refers to "serious misconduct or willful
disobedience - - -". There must be reasonable proportionality between, on the one hand, the
willful disobedience by the employee and, on the other hand, the penalty imposed therefor. x x
x"
In instant case, the POEA found that private respondent's actuation which led to his
dismissal was the first and only act of disobedience during his service with the
petitioner. Furthermore, examination of the circumstances surrounding private respondent's
disobedience shows that the repatriated seaman's utterance of "makakasaksak ako" so instilled
fear in private respondent that he was deterred from carrying out the order of the captain. Hence,
his act could not be rightfully characterized as one motivated by a "wrongful and perverse
attitude." Besides, said incident posed no serious or substantial danger to the well-being of his
other co-employees or of the general public doing business with petitioner employer. Neither did
such behavior threaten substantial prejudice to the business of his employer.
In light of the foregoing, we agree with the NLRC that termination of the private
respondent's services was a disproportionately heavy penalty.
Coming to the second issue involving the award of overtime pay, the NLRC in its assailed
resolution states:
"Anent the overtime pay, complainant alleged that he is entitled thereto as the same is a fixed
overtime pay. The respondents failed to controvert said allegations. In short, the complainant's
claim for overtime pay was undisputed and for this reason, the grant of this claim must be
upheld."[6]
Petitioner, on the other hand, cites this Court's pronouncement in Cagampan v.
NLRC,[7] thus:
"As regards the question of overtime pay, the NLRC cannot be faulted for disallowing the
payment of said pay because it merely straightened out the distorted interpretation asserted by
petitioners and defined the correct interpretation of the provision on overtime pay embodied in
the contract conformably with settled doctrines on the matter. Notably, the NLRC ruling on the
disallowance of overtime pay is ably supported by the fact that petitioners never produced any
proof of actual performance of overtime work.

Petitioners have conveniently adopted the view that the "guaranteed or fixed overtime pay of
30% of the basic salary per month" embodied in their employment contract should be awarded to
them as part of a "package benefit." They have theorized that even without sufficient evidence of
actual rendition of overtime work, they would automatically be entitled to overtime pay. Their
theory is erroneous for being illogical and unrealistic. Their thinking even runs counter to the
intention behind the provision. The contract provision means that the fixed overtime pay of 30%
would be the basis for computing the overtime pay if and when overtime work would be
rendered. Simply stated, the rendition of overtime work and the submission of sufficient proof
that said work was actually performed are conditions to be satisfied before a seaman could be
entitled to overtime pay which should be computed on the basis of 30% of the basic monthly
salary. In short, the contract provision guarantees the right to overtime pay but the entitlement to
such benefit must first be established. Realistically speaking, a seaman, by the very nature of his
job, stays on board a ship or vessel beyond the regular eight-hour work schedule. For the
employer to give him overtime pay for the extra hours when he might be sleeping or attending to
his personal chores or even just lulling away his time would be extremely unfair and
unreasonable."
Petitioner's argument is well taken. A close scrutiny of the computation of the monetary
award[8] shows that the award for overtime was for the remaining six (6) months and three (3)
days of private respondent's contract at which time he was no longer rendering services as he had
already been repatriated. In light of our aforequoted ruling in Cagampan v. NLRC, said award for
overtime should be, as it is hereby, disallowed for being unjustified.
WHEREFORE, the decision of the NLRC is hereby AFFIRMED with the modification that
the award for overtime pay should be DELETED.
SO ORDERED.

ABDULJUAHID R. PIGCAULAN,
Petitioner,

G.R. No. 173648

Present:
- versus -

CORONA, C.J., Chairperson,

LEONARDO-DE CASTRO,

DEL CASTILLO,
ABAD, and
VILLARAMA, JR., JJ.

SECURITY and CREDIT

INVESTIGATION, INC. and/or
Promulgated:
RENE AMBY REYES ,
Respondents.
January 16, 2012
x-------------------------------------------------------------------x
DECISION
DEL CASTILLO, J.:
It is not for an employee to prove non-payment of benefits to which he is entitled by law. Rather, it is on
the employer that the burden of proving payment of these claims rests.
This Petition for Review on Certiorari[1] assails the February 24, 2006 Decision[2] of the Court of
Appeals (CA) in CA-G.R. SP No. 85515, which granted the petition for certiorari filed therewith, set
aside the March 23, 2004[3] and June 14, 2004[4] Resolutions of the National Labor Relations Commission
(NLRC), and dismissed the complaint filed by Oliver R. Canoy (Canoy) and petitioner Abduljuahid R.
Pigcaulan (Pigcaulan) against respondent Security and Credit Investigation, Inc. (SCII) and its General
Manager, respondent Rene Amby Reyes. Likewise assailed is the June 28, 2006 Resolution[5] denying
Canoys and Pigcaulans Motion for Reconsideration.[6]
Factual Antecedents
Canoy and Pigcaulan were both employed by SCII as security guards and were assigned to SCIIs
different clients. Subsequently, however, Canoy and Pigcaulan filed with the Labor Arbiter separate
complaints[7]for underpayment of salaries and non-payment of overtime, holiday, rest day, service
incentive leave and 13th month pays. These complaints were later on consolidated as they involved the
same causes of action.
Canoy and Pigcaulan, in support of their claim, submitted their respective daily time records reflecting the
number of hours served and their wages for the same. They likewise presented itemized lists of their
claims for the corresponding periods served.
Respondents, however, maintained that Canoy and Pigcaulan were paid their just salaries and
other benefits under the law; that the salaries they received were above the statutory minimum wage and
the rates provided by the Philippine Association of Detective and Protective Agency Operators

(PADPAO) for security guards; that their holiday pay were already included in the computation of their
monthly salaries; that they were paid additional premium of 30% in addition to their basic salary
whenever they were required to work on Sundays and 200% of their salary for work done on holidays;
and, that Canoy and Pigcaulan were paid the corresponding 13th month pay for the years 1998 and
1999. In support thereof, copies of payroll listings[8] and lists of employees who received their 13th month
pay for the periods December 1997 to November 1998 and December 1998 to November 1999[9] were
presented. In addition, respondents contended that Canoys and Pigcaulans monetary claims should only
be limited to the past three years of employment pursuant to the rule on prescription of claims.
Ruling of the Labor Arbiter
Giving credence to the itemized computations and representative daily time records submitted by Canoy
and Pigcaulan, Labor Arbiter Manuel P. Asuncion awarded them their monetary claims in his
Decision[10]dated June 6, 2002. The Labor Arbiter held that the payroll listings presented by the
respondents did not prove that Canoy and Pigcaulan were duly paid as same were not signed by the latter
or by any SCII officer.The 13th month payroll was, however, acknowledged as sufficient proof of
payment, for it bears Canoys and Pigcaulans signatures. Thus, without indicating any detailed
computation of the judgment award, the Labor Arbiter ordered the payment of overtime pay, holiday pay,
service incentive leave pay and proportionate 13th month pay for the year 2000 in favor of Canoy and
Pigcaulan, viz:
WHEREFORE, the respondents are hereby ordered to pay the complainants: 1)
their salary differentials in the amount of P166,849.60 for Oliver Canoy and P121,765.44
for Abduljuahid Pigcaulan; 2) the sum of P3,075.20 for Canoy and P2,449.71 for
Pigcaulan for service incentive leave pay and; [3]) the sum of P1,481.85 for Canoy
and P1,065.35 for Pigcaulan as proportionate 13th month pay for the year 2000. The rest
of the claims are dismissed for lack of sufficient basis to make an award.
SO ORDERED.[11]

Ruling of the National Labor Relations Commission

Respondents appealed to the NLRC. They alleged that there was no basis
for the awards made because aside from the self-serving itemized computations, no representative daily
time record was presented by Canoy and Pigcaulan. On the contrary, respondents asserted that the payroll
listings they submitted should have been given more probative value. To strengthen their cause, they

attached to their Memorandum on Appeal payrolls[12] bearing the individual signatures of Canoy and
Pigcaulan to show that the latter have received their salaries, as well as copies of transmittal letters[13] to
the bank to show that the salaries reflected in the payrolls were directly deposited to the ATM accounts of
SCIIs employees.
The NLRC, however, in a Resolution[14] dated March 23, 2004, dismissed the appeal and held
that the evidence show underpayment of salaries as well as non-payment of service incentive leave
benefit.Accordingly, the Labor Arbiters Decision was sustained. The motion for reconsideration thereto
was likewise dismissed by the NLRC in a Resolution[15] dated June 14, 2004.
Ruling of the Court of Appeals
In respondents petition for certiorari with prayer for the issuance of a temporary restraining order and
preliminary injunction[16] before the CA, they attributed grave abuse of discretion on the part of the
NLRC in finding that Canoy and Pigcaulan are entitled to salary differentials, service incentive leave pay
and proportionate 13th month pay and in arriving at amounts without providing sufficient bases therefor.
The CA, in its Decision[17] dated February 24, 2006, set aside the rulings of
both the Labor Arbiter and the NLRC after noting that there were no factual and legal bases mentioned in
the questioned rulings to support the conclusions made. Consequently, it dismissed all the monetary
claims of Canoy and Pigcaulan on the following rationale:
First. The Labor Arbiter disregarded the NLRC rule that, in cases involving money
awards and at all events, as far as practicable, the decision shall embody the detailed and
full amount awarded.
Second. The Labor Arbiter found that the payrolls submitted by SCII have no probative
value for being unsigned by Canoy, when, in fact, said payrolls, particularly the payrolls
from 1998 to 1999 indicate the individual signatures of Canoy.
Third. The Labor Arbiter did not state in his decision the substance of the evidence
adduced by Pigcaulan and Canoy as well as the laws or jurisprudence that would show
that the two are indeed entitled to the salary differential and incentive leave pays.
Fourth. The Labor Arbiter held Reyes liable together with SCII for the payment of the
claimed salaries and benefits despite the absence of proof that Reyes deliberately or
maliciously designed to evade SCIIs alleged financial obligation; hence the Labor Arbiter
ignored that SCII has a corporate personality separate and distinct from Reyes. To justify
solidary liability, there must be an allegation and showing that the officers of the

corporation deliberately or maliciously designed to evade the financial obligation of the

corporation.[18]

Canoy and Pigcaulan filed a Motion for Reconsideration, but same was denied by the CA in a
Resolution[19] dated June 28, 2006.
Hence, the present Petition for Review on Certiorari.
Issues
The petition ascribes upon the CA the following errors:
I. The Honorable Court of Appeals erred when it dismissed the complaint on
mere alleged failure of the Labor Arbiter and the NLRC to observe the prescribed form
of decision, instead of remanding the case for reformation of the decision to include the
desired detailed computation.
II. The Honorable Court of Appeals erred when it [made] complainants suffer the
consequences of the alleged non-observance by the Labor Arbiter and NLRC of the
prescribed forms of decisions considering that they have complied with all needful acts
required to support their claims.
III. The Honorable Court of Appeals erred when it dismissed the complaint
allegedly due to absence of legal and factual [bases] despite attendance of substantial
evidence in the records.[20]

It is well to note that while the caption of the petition reflects both the names of Canoy and
Pigcaulan as petitioners, it appears from its body that it is being filed solely by Pigcaulan. In fact, the
Verification and Certification of Non-Forum Shopping was executed by Pigcaulan alone.
In his Petition, Pigcaulan submits that the Labor Arbiter and the NLRC are not strictly bound by
the rules. And even so, the rules do not mandate that a detailed computation of how the amount awarded
was arrived at should be embodied in the decision. Instead, a statement of the nature or a description of
the amount awarded and the specific figure of the same will suffice. Besides, his and Canoys claims were
supported by substantial evidence in the form of the handwritten detailed computations which the Labor
Arbiter termed as representative daily time records, showing that they were not properly compensated for
work rendered. Thus, the CA should have remanded the case instead of outrightly dismissing it.

In their Comment,[21] respondents point out that since it was only Pigcaulan who filed the petition,
the CA Decision has already become final and binding upon Canoy. As to Pigcaulans arguments,
respondents submit that they were able to present sufficient evidence to prove payment of just salaries and
benefits, which bits of evidence were unfortunately ignored by the Labor Arbiter and the
NLRC. Fittingly, the CA reconsidered these pieces of evidence and properly appreciated them. Hence, it
was correct in dismissing the claims for failure of Canoy and Pigcaulan to discharge their burden to
disprove payment.
Pigcaulan, this time joined by Canoy, asserts in his Reply[22] that his filing of the present petition
redounds likewise to Canoys benefit since their complaints were consolidated below. As such, they
maintain that any kind of disposition made in favor or against either of them would inevitably apply to the
other. Hence, the institution of the petition solely by Pigcaulan does not render the assailed Decision final
as to Canoy. Nonetheless, in said reply they appended Canoys affidavit[23] where he verified under oath
the contents and allegations of the petition filed by Pigcaulan and also attested to the authenticity of its
annexes. Canoy, however, failed to certify that he had not filed any action or claim in another court or
tribunal involving the same issues. He likewise explains in said affidavit that his absence during the
preparation and filing of the petition was caused by severe financial distress and his failure to inform
anyone of his whereabouts.
Our Ruling
The assailed CA Decision is considered final as to
Canoy.

We have examined the petition and find that same was filed by Pigcaulan solely on his own behalf. This
is very clear from the petitions prefatory which is phrased as follows:
COMES NOW Petitioner Abduljuahid R. Pigcaulan, by counsel, unto this
Honorable Court x x x. (Emphasis supplied.)

Also, under the heading Parties, only Pigcaulan is mentioned as petitioner and consistent with this, the
body of the petition refers only to a petitioner and never in its plural form petitioners. Aside from the fact
that the Verification and Certification of Non-Forum Shopping attached to the petition was executed by
Pigcaulan alone, it was plainly and particularly indicated under the name of the lawyer who prepared the
same, Atty. Josefel P. Grageda, that he is the Counsel for Petitioner Adbuljuahid Pigcaulan only. In view

of these, there is therefore, no doubt, that the petition was brought only on behalf of Pigcaulan. Since no
appeal from the CA Decision was brought by Canoy, same has already become final and executory as to
him.
Canoy cannot now simply incorporate in his affidavit a verification of the contents and allegations of the
petition as he is not one of the petitioners therein. Suffice it to state that it would have been different had
the said petition been filed in behalf of both Canoy and Pigcaulan. In such a case, subsequent submission
of a verification may be allowed as non-compliance therewith or a defect therein does not necessarily
render the pleading, or the petition as in this case, fatally defective.[24] The court may order its submission
or correction, or act on the pleading if the attending circumstances are such that strict compliance with the
Rule may be dispensed with in order that the ends of justice may be served thereby. Further, a verification
is deemed substantially complied with when one who has ample knowledge to swear to the truth of the
allegations in the complaint or petition signs the verification, and when matters alleged in the petition
have been made in good faith or are true and correct.[25] However, even if it were so, we note that Canoy
still failed to submit or at least incorporate in his affidavit a certificate of non-forum shopping.
The filing of a certificate of non-forum shopping is mandatory so much so
that non-compliance could only be tolerated by special circumstances and compelling reasons.[26] This
Court has held that when there are several petitioners, all of them must execute and sign the certification
against forum shopping; otherwise, those who did not sign will be dropped as parties to the case.[27] True,
we held that in some cases, execution by only one of the petitioners on behalf of the other petitioners
constitutes substantial compliance with the rule on the filing of a certificate of non-forum shopping on the
ground of common interest or common cause of action or defense.[28] We, however, find that common
interest is not present in the instant petition. To recall, Canoys and Pigcaulans complaints were
consolidated because they both sought the same reliefs against the same respondents. This does not,
however, mean that they share a common interest or defense. The evidence required to substantiate their
claims may not be the same. A particular evidence which could sustain Canoys action may not effectively
serve as sufficient to support Pigcaulans claim.
Besides, assuming that the petition is also filed on his behalf, Canoy failed to show any
reasonable cause for his failure to join Pigcaulan to personally sign the Certification of Non-Forum
Shopping. It is his duty, as a litigant, to be prudent in pursuing his claims against SCII, especially so, if he
was indeed suffering from financial distress. However, Canoy failed to advance any justifiable reason
why he did not inform anyone of his whereabouts when he knows that he has a pending case against his
former employer. Sadly, his lack of prudence and diligence cannot merit the courts consideration or
sympathy. It must be emphasized at this point that procedural rules should not be ignored simply because

their non-observance may result in prejudice to a partys substantial rights. The Rules of Court should be
followed except only for the most persuasive of reasons.[29]
Having declared the present petition as solely filed by Pigcaulan, this Court shall consider the
subsequent pleadings, although apparently filed under his and Canoys name, as solely filed by the former.
There was no substantial evidence to support the grant
of overtime pay.

The Labor Arbiter ordered reimbursement of overtime pay, holiday pay, service incentive leave pay and
13th month pay for the year 2000 in favor of Canoy and Pigcaulan. The Labor Arbiter relied heavily on
the itemized computations they submitted which he considered as representative daily time records to
substantiate the award of salary differentials. The NLRC then sustained the award on the ground that
there was substantial evidence of underpayment of salaries and benefits.
We find that both the Labor Arbiter and the NLRC erred in this regard. The handwritten itemized
computations are self-serving, unreliable and unsubstantial evidence to sustain the grant of salary
differentials, particularly overtime pay. Unsigned and unauthenticated as they are, there is no way of
verifying the truth of the handwritten entries stated therein. Written only in pieces of paper and solely
prepared by Canoy and Pigcaulan, these representative daily time records, as termed by the Labor Arbiter,
can hardly be considered as competent evidence to be used as basis to prove that the two were underpaid
of their salaries. We find nothing in the records which could substantially support Pigcaulans contention
that he had rendered service beyond eight hours to entitle him to overtime pay and during Sundays to
entitle him to restday pay.Hence, in the absence of any concrete proof that additional service beyond the
normal working hours and days had indeed been rendered, we cannot affirm the grant of overtime pay to
Pigcaulan.
Pigcaulan is entitled to holiday pay, service incentive
leave pay and proportionate 13th month pay for year
2000.

However, with respect to the award for holiday pay, service incentive leave
pay and 13th month pay, we affirm and rule that Pigcaulan is entitled to these benefits.
Article 94 of the Labor Code provides that:

ART. 94. RIGHT TO HOLIDAY PAY. (a) Every worker shall be paid his
regular daily wage during regular holidays, except in retail and service establishments
regularly employing less than ten (10) workers;
xxxx

While Article 95 of the Labor Code provides:

ART. 95. RIGHT TO SERVICE INCENTIVE LEAVE. (a) Every employee

who has rendered at least one year of service shall be entitled to a yearly service incentive
of five days with pay.
xxxx

Under the Labor Code, Pigcaulan is entitled to his regular rate on holidays even if he does not
work. Likewise, express provision of the law entitles him to service incentive leave benefit for he
rendered service for more than a year already. Furthermore, under Presidential Decree No. 851,[31] he
should be paid his 13th month pay. As employer, SCII has the burden of proving that it has paid these
benefits to its employees.[32]
[30]

SCII presented payroll listings and transmittal letters to the bank to show that Canoy and
Pigcaulan received their salaries as well as benefits which it claimed are already integrated in the
employees monthly salaries. However, the documents presented do not prove SCIIs allegation. SCII
failed to show any other concrete proof by means of records, pertinent files or similar documents
reflecting that the specific claims have been paid. With respect to 13th month pay, SCII presented proof
that this benefit was paid but only for the years 1998 and 1999. To repeat, the burden of proving payment
of these monetary claims rests on SCII, being the employer. It is a rule that one who pleads payment has
the burden of proving it. Even when the plaintiff alleges non-payment, still the general rule is that the
burden rests on the defendant to prove payment, rather than on the plaintiff to prove nonpayment.[33] Since SCII failed to provide convincing proof that it has already settled the claims, Pigcaulan
should be paid his holiday pay, service incentive leave benefits and proportionate 13th month pay for the
year 2000.
The CA erred in dismissing the claims instead of
remanding the case to the Labor Arbiter for a detailed
computation of the judgment award.

Indeed, the Labor Arbiter failed to provide sufficient basis for the monetary
awards granted. Such failure, however, should not result in prejudice to the substantial rights of the
party. While we disallow the grant of overtime pay and restday pay in favor of Pigcaulan, he is
nevertheless entitled, as a matter of right, to his holiday pay, service incentive leave pay and 13th month
pay for year 2000. Hence, the CA is not correct in dismissing Pigcaulans claims in its entirety.
Consistent with the rule that all money claims arising from an employer-employee relationship shall be
filed within three years from the time the cause of action accrued,[34] Pigcaulan can only demand the
amounts due him for the period within three years preceding the filing of the complaint in
2000. Furthermore, since the records are insufficient to use as bases to properly compute Pigcaulans
claims, the case should be remanded to the Labor Arbiter for a detailed computation of the monetary
benefits due to him.
WHEREFORE, the petition is GRANTED. The Decision dated
February 24, 2006 and Resolution dated June 28, 2006 of the Court of Appeals in CA-G.R. SP No. 85515
are REVERSED and SET ASIDE. Petitioner Abduljuahid R. Pigcaulan is hereby
declared ENTITLEDto holiday pay and service incentive leave pay for the years 1997-2000 and
proportionate 13th month pay for the year 2000.
The case is REMANDED to the Labor Arbiter for further proceedings to determine the exact amount
and to make a detailed computation of the monetary benefits due Abduljuahid R. Pigcaulan which
Security and Credit Investigation Inc. should pay without delay.
SO ORDERED.

G.R. No. L-58870 December 18, 1987

CEBU
INSTITUTE
OF
TECHNOLOGY
(CIT), petitioner,
vs.
HON. BLAS OPLE, in his capacity as Minister, Ministry of Labor and Employment,
JULIUS ABELLA, ARSENIO ABELLANA, RODRIGO ALIWALAS, ZOSIMO
ALMOCERA, GERONIDES ANCOG, GREGORIO ASIA, ROGER BAJARIAS,
BERNARDO BALATAYO, JR., BASILIO CABALLES, DEMOCRITO TEVES,
VOLTAIRE DELA CERNA, ROBERTO COBARRUBIAS, VILMA GOMEZ CHUA,
RUBEN GALLITO, EDGARDO CONCEPCION, VICTOR COQUILLA, JOSE
DAKOYKOY, PATERNO WONG, EVELYN LACAYA, RODRIGO GONZALES,
JEOGINA GOZO, MIGUEL CABALLES, CONSUELO JAVELOSA, QUILIANO
LASCO, FRANKLIN LAUTA, JUSTINIANA LARGO, RONALD LICUPA, ALAN
MILANO, MARIA MONSANTO, REYNALDO NOYNAY, RAMON PARADELA,
NATALIO PLAZA, LUZPURA QUIROGA, NOE RODIS, COSMENIA SAAVEDRA,
LEONARDO SAGARIO, LETICIA SERRA, SIEGFREDO TABANAG, LUCINO
TAMAOSO, DANILO TERANTE, HELEN CALVO TORRES, ERNESTO
VILLANUEVA, DOLORES VILLONDO, EDWARD YAP, ROWENA VIVARES,
DOLORES SANANAM, RODRIGO BACALSO, YOLANDA TABLANTE, ROMERO
BALATUCAN, CARMELITA LADOT, PANFILO CANETE, EMMANUEL CHAVEZ,
JR., SERGIO GALIDO, ANGEL COLLERA, ZOSIMO CUNANAN, RENE BURT
LLANTO, GIL BATAYOLA, VICENTE DELANTE, CANDELARIO DE DIOS, JOSE
MA. ESTELLA, NECITA TRINIDAD, ROTELLO ILUMBA, TEODORICO JAYME,
RAYMUNDO ABSIN, RUDY MANEJA, REYNA RAMOS, ANASTACIA BLANCO, FE
DELMUNDO, ELNORA MONTERA, MORRISON MONTESCLAROS, ELEAZAR
PANIAMOGAN, BERNARDO PILAPIL, RODOLFO POL, DEMOSTHENES
REDOBLE, PACHECO ROMERO, DELLO SABANAL, SARAH SALINAS, RENATO
SOLATORIO, EDUARDO TABLANTE, EMMANUEL TAN, FELICISIMO TESALUNA,
JOSE VERALLO, JR., MAGDALENO VERGARA, ESMERALDA ABARQUEZ, MAC
ARTHUR DACUYCUY ACOMPANADA, TRINIDAD ADLAWAN, FE ELIZORDO
ALCANTARA, REOSEBELLA AMPER, ZENAIDA BACALSO, ELIZA BADANA,
GEORGIA BAS, ERLINDA BURIAS, ELDEFONSO BURIAS, CORAZON CASENAS,
REGINO CASTANEDA, GEORGE CATADA, CARMENCITA G. CHAVEZ, LORETIA
CUNANAN, FLORES DELFIN, TERESITA ESPINO, ELVIE GALANZA, AMADEA
GALELA, TERESITA. JUNTILLA, LEONARDA KAPUNGAN, ADORACION
LANAWAN, LINDA LAYAO, GERARDO LAYSON, VIRGILIO LIBETARIO,
RAYMOND PAUL LOGARTA, NORMA LUCERO, ANATOLIA MENDEZ,
ELIODORO MENDEZ, JUDALINE MONTE, ELMA OCAMPO, ESTEFA OLIVARES,
GEORGE ORAIS, CRISPINA PALANG, GRETA PEGARIDO, MELBA QUIACHON,
REMEDIOS QUIROS, VIRGINIA RANCES, EDNA DELOS REYES, VICENTE TAN,
EMERGENCIA ROSELL, JULIETA TATING, MERCIA TECARRO, FELISA
VERGARA, WEMINA VILLACIN, MACRINA YBARSABAL, MILAGROS CATALAN,
JULIETA AQUINDE, SONIA ARTIAGA, MA. TERESITA OBANDO, ASUNCION
ABAYAN, ESTHER CARREON, ECHEVARRE, BUENAFE SAMSON, CONCEPCION
GONZALES, VITALIANA VENERACION, LEONCIA ABELLAR, REYNITA
VILLACARLOS. respondents.

No. L-68345 December 18, 1987

DIVINE
WORD
COLLEGE
OF
LEGAZPI, petitioner,
vs.
The Honorable Deputy Minister of Labor and Employment, VICENTE LEOGARDO, JR.,
the HONORABLE REGIONAL DIRECTOR (Regional Office No. 5) of the Ministry of
Labor & Employment GERARDO S. CASTILLO, CECILIA MANUEL and other alleged
complainants, respondents.
Nos. L-69224-5 December 18, 1987
FAR
EASTERN
UNIVERSITY
EMPLOYEES
LABOR
UNION, petitioner,
vs.
FAR EASTERN UNIVERSITY and the NATIONAL LABOR RELATIONS
COMMISSION, respondents.
No. 70832 December 18, 1987
GREGORIO T. FABROS, ROGELIO B. DE GUZMAN, CRESENCIANO ESPINO, JOSE
RAMOS SUNGA, BAYLON BANEZ FERNANDO ELESTERIO, ISMAEL TABO,
AMABLE TUIBEO CELSO TUBAY, RAFAEL HERNANDEZ, GERONIMO
JASARENO, MEL BALTAZAR, MA. LOURDES PASCUAL, T. DEL ROSARIO
ACADEMY TEACHERS and EMPLOYEES ASSOCIATION, DENNIS MONTE, BECKY
TORRES, LOIDA VELASCO, ROMLY NERY, DAISY N. AMPIG, PATRICIO
DOLORES, ROGELIO RAMIREZ, and NILDA L. SEVILLA, petitioners,
vs.
The HON. JAIME C. LAYA, in his capacity as Minister of Education, Culture and
Sports, respondents.
No. L-76524 December 18, 1987
JASMIN BISCOCHO, ROWENA MARIANO, AGNES GALLEGO, MA. ANA
ORDENES, ISABEL DE LEON, LUZVIMINDA FIDEL, MARIQUIT REYES, SOTERA
ORTIZ, ANGELINA ROXAS, BITUIN DE PANO, ELIZABETH ORDEN, APOLLO
ORDEN, GUILLERMA CERCANO, IMELDA CARINGAL, EFREN BATIFORA,
ROSIE VALDEZ, DELIA QUILATEZ, FELIX RODRIGUEZ, OSCAR RODRIGUEZ,
JOVITA CEREZO, JOSEFINA BONDOC, BELEN POSADAS, DOLORES PALMA,
ANTONINA CRUS, CONRADO BANAYAT, TERESITA LORBES, and CORAZON
MIRANDA, petitioners,
vs.
THE HONORABLE AUGUSTO SANCHEZ, in his capacity as Minister of Labor and
Employment, ESPIRITU SANTO PAROCHIAL SCHOOL AND ESPIRITU SANTO
PAROCHIAL SCHOOL FACULTY ASSOCIATION,respondents.
No. 76596 December 18, 1987

RICARDO
C.
VALMONTE
and
CORAZON
BADIOLA, petitioners,
vs.
THE HONORABLE AUGUSTO SANCHEZ, in his capacity as Minister of Labor and
Employment, ESPIRITU SANTO PAROCHIAL SCHOOL FACULTY ASSOCIATION,
and ESPIRITU SANTO PAROCHIAL SCHOOL,respondents.

CORTES, J.:
Six cases involving various private schools, their teachers and non-teaching school personnel,
and even parents with children studying in said schools, as well as the then Minister of Labor and
Employment, his Deputy, the National Labor Relations Commission, and the then Minister of
Education, Culture and Sports, have beenconsolidated in this single Decision in order to dispose
of uniformly the common legal issue raised therein, namely, the allocation of the incremental
proceeds of authorized tuition fee increases of private schools provided for in section 3 (a) of
Presidential Decree No. 451, and thereafter, under the Education Act of 1982 (Batas Pambansa
Blg. 232).
Specifically, the common problem presented by these cases requires an interpretation of section
3(a) of Pres. Decree No. 451 which states:
SEC. 3. Limitations. The increase in tuition or other school fees or other
charges as well as the new fees or charges authorized under the next preceding
section shall be subject to the following conditions;
(a) That no increase in tuition or other school fees or charges shall be approved
unless sixty (60%)per centum of the proceeds is allocated for increase in salaries
or wages of the members of the faculty and all other employees of the school
concerned, and the balance for institutional development, student assistance and
extension services, and return to investments: Provided That in no case shall the
return to investments exceed twelve (12%) per centum of the incremental
proceeds;
xxx xxx xxx
In addition, there is also a need for a pronouncement on the effect of the subsequent enactment of
B.P. Blg. 232 which provides for the allocation of tuition fee increases in section 42 thereof.
In a nutshell, the present controversy was precipitated by the claims of some school personnel for
allowances and other benefits and the refusal of the private schools concerned to pay said
allowances and benefits on the ground that said items should be deemed included in the salary
increases they had paid out of the 60% portion of the proceeds from tuition fee increases
provided for in section 3 (a) of Pres. Decree No. 451. The interpretation and construction of laws
being a matter of judicial power and duty [Marbury v. Madison, 1 Cranch 137 (1803); Endencia
v. David, 93 Phil. 696 (1953)], this Court has been called upon to resolve the controversy.

In the process of reading and at times, having to decipher, the numerous pleadings filed in the six
cases, the Court found that the main issue has been approached by the parties from almost
diametrical points, thereby bringing into focus three sub-issues: first, whether or not allowances
and other fringe benefits of faculty members and other school employees may be charged against
the 60% portion of the tuition fee increases provided for in section 3(a) of Pres. Dec. No.
451: second, whether or not the same items may be charged against said portion under the
provisions of B.P. Blg. 232: and, third, whether or not schools and their employees may enter
into a collective bargaining agreement allocating more than 60% of said incremental proceeds
for salary increases and other benefits of said employees. After these sub-issues have been
resolved, the Court will tackle the other incidents attending the individual cases, seriatim.
The factual antecedents that brought these cases before this Tribunal are as follows:
I.. FACTUAL BACKGROUND OF EACH CASE
A.
CEBU INSTITUTE OF TECHNOLOGY CASE
This case originated from a Complaint filed with the Regional Office No. VII of the Ministry of
Labor on February 11, 1981 against petitioner Cebu Institute of Technology (CIT) by private
respondents, Panfilo Canete, et al., teachers of CIT, for non-payment of: a) cost of living
allowances (COLA) under Pres. Dec. Nos. 525, 1123, 1614, 1678 and 1713, b) thirteenth (13th)
month pay differentials and c) service incentive leave. By virtue of an Order issued by the then
Deputy Minister of Labor Carmelo C. Noriel, a labor-management committee composed of one
representative each from the Ministry of Labor and Employment (MOLE), the Minister of
Education, Culture and Sports (MECS), and two representatives each from CIT and from the
teachers was created. Said committee was to ascertain compliance with the legal requirements
for the payment of COLA, thirteenth (13th) month pay and service incentive leave [Rollo, p. 84].
The position taken by CIT during the conference held by the labor management committee was
that it had paid the allowances mandated by various decrees but the same had been integrated in
the teacher's hourly rate. It alleged that the payment of COLA by way of salary increases is in
line with Pres. Dec. No. 451. It also claimed in its position paper that it had paid thirteenth month
pay to its employees and that it was exempt from the payment of service incentive leave to its
teachers who were employed on contract basis [Rollo, pp. 85-86].
After the report and recommendation of the committee, herein public respondent, then Minister
of Labor and Employment issued the assailed Order dated September 29, 1981 and held that the
basic hourly rate designated in the Teachers' Program is regarded as the basic hourly rate of
teachers exclusive of the COLA, and that COLA should not be taken from the 60% incremental
proceeds of the approved increase in tuition fee. The dispositive portion of the Order reads:
PREMISES CONSIDERED, CIT is hereby ordered to pay its teaching staff the
following:

1) COLA under P.D.'s 525 and 1123 from February 1978 up to 1981;
2) COLA under P.D.'s l6l4,1634,1678 and l7l3;and
3) Service incentive leave from l978 upto l981.
CIT is further directed to integrate into the basic salaries of its teachers and (sic)
COLA under P.D.'s 525 and 1123 starting on January 1981, pursuant to P.D.
1751. For purposes of integration, the hourly rate shown in its Teachers' Program
for school year 198182 shall be considered as the basic hourly rate.
SO ORDERED.
Petitioner assails the aforesaid Order in this Special Civil Action of certiorari with Preliminary
Injunction and/or Restraining Order. The Court issued a Temporary Restraining Order on
December 7, 1981 against the enforcement of the questioned Order of the Minister of Labor and
Employment.
B.
DIVINE WORD COLLEGE OF LEGAZPI CASE
Upon a complaint filed by ten faculty members for alleged non-compliance by herein petitioner
Divine Word College of Legazpi with, among others, Pres. Dec. No. 451, i.e., allowances were
charged to the 60% incremental proceeds of tuition fee increase, the Labor Regulation Section of
Regional Office No. V (Legazpi City) of the Ministry of Labor and Employment conducted an
inspection of the employment records of said school. On the basis of the report on the special
inspection that the school did not comply with Pres. Dec. No. 451, herein respondent Regional
Director issued an Order dated May 30, 1983, requiring compliance by the Divine Word College.
The latter filed a Memorandum of Appeal from said Order which the Regional Director treated
as a Motion for Reconsideration. Upon failure of the school to comply with the aforesaid Order,
another Order (August 2, 1983) was issued by herein respondent Regional Director requiring
herein petitioner to pay the faculty members- complainants (herein private respondents) the
amounts indicated therein or the total sum of Six Hundred Seventeen Thousand Nine Hundred
Sixty Seven Pesos and Seventy Seven Centavos (P 617,967.77). Petitioner's Motion for
Reconsideration of the Order was denied.
On appeal, the respondent Deputy Minister of Labor and Employment affirmed the Order of the
Regional Director,viz:
xxx xxx xxx
Coming now to the substantial merit of the case, we share the view that the
emergency allowances due the complainants under the several presidential
decrees (PD's 525, 1123, etc.) cannot be charged by the respondent against the
60% of the incremental proceeds from increase in tuition fees authorized under

PD 451, not only because as per decision of the Supreme Court (UE vs. UE
Faculty Association, et. al., G.R. No. 57387, September 30, 1982) said allowances
whether mandated by law or secured by collective bargaining should be taken
only from the return to investment referred to in the decree if the school has no
other resources to grant the allowances but not from the 60% incremental
proceeds, but also because to hold otherwise would, to our mind, inevitably result
in the loss of one benefit due the complainants-that is the salary or wage increase
granted them by PD 451.
In other words, we believe that by paying the complainants' allowances out of the
60% incremental proceeds intended for their salary increase they are practically
being deprived of one benefit-their share in the 60% incremental proceeds in
terms of salary or wage increase.
WHEREFORE, for the reasons abovestated, the Order appealed from is hereby
AFFIRMED, and the appeal DISMISSED, for lack of merit.
SO ORDERED.
(Annex "K " to Petition; Rollo, p. 108, 110).
This special civil action of certiorari and Prohibition with Preliminary Injunction questions the
interpretation of, and application by the respondent Deputy Minister, of the provisions of Pres.
Dec. No. 45 1, as set forth in the assailed Order.
On March 25, 1985, after considering the allegations, issues and arguments adduced in the
Petition as well as the Comment thereon of the public respondent and dispensing with the private
respondents' Comment, the Court resolved to dismiss the Petition for lack of merit (Rollo, p.
198). On April 26, 1985, petitioner filed a Motion for Reconsideration with Motion to Consider
the Case En Banc. On June 26, 1985 the First Division of the Court referred the case to the Court
En Banc for consolidation with G.R. No. 70832, entitled "Gregorio T. Fabros, et al vs. Hon.
Jaime C. Laya, etc. " since it involves the same issue on the application of 60% incremental
proceeds of authorized tuition fee increases [Rollo, p. 235]. The Court EN BANC resolved to
accept the case. (Resolution of July 16, 1985). These cases were further consolidated with other
cases involving the same issues.
C.
FAR EASTERN UNIVERSITY CASE
On December 17, 1978, petitioner Union filed with the Ministry of Labor and Employment a
complaint against respondent University for non-payment of legal holiday pay and underpayment of the thirteenth (13th) month pay. On July 7, 1979, while the case was pending, the
Union President, in his personal capacity, filed another complaint for violation of Pres. Dec. No.
451 against the same respondent.

The two cases were forthwith consolidated and jointly heard and tried. On March 10, 1980,
Labor Arbiter Ruben A. Aquino promulgated a decision the dispositive portion of which is
quoted hereunder:
RESPONSIVE TO THE FOREGOING, respondent is hereby directed, within ten
(10) days from receipt hereof, to:
1. To (sic) pay the paid legal holidays that it withdrew since January 14, 1976 up
to the present; and
2. Pay the 13th month pay differential of complainant's for the covered period
December 16, 1975 to December 17, 1978, date of filing of complaint for nonpayment of legal holiday pay and under payment of the 13th month pay, and
thereafter. Barred forever are money claims beyond three (3) years from the time
the course (sic) of action occurred. Respondent's formula on transportation
allowance which was deducted from the 13th month pay is thus subject to this
prescriptive period, for purposes of computation of differentials for the 13th
month pay.
The claim under PD 451 is hereby dismissed for lack of merit.
SO ORDERED.
(Annex " E " to Petition; Rollo, p. 55, 65-66).
Both parties appealed the decision of the Labor Arbiter. On September 18, 1984, the respondent
Commission disposed of the appeal in the following manner:
RESPONSIVE TO THE FOREGOING, the Decision of Labor Arbiter Ruben A.
Aquino in the instant case dated March 10, 1980 is hereby Modified in the sense
that complainant's claims for legal holiday pay and 13th month pay are likewise
dismissed for lack of merit and the dismissal of the claim under P.D. 451 is
hereby Affirmed en (sic) toto.
(Annex "A" to Petition: Rollo, p. 24, 35).
Petitioner's Motion for Reconsideration dated September 29, 1984 was denied for lack of merit
on November 8, 1984. Before this Court is the petition on certiorari filed by the Union assailing
the abovementioned decision of the Commissioner.
D.
FABROS CASE
This petition is in the nature of a class suit brought by petitioners in behalf of the faculty
members and other employees of more than 4000 private schools nationwide. Petitioners seek to

enjoin the implementation of paragraphs 7 to 7.5 of MECS Order No. 5, series of 1985 on the
ground that the said order is null and void for being contrary to Pres. Dec. No. 451 and the
rulings of the Supreme Court in the cases of University of the East v. UE Faculty
Association [G.R. No. L-57387, September 20, 1982, 117 SCRA 5541, University of Pangasinan
Faculty Union v. University of Pangasinan and NLRC [G.R. No. 63122, February 20, 1984, 127
SCRA 691 ], St. Louis University Faculty Club v. NLRC and St. Louis University [G.R. No.
65585, September 28, 1984, 132 SCRA 380].
On September 11, 1982, Batas Pambansa Blg. 232 (Education Act of 1982) was signed into law.
On the matter of tuition and other school fees of private schools, section 42 of said law provides
as follows:
Sec. 42. Tuition and other School Fees. Each private School shall determine its
rate of tuition and other school fees or charges. The rates and charges adopted by
schools pursuant to this provision shall be collectible, and their application or use
authorized subject to rules and regulations promulgated by the Ministry of
Education, Culture and Sports. (Emphasis supplied).
Invoking section 42 of B.P. Blg. 232, among others, as its legal basis, the then Minister of
Education Jaime C. Laya promulgated on April 1, 1985 the disputed MECS Order No. 25, s.
1985 entitled Rules and Regulations To Implement the Provisions of B.P. Blg. 232. The
Education Act of 1982, Relative to Student Fees for School Year 1985-1986. The relevant
portions of said Order are quoted hereunder:
7. Application or Use of Tuition and
Other School Fees or Charges.
7.1. The proceeds from tuition fees and other school charges as well as other
income of each school shall be treated as an institutional fund which shall be
administered and managed for the support of school purposes
strictly: Provided, That for the purpose of generating additional financial
resources or income for the operational support and maintenance of each school
two or more schools may pool their institutional funds, in whole or in part, subject
to the prior approval of their respective governing boards.
7.2. Tuition fees shag be used to cover the general expenses of operating the
school in order to allow it to meet the minimum standards required by the
Ministry or any other higher standard, to which the school aspires. They may be
used to meet the costs of operation for maintaining or improving the quality of
instruction/training/research through improved facilities and through the payment
of adequate and competitive compensation for its faculty and support personnel,
including compliance with mandated increases in personnel compensation and/or
allowance.

7.3. Tuition fees shag be used to cover minimum and necessary costs including
the following: (a) compensation of school personnel such as teaching or
academic staff, school administrators, academic non-teaching personnel, and
non-academic personnel, (b) maintenance and operating expenses, including
power and utilities, rentals, depreciation, office supplies; and (c) interest
expenses and installment payments on school debts.
7.4. Not less than sixty (60) percent of the incremental tuition proceeds shall be
used for salaries or wages, allowances and fringe benefits of faculty and support
staff, including cost of living allowance, imputed costs of contributed services,
thirteenth (13th) month pay, retirement fund contributions, social security,
medicare, unpaid school personnel claims and payments as may be prescribed by
mandated wage orders. collective bargaining agreements and voluntary employer
practices, Provided That increases in fees specifically authorized for the purposes
listed in paragraph 4.3.3 hereof shall be used entirely for those purposes. (Italics
supplied).
7.5. Other student fees and charges as may be approved, including registration,
library, laboratory, athletic, application, testing fees and charges shall be used
exclusively for the indicated purposes, including (a) the acquisition and
maintenance of equipment, furniture and fixtures, and buildings, (b) the payment
of debt amortization and interest charges on debt incurred for school laboratory,
athletic, or other purposes, and (c) personal services and maintenance and
operating expenses incurred to operate the facilities or services for which fees and
charges are collected.
The Petition prayed for the issuance of a temporary restraining order which was granted by this
Court after hearing. The dispositive portion of the resolution dated May 28, 1985 reads as
follows:
After due consideration of the allegations of the petition dated May 22, 1985 and
the arguments of the parties, the Court Resolved to ISSUE, effective immediately
and continuing until further orders from this Court, a TEMPORARY
RESTRAINING ORDER enjoining the respondent from enforcing or
implementing paragraphs 7.4 to 7.5 of MECS Order No. 25, s. 1985, which
provide for the use and application of sixty per centum (60%) of the increases in
tuition and other school fees or charges authorized by public respondent for the
school year 1985-1986 in a manner inconsistent with section 3(a), P.D. No. 451,
(which allocates such 60% of the increases exclusively "for increases in salaries
or wages of the members of the faculty and other employees of the school
concerned.") and directing accordingly that such 60% of the authorized increases
shall be held in escrow by the respective colleges and universities, i.e., shall be
kept intact and not disbursed for any purpose pending the Court's resolution of the
issue of the validity of the aforementioned MECS Order in question.
(Rollo, p. 21).

In the same resolution, the Philippine Association of Colleges and Universities (PACU) was
impleaded as respondent.
Subsequent to the issuance of this resolution, four (4) schools, represented in this petition, moved
for the lifting of the temporary restraining order as to them. In separate resolutions, this Court
granted their prayers.
Ateneo de Manila University, De La Sale University (Taft Avenue) and De La Salle UniversitySouth, through their respective counsels, manifested that for the school year 1985-1986, tuition
fee increase was approved by the MECS and that on the basis of Pres. Dec. No. 451, 60% of the
tuition fee increases shall answer for salary increase. However, a budgeted salary increase,
exclusive of living allowances and other benefits, was approved for the same school year which
when computed amounts to more than the 60%.
This Court granted the motions in separate resolutions lifting the temporary restraining order
with respect to these schools in order that they may proceed with the implementation of the
general salary increase for their employees.
In the case of St. Louis University, its Faculty Club, Administrative Personnel Association and
the University itself joined in a petition seeking for leave that 49% of the increase in tuition and
other fees for school year 1985-1986 be released. Petitioners manifested that the remaining
balance shall continue to be held in escrow by the University.
In a resolution dated January 28, 1986, the Court resolved as follows:
Accordingly, the Temporary Restraining Order issued by this Court on May 28,
1985 is hereby ordered LIFTED with respect to Saint Louis University of Baguio
City in order that it may proceed immediately with the implementation of salary
increases for its employees.
D.
BISCOCHO CASE
The Espiritu Santo Parochial School and the Espiritu Santo Parochial School Faculty Association
were parties to a labor dispute which arose from a deadlock in collective bargaining. The parties
entered into conciliation proceedings. The union went on strike after efforts at the conciliation
failed. Subsequently, a return to work agreement was forged between the parties and both agreed
to submit their labor dispute to the jurisdiction of the Minister of Labor.
In the exercise of his power to assume jurisdiction, the Ministry of Labor and Employment
issued an Order dated April 14, 1986 which provides for the following:
IN CONSIDERATION OF ALL THE FOREGOING, the Ministry hereby
declares the strike staged by the Union to be legal and orders the following:

a) the School to submit the pertinent record of employment of Romualdo Noriego

to the Research and Information Division of the NLRC for computation of his
underpayment of wages and for the parties to abide by the said computation;
b) the School to submit all pertinent record of collections of tuition fee increases
for school year (sic) 1982-1983, 1983-1984 and 1984-1985 to the Research and
Information Division of the NLRC for proper computation and for equal
distribution of the amount to all employees and teachers during the
abovementioned school year (sic) as their salary adjustment under P.D. 461;
c) the parties to wait for the final resolution of the illegal dismissal (case)
docketed as NLRC NCR Case No. 5-1450-85 and to abide by the said resolution;
d) to furnish the MECS a copy of this order for them to issue the guidelines in the
implementation of PRODED Program;
e) the parties to execute a collective bargaining agreement with an economic
package equivalent to 90% of the proceeds from tuition fee increases for school
year 1985-1986 and another 90% for school year 1986-1987 and 85% for school
year 1987-1988. The amount aforementioned shall be divided equally to all
members of the bargaining unit as their respective salary adjustments. Such other
benefits being enjoyed by the members of the bargaining unit prior to the
negotiation of the CBA shall remain the same and shall not be reduced.
f) the School to deduct the amount equivalent to ten (10%) per cent of the
backwages payable to all members of the bargaining unit as negotiation fee and
to deliver the same to the Union Treasurer for proper disposition (Emphasis
supplied).
SO ORDERED.
(Rollo, pp. 16-17)
Pursuant to the said order, private respondent Union agreed to incorporate in their proposed
collective bargaining agreement (CBA) with the School the following:
2) The Union and School Administration will incorporate the following in their
CBA 1) The computation of the tuition fee increase shall be gross to
gross from which the corresponding percentage of 90% will be
taken. The resulting amount will be divided among 141.5
employees for 1985-86 and 132.5 employees for 1986-87.

1/2 of the resulting increase will be added to basic and divided by

13.3 to arrive at monthly increase in basic. The other 1/2 will be
divided by 12.3 to arrive at monthly increase in living allowance.
xxx xxx xxx
4) xxx
Upon request/demand of the Union, School win deduct from backwages of
managerial employees and others outside the bargaining unit what Union win
charge its own members in the form of attorney's fees, special assessment and
union dues/agency fee.
5) The signing of the CBA and payment of backwages and others shall be on
November 26, 1986 at the Espiritu Santo Parochial School Library.
(Rollo, pp. 3-4).
The herein petitioners, Jasmin Biscocho and 26 others, all employees and faculty members of the
respondent School, filed the present petition for prohibition to restrain the implementation of the
April 14, 1986 Order of respondent Labor Minister as well as the agreements arrived at pursuant
thereto. They contend that said Order and agreements affect their rights to the 60% incremental
proceeds under Pres. Dec. No. 451 which provide for the exclusive application of the 60%
incremental proceeds to basic salary.
Acting on the petitioners' prayer, this Court immediately issued a temporary restraining order on
November 25, 1986 ". . . enjoining the respondents from enforcing, implementing and
proceeding with the questioned order of April 14, 1986 and collective bargaining agreement
executed between respondents Union and the School Administration in pursuance thereof."
[Rollo, p. 20].
F.
VALMONTE CASE
This Petition was filed by parents with children studying at respondent school, Espiritu Santo
Parochial School to nullify the Order dated April 14, 1986 issued by public respondent, then
Minister of Labor and Employment, specifically paragraphs (e) and (f) thereof, quoted in the
Biscocho case.
The award contained in the said Order is the result of the assumption of jurisdiction by the public
respondent over a labor dispute involving the private respondents school and faculty association.
The latter had earlier filed a notice of strike because of a bargaining deadlock on the demands of
its members for additional economic benefits. After numerous conciliation conferences held
while the union was on strike, the parties voluntarily agreed that the public respondent shall
assume jurisdiction over all the disputes between them. As to the subject matter of the instant

case, the public respondent found that the latest proposals of the respondent school was to give
85% of the proceeds from tuition fee increases for the school years to be divided among the
teachers and employees as salary adjustments. What the respondent faculty association offered to
accept was a package of 95% for school year 1985-1986, 90% for school year 1986- 1987. The
respondent school offered to strike the middle of the two positions, hence the Order complained
of by the petitioners [See Annex "A", Petition; Rollo, pp. 9, 14-15; Comment of the Respondent
Faculty Association: Rollo, p. 26].
II. RESOLUTION OF THE COMMON LEGAL ISSUE
This long-drawn controversy has sadly placed on the balance diverse interests, opposed yet
intertwined, and all deserving, and demanding, the protection of the State. On one arm of the
balance hang the economic survival of private schools and the private school system, undeniably
performing a complementary role in the State's efforts to maintain an adequate educational
system in the country. Perched precariously on the other arm of the same balance is the muchneeded financial uplift of schoolteachers, extolled for all times as the molders of the minds of
youth, hence of every nation's future. Ranged with them with needs and claims as insistent are
other school personnel. And then, anxiously waiting at the sidelines, is the interest of the public
at large, and of the State, in the continued availability to all who desire it, high-standard
education consistent with national goals, at a reasonable and affordable price.
Amidst these opposing forces the task at hand becomes saddled with the resultant implications
that the interpretation of the law would bear upon such varied interests. But this Court can not go
beyond what the legislature has laid down. Its duty is to say what the law is as enacted by the
lawmaking body. That is not the same as saying what the law should be or what is the correct
rule in a given set of circumstances. It is not the province of the judiciary to look into the wisdom
of the law nor to question the policies adopted by the legislative branch. Nor is it the business of
this Tribunal to remedy every unjust situation that may arise from the application of a particular
law. It is for the legislature to enact remedial legislation if that be necessary in the premises. But
as always, with apt judicial caution and cold neutrality, the Court must carry out the delicate
function of interpreting the law, guided by the Constitution and existing legislation and mindful
of settled jurisprudence. The Court's function is therefore limited, and accordingly, must confine
itself to the judicial task of saying what the law is, as enacted by the lawmaking body.
FIRST SUB-ISSUE
A. Whether or not allowances and other fringe benefits of employees may be
charged against the 60% portion of the incremental proceeds provided for in sec.
3(a) of Pres. Dec. No. 451.
1. Arguments raised in the Cebu Institute of Technology case
In maintaining its position that the salary increases it had paid to its employees should be
considered to have included the COLA, Cebu Institute of Technology (CIT) makes reference to
Pres. Dec. No. 451 and its Implementing Rules. The line of reasoning of the petitioner appears to
be based on the major premise that under said decree and rules, 60% of the incremental proceeds

from tuition fee increases may be applied to salaries, allowances and other benefits of teachers
and other school personnel. In support of this major premise, petitioner cites various
implementing rules and regulations of the then Minister of Education, Culture and Sports, to the
effect that 60% of the incremental proceeds may be applied to salaries, allowances and other
benefits for members of the faculty and other school personnel [Petition citing Implementing
Rules and Regulations of Pres. Dec. No. 451 of various dates; Rollo, pp. 318-320]. Petitioner
concludes that the salary increases it had granted the CIT teachers out of the 60% portion of the
incremental proceeds of its tuition fee increases from 1974-1980 pursuant to Pres. Dec. No. 451
and the MECS implementing rules and regulations must be deemed to have included the COLA
payable to said employees for those years [Rollo, pp. 911].
With leave of Court, the Philippine Association of Colleges and Universities, filed its
Memorandum as Intervenor in support of the proposition that schools may pay the COLA to
faculty members and other employees out of the 60% of the increase in tuition fees. In addition
to the arguments already set forth in the memorandum of the petitioner CIT, intervenor PACU
attacks the Decision of this Court in University of the East v. University of the East Faculty
Association et. all G.R. No. 57387 as "not doctrinal" and inapplicable to the CIT case. The Court
held in the UE case, which was promulgated on September 30, 1982, during the pendency of
these cases, that:
... allowances and benefits should be chargeable to the return to investment
referred to in Sec. 3(a), if the schools should happen to have no other resources
than incremental proceeds of authorized tuition fee increases ... (See Dispositive
Portion of the Decision)
Intervenor PACU alleges that the aforecited U.E. decision does not categorically rule that COLA
and other fringe benefits should not be charged against the 60% incremental proceeds of the
authorized tuition fee increase.
The Solicitor General, on the other hand, argues in support of the Order of the public respondent
that Pres. Dec. No. 451 allocates the 60% proceeds of tuition fee increases exclusively for salary
increases of teachers and non- teaching supportive personnel of the school concerned, and that
the Decree does not provide that said salary increases would take the place of the COLA [Rollo,
p. 244-245]. He cites as authority for this stance, two (2) memoranda of the then President dated
June 6, 1978 and March 30, 1979 both of which provide that the 60% incremental proceeds of
tuition fee increases "shall be allocated for the increase in the salaries of teachers and supportive
personnel. " Anent the U.E. case, the Solicitor General states that the Supreme Court in deciding
said case took note of the stand of the Office of the President that the 60% incremental proceeds
shall be solely applied to salaries of faculty members and employees.
On August 7, 1986, considering the supervening events, including the change of administration,
that have transpired during the pendency of these cases, the Court required the Solicitor General
to state whether or not he maintains the action and position taken by his predecessor-in-office. In
his Compliance with said Resolution, the Solicitor General Manifested the position that:

a. If the tuition fee increase was collected during the effectivity oil Presidential
Decree No. 451, 60% thereof shall answer exclusively for salary increase of
school personnel. Other employment benefits shall be covered by the 12%
allocated for return of investment, this is in accordance with the ruling of this
Honorable Court in University of the East vs. U.E. Faculty Association, et. al (117
SCRA 554), ... and reiterated in University of Pangasinan Faculty Union v.
University of Pangasinan, et. al. (127 SCRA 691) and St. Louis Faculty Club u.
NLRC (132 SCRA 380).
b. If the salary increase was collected during the effectivity of Batas Pambansa
Blg. (sic) 232, 60% thereof shall answer not only for salary increase of school
personnel but also for other employment benefits.
(Rollo, at pp. 513-514)
2. Arguments raised in the Divine Word College Case
Petitioner Divine Word College of Legazpi (DWC) advances the theory that the COLA, 13th
month pay and other personnel benefits decreed by law, must be deemed chargeable against the
60% portion allocated for increase of salaries or wages of faculty and all other school employees.
In support of this stance, petitioner points out that said personnel benefits are not included in the
enumeration of the items for which the balance (less 60%) or 40% portion of the incremental
proceeds may be alloted under section 3(a) of Pres. Dec. No. 451 [Rollo, pp. 29-30. Petitioner
likewise cites the interpretation of the respondent Minister of Education, Culture and Sports
embodied in the Implementing Rules and Regulations of P.D. 451, DEC Issuance, May 13, 1987;
Rollo, p. 30], that the 60% incremental proceeds of authorized tuition fee increases may be
applied to increases in emoluments and/or benefits for members of faculty, including staff and
administrative employees of the school as the valid interpretation of the law, as against that made
by the respondent Deputy Minister of Labor in the assailed Order. If the latter interpretation is
upheld, petitioner would go as far as questioning the constitutionality of Pres. Dec. No. 451 upon
the ground that the same discriminates against the petitioner and other private schools as a class
of employers. According to the petitioner, the discrimination takes the form of requiring said
class of employers to give 60% of their profits to their employees in addition to the COLA
mandated by law, while other employers have to contend only with salary increases and COLA
[Petition; Rollo, p. 46].
With regard to the Decision of this Court in the U.E. case, petitioner claims exemption therefrom
upon the ground that the Court's interpretation of a law cannot be applied retroactively to parties
who have relied upon the previous administrative interpretation which has not been declared
invalid or unconstitutional [Petition; Rollo, pp. 50-51 1. Petitioner further argues on this point
that if the court had intended to invalidate the MECS interpretation of the Decree, it should have
positively stated so in the Decision [Petition; Rollo, p. 50].
The Comment of the public respondents cite as settled jurisprudence applicable to the case at bar,
the ruling of this Court in the U.E. case, supra, which was reiterated in the subsequent cases

of University of Pangasinan Faculty Union v. University of Pangasinan et all and St. Louis
Faculty Club v. NLRC, et al.
Public respondents Deputy Minister of Labor and Employment and Regional Director of the
MOLE (Region V) likewise attack the validity of the Revised Implementing Rules and
Regulations of Pres. Dec. No. 451 cited by the petitioner insofar as said rules direct the allotment
of the 60% of incremental proceeds from tuition fee hikes for retirement plan, faculty
development and allowances. They argue that said rules and regulations were invalid for having
been promulgated in excess of the rule-making authority of the then Minister of Education under
Pres. Dec. No. 451 which mandates that the 60% of incremental proceeds from tuition fee hikes
should be allotted solely for salary increases [Comment; Rollo, pp. 184-185]. Finally, with
respect to the issue on the allege unconstitutionality of Pres. Dec. No. 451, the public
respondents posit that a legislation (such as Pres. Dec. No. 451) which affects a particular class
does not infringe the constitutional guarantee of equal protection of the law as long as it applies
uniformly and without discrimination to everyone of that class [Comment; Rollo, p. 14].
3. Arguments raised in the Far Eastern University case
It is the petitioner's contention that in respect of Pres. Dec. No. 451, the decision of the NLRC is
a defiance of the rulings of this Court in the cases of University of the East v. U.E. Faculty,
Association et al. and of University of Pangasinan Faculty Union v. University of Pangasinan
and NLRC (supra). The Union submits that monetary benefits, other than increases in basic
salary, are not chargeable to the 60% incremental proceeds.
The respondent University in its Comment dated June 13, 1982 refers to Article 97(f) of the
Labor Code which provides a definition of the term "wages" to support its position that "salaries
or wages" as used in Pres. Dec. No. 451 should be interpreted to include other benefits in terms
of money.
As mentioned in the Cebu Institute of Technology case, the Solicitor General filed its
Compliance with this Court's resolution dated August 7, 1986 requiring him to manifest whether
public respondents maintain the position they have taken in these consolidated cases. The
resolution of September 25, 1986 required petitioners to Comment on said Compliance.
The Comment dated December 6, 1986 was received by this Court after petitioner Union was
required to show cause why no disciplinary action should be taken against them for failure to
comply earlier. The Union agreed with the position taken by the Solicitor General that under
Pres. Dec. No. 451, 60% of the tuition fee increases, shall answer exclusively for salary increase.
However, it expressed disagreement with the opinion that during the effectivity of B.P. Blg. 232,
the 60% ncremental proceeds shall answer not only for salary increases but also for other
employment benefits. The Union argues that whereas "Pres. Dec. No. 451 is a law on a
particular subject, viz., increase of tuition fee by educational institutions and how such increase
shall be allocated B.P. Blg. 232 is not a law on a particular subject of increase of tuition fee . . .
; at most it is a general legislation on tuition fee as it touches on such subject in general, "
[Comment on Compliance; Rollo, p. 376], Suppletory to its argument that B.P. Blg. 232 did not

impliedly repeal Pres. Dec. No. 451, the Union also invokes the principle that a special or
particular law cannot be repealed by a general law.
RESOLUTION OF THE FIRST SUB-ISSUE
This Court has consistently held, beginning with the University of the East case, that if the
schools have no resources other than those derived from tuition fee increases, allowances and
benefits should be charged against the proceeds of tuition fee increases which the law allows for
return on investments under section 3(a) of Pres. Dec. No. 451, therefore, not against the 60%
portion allocated for increases in salaries and wages (See 117 SCRA at 571). This ruling was
reiterated in the University of Pangasinan case and in the Saint Louis Universitycase.
There is no cogent reason to reverse the Court's ruling in the aforecited cases. Section 3(a) of
Pres. Dec. No. 451 imposes among the conditions for the approval of tuition fee increases, the
allocation of 60% per cent of the incremental proceeds thereof for increases in salaries or wages
of school personnel and not for any other item such as allowances or other fringe benefits. As
aptly put by the Court in University of Pangasinan Faculty Union v. University of Pangasinan,
supra:
... The sixty (60%) percent incremental proceeds from the tuition increase are to
be devoted entirely to wage or salary increases which means increases in basic
salary. The law cannot be construed to include allowances which are benefits
over and above the basic salaries of the employees. To charge such benefits to the
60% incremental proceeds would be to reduce the increase in basic salary
provided by law, an increase intended also to help the teachers and other workers
tide themselves and their families over these difficult economic times. [Italics
supplied] (127 SCRA 691, 702).
This interpretation of the law is consistent with the legislative intent expressed in the Decree
itself, i.e., to alleviate the sad plight of private schools and that of their personnel wrought by
slump in enrollment and increasing operational costs on the part of the schools, and the
increasing costs of living on the part of the personnel (Preamble, Pres. Dec. No. 451). While
coming to the aid of the private school system by simplifying the procedure for increasing tuition
fees, the Decree imposes as a condition for the approval of any such increase in fees, the
allocation of 60% of the incremental proceeds thereof, to increases in salaries or wages of school
personnel. This condition makes for a quid pro quo of the approval of any tuition fee hike by a
school, thereby assuring the school personnel concerned, of a share in its proceeds. The
condition having been imposed to attain one of the main objectives of the Decree, which is to
help the school personnel cope with the increasing costs of living, the same cannot be interpreted
in a sense that would diminish the benefit granted said personnel.
In the light of existing laws which exclude allowances from the basic salary or wage in the
computation of the amount of retirement and other benefits payable to an employee, this Court
will not adopt a different meaning of the terms "salaries or wages" to mean the opposite, i.e. to
include allowances in the concept of salaries or wages.

As to the alleged implementing rules and regulations promulgated by the then MECS to the
effect that allowances and other benefits may be charged against the 60% portion of the proceeds
of tuition fee increases provided for in Section 3(a) of Pres. Dec. No. 45 1, suffice it to say that
these were issued ultra vires, and therefore not binding upon this Court.
The rule-making authority granted by Pres. Dec. No. 451 is confined to the implementation of
the Decree and to the imposition of limitations upon the approval of tuition fee increases, to wit:
SEC. 4. Rules and Regulations. The Secretary of Education and Culture is
hereby authorized, empowered and directed to issue the requisite rules and
regulations for the effective implementation of this Decree. He may, in addition to
the requirements and limitations provided for under Sections 2 and 3 hereof,
impose other requirements and limitations as he may deem proper and reasonable.
The power does not allow the inclusion of other items in addition to those for which 60% of the
proceeds of tuition fee increases are allocated under Section 3(a) of the Decree.
Rules and regulations promulgated in accordance with the power conferred by law would have
the force and effect of law [Victorias Milling Company, Inc. v. Social Security Commission, 114
Phil. 555 (1962)] if the same are germane to the subjects of the legislation and if they conform
with the standards prescribed by the same law [People v. Maceren, G.R. No. L-32166, October
18, 1977, 79 SCRA 450]. Since the implementing rules and regulations cited by the private
schools adds allowances and other benefits to the items included in the allocation of 60% of the
proceeds of tuition fee increases expressly provided for by law, the same were issued in excess of
the rule-making authority of said agency, and therefore without binding effect upon the courts.
At best the same may be treated as administrative interpretations of the law and as such, they
may be set aside by this Court in the final determination of what the law means.
SECOND SUB-ISSUE
B. Whether or not allowances and other fringe benefits may be charged against the 60% portion
of the incremental proceeds of tuition fee increases upon the effectivity of the Education Act of
1982 (B.P. Blg. 232).
1. Arguments raised in the Fabros case
In assailing MECS Order No. 25, s. 1985, petitioners argue that the matter of allocating the
proceeds from tuition fee increases is still governed by Pres. Dec. No. 451. It is their opinion that
section 42 of B.P. Blg. 232 did not repeal Pres. Dec. No. 451 for the following reasons: first,
there is no conflict between section 42 of B.P. Blg. 232 and section 3(a) of Pres. Dec. No. 451 or
any semblance of inconsistency to deduce a case of a repeal by implication: second, Pres. Dec.
No. 451 is a specific law upon a particular subject-the purposes and distribution of the
incremental proceeds of tuition fee increases, while B.P. Blg. 232 is a general law on the
educational system; as such, a specific law is not repealed by a subsequent general law in the
absence of a clear intention; and third, Pres. Dec. No. 451 is still the only law on the subject of
tuition fee increases there being no prescription or provision in section 42 of B.P. Blg. 232 or

elsewhere in the law. They furthermore aver that the disputed MECS Order which imposed
additional burdens against the 60% incremental proceeds of tuition fee increases are not provided
in either Pres. Dec. No. 451 or B.P. Blg. 232. The logical result as intimated by petitioners is that
the inclusion of paragraph 7.4 and related paragraphs 7 to 7.3 and 7.5 in the questioned MECS
order contravenes the statutory authority granted to the public respondent, and the same are
therefore, void.
Respondent PACU takes the contrary view contending that MECS Order No. 25, s. 1985,
complies with the mandate of section 42 of B.P. Blg. 232 which law had already repealed Pres.
Dec. No. 451. PACU notes that theUniversity of the East case invoked by petitioners is not
applicable because the issue in that case does not involve the effect of B.P. Blg. 232 on Pres.
Dec. No. 451.
The Solicitor General, representing the public respondent, after giving a summary of the matters
raised by petitioner and respondent PACU, points out that the decisive issue in this case is
whether B.P. Big. 232 has repealed Pres. Dec. No. 451 because on the answer to this question
depends the validity of MECS Order No. 25, s. 1985. Public respondent holds the view
consistent with that of PACU on the matter of B.P. Blg. 232 having repealed Pres. Dec. No. 451.
To support this contention, the Solicitor General compared the respective provisions of the two
laws to show the inconsistency and incompatibility which would result in a repeal by
implication.
RESOLUTION OF THE SECOND SUB-ISSUE
On the matter of tuition fee increases section 42 of B.P. Blg. 232 provides:
SEC. 42. Tuition and Other School Fees. Each private school shall determine
its rate of tuition and other school fees or charges. The rates and charges adopted
by schools pursuant to this provision shall be collectible and their application or
use authorized, subject to rules and regulations promulgated by the Ministry of
Education, Culture and Sports. (Emphasis supplied).
The enactment of B.P. Blg. 232 and the subsequent issuance of MECS Order No. 25, s. 1985
revived the old controversy on the application and use of the incremental proceeds from tuition
fee increases. As can be gleaned from the pleadings and arguments of the parties in these cases,
one side, composed of the teachers and other employees of the private schools, insist on the
applicability of section 3(a) of Pres. Dec. No. 451 as interpreted arid applied in the University of
the East, University of Pangasinan and St Louis University cases, while the private schools
uphold the view that the matter of allocating the incremental proceeds from tuition fee increases
is governed by section 42 of B.P. Blg. 232 as implemented by the MECS Rules and Regulations.
As stated, the latter's argument is premised on the allegation that B.P. Blg. 232 impliedly
repealed Pres. Dec. No. 451.
On the second sub-issue, therefore, this Court upholds the view taken by the Solicitor General in
the Fabros case, that the decisive issue is whether B.P. Blg. 232 has repealed Pres. Dec. No. 451.

In recognition of the vital role of private schools in the country's educational system, the
government has provided measures to regulate their activities. As early as March 10, 1917, the
power to inspect private schools, to regulate their activities, to give them official permits to
operate under certain conditions and to revoke such permits for cause was granted to the then
Secretary of Public Instruction by Act No. 2706 as amended by Act No. 3075 and
Commonwealth Act No. 180. Republic Act No. 6139, enacted on August 31, 1970, provided for
the regulation of tuition and other fees charged by private schools in order to discourage the
collection of exorbitant and unreasonable fees. In an effort to simplify the "cumbersome and time
consuming" procedure prescribed under Rep. Act No. 6139 and "to alleviate the sad plight of
private schools," Pres. Dec. No. 451 was enacted on May 11, 1974. While this later statute was
being implemented, the legislative body envisioned a comprehensive legislation which would
introduce changes and chart directions in the educational system, hence, the enactment of B.P.
Blg. 232. What then was the effect of B.P. Blg. 232 on Pres. Dec. No. 451?
The Court after comparing section 42 of B.P. Blg. 232 and Pres. Dec. No. 451, particularly
section 3(a) thereof, finds evident irreconcilable differences.
Under Pres. Dec. No. 451, the authority to regulate the imposition of tuition and other school
fees or charges by private schools is lodged with the Secretary of Education and Culture (Sec. 1),
where section 42 of B.P. Blg. 232 liberalized the procedure by empowering each private school
to determine its rate of tuition and other school fees or charges.
Pres. Dec. No. 451 provides that 60% of the incremental proceeds of tuition fee increases shall
be applied or used to augment the salaries and wages of members of the faculty and other
employees of the school, while B.P. Blg. 232 provides that the increment shall be applied or used
in accordance with the regulations promulgated by the MECS.
A closer look at these differences leads the Court to resolve the question in favor of repeal. As
pointed out by the Solicitor General, three aspects of the disputed provisions of law support the
above conclusion. First, the legislative authority under Pres. Dec. No. 451 retained the power to
apportion the incremental proceeds of the tuition fee increases; such power is delegated to the
Ministry of Education and Culture under B.P. Blg. 232.Second, Pres. Dec. No. 451 limits the
application or use of the increment to salary or wage increase, institutional development, student
assistance and extension services and return on investment, whereas B.P. Blg. 232 gives the
MECS discretion to determine the application or use of the increments. Third, the extent of the
application or use of the increment under Pres. Dec. No. 451 is fixed at the pre-determined
percentage allocations; 60% for wage and salary increases, 12% for return in investment and the
balance of 28% to institutional development, student assistance and extension services, while
under B.P. Blg. 232, the extent of the allocation or use of the increment is likewise left to the
discretion of the MECS.
The legislative intent to depart from the statutory limitations under Pres. Dec. No. 451 is
apparent in the second sentence of section 42 of B.P. Blg. 232. Pres. Dec. No. 451 and section 42
of B.P. Blg. 232 which cover the same subject matter, are so clearly inconsistent and
incompatible with each other that there is no other conclusion but that the latter repeals the
former in accordance with section 72 of B.P. Blg. 232 to wit:

Sec. 72. Repealing clause. All laws or parts thereof inconsistent with any
provision of this Act shall be deemed repealed or modified, as the case may be.
Opinion No. 16 of the Ministry of Justice dated January 29, 1985, quoted below, supports the
above conclusion:
Both P.D. No. 451 and B.P. Blg. 232 deal with the imposition of tuition and other
school fees or charges and their use and application, although the latter is broader
in scope as it covers other aspects of the education system. We note substantial
differences or inconsistencies between the provisions of the two laws. P.D. No.
451 prescribes certain limitations in the increase of tuition and other school fees
and their application, whereas the latter law, B.P. Blg. 232 s silent on the matter.
Under P.D. 451, rates of tuition/school fees need prior approval of the Secretary
of Education, Culture (now Minister of Education, Culture and Sports), who also
determines the reasonable rates for new school fees, whereas under B.P. Blg. 232,
each private school determines its rate of tuition and other school fees or charges.
P.D. No. 451 authorizes the Secretary of Education and Culture to issue requisite
rules and regulations to implement the said Decree and for that purpose, he is
empowered to impose other requirements and limitations as he may deem proper
and reasonable in addition to the limitations prescribed by the Decree for
increases in tuition fees and school charges, particularly, the limitations imposed
in the allocation of increases in fees and charges, whereas under B.P. Blg. 232,
the collection and application or use of rates and charges adopted by the school
are subject to rules and regulations promulgated by the Ministry of Education,
Culture and Sports without any mention of the statutory limitations on the
application or use of the fees or charges. The authority granted to private schools
to determine its rates of tuition and unconditional authority vested in the Ministry
of Education, Culture and Sports to determine by rules and regulations the
collection and application or use of tuition or fees rates and charges under B.P.
Big. 232 constitute substantial and irreconcilable incompatibility with the
provisions of P.D. No. 451, which should be for that reason deemed to have been
abrogated by the subsequent legislation.
Moreover, B.P. Blg. 232 is a comprehensive legislation dealing with the
establishment and maintenance of an integrated system of education and as such,
covers the entire subject matter of the earlier law, P.D. No. 451. The omission of
the limitations or conditions imposed in P.D. No. 451 for increases in tuition fees
and school charges is an indication of a legislative intent to do away with the said
limitations or conditions. (Crawford, supra, p. 674). It has also been said that
an act which purports to set out in full all that it intends to contain,
operates as a repeal of anything omitted which was contained in
the old act and not included in the amendatory act." (People vs.
Almuete 69 SCRA 410; People vs. Adillo 68 SCRA 90) (Ministry
of Justice, Op. No. 16, s. 1985).

Having concluded that under B.P. Big. 232 the collection and application or use of tuition and
other school fees are subject only to the limitations under the rules and regulations issued by the
Ministry, the crucial point now shifts to the said implementing rules.
The guidelines and regulations on tuition and other school fees issued after the enactment of B.P.
Blg. 232 consistently permit the charging of allowances and other benefits against the 60%
incremental proceeds. Such was the tenor in the MECS Order No. 23, s. 1983; MECS Order No.
15, s. 1984; MECS Order No. 25, s. 1985; MECS Order No. 22, s. 1986; and DECS Order No.
37, s. 1987. The pertinent portion of the latest order reads thus:
In any case of increase at least sixty percent (60%) of the incremental proceeds
should be allocated for increases in or provisions for salaries or wages,
allowances and fringe benefits of faculty and other staff, including accruals to
cost of living allowance, 13th month pay, social security, medicare and retirement
contribution and increases as may be provided in mandated wage orders,
collective bargaining agreements or voluntary employer practices.
The validity of these orders, particularly MECS Order No. 25, s. 1985, is attacked on the ground
that the additional burdens charged against ". . . the 60% of the proceeds of the increases in
tuition fees constitute both as [sic] an excess of statutory authority and as (sic) a substantial
impairment of the accrued, existing and protected rights and benefits of the members of faculty
and non-academic personnel of private schools." Memorandum for Petitioners, Rollo, p. 1911.
Petitioners alleged that these additional burdens under the MECS Order are not provided in the
law itself, either in section 42 of B.P. Blg. 232 or section 3(a) of Pres. Dec. No. 451, except
increases in salaries in the latter provision.
Section 42 of B.P. Blg. 232 grants to the Minister of Education (now Secretary of Education)
rule-making authority to fill in the details on the application or use of tuition fees and other
school charges. In the same vein is section 70 of the same law which states:
SEC. 70. Rule-making Authority. The Minister of Education, Culture and
Sports charged with the administration and enforcement of this Act, shall
promulgate the necessary implementing rules and regulations.
Contrary to the petitioners' insistence that the questioned rules and regulations contravene the
statutory authority granted to the Minister of Education, this Court finds that there was a valid
exercise of rule-making authority.
The statutory grant of rule-making power to administrative agencies like the Secretary of
Education is a valid exception to the rule on non-delegation of legislative power provided two
conditions concur, namely: 1) the statute is complete in itself, setting forth the policy to be
executed by the agency, and 2) said statute fixes a standard to which the latter must conform
[Vigan Electric Light Co., Inc. v. Public Service Commission, G.R. No. L-19850, January 30,
1964, and Pelaez v. Auditor General, G. R. No. L-23825, December 24, 1965].

The Education Act of 1982 is "an act providing for the establishment and maintenance of an
integrated system for education " with the following basic policy:
It is the policy of the State to establish and maintain a complete, adequate and
integrated system of education relevant to the goals of national development.
Toward this end, the government shall ensure, within the context of a free and
democratic system, maximum contribution of the educational system to the
attainment of the following national development goals:
1. To achieve and maintain an accelerating rate of economic development and
social progress;
2. To assure the maximum participation of all the people in the attainment and
enjoyment of the benefits of such growth; and
3. To achieve and strengthen national unity and consciousness and preserve,
develop and promote desirable cultural, moral and spiritual values in a changing
world.
The State shall promote the right of every individual to relevant quality education,
regardless of sex, age, creed, socioeconomic status, physical and mental
conditions, racial or ethnic origin, political or other affiliation. The State shall
therefore promote and maintain equality of access to education as well as the
enjoyment of the benefits of education by all its citizens.
The State shall promote the right of the nation's cultural communities in the
exercise of their right to develop themselves within the context of their cultures,
customs, traditions, interests and belief, and recognizes education as an
instrument for their maximum participation in national development and in
ensuring their involvement in achieving national unity. (Section 3, Declaration of
Basic Policy).
With the foregoing basic policy as well as, specific policies clearly set forth in its various
provisions, the Act is complete in itself and does not leave any part of the policy-making, a
strictly legislative function, to any administrative agency.
Coming now to the presence or absence of standards to guide the Minister of Education in the
exercise of rule-making power, the pronouncement in Edu v. Ericta [G.R. No. L-32096, October
24, 1970, 35 SCRA 481, 497] is relevant:
The standard may be either expressed or implied. If the former, the nondelegation objection is easily met. The standard though does not have to be
spelled out specifically. It could be implied from the policy and purpose of the act
considered as a whole. In the Reflector Law, clearly the legislative objective is
public safety. What is sought to be attained as in Calalang v. Williams is "safe
transit upon the roads." (Italics supplied).

Thus, in the recent case of Tablarin et al. v. Hon. Gutierrez, et al. (G.R. No. 78164, July 31,
1987], the Court held that the necessary standards are set forth in Section 1 of the 1959 Medical
Act, i.e., "the standardization and regulation of medical education" as well as in other provisions
of the Act. Similarly, the standards to be complied with by Minister of Education in this case
may be found in the various policies set forth in the Education Act of 1982.
MECS Order No. 25, s. 1985 touches upon the economic relationship between some members
and elements of the educational community, i.e., the private schools and their faculty and support
staff. In prescribing the minimum percentage of tuition fee increments to be applied to the
salaries, allowances and fringe benefits of the faculty and support staff, the Act affects the
economic status and the living and working conditions of school personnel, as well as the
funding of the private schools.
The policies and objectives on the welfare and interests of the various members of the
educational community are found in section 5 of B.P. Blg. 232. which states:
SEC. 5. Declaration of Policy and Objectives. It is likewise declared
government policy to foster, at all times, a spirit of shared purposes and
cooperation among the members and elements of the educational community, and
between the community and other sectors of society, in the realization that only in
such an atmosphere can the true goals and objectives of education be fulfilled.
Moreover, the State shall:
1. Aid and support the natural right and duty of parents in the rearing of the youth
through the educational system.
2. Promote and safeguard the welfare and interests of the students by defining
their rights and obligations, according them privileges, and encouraging the
establishment of sound relationships between them and the other members of the
school community.
3. Promote the social and economic status of an school personnel, uphold their
rights, define their obligations, and improve their living and working conditions
and career prospects.
4. Extend support to promote the viability of those institutions through which
parents, students and school personnel seek to attain their educational goals.
On the other hand, the policy on the funding of schools in general, are laid down in section 33:
SEC. 33. Declaration of Policy. It is hereby declared to be a policy of the State
that the national government shall contribute to the financial support of
educational programs pursuant to the goals of education as declared in the
Constitution. Towards this end, the government shall:

1. Adopt measures to broaden access to education through financial assistance and

other forms of incentives to schools, teachers, pupils and students; and
2. Encourage and stimulate private support to education through, inter alia, fiscal
and other assistance measures.
Given the abovementioned policies and objectives, there are sufficient standards to guide the
Minister of Education in promulgating rules and regulations to implement the provisions of the
Education Act of 1982, As in the Ericta and Tablarin cases, there is sufficient compliance with
the requirements of the non-delegation principle.
THIRD SUB-ISSUE
C. Whether or not schools and their employees may enter into a collective
bargaining agreement allocating more than 60% of said incremental proceeds for
salary increases and other benefits of said employees.
1. Arguments raised in the Biscocho and Valmonte cases
Assailed by the petitioners in the Biscocho and the Valmonte cases is the Order of the respondent
Minister of Labor directing the execution of a CBA between the school and the respondent
Espiritu Santo Parochial School Faculty Association which provides for an economic package
equivalent to 90% of the proceeds of tuition fee increases for school year 1985-1986, another
90% for school year 1986-1987 and 85% for school year 1987-1988. Pursuant to said Order,
petitioners in the Biscocho case alleged that the parties had agreed to incorporate in their CBA a
provision which allocates one-half (1/2) of the 90% portion of the proceeds or 45% to increases
in the monthly basic salaries and the other one-half (1/2) or 45% to increases in monthly living
allowance.
The petitioners in the two cases seek the nullification of the MOLE Order for exactly opposite
reasons. In theBiscocho case, the controversy springs from what petitioners perceive to be a
diminution of the benefits to be received by the school employees insofar as the CBA allocates
only 45% for salary increases instead of 60%, which petitioners claim to be the portion set aside
by Pres. Dec. No. 451 for that purpose. Parenthetically, the case questions the allocation of the
remaining 45% of the 90% economic package under the CBA, to allowances. Stripped down to
its essentials, the question is whether or not the 90% portion of the proceeds of tuition fee
increases alloted for the economic package may be allocated for both salary increases and
allowances.
On the other hand, petitioners in the Valmonte case believe that the MOLE cannot order the
execution of a CBA which would allocate more than 60% of the proceeds of tuition fee increases
for salary increases of school employees. Furthermore, petitioners question the authority of the
then Minister of Labor and Employment to issue the aforequoted Order insofar as this allocates
the tuition fee increases of the respondent private school. According to them, only the Minister
of Education, Culture and Sports has the authority to promulgate rules and regulations on the use
of tuition fees and increases thereto, pursuant to the provisions of B.P. Blg. 232. They further

argue that the assailed Order collides with the provisions of Pres. Dec. No. 451 insofar as it
allocates 90% of the tuition fee increases for salary adjustments of the members of the
bargaining unit which exceeds the 60% of the said increases allocated by the Decree for the same
purpose.
Before delving further into the questions raised, this Court notes that in the Valmonte case,
respondent Minister and respondent Faculty Association raise a procedural objection to the filing
of the Petition: the standing of the petitioners to bring this suit. Both respondents decry the
petitioners' lack of the interest required in Rule 65 of the Rules of Court for the filing of the
Petition for certiorari and Prohibition, since the latter do not appear to be in any way aggrieved
by the enforcement of the Order. Petitioners-parents did not even participate in the proceedings
below which led to the issuance of the assailed Order.
This Court finds merit in the respondents' objection. Under Rule 65 of the Rules of Court (Secs.
1 and 2), only a person aggrieved by the act or proceeding in question may file a petition for
certiorari and/or prohibition. TheValmonte petition fails to indicate how the petitioners would be
aggrieved by the assailed Order. It appears that the petitioners are not parties and never at any
time intervened in the conciliation conferences and arbitration proceedings before the respondent
Minister. The parties therein, who stand to be directly affected by the Order of the respondent
Minister, do not contest the validity of said Order. The petition does not even state that
petitioners act as representative of the parents' association in the School or in behalf of other
parents similarly situated.
If indeed, petitioners Valmonte and Badiola are aggrieved by the said Order, they should have
intervened and moved for a reconsideration of respondent Minister's Order before filing the
instant petition. Petitioners failed to show that the case falls under any one of the recognized
exceptions to the rule that a motion for reconsideration should first be availed of before filing a
petition for certiorari and prohibition.
In view of the foregoing, the resolution of the third sub-issue will be based mainly on the
arguments raised in theBiscocho case.
RESOLUTION OF THE THIRD SUB-ISSUE
The Biscocho case involves the issue on the allocation of the incremental proceeds of the tuition
fee increases applied for by the respondent Espiritu Santo Parochial School for school years
1985-1986, 1986-1987, and 1987-1988. With the repeal of Pres. Dec. No. 451 by B.P. Blg. 232,
the allocation of the proceeds of any authorized tuition fee increase must be governed by specific
rules and regulations issued by the Minister (now Secretary) of Education pursuant to his
broadened rule making authority under section 42 of the new law. Thus, insofar as the proceeds
of the authorized tuition fee increases for school year 1985-1986 are concerned, the allocation
must conform with the pertinent section of MECS Order No. 25, s. 1985, to wit:
7. Application or Use of Tuition and Other School Fees or Charges.
xxx xxx xxx

7.4. Not less than sixty (60) percent of the incremental tuition proceeds shall be
used for salaries or wages, allowances and fringe benefits of faculty and support
staff, including cost of living allowance, imputed costs of contributed services,
thirteenth (13th) month pay, retirement fund contributions, social security,
medicare, unpaid school personnel claims, and payments as may be prescribed by
mandated wage orders, collective bargaining agreements and voluntary employer
practices:Provided, That increases in fees specifically authorized for the purposes
fisted in paragraph 4.3.3 hereof shall be used entirely for those purposes.
xxx xxx xxx
With regard to the proceeds of the tuition fee increases for school year 1986-1987, the applicable
rules are those embodied in MECS Order No. 22, s. 1986 which made reference to MECS Order
No. 25, s. 1985, the pertinent portion of which is quoted above.
Finally, as to the proceeds of the tuition fee increases for school year 1987- 1988, DECS Order
No. 37, s. 1987 must apply:
c. Allocation of lncremental Proceeds
(1) In any case of increase at least sixty percent (60%) of the incremental
proceeds should be allocated for increases in or provisions for salaries or wages,
allowances and fringe benefits of faculty and other staff, including accruals to
cost of living allowance, 13th month pay, social security, medicare and retirement
contributions and increases as may be provided in mandated wage orders,
collective bargaining agreements or voluntary employer practices.
(2) Provided, that in all cases of increase the allocation of the incremental
proceeds shall be without prejudice to the Supreme Court cases on the
interpretation and applicability of existing legislations on tuition and other fees
especially on the allocation and use of any incremental proceeds of tuition and
other fees increases. (Emphasis supplied).
xxx xxx xxx
Based on the aforequoted MECS and DECS rules and regulations which implement BP Blg. 232,
the 60% portion of the proceeds of tuition fee increases may now be allotted for both salaries and
allowances and other benefits. The 60% figure is, however, a minimum which means that schools
and their employees may agree on a larger portion, or in this case, as much as 90% for salaries
and allowances and other benefits. This is not in anyway to allow diminution or loss of the
portion allotted for institutional development of the school concerned. Thus, paragraph 7.5 of
MECS Order No. 25, series of 1985 specifically provides that other student fees and charges like
registration, library, laboratory or athletic fees shall be used exclusively for the purposes
indicated.
III RESOLUTION OF THE SPECIFIC ISSUES

CEBU INSTITUTE OF TECHNOLOGY CASE

Petitioner assigns three other errors in the petition for certiorari:
1
RESPONDENT MINISTER OF THE MINISTRY OF LABOR AND EMPLOYMENT
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO A DENIAL OF DUE
PROCESS OF LAW IN DIRECTLY ISSUING THE ORDER DATED SEPTEMBER 29,1981
WITHOUT CONDUCTING A FORMAL INVESTIGATION AND ARBITRATION
PROCEEDINGS.
2
PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PETITIONER IS
EXEMPTED AND/OR NOT OBLIGED TO PAY SERVICE INCENTIVE LEAVE.
3
PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PRIVATE RESPONDENTS'
CLAIMS FOR COLA AND SERVICE INCENTIVE LEAVE ARE FULLY BARRED BY
LACHES AND/OR EXTINGUISHED BY PRESCRIPTION.
1. Petitioner assails the Order of the Minister of Labor on the ground that the same was issued
without the benefit of a hearing and was merely based on the report of the labor management
committee which is allegedly without power to pass upon the issues raised. On this premise,
petitioner claims that it was denied its right to due process.
Petitioner's contention is without merit. The Labor Management Committee was empowered to
investigate the complaint against the petitioner for non-payment of the cost of living allowance,
13th month pay and service incentive leave from 1974-1981 [Annex "F"; Rollo, p. 37]. In the
committee, petitioner was represented by its counsel, registrar and assistant accountant and in the
conferences that were held, the representatives of the petitioner were present. Furthermore, the
petitioner's position paper submitted to the committee reflects that in all the deliberations, it was
never denied the right to present evidence and be heard on all the issues raised, particularly to
demonstrate that it had complied with the various COLA, 13th month pay and service incentive
leave decrees. The evidence presented during the conferences and the position paper of the
parties were made the basis of the committee's report and recommendation which in turn became
the basis of the order of the Minister of Labor directing the petitioner to pay the complainants
their COLA and service incentive leave benefits.
It could not therefore be contended that the petitioner was deprived of his right to be heard when
it appears on the record that it was permitted to ventilate its side of the issues. There was
sufficient compliance with the requirements of due process. In the face of the well- settled
principle that administrative agencies are not strictly bound by the technical rules of procedure,
this Court dismisses the petitioner's claim that formal investigative and arbitration proceedings

should be conducted. "While a day in court is a matter of right in judicial proceedings, in

administrative proceedings it is otherwise since they rest upon different principles." [Cornejo v.
Gabriel and Provincial Board of Rizal, 41 Phil. 188 (1920); Tajonera v. Lamaroza, G.R. Nos. L48907 and L-49035, December 19,1981, 110 SCRA 438].
2. Going now to the matter of service incentive leave benefits, petitioner claims that private
respondents are engaged by the school on a contract basis as shown by the individual teachers
contract which defines the nature, scope and period of their employment; hence, they are not
entitled to the said benefit according to Rule V of the Implementing Rules and Regulations of the
Labor Code to wit:
Sec. 1. Coverage. This rule [on Service Incentive Leave] shall apply to all
employees, except:
xxx xxx xxx
(d) Field personnel and other employees whose performance is unsupervised by
the employer including those who are engaged on task or contract basis, purely
commission basis, or those who are paid in a fixed amount for performing work
irrespective of the time consumed in the performance thereof; (MOLE Rules and
Regulations, Rule V, Book III)
The phrase "those who are engaged on task or contract basis" should however, be related with
"field personnel " applying the rule on ejusdem generis that general and unlimited terms are
restrained and limited by the particular terms that they follow, [Vera v. Cuevas, G.R. No. L33693, May 31, 1979, 90 SCRA 379]. Clearly, petitioner's teaching personnel cannot be deemed
field personnel which refers "to non-agricultural employees who regularly perform their duties
away from the principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty. [Par. 3, Article 82,
Labor Code of the Philippines]. Petitioner's claim that private respondents are not entitled to the
service incentive leave benefit cannot therefore be sustained.
3. As a last ditch effort to bar private respondents'claims, petitioner asserts that the same are
barred by laches and/or extinguished by prescription according to Article 291 of the Labor Code
which provides:
Art. 291. Money claims. All money claims arising from employer-employee ,
relations accruing during the effectivity of this Code shall be filed within three (3)
years from the time the cause of action accrued; otherwise, they shall be forever
barred.
All money claims accruing prior to the effectivity of this Code shall be filed with
the appropriate entities established under this Code within one (1) year from the
date of effectivity, and shall be processed or determined in accordance with
implementing rules and regulations of the Code; otherwise, they shall be forever
barred.

xxx xxx xxx

Considering that the complaint alleging non-payment of benefits was filed only on February 11,
1981, petitioner argues that prescription has already set in.
From the aforequoted provision, it is not fully accurate to conclude that the entire claims for
COLA and service incentive leave are no longer recoverable. This Court finds no reason to
disturb the following pronouncement of the Minister of Labor:
xxx xxx xxx
Simply stated, claims for COLA under P.D. 525, which took effect on August 1,
1974, for the months of August, September and October 1974 must be filed
within one (1) year from November 1, 1974, otherwise they shall be considered
prescribed; claims under the same decree that accrued on or after November 1,
1974 should be initiated within three (3) years from the date of accrual thereof,
otherwise the same shall be deemed extinguished. Although this particular claim
was filed on February 11, 1981, petitioners herein are entitled to COLA under
P.D. 525 from February 1978 up to the present since the COLA that accrued in
February 1978 has not yet prescribed at the time that the claim was filed in
February 1981. In the same vein, petitioners herein should be granted COLA
under P.D. 1123 from February 1978 up to 1981 inasmuch as said decree became
effective only on May 11, 1977. Further, petitioners are entitled to the full amount
of COLA provided under P.D.'s 1614, 1634, 1678 and 1713. It must be pointed
out that the earliest of the just cited four (4) decrees, i.e., P.D. 1614, just took
effect on April 1, 1979. Thus, the prescriptive period under Art. 292 of the Labor
Code, as amended, does not as yet apply to money claims under the just
mentioned decrees.
DIVINE WORD COLLEGE CASE
In assailing the disputed Order, petitioner contends that the public respondents acted with grave
and patent abuse of discretion amounting to lack of jurisdiction in that:
1. The Regional Director has no jurisdiction over money claims arising from
employer-employee relationship; and
2. The Regional Director and Deputy Minister of Labor adopted the report of the
Labor Standards Division without affording the petitioner the opportunity to be
heard.
1. Petitioner school claims that the case at bar is a money claim and should therefore be within
the original and exclusive jurisdiction of the Labor Arbiter pursuant to article 217 of the Labor
Code, as amended.

It appears from the record, however, that the original complaint filed by ten (10) faculty
members of the Divine Word College was for non-compliance with Pres. Dec. No. 451 and with
Labor Code provisions on service incentive leave, holiday and rest day pay and which complaint
specifically prayed that an inspection of the College be conducted.
Contrary to the petitioner's protestation of lack of jurisdiction, the Secretary of Labor or his duly
authorized representatives (which includes Regional Directors) are accorded the power to
investigate complaints for non- compliance with labor laws, particularly those which deal with
labor standards such as payment of wages and other forms of compensation, working hours,
industrial safety, etc. This is provided for in article 128 of the Labor Code, as amended:
Art. 128. Visitorial and enforcement power.
(a) The Secretary of Labor or his duly authorized representatives including labor
regulation officers, shall have access to employers' records and premises at any
time of the day or night, whenever work is being undertaken therein, and the right
to copy therefrom, to question any employee and investigate any fact, condition or
matter which may be necessary to determine violations or which may aid in the
enforcement of this Code and of any labor law, wage order or rules and
regulations issued pursuant thereto.
(b) The Secretary of Labor or his duly authorized representatives shall have the
power to order and administer, after due notice and hearing, compliance with the
labor standards provisions of this Code based on the findings of labor regulation
officers or industrial safety engineers made in the course of inspection, and to
issue writs of execution to the appropriate authority for the enforcement of their
order, except in cases where the employer contests the findings of the labor
regulations officer and raises issues which cannot be resolved without considering
evidentiary matters that are not verifiable in the normal course of inspection.
(Emphasis supplied).
Furthermore, Policy Instruction No. 6 which deals with the distribution of jurisdiction over labor
cases restates inter alia that "(L)abor standards cases arising from violation of labor standards
laws discovered in the course of inspection or complaints where employer-employee relations
still exist" are under the exclusive original jurisdiction of the Regional Director.
Even assuming that respondent Regional Director was without jurisdiction to entertain the case
at bar, petitioner is now barred at this stage to claim lack of jurisdiction having actively
participated in the proceedings below. Petitioner never questioned the jurisdiction of the
respondent Regional Director.
2. The petitioner claims that it was never afforded the opportunity to be heard and was therefore
denied due process.
There is no dispute that an inspection of the College was conducted after a complaint by some
faculty members was filed with the Regional Office of the Ministry of Labor and Employment.

A report was submitted on the basis of the findings contained therein. Petitioner was furnished a
copy of said report to which it filed a comment. Finding this to be without merit, the Regional
Director issued an order giving petitioner ten (10) days to manifest its compliance with the
findings, otherwise, another would be issued to enforce payment. Petitioner appealed but instead
of resolving the memorandum of appeal, which the Regional Director treated as a motion for
reconsideration, said Director issued another Order dated August 2, 1983 directing the payment
of the employees' share in the sixty (60%) percent incremental proceeds. Petitioner moved for a
reconsideration of the latest order which the Regional Director, however, denied, thereby
elevating the case to the Office of the Minister of Labor and Employment.
The foregoing facts demonstrate that petitioner had the opportunity to refute the report on the
inspection conducted. It submitted a comment thereto, which was in effect its position paper. The
arguments therein and evidence attached thereto were considered by respondent Regional
Director in the order issued subsequently. They, therefore, had ample opportunity to present their
side of the controversy.
What due process contemplates is not merely the existence of an actual hearing. The "right to be
heard" focuses more on the substance rather than the form. In the case at bar, petitioner was
actually heard through the pleadings that it filed with the Regional Office V. As it itself admitted
in its petition that it was afforded the right to be heard on appeal [See Rollo, p. 581, petitioner
cannot therefore insist that it was denied due process.
FAR EASTERN UNIVERSITY CASE
Two other issues are raised in this petition, to wit:
1
WHETHER OR NOT 'TRANSPORTATION ALLOWANCE' SHOULD BE CONSIDERED AS
'EQUIVALENT TO 13TH-MONTH PAY UNDER PRES. DEC. NO. 851.
2
WHETHER OR NOT LEGAL HOLIDAY PAY BENEFIT COULD BE VALIDLY
WITHDRAWN AFTER BEING PRACTICED CONTINUOUSLY FOR EIGHT (8) MONTHS.
1. The issue on the thirteenth (13th) month pay involves an interpretation of the provisions of
Pres. Dec. No. 851 which requires all employers "to pay all their employees receiving a basic
salary of not more than Pl,000 a month, regardless of the nature of the employment, a 13thmonth pay" (Sec. 1). However, "employer[s] already paying their employees a 13th-month pay
or its equivalent are not covered" (Sec. 2). (Emphasis supplied)
The Rules and Regulations Implementing Pres. Dec. No. 851 provide the following:
SEC. 3. Employees. The Decree shall apply to all employers except to: ...

c) Employers already paying their employees 13th-month or more in a calendar

year or its equivalent at the time of this issuance; ...
xxx xxx xxx
The term "its equivalent" as used in paragraph (c) hereof shall include Christmas
bonus, mid-year bonus, profit-sharing payments and other cash bonuses
amounting to not less than 1/12th of the basic salary but shall not include cash and
stock dividends, cost of living allowances and all other allowances regularly
enjoyed by the employer, as well as non-monetary benefits. Where an employer
pays less than 1/1 2th of the employees basic salary, the employer shall pay the
difference.
In the case at bar, the 13th month pay is paid in the following manner:
FOR REGULAR EMPLOYEES:
Transportation Allowance (TA)
50% of basic for the first year of service plus additional 5% every year thereafter
but not to exceed 100% of basic salary
Christmas Bonus (CB)
50% of basic salary for the first year of service plus additional 5% every year
thereafter but not to exceed 100% of basic salary.
For employees who have served the University for more than 10 years, the
University pays them emoluments equivalent to the 14 months salaries.
13th Month Pay Formula:
Monthly Rate x No. of
months served for the year
Less TA/CB = 13th Mo. pay
12 months
FOR CASUAL EMPLOYEES:
13th Month Pay Formula:
Add salaries from 16 December of previous year to 15th December of present year [and] divide
by 12 months = 13th Mo. Pay (Rollo, pp. 60, 72).

The University's answer to the Union's claim of underpayment of the 13th month pay is that the
"transportation allowance" paid to its employees partakes the nature of a mid-year bonus which
under section 2 of Pres. Dec. No. 851 and section 3(c) of the Implementing Rules and
Regulations is equivalent to the 13th month pay,
The Labor Arbiter ordered FEU to pay the 13th month pay differentials of the complainants
reasoning that:
CLEARLY, transportation allowance cannot be considered as equivalent" of 13th
month pay as it is neither a Christmas bonus, mid-year bonus, profit sharing
payment, or other cash bonuses, pursuant to paragraphs (c) and (e), Section 3 of
PD 851. The regularity of its payment further cements this proposition.
PERFORCE, complainants are underpaid of their 13th month pay in an amount
equivalent to 50% of their basic salary for the lst year of service, plus additional
5% every year thereafter but not to exceed 100% of their basic salary which, per
respondent's formula, corresponds to their transportation allowance. (Rollo, p.
61).
On appeal, the Third Division of the National Labor Relations Commission reversed the Labor
Arbiter's ruling by dismissing the complainant's claim for underpayment of the 13th month pay
for lack of merit. The NLRC ruled that:
From the above findings and conclusion, it is clear that insofar as employees with
ten (10) years of service or more are concerned, they receive the equivalent of one
(1) month pay for Christmas bonus and another one (1) month pay as
transportation allowance or a total of fourteen (14) months salary in a year.
Obviously, this group of employees are fully paid of their 13th month pay and are
not therefore subject to the instant claim. As it is only those with less than ten (10)
years of service are included or encompassed by the Labor Arbiter's resolution on
this particular issue. With this clarification, we shall now proceed to discuss the
crux of the controversy, that is, the determination of whether or not the so
designated "transportation allowance" being paid to the employees should be
considered among those deemed equivalent to 13th month pay. As adverted
earlier, the Labor Arbiter opined that it cannot be so considered as the equivalent
of 13th month pay.
xxx xxx xxx
In passing upon the issue, we deemed it best to delve deeper into the nature and
intendment of the transportation allowances as designated by both the
complainants and the respondent. Complainants claim that the transportation
allowance they enjoy has always been called and termed allowance and never as
bonus since the time the same was given to them. They assert that it simply was
intended as an allowance and not a bonus. It would appear however that
complainants do not dispute respondent's stand that transportation allowance is

being paid only every March of each year as distinguished from other allowances
that are being paid on a monthly basis or on a bimonthly basis; that the amount of
transportation allowance to be paid is dependent on the length of service of the
employee concerned (i.e. 50% basic in the first year and additional 5% for each
succeeding years, etc.); that the said method of computing the amount of the
transportation allowance to be paid the complainants is Identical to that used in
determining Christmas bonus (respondent's exhibit 8) that the reason behind said
transportation allowance is to financially assist employees in meeting their tax
obligations as the same become due on or about the month of March of each year.
xxx xxx xxx
We are inclined to believe and so hold that by the manner by which said
transportation allowance is being paid (only once a year) as well as the method in
determining the amount to be paid (similar to Christmas bonus) and considering
further the reason behind said payment (easing the burden of taxpayer-employee),
the said transportation allowance given out by respondent while designating as
such, partakes the nature of a mid-year bonus. It bears to note in passing that in
providing for transportation allowance, respondent was not compelled by law nor
by the CBA (Annex "A" of respondent's Appeal) as nowhere in the CBA nor in
the Labor Code can be found any provision on transportation allowance. It was
therefore a benefit that stemmed out purely from the voluntary act and generosity
of the respondent FEU. Moreover, said transportation allowance is only being
paid once a year. On the other hand, regular allowances not considered as 13th
month pay equivalent under P.D. 851, to our mind, refer to those paid on regular
intervals and catering for specific employees' needs and requirements that recur
on a regular basis. Verily, if the intendment behind the disputed transportation
allowance is to answer for the daily recurring transportation expenses of the
employees, the same should have been paid to employees on regular periodic
intervals. All indications, as we see it, point out to conclusion that the disputed
transportation allowance, while dominated as such apparently for lack of better
term, is in fact a form of bonus doled out by the respondent during the month of
March every year.
Hence, we hold that it is one of those that can very well be considered as
equivalent to the 13th month pay (Rollo, pp. 73, 74, 75, 76).
This Court sustains the aforequoted view of public respondent. The benefit herein designated as
"transportation allowance" is a form of bonus equivalent to the 13th month pay. Nevertheless,
where this does not amount to 1/12 of the employees basic salary, the employer shall pay the
difference.
The evident intention of the law was to grant an additional income in the form of a 13th month
pay to employees not already receiving the same. This Court ruled in National Federation of
Sugar Workers (NFSW) v. Ovejera[G.R. No. 59743, May 31, 1982, 114 SCRA 354].

Otherwise put, the intention was to grant some relief not to all workers but
only to the unfortunate ones not actually paid a 13th month salary or what
amounts to it, by whatever name called: but it was not envisioned that a double
burden would be imposed on the employer already paying his employees a 13th
month pay or its equivalent whether out of pure generosity or on the basis of a
binding agreement and, in the latter case, regardless of the conditional character
of the grant (such as making the payment dependent on profit), so long as there is
actual payment. Otherwise, what was conceived to be a 13th month salary would
in effect become a 14th or possibly 15th month pay.
xxx xxx xxx
Pragmatic considerations also weigh heavily in favor of crediting both voluntary
and contractual bonuses for the purpose of determining liability for the 13th
month pay. To require employers (already giving their employees a 13th month
salary or its equivalent) to give a second 13th month pay would be unfair and
productive of undesirable results. To the employer who had acceded and is
already bound to give bonuses to his employees, the additional burden of a 13th
month pay would amount to a penalty for his munificence or liberality. The
probable reaction of one so circumstanced would be to withdraw the bonuses or
resist further voluntary grants for fear that if and when a law is passed giving the
same benefits, his prior concessions might not be given due credit; and this
negative attitude would have an adverse impact on the employees (pp.369,370).
The case of Dole Philippines, Inc. v. Leogardo [G.R. No. 60018, October 23, 1982, 117 SCRA
938 (1982)], citing the ruling in the above case also pointed out that:
To hold otherwise would be to impose an unreasonable and undue burden upon those employers
who had demonstrated their sensitivity and concern for the welfare of their employees. A
contrary stance would indeed create an absurd situation whereby an employer who started giving
his employees the 13th month pay only because of the unmistakable force of the law would be in
a far better position than another who, by his own magnanimity or by mutual agreement, had
long been extending his employees the benefits contemplated under PD No. 851, by whatever
nomenclature these benefits have come to be known. Indeed, PD No. 851, a legislation
benevolent in its purpose, never intended to bring about such oppressive situation. (p. 944)
2. Presidential Decree No. 570-A was issued on November 1, 1974 amending certain articles of
Presidential Decree No. 442 (Labor Code of the Philippines promulgated on May 1, 1974 which
took effect six months thereafter). Section 28 thereof provides that:
Section 28. A new provision is hereby substituted in lieu of the original provision
of Article 258 of the same Code to read as follows:
Art. 258. Right to holiday pay-

(a) Every worker shall be paid his regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;
(b) The term "holiday" as used in this Chapter, shall include: New Year's day,
Maundy Thursday, Good Friday, the ninth of April, the first of May, the twelfth
of June, the fourth of July, the thirtieth of November, the twenty fifth and thirtieth
of December and the day designated by law for holding a general election.
(c) When employer may require work on holidays. The employer may require an
employee to work on any holiday but such employee shall be paid a compensation
equivalent twice his regular rate.
Presidential Decree No. 850 issued on December 16, 1975 also amending certain articles of Pres.
Dec. No. 442 adopted the aforequoted provision. Two months later, on February 16, 1976, the
Rules and Regulations Implementing the Labor Code, as amended, was released the pertinent
portion of which states that:
Section 2. Status of employees paid by the month. Employees who are
uniformly paid by the month, irrespective of the number of working days therein,
with a salary of not less than the statutory or established minimum wage shall be
presumed to be paid for all days in the month whether worked or not.
For this purpose, the monthly minimum wage shall not be less than the statutory
minimum wage multiplied by 365 days divided by twelve.
(e) Section 3. Holiday Pay. Every employer shall pay his employees their
regular daily wage for any unworked regular holiday.
As used in the Rule, the term 'holiday' shall exclusively refer to: New Year's Day,
Maundy Thursday, Good Friday, the ninth of April, the first of May, the twelfth
of June, the fourth of July, the thirtieth of November, the twenty-fifth and thirtieth
of December and the day designated by law for a general election or national
referendum or plebiscite (MOLE Rules and Reg. Book III, Rule IV, sec. 2 (1976).
After one week, on February 23, 1976, the Minister of Labor issued Policy Instruction No. 9, to
clarify further the right to holiday pay, thus:
The Rules Implementing PD 850 have clarified the policy in the implementation
of the ten (10) paid legal holidays. Before PD 850. the number of working days a
year in a firm was considered important in determining entitlement to the benefit.
Thus, where an employee was working for at least 313 days, he was definitely
already paid. If he was working for less than 313, there was no certainty whether
the ten (10) paid legal holidays were already paid to him or not.
The ten (10) paid legal holidays law, to start with, is intended to benefit
principally daily employees. In the case of monthly, only those whose monthly

salary did not yet include payment for the ten (10) paid legal holidays are entitled
to the benefit.
Under the rules implementing PD 850, this policy has been fully clarified to
eliminate controversies on the entitlement of monthly paid employees. The new
determining rule is this: If the monthly paid employee is receiving not less than P
240, the maximum monthly minimum wage, and his monthly pay is uniform from
January to December, he is presumed to be already paid the ten (10) paid legal
holidays. However, if deductions are made from his monthly salary on account of
holidays in months where they occur, then he is entitled to the ten (10) legal
holidays.
These new interpretations must be uniformly and consistently upheld.
This issuance shall take effect immediately.
In the meantime, respondent University paid its employees holiday pay for the following days:
DATE HOLIDAYS PAID
June 9, 1975 for the previous nine legal holidays
August, 1975 for the previous June 12 and July 4
Jan. 14, 1976 or the previous Nov. 30, Dec. 25
and 30 and Jan. 1
After January 14, 1976, however, the University ceased paying the holiday pay allegedly by
reason of Policy Instruction No. 9. Specifically, the University claimed that the monthly salary of
its employees was, as of 1976, more than P 240.00 without deductions from their monthly salary
on account of holidays in months where they occurred and that therefore, by virtue of Policy
Instruction No. 9, they were no longer entitled to the ten paid legal holidays.
Petitioners, upon the other hand, contend that Policy Instruction No. 9 could not have possibly
been the reason that prompted the University to withdraw such benefits from its faculty and
employees because said implementing rule was issued only on April 23, 1976 or four months
later.
The Labor Arbiter ruled in favor of the complainant Union for the reason that ". . . the payment
of the 10-paid legal holiday benefits from June 8, 1975 up to January 14, 1976 is considered an
employer practice that can no longer be withdrawn." [Decision; Rollo, p. 59].
As in the case of the 13th month pay, the NLRC reversed the Labor Arbiter's ruling. The NLRC
held that:

Apparently, Arbiter Ruben Aquino concluded that payment by the respondent of

the legal holiday pay preceded the effectivity of the Rules and Regulations
Implementing P.D. 850 and which rules took effect on February 16, 1976. Hence,
his conclusion that the payment of the legal holiday pay stemmed out from
company practice and not from law. Tracing back, however, the payments made
by respondent of said holiday pay will show that, if ever, the same was made
pursuant to P.D. 570-A which took effect on November 1, 1974. Noteworthy is
the undisputed fact that respondent first paid its employees legal holiday pay in
June 1975 corresponding to nine (9) legal holidays. It bears to note that from the
time of the effectivity of P.D. 570-A which was in November of 1974 up to June
of 1975, the time respondent first paid legal holiday pay for nine (9) legal
holidays, there, were indeed more or less nine legal holidays that transpired to
wit: November 30, 1974, December 25, 1974, December 30, 1974, January 1,
1975, February 27, 1975 (Referendum Day), Maundy Thursday of 1975, Good
Friday of 1975, April 9, 1975 and finally, May 1st of 1975. We are therefore
inclined to lend credence to respondent's claim that the payment of legal holiday
pay was in fact made pursuant to law, P.D. 570-A in particular, it is not one that
arose out of company practice or policy.
Finding that said payment was made based on an honest although erroneous
interpretation of law, which interpretation was later on corrected by the issuance
(sic) of Policy Instruction No. 9 and which issuance prompted respondent to
withdraw the holiday pay benefits extended to the employees who were paid on a
regular monthly basis, and finding further that under Policy Instructions No. 9,
said subject employees are deemed paid their holiday pay as they were paid on a
monthly basis at a wage rate presumably above the statutory minimum, we
believe and so hold that the withdrawal of said holiday pay benefit was valid and
justifiable under the circumstances (Rollo, pp. 33-4).
This Court cannot sustain the foregoing decision of public respondent. Said decision relied on
Section 2, Rule IV, Book Ill of the implementing rules and on Policy Instruction No. 9 which
were declared by this Court to be null and void in Insular Bank of Asia and America Employee's
Union (IBAAEU) v. Inciong (G.R. No. 52415, October 23, 1984, 132 SCRA 6631. In disposing
of the issue at hand, this Court reiterates the ruling in that case, to wit:
WE agree with the petitioner's contention that Section 2, Rule IV, Book Ill of the
implementing rules and Policy Instruction No. 9 issued by the then Secretary of
Labor are nun and void since in the guise of clarifying the Labor Code's provision
on holiday pay, they in fact amended them by enlarging the scope of their
exclusion.
xxx xxx xxx
It is elementary in the rules of statutory construction that when the language of the
law is clear and unequivocal the law must be taken to mean exactly what it says.
In the case at bar, the provisions of the Labor Code on the entitlement to the

benefits of holiday pay are clear and explicit it provides for both the coverage
of and exclusion from the benefits. In Policy Instruction No. 9, the then Secretary
of Labor went as far as to categorically state that the benefit is principally
intended for daily paid employees, when the law clearly states that every worker
shall be paid their regular holiday pay. This is a flagrant violation of the
mandatory directive of Article 4 of the Labor Code, which states that "All doubts
in the implementation and interpretation of the provisions of this Code, including
its implementing rules and regulations, shall be resolved in favor of labor. "
Moreover, it shall always be presumed that the legislature intended to enact a
valid and permanent statute which would have the most beneficial effect that its
language permits (Orlosky vs. Haskell, 155 A. 112). (pp. 673-4).
BISCOCHO CASE
At issue also in this petition is whether the 60% incremental proceeds may be subjected to
attorney's fees, negotiation fees, agency fees and the like.
The Court notes the fact that there are two classes of employees among the petitioners: (1) those
who are members of the bargaining unit and (2) those who are not members of the bargaining
unit. The first class may be further subdivided into two: those who are members of the collective
bargaining agent and those who are not.
It is clear that the questioned Order of the respondent Minister applies only to members of the
bargaining unit.The CBA prepared pursuant to said Order, however, covered employees who are
not members of the bargaining unit, although said CBA had not yet been signed at the time this
petition was filed on November 24, 1986. Assuming it was signed thereafter, the inclusion of
employees outside the bargaining unit should be nullified as this does not conform to said order
which directed private respondents to execute a CBA covering only members of the bargaining
unit.
Being outside the coverage of respondent Minister's order, and thus, not entitled to the economic
package involved therein, employees who are non- members of the bargaining unit should not be
assessed negotiation fees, attorney's fees, agency fees and the like, for the simple reason that the
resulting collective bargaining agreement does not apply to them. It should be clear, however,
that while non-members of the bargaining unit are not entitled to the economic package provided
by said order, they are, in lieu thereof, still entitled to their share in the 60% incremental
proceeds of increases in tuition or other school fees or charges.
As far as assessment of fees against employees of the collective bargaining unit who are not
members of the collective bargaining agent is concerned, Article 249 of the Labor Code, as
amended by B.P. Blg. 70, provides the rule:
Art. 249. Unfair labor practices of employers.xxx xxx xxx

(e) ... Employees of an appropriate collective bargaining unit who are not
members of the recognized collective bargaining agent may be assessed a
reasonable fee equivalent to the dues and other fees paid by members of the
recognized collective bargaining agent, if such non- union members accept the
benefits under the collective agreement . . .
Employees of the collective bargaining unit who are not members of the collective bargaining
agent have to pay the foregoing fees if they accept the benefits under the collective bargaining
agreement and if such fees are not unreasonable. Petitioners who are members of the bargaining
unit failed to show that the equivalent of ten (10%) percent of their backwages sought to be
deducted is unreasonable.
WHEREFORE, the Court rules:
CEBU INSTITUTE OF TECHNOLOGY CASE
In G.R. No. 58870, the Order of respondent Minister of Labor and Employment dated September
29, 1981 is SUSTAINED insofar as it ordered petitioner Cebu Institute of Technology to pay its
teaching staff the following:
(1) Cost of living allowance under Pres. Dec.Nos.525 and 1123 from February
1978 up to 1981;
(2) Cost of living allowance under Pres. Dec. Nos. 1614, 1634, 1678 and 1713;
and
(3) Service incentive leave due them from 1978.
The Temporary Restraining Order issued by this Court on December 7, 1981 is hereby LIFTED
and SET ASIDE. No costs.
DIVINE WORD COLLEGE CASE
The petition in G.R. No. 68345 is DENIED for lack of merit. The questioned Orders of
respondent Deputy Minister of Labor and Employment, dated December 19, 1983 and July 4,
1984 are SUSTAINED insofar as said Orders denied the payment of the emergency cost of living
allowances of private respondents faculty teachers of the Divine Word College of Legazpi out of
the sixty (60%) incremental proceeds of tuition and other school fee increases collected during
the effectivity of Pres. Dec. No. 451. The Rules and Regulations implementing Pres. Dec. No.
451 are hereby declared invalid for being ultra vires No costs.
FAR EASTERN UNIVERSITY CASE
The Decision of public respondent National Labor Relations Commission dated September 18,
1984 isREVERSED insofar as it affirmed in toto the dismissal of petitioner Far Eastern
University Employee Labor Union's claim under Pres. Dec. No. 451 and its claim for payment of

holiday pay. Private respondent Far Eastern University is therefore ordered to pay its employees
the following:
(1) Their sixty (60) percent share in the increases in tuition and other school fees
or charges which shall be allocated exclusively for increase in salaries or wages if
the tuition or other school fee increase was collected during the effectivity of Pres.
Dec. No. 451;
(2) Their claim for holiday pay which was withdrawn since January 14, 1976 up
to the present.
The Decision of respondent National Labor Relations Commission, however,
is SUSTAINED insofar as it denied petitioner's claim for thirteenth (1 3th month pay. No costs.
FABROS CASE
In G.R. No. 70832, the Petition for certiorari and Prohibition is DISMISSED. MECS Order No.
25. s. 1985, particularly paragraphs 7.0 to 7.5 thereof, which provide for the use and application
of sixty (60%) percent of the increases in tuition and other school fees or charges, having been
issued pursuant to B.P. Blg. 232 which repealed Pres. Dec. No. 451, is hereby declared VALID.
The Temporary Restraining Order issued by this Court dated May 29, 1985 is LIFTED and SET
ASIDE. No costs.
BISCOCHO CASE
The assailed portions of the Order of the Minister of Labor and Employment dated April 14,
1986 are AFFIRMED. The collective bargaining agreement prepared pursuant thereto should,
however, be MODIFIED to cover only members of the bargaining unit. Only petitioners who are
members of the collective bargaining unit, if they accept the benefits under the resulting
collective bargaining agreement, shall be charged ten (10%) percent of the payable backwages as
negotiation fees. The Temporary Restraining Order dated November 25, 1986
is LIFTEDand SET ASIDE. No costs.
VALMONTE CASE
The petition in G.R. No. 76596 is DISMISSED for lack of merit.
Effective September 1, 1982, the application and use of the proceeds from increases in tuition
fees and other schools fees or charges shall be governed by section 42 of B.P. Blg. 232 as
implemented by the Rules and Regulations issued by the then Ministry, now Department of
Education, Culture and Sports. SO ORDERED.
Teehankee, C.J., Yap, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Bidin and
Sarmiento, JJ., concur.
Fernan, Narvasa, Cruz and Padilla, JJ., took no part.

G.R. No. L-49582 January 7, 1986

CBTC
EMPLOYEES
UNION, petitioner,
vs.
THE HONORABLE JACOBO C. CLAVE, Presidential Executive Assistant, and
COMMERCIAL BANK & TRUST COMPANY OF THE PHILIPPINES, respondents.
Francisco F. Angeles for petitioner.
Pacis, Reyes, De Leon & Cruz Law, Office for respondent CBTC.
Edmundo R. AbigaN, Jr. for respondent Union.

DE LA FUENTE, J.:
Petition for certiorari seeking to annul and set aside the decision of the respondent Presidential
Executive Assistant 1 affirming that of the Acting Secretary of Labor who reversed the decision
of the National Labor Relations Comission which upheld the Voluntary Arbitrator's order
directing the private respondent bank to pay its monthly paid employees their "legal holiday
pay."
Petitioner Commercial Bank and Trust Company Employees' Union (Union for short) lodged a
complaint with the Regional Office No. IV, Department of Labor, against private respondent
bank (Comtrust) for non-payment of the holiday pay benefits provided for under Article 95 of
the Labor Code in relation to Rule X, Book III of the Rules and Regulations Implementing the
Labor Code.
Failing to arrive at an amicable settlement at conciliation level, the parties opted to submit their
dispute for voluntary arbitration. The issue presented was: "Whether the permanent employees of
the Bank within the collective bargaining unit paid on a monthly basis are entitled to holiday
pay effective November 1, 1974, pursuant to Article 95 (now Article 94) of the Labor Code, as
amended and Rule X (now Rule IV), Book III of the Rules and Regulations Implementing the
Labor Code. "
In addition, the disputants signed a Submission Agreement stipulating as final, unappealable and
executory the decision of the Arbitrator, including subsequent issuances for clarificatory and/or
relief purposes, notwithstanding Article 262 of the Labor Code which allow appeal in certain
instances. 2
In the course of the hearing, the Arbitrator apprised the parties of an interpretative bulletin on
"holiday pay" about to be issued by the Department of Labor. Whereupon, the Union filed a
Manifestation 3 which insofar as relevant stated:

6. That complainant union . . . has manifested its apprehension on the contents of

the said Interpretative Bulletin in view of a well-nigh irresistible move on the part
of the employers to exclude permanent workers similarly situated as the
employees of Comtrust from the coverage of the holiday pay benefit despite the
express and self-explanatory provisions of the law, its implementing rules and
opinions thereon . . . .
7. That in the event that said Interpretative Bulletin regarding holiday pay would
be adverse to the present claim . . . in that it would in effect exclude the said
employees from enjoyment of said benefit, whether wholly or partially,
complainant union respectfully reserves the right to take such action as may be
appropriate to protect its interests, a question of law being involved. . . . An
Interpretative Bulletin which was inexistent at the time the said commitment was
made and which may be contrary to the law itself should not bar the right of the
union to claim for its holiday pay benefits.
On April 22, 1976, the Arbitrator handed down an award on the dispute. Relevant portions
thereof read as follows:
The uncontroverted facts of this case are as follows:
(1) That the complainant Union is the recognized sole and exclusive collective
bargaining representative of all the permanent rank-and-file employees of the
Bank with an existing Collective Bargaining Agreement covering the period from
July 1, 1974 up to June 30, 1977;
(2) That ... the standard workweek of the Bank generally consists of five (5) days
of eight (8) hours each day which, . . . said five days are generally from Monday
thru Friday; and, as a rule, Saturdays, Sundays and the regular holidays are not
considered part of the standard workweek.
(3) That, in computing the equivalent daily rate of its employees covered by the
CBA who are paid on a monthly basis, the following computation is used, as per
the provisions of Section 4, Article VII, of the CBA (Annex "A"):
Daily Rate = Basic Monthly Salary plus CLA x 12 250
Basic Hourly Rate = Daily Rate 8
(4) That the divisor of '250', . . . was arrived at by subtracting the 52 Sundays, 52
Saturdays, the 10 regular holidays and December 31 (secured thru bargaining), or
a total of 115 off-days from the 365 days of the year or a difference of 250 days.
Considering the above uncontroverted facts, the principal question to be resolved
is whether or not the monthly pay of the covered employees already includes what
Article 94 of the Labor Code requires as regular holiday pay benefit in the amount

of his regular daily wage (100% if unworked or 200% if worked) during the
regular holidays enumerated therein, i.e., Article 94(c) of the Labor Code.
In its latest Memorandum, filed on March 26, 1976, the Bank relies
heavily on the provisions of Section 2, Rule IV, Book 111, of the
Rules and Regulations implementing particularly Article 94
(formerly Article 208) of the Labor Code, which Section reads as
follows:
SECTION 2. Status of employees paid by the month -Employees who are
uniformly paid by the month, irrespective of the number of' working days therein
with a salary of not less than the statutory or established minimum wage, shall be
presumed to be paid for all days in the month whether worked or not.
For this purpose, the monthly minimum wage shall not be less than the statutory
minimum wage multiplied by 365 days divided by twelve. (Emphasis supplied).
While admitting that there has virtually been no change effected by Presidential
Decree No. 850, which amended the Labor Code, other than the re-numbering of
the original Article 208 of said Code to what is now Article 94, the Bank,
however, attaches a great deal of significance in the above-quoted Rule as to
render the question at issue 'moot and academic'.
On the other hand, the Union maintains, in its own latest Memorandum, filed also
on March 26, 1976, that the legal presumption established in the above-quoted
Rule is merely a disputable presumption. This contention of the Union is now
supported by a pronouncement categorically to that effect by no less than the
National Labor Relations Commission (NLRC) in the case of The Chartered Bank
Employees Association vs. The Chartered Bank. NLRC Case No. (s) RB-IV-173975 (RO4-5-3028-75), which reads, in part, as follows:
. . . A disputable presumption was sea in that it would be presumed
the salary of monthly-paid employees may already include rest
days, such as Saturdays, Sundays, special and legal holidays,
worked or unworked, in effect connoting that evidence to the
contrary may destroy such a supposed legal presumption. Indeed,
the Rule merely sets a presumption. It does not conclusively
presume that the salary of monthly-paid employees already
includes unworked holidays. . . .
The practice of the Bank of paying its employees a sum equivalent
to Base pay plus Premium on Saturdays, Sundays and special and
legal holidays, destroys the legal presumption that monthly pay is
for an days of the month. For if the monthly pay is payment for all
days of the month, then why should the employee be
paid again for working on such rest days. (Emphasis supplied)

There is no reason at present not to adopt the above ruling of the Honorable
Comission, especially considering the fact that this Arbitrator, in asking a query
on the nature of the presumption established by the above Rule, from the Director
of Labor Standards in the PMAP Conference held at the Makati Hotel on March
13, 1976, was given the categorical answer that said presumption is merely
disputable. This answer from the Labor Standards Director is significant
inasmuch as it is his office, the Bureau of Labor Standards, that is reportedly
instrumental in the preparation of the implementing Rules, particularly on Book
III of the Labor Code on Conditions of Employment, to which group the present
Rule under discussion belongs.
So, rather than rendering moot and academic the issue at hand, as suggested by
the Bank, the more logical step to take is to determine whether or not there is
sufficient evidence to overcome the disputable presumption established by the
Rule.
It is unquestioned, and as provided for in the CBA itself, that the divisor used in
determining the daily rate of the monthly-paid employees is '250'.
xxx xxx xxx
Against this backdrop, certain relevant and logical conclusions result, namely:
(A) The Bank maintains that, since its inception or start of operations in 1954, all
monthly-paid employees in the Bank are paid their monthly salaries without any
deduction for unworked Saturdays, Sundays, legals and special holidays. On the
other hand, it also maitains that, as a matter of fact, 'always conscious of its
employee who has to work, on respondent's rest days of Saturdays and Sundays or
on a legal holiday, an employee who works overtime on any of said days is paid
one addition regular pay for the day plus 50% of said regular pay (Bank's
Memorandum, page 3, filed January 21, 1976). . . .
xxx xxx xxx
On the other hand, there is more reason to believe that, if the Bank has never
made any deduction from its monthly-paid employees for unworked Saturdays,
Sundays, legal and special holidays, it is because there is really nothing to deduct
properly since the monthly, salary never really included pay for such unworked
days-and which give credence to the conclusion that the divisor '250' is the proper
one to use in computing the equivalent daily rate of the monthly-paid employees.
(B) The Bank further maintains that the holiday pay is intended only for dailypaid workers. In this regard, the NLRC has this to say , in the same above-quoted
Chartered Bank case:

It is contended that holiday pay is primarily for daily wage earners.

Let us examine the law, more specifically Article 95 (now Article
94) of the Labor Code to see whether it supports this contention.
The words used in the Decree are 'every worker', while the framers
of the Implementing Rules preferred the use of the phrase 'all
employees.' Both the decree itself and the Rules mentioned
enumerated the excepted workers. It is a basic rule of statutory
construction that putting an exception limits or modifies the
enumeration or meaning made in the law. it is thus easy to see that
a mere reading ofthe Decree and of the Rules would show that the
monthly-paid employees of the Bank are not expressly included in
the enumeration of the exception.
Special notice is made of the fact that the criteria at once readable
from the exception referred to is the nature of the job and the
number of employees involved, and not whether the employee is a
daily-wage earner or a regular monthly-paid employee.
There is no reason at all to digress from the above-quoted observation of the
Honorable Commission for purposes of the present case.
xxx xxx xxx
Finally, inasmuch as Article 94 of the Labor Code is one of its so-called selfexecuting provisions, conjointly with its corresponding implementing Rules, it is
to be taken to have taken effect, as of November 1, 1974, as per Section I (1),
Rule IV, Book III , of the Implementing Rules.
WHEREAS, all the above premises considered, this Arbitrator rules that:
(1) All the monthly-paid employees of the Bank herein represented by the Union
and as governed by their Collective Bargaining Agreement, are entitled to the
holiday pay benefits as provided for in Article 94 of the labor Code and as
implemented by Rule IV, Book III, of the corresponding implementing Rules,
except for any day or any longer period designated by lawor holding a general
election or referendum;
(2) Paragraph (1) hereof means that any covered employee who does not work on
any of the regular holidays enumerated in Article 94 (c) of the Labor Code, except
that which is designated for election or referendum purposes, is still entitled to
receive an amount equivalent to his regular daily wage in addition to his monthly
salary. If he work on any of the regular holidays, other than that which is
designated for election or referendum purposes, he is entitled to twice, his regular
daily wage in addition to his monthly salary. The 50% premium pay provided for
in the CBA for working on a rest day (which has been interpreted by the parties to
include the holidays) shall be deemed already included in the 200% he receives

for working on a regular holiday. With respect to the day or any longer period
designated by law for holding a general election or referendum, if the employee
does not work on such day or period he shall no longer be entitled to receive any
additional amount other than his monthly salary which is deemed to include
already his regular daily wage for such day or period. If he works on such day or
period, he shall be entitled to an amount equivalent to his regular daily wage
(100%) for that day or period in addition to his monthly salary. The 50% premium
pay provided for in the CBA for working on that day or period shall be deemed
already included in the additional 100% he receives for working on such day or
period; and
(3) The Bank is hereby ordered to pay all the above employees in accordance with
the above paragraphs (1) and (2), retroactive from November 1, 1974.
SO ORDERED.
April 22, 1976, Manila, Philippines. 4
The next day, on April 23, 1976, the Department of Labor released Policy Instructions No. 9,
hereinbelow quoted:
The Rules implementing PD 850 have clarified the policy in the implementation
of the ten (10) paid legal holidays. Before PD 850, the number of working days a
year in a firm was considered important in determining entitlement to the benefit.
Thus, where an employee was working for at least 313 days, he was considered
definitely already paid. If he was working for less than 313, there was no certainty
whether the ten (10) paid legal holidays were already paid to him or not.
The ten (10) paid legal holidays law, to start with, is intended to benefit
principally daily employees. In the case of monthly, only those whose monthly
salary did not yet include payment for the ten (10) paid legal holidays are entitled
to the benefit.
Under the rules implementing PD 850, this policy has been fully clarified to
eliminate controversies on the entitlement of monthly paid employees. The new
determining rule is this: If the monthly paid employee is receiving not less than P
240, the maximum monthly minimum wage, and his monthly pay is uniform from
January to December, he is presumed to be already paid the ten (10) paid legal
holidays. However, if deductions are made from his monthly salary on account of
holidays in months where they occur, then he is still entitled to the ten (10) paid
legal holidays.
These new interpretations must be uniformly and consistently upheld.
This issuance shall take effect immediately.

After receipt of a copy of the award, private respondent filed a motion for reconsideration,
followed by a supplement thereto. Said motion for reconsideration was denied. A copy of the
order of denial was received by private respondent on July 8, 1976.
Said private respondent interposed an appeal to the National Labor Relations Commission
(NLRC), contending that the Arbitrator demonstrated gross incompetence and/or grave abuse of
discretion when he entirely premised the award on the Chartered Bank case and failed to apply
Policy Instructions No. 9. This appeal was dismissed on August 16, 1976, by the NLRC because
it was filed way beyond the ten-day period for perfecting an appeal and because it contravened
the agreement that the award shall be final and unappealable.
Private respondent then appealed to the Secretary of Labor. On June 30, 1977, the Acting
Secretary of Labor reversed the NLRC decision and ruled that the appeal was filed on time and
that a review of the case was inevitable as the money claim exceeded P100,000.00. 5 Regarding
the timeliness of the appeal, it was pointed out that the labor Department had on several
occasions treated a motion for reconsideration (here, filed before the Arbitrator) as an appeal to
the proper appellate body in consonance with the spirit of the Labor Code to afford the parties a
just, expeditious and inexpensive disposition of their claims, liberated from the strict technical
rules obtaining in the ordinary courts.
Anent the issue whether or not the agreement barred the appeal, it was noted that the
Manifestation, supra, "is not of slight significance because it has in fact abrogated complainant's
commitment to abide with the decision of the Voluntary Arbitrator without any reservation" and
amounted to a "virtual repudiation of the agreement vesting finality" 6 on the arbitrator's
disposition.
And on the principal issue of holiday pay, the Acting Secretary, guided by Policy Instructions
No. 9, applied thesame retrospectively, among other things.
In due time, the Union appealed to the Office of the President. In affirming the assailed decision,
Presidential Executive Assistant Jacobo C. Clave relied heavily on the Manifestation and Policy
Instructions No. 9.
Hence, this petition.
On January 10, 1981, petitioner filed a motion to substitute the Bank of the Philippine Islands as
private respondent, as a consequence of the Articles of Merger executed by said bank and
Commercial Bank & Trust Co. which inter alia designated the former as the surviving corporate
entity. Said motion was granted by the Court.
We find the petitioner impressed with merit.
In excluding the union members of herein petitioner from the benefits of the holiday pay law,
public respondent predicated his ruling on Section 2, Rule IV, Book III of the Rules to
implement Article 94 of the labor Code promulgated by the then Secretary of labor and Policy
Instructions No. 9.

In Insular Bank of Asia and America Employees' Union (IBAAEU) vs. Inciong, 7 this Court's
Second Division, speaking through former Justice Makasiar, expressed the view and declared
that the aforementioned section and interpretative bulletin are null and void, having been
promulgated by the then Secretary of Labor in excess of his rule-making authority. It was
pointed out, inter alia, that in the guise of clarifying the provisions on holiday pay, said rule and
policy instructions in effect amended the law by enlarging the scope of the exclusions. We
further stated that the then Secretary of Labor went as far as to categorically state that the benefit
is principally intended for daily paid employees whereas the law clearly states that every worker
shall be paid their regular holiday pay-which is incompatible with the mandatory directive, in
Article 4 of the Labor Code, that "all doubts in the implementation and interpretation of the
provisions of Labor Code, including its implementing rules and regulations, shall be resolved in
favor of labor." Thus, there was no basis at all to deprive the union members of their right to
holiday pay.
In the more recent case of The Chartered Bank Employees Association vs. Hon. Ople, 8 this
Court in an en bancdecision had the occasion to reiterate the above-stated pronouncement. We
added:
The questioned Section 2, Rule IV, Book III of the Integrated Rules and the
Secretary's Policy Instruction No. 9 add another excluded group, namely,
'employees who are uniformly paid by the month'. While the additional exclusion
is only in the form of a presumption that all monthly paid employees have already
been paid holiday pay, it constitutes a taking away or a deprivation which must be
in the law if it is to be valid. An administrative interpretation which diminishes
the benefits of labor more than what the statute delimits or withholds is obviously
ultra vires.
In view of the foregoing, the challenged decision of public respondent has no leg to stand on as it
was premised principally on the same Section 2, Rule IV, Book III of the Implementing Rules
and Policy Instructions No. 9. This being the decisive issue to be resolved, We find no necessity
to pass upon the other issues raised, such as the effects of the Union's Manifestation and the
propriety of applying Policy Instructions No. 9 retroactively to the instant case.
WHEREFORE, the questioned decisions of the respondent Presidential Executive Assistant and
the Acting Secretary of labor are hereby set aside, and the award of the Arbitrator reinstated.
Costs against the private respondent.
IT IS SO ORDERED.

G.R. No. 144664

March 15, 2004

ASIAN
TRANSMISSION
CORPORATION, petitioner,
vs.
The Hon. COURT OF APPEALS, Thirteenth Division, HON. FROILAN M. BACUNGAN
as Voluntary Arbitrator, KISHIN A. LALWANI, Union, Union representative to the Panel
Arbitrators; BISIG NG ASIAN TRANSMISSION LABOR UNION (BATLU); HON.
BIENVENIDO T. LAGUESMA in his capacity as Secretary of Labor and Employment;
and DIRECTOR CHITA G. CILINDRO in her capacity as Director of Bureau of Working
Conditions, respondents.
DECISION
CARPIO-MORALES, J.:
Petitioner, Asian Transmission Corporation, seeks via petition for certiorari under Rule 65 of the
1995 Rules of Civil Procedure the nullification of the March 28, 2000 Decision1 of the Court of
Appeals denying its petition to annul 1) the March 11, 1993 "Explanatory Bulletin"2 of the
Department of Labor and Employment (DOLE) entitled "Workers Entitlement to Holiday Pay
on April 9, 1993, Araw ng Kagitingan and Good Friday", which bulletin the DOLE reproduced
on January 23, 1998, 2) the July 31, 1998 Decision3 of the Panel of Voluntary Arbitrators ruling
that the said explanatory bulletin applied as well to April 9, 1998, and 3) the September 18,
19984 Resolution of the Panel of Voluntary Arbitration denying its Motion for Reconsideration.
The following facts, as found by the Court of Appeals, are undisputed:
The Department of Labor and Employment (DOLE), through Undersecretary Cresenciano B.
Trajano, issued an Explanatory Bulletin dated March 11, 1993 wherein it clarified, inter alia, that
employees are entitled to 200% of their basic wage on April 9, 1993, whether unworked,
which[,] apart from being Good Friday [and, therefore, a legal holiday], is also Araw ng
Kagitingan [which is also a legal holiday]. The bulletin reads:
"On the correct payment of holiday compensation on April 9, 1993 which apart from being Good
Friday is alsoAraw ng Kagitingan, i.e., two regular holidays falling on the same day, this
Department is of the view that the covered employees are entitled to at least two hundred percent
(200%) of their basic wage even if said holiday is unworked. The first 100% represents the
payment of holiday pay on April 9, 1993 as Good Friday and the second 100% is the payment of
holiday pay for the same date as Araw ng Kagitingan.
Said bulletin was reproduced on January 23, 1998, when April 9, 1998 was both Maundy
Thursday and Araw ng Kagitingan x x x x
Despite the explanatory bulletin, petitioner [Asian Transmission Corporation] opted to pay
its daily paid employees only 100% of their basic pay on April 9, 1998. Respondent Bisig ng
Asian Transmission Labor Union (BATLU) protested.

In accordance with Step 6 of the grievance procedure of the Collective Bargaining Agreement
(CBA) existing between petitioner and BATLU, the controversy was submitted for voluntary
arbitration. x x x x On July 31, 1998,the Office of the Voluntary Arbitrator rendered a decision
directing petitioner to pay its covered employees "200% and not just 100% of their regular daily
wages for the unworked April 9, 1998 which covers two regular holidays, namely, Araw ng
Kagitignan and Maundy Thursday." (Emphasis and underscoring supplied)
Subject of interpretation in the case at bar is Article 94 of the Labor Code which reads:
ART. 94. Right to holiday pay. - (a) Every worker shall be paid his regular daily wage during
regular holidays, except in retail and service establishments regularly employing less than ten
(10) workers;
(b) The employer may require an employee to work on any holiday but such employee
shall be paid a compensation equivalent to twice his regular rate; and
(c) As used in this Article, "holiday" includes: New Years Day, Maundy Thursday,
Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of July,
the thirtieth of November, the twenty-fifth and thirtieth of December and the day
designated by law for holding a general election,
which was amended by Executive Order No. 203 issued on June 30, 1987, such that the regular
holidays are now:
1. New Years Day January 1
2. Maundy Thursday Movable Date
3. Good Friday Movable Date
4. Araw ng Kagitingan April 9 (Bataan and Corregidor Day)
5. Labor Day May 1
6. Independence Day June 12
7. National Heroes Day Last Sunday of August
8. Bonifacio Day November 30
9. Christmas Day December 25
10. Rizal Day December 30
In deciding in favor of the Bisig ng Asian Transmission Labor Union (BATLU), the Voluntary
Arbitrator held that Article 94 of the Labor Code provides for holiday pay for every regular

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

WHETHER OR NOT THE SECRETARY OF THE DEPARTMENT OF LABOR AND

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

For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must show
that he has no plain, speedy and adequate remedy in the ordinary course of law against its
perceived grievance. A remedy is considered "plain, speedy and adequate" if it will promptly
relieve the petitioner from the injurious effects of the judgment and the acts of the lower court or
agency. In this case, appeal was not only available but also a speedy and adequate remedy.6
The records of the case show that following petitioners receipt on August 18, 2000 of a copy of
the August 10, 2000 Resolution of the Court of Appeals denying its Motion for Reconsideration,
it filed the present petition for certiorari on September 15, 2000, at which time the Court of
Appeals decision had become final and executory, the 15-day period to appeal it under Rule 45
having expired.
Technicality aside, this Court finds no ground to disturb the assailed decision.
Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that the State
shall afford protection to labor.7 Its purpose is not merely "to prevent diminution of the monthly
income of the workers on account of work interruptions. In other words, although the worker is
forced to take a rest, he earns what he should earn, that is, his holiday pay."8 It is also intended to
enable the worker to participate in the national celebrations held during the days identified as
with great historical and cultural significance.
Independence Day (June 12), Araw ng Kagitingan (April 9), National Heroes Day (last Sunday
of August), Bonifacio Day (November 30) and Rizal Day (December 30) were declared national
holidays to afford Filipinos with a recurring opportunity to commemorate the heroism of the
Filipino people, promote national identity, and deepen the spirit of patriotism. Labor Day (May
1) is a day traditionally reserved to celebrate the contributions of the working class to the
development of the nation, while the religious holidays designated in Executive Order No. 203
allow the worker to celebrate his faith with his family.
As reflected above, Art. 94 of the Labor Code, as amended, affords a worker the enjoyment of
ten paid regular holidays.9 The provision is mandatory,10 regardless of whether an employee is
paid on a monthly or daily basis.11 Unlike a bonus, which is a management prerogative,12 holiday
pay is a statutory benefit demandable under the law. Since a worker is entitled to the enjoyment
of ten paid regular holidays, the fact that two holidays fall on the same date should not operate to
reduce to nine the ten holiday pay benefits a worker is entitled to receive.
It is elementary, under the rules of statutory construction, that when the language of the law is
clear and unequivocal, the law must be taken to mean exactly what it says. 13 In the case at bar,
there is nothing in the law which provides or indicates that the entitlement to ten days of holiday
pay shall be reduced to nine when two holidays fall on the same day.
Petitioners assertion that Wellington v. Trajano14 has "overruled" the DOLE March 11, 1993
Explanatory Bulletin does not lie. In Wellington, the issue was whether monthly-paid employees
are entitled to an additional days pay if a holiday falls on a Sunday. This Court, in answering the
issue in the negative, observed that in fixing the monthly salary of its
employees, Wellington took into account "every working day of the year including the holidays

specified by law and excluding only Sunday." In the instant case, the issue is whether daily-paid
employees are entitled to be paid for two regular holidays which fall on the same day.15
In any event, Art. 4 of the Labor Code provides that all doubts in the implementation and
interpretation of its provisions, including its implementing rules and regulations, shall be
resolved in favor of labor. For the working mans welfare should be the primordial and
paramount consideration.16
Moreover, Sec. 11, Rule IV, Book III of the Omnibus Rules to Implement the Labor Code
provides that "Nothing in the law or the rules shall justify an employer in withdrawing or
reducing any benefits, supplements or payments for unworked regular holidays as provided in
existing individual or collective agreement or employer practice or policy."17
From the pertinent provisions of the CBA entered into by the parties, petitioner had obligated
itself to pay for the legal holidays as required by law. Thus, the 1997-1998 CBA incorporates the
following provision:
ARTICLE
PAID LEGAL HOLIDAYS

XIV

The following legal holidays shall be paid by the COMPANY as required by law:
1. New Years Day (January 1st)
2. Holy Thursday (moveable)
3. Good Friday (moveable)
4. Araw ng Kagitingan (April 9th)
5. Labor Day (May 1st)
6. Independence Day (June 12th)
7. Bonifacio Day [November 30]
8. Christmas Day (December 25th)
9. Rizal Day (December 30th)
10. General Election designated by law, if declared public non-working holiday
11. National Heroes Day (Last Sunday of August)
Only an employee who works on the day immediately preceding or after a regular holiday shall
be entitled to the holiday pay.

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

[G.R. No. 146775. January 30, 2002]

SAN MIGUEL CORPORATION, petitioner, vs. THE HONORABLE COURT OF

APPEALS-FORMER THIRTEENTH DIVISION, HON. UNDERSECRETARY
JOSE M. ESPAOL, JR., Hon. CRESENCIANO B. TRAJANO, and HON.
REGIONAL DIRECTOR ALLAN M. MACARAYA, respondents.
DECISION
KAPUNAN, J.:
Assailed in the petition before us are the decision, promulgated on 08 May 2000, and the
resolution, promulgated on 18 October 2000, of the Court of Appeals in CA G.R. SP-53269.
The facts of the case are as follows:
On 17 October 1992, the Department of Labor and Employment (DOLE), Iligan District
Office, conducted a routine inspection in the premises of San Miguel Corporation (SMC) in Sta.
Filomena, Iligan City. In the course of the inspection, it was discovered that there was
underpayment by SMC of regular Muslim holiday pay to its employees. DOLE sent a copy of
the inspection result to SMC and it was received by and explained to its personnel officer Elena
dela Puerta.[1] SMC contested the findings and DOLE conducted summary hearings on 19
November 1992, 28 May 1993 and 4 and 5 October 1993. Still, SMC failed to submit proof that
it was paying regular Muslim holiday pay to its employees. Hence, Alan M. Macaraya, Director
IV of DOLE Iligan District Office issued a compliance order, dated 17 December 1993, directing
SMC to consider Muslim holidays as regular holidays and to pay both its Muslim and nonMuslim employees holiday pay within thirty (30) days from the receipt of the order.
SMC appealed to the DOLE main office in Manila but its appeal was dismissed for having
been filed late. The dismissal of the appeal for late filing was later on reconsidered in the order
of 17 July 1998 after it was found that the appeal was filed within the reglementary
period. However, the appeal was still dismissed for lack of merit and the order of Director
Macaraya was affirmed.
SMC went to this Court for relief via a petition for certiorari, which this Court referred to
the Court of Appeals pursuant to St. Martin Funeral Homes vs. NLRC.[2]
The appellate court, in the now questioned decision, promulgated on 08 May 2000, ruled, as
follows:
WHEREFORE, the Order dated December 17, 1993 of Director Macaraya and Order dated July
17, 1998 of Undersecretary Espaol, Jr. is hereby MODIFIED with regards the payment of
Muslim holiday pay from 200% to 150% of the employee's basic salary. Let this case be
remanded to the Regional Director for the proper computation of the said holiday pay.
SO ORDERED.[3]

Its motion for reconsideration having been denied for lack of merit, SMC filed a petition
for certiorari before this Court, alleging that:
PUBLIC RESPONDENTS SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE OF
DISCRETION WHEN THEY GRANTED MUSLIM HOLIDAY PAY TO NON-MUSLIM
EMPLOYEES OF SMC-ILICOCO AND ORDERING SMC TO PAY THE SAME
RETROACTIVE FOR ONE (1) YEAR FROM THE DATE OF THE PROMULGATION OF
THE COMPLIANCE ORDER ISSUED ON DECEMBER 17, 1993, IT BEING CONTRARY
TO THE PROVISIONS, INTENT AND PURPOSE OF P.D. 1083 AND PREVAILING
JURISPRUDENCE.
THE ISSUANCE OF THE COMPLIANCE ORDER WAS TAINTED WITH GRAVE ABUSE
OF DISCRETION IN THAT SAN MIGUEL CORPORATION WAS NOT ACCORDED DUE
PROCESS OF LAW; HENCE, THE ASSAILED COMPLIANCE ORDER AND ALL
SUBSEQUENT ORDERS, DECISION AND RESOLUTION OF PUBLIC RESPONDENTS
WERE ALL ISSUED WITH GRAVE ABUSE OF DISCRETION AND ARE VOID AB
INITIO.
THE HON. COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN
IT DECLARED THAT REGIONAL DIRECTOR MACARAYA, UNDERSECRETARY
TRAJANO AND UNDERSECRETARY ESPAOL, JR., WHO ALL LIKEWISE ACTED WITH
GRAVE ABUSE OF DISCRETION AND WITHOUT OR IN EXCESS OF THEIR
JURISDICTION, HAVE JURISDICTION IN ISSUING THE ASSAILED COMPLIANCE
ORDER AND SUBSEQUENT ORDERS, WHEN IN FACT THEY HAVE NO
JURISDICTION OR HAS LOST JURISDICTION OVER THE HEREIN LABOR STANDARD
CASE.[4]
At the outset, petitioner came to this Court via a petition for certiorari under Rule 65 instead
of an appeal under Rule 45 of the 1997 Rules of Civil Procedure. In National Irrigation
Administration vs. Court of Appeals,[5] the Court declared:
x x x (S)ince the Court of Appeals had jurisdiction over the petition under Rule 65, any alleged
errors committed by it in the exercise of its jurisdiction would be errors of judgment which are
reviewable by timely appeal and not by a special civil action of certiorari. If the aggrieved party
fails to do so within the reglementary period, and the decision accordingly becomes final and
executory, he cannot avail himself of the writ of certiorari, his predicament being the effect of
his deliberate inaction.
The appeal from a final disposition of the Court of Appeals is a petition for review under Rule 45
and not a special civil action under Rule 65 of the Rules of Court, now Rule 45 and Rule 65,
respectively, of the 1997 Rules of Civil Procedure. Rule 45 is clear that decisions, final orders or
resolutions of the Court of Appeals in any case, i.e., regardless of the nature of the action or
proceeding involved, may be appealed to this Court by filing a petition for review, which would
be but a continuation of the appellate process over the original case. Under Rule 45 the
reglementary period to appeal is fifteen (15) days from notice of judgment or denial of motion
for reconsideration.

xxx
For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must show
that he has no plain, speedy and adequate remedy in the ordinary course of law against its
perceived grievance. A remedy is considered "plain, speedy and adequate" if it will promptly
relieve the petitioner from the injurious effects of the judgment and the acts of the lower court or
agency. In this case, appeal was not only available but also a speedy and adequate remedy.[6]
Well-settled is the rule that certiorari cannot be availed of as a substitute for a lost
appeal.[7] For failure of petitioner to file a timely appeal, the questioned decision of the Court of
Appeals had already become final and executory.
In any event, the Court finds no reason to reverse the decision of the Court of Appeals.
Muslim holidays are provided under Articles 169 and 170, Title I, Book V, of Presidential
Decree No. 1083,[8] otherwise known as the Code of Muslim Personal Laws, which states:
Art. 169. Official Muslim holidays. - The following are hereby recognized as legal Muslim
holidays:
(a) Amun Jadd (New Year), which falls on the first day of the first lunar month
of Muharram;
(b) Maulid-un-Nab (Birthday of the Prophet Muhammad), which falls on the twelfth
day of the third lunar month of Rabi-ul-Awwal;
(c) Lailatul Isr Wal Mirj (Nocturnal Journey and Ascension of the Prophet
Muhammad), which falls on the twenty-seventh day of the seventh lunar month
of Rajab;
(d) d-ul-Fitr (Hari Raya Puasa), which falls on the first day of the tenth lunar month
of Shawwal, commemorating the end of the fasting season; and
(e) d-l-Adh (Hari Raya Haji),which falls on the tenth day of the twelfth lunar month
of Dhl-Hijja.
Art. 170. Provinces and cities where officially observed. - (1) Muslim holidays shall be officially
observed in the Provinces of Basilan, Lanao del Norte, Lanao del Sur, Maguindanao, North
Cotabato, Iligan, Marawi, Pagadian, and Zamboanga and in such other Muslim provinces and
cities as may hereafter be created;
(2) Upon proclamation by the President of the Philippines, Muslim holidays may also be
officially observed in other provinces and cities.
The foregoing provisions should be read in conjunction with Article 94 of the Labor Code,
which provides:
Art. 94. Right to holiday pay. -

(a) Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than
ten (10) workers;
(b) The employer may require an employee to work on any holiday but such
employee shall be paid a compensation equivalent to twice his regular
rate; x x x.
Petitioner asserts that Article 3(3) of Presidential Decree No. 1083 provides that (t)he
provisions of this Code shall be applicable only to Muslims x x x. However, there should be no
distinction between Muslims and non-Muslims as regards payment of benefits for Muslim
holidays. The Court of Appeals did not err in sustaining Undersecretary Espaol who stated:
Assuming arguendo that the respondents position is correct, then by the same token, Muslims
throughout the Philippines are also not entitled to holiday pays on Christian holidays declared by
law as regular holidays. We must remind the respondent-appellant that wages and other
emoluments granted by law to the working man are determined on the basis of the criteria laid
down by laws and certainly not on the basis of the workers faith or religion.
At any rate, Article 3(3) of Presidential Decree No. 1083 also declares that x x x nothing herein
shall be construed to operate to the prejudice of a non-Muslim.
In addition, the 1999 Handbook on Workers Statutory Benefits, approved by then DOLE
Secretary Bienvenido E. Laguesma on 14 December 1999 categorically stated:
Considering that all private corporations, offices, agencies, and entities or establishments
operating within the designated Muslim provinces and cities are required to observe Muslim
holidays, both Muslim and Christians working within the Muslim areas may not report for
work on the days designated by law as Muslim holidays.[9]
On the question regarding the jurisdiction of the Regional Director Allan M. Macaraya,
Article 128, Section B of the Labor Code, as amended by Republic Act No. 7730, provides:
Article 128. Visitorial and enforcement power. xxx
(b) Notwithstanding the provisions of Article 129 and 217 of this Code to the contrary,
and in cases where the relationship of employer-employee still exists, the Secretary
of Labor and Employment or his duly authorized representatives shall have the
power to issue compliance orders to give effect to the labor standards provisions of
this Code and other labor legislation based on the findings of labor employment and
enforcement officers or industrial safety engineers made in the course of the
inspection. The Secretary or his duly authorized representative shall issue writs of
execution to the appropriate authority for the enforcement of their orders, except in
cases where the employer contests the findings of the labor employment and

enforcement officer and raises issues supported by documentary proofs which were
not considered in the course of inspection.
xxx
In the case before us, Regional Director Macaraya acted as the duly authorized
representative of the Secretary of Labor and Employment and it was within his power to issue
the compliance order to SMC. In addition, the Court agrees with the Solicitor General that the
petitioner did not deny that it was not paying Muslim holiday pay to its non-Muslim
employees. Indeed, petitioner merely contends that its non-Muslim employees are not entitled to
Muslim holiday pay. Hence, the issue could be resolved even without documentary proofs. In
any case, there was no indication that Regional Director Macaraya failed to consider any
documentary proof presented by SMC in the course of the inspection.
Anent the allegation that petitioner was not accorded due process, we sustain the Court of
Appeals in finding that SMC was furnished a copy of the inspection order and it was received by
and explained to its Personnel Officer. Further, a series of summary hearings were conducted by
DOLE on 19 November 1992, 28 May 1993 and 4 and 5 October 1993. Thus, SMC could not
claim that it was not given an opportunity to defend itself.
Finally, as regards the allegation that the issue on Muslim holiday pay was already resolved
in NLRC CA No. M-000915-92 (Napoleon E. Fernan vs. San Miguel Corporation Beer Division
and Leopoldo Zaldarriaga),[10] the Court notes that the case was primarily for illegal dismissal
and the claim for benefits was only incidental to the main case. In that case, the NLRC Cagayan
de Oro City declared, in passing:
We also deny the claims for Muslim holiday pay for lack of factual and legal basis. Muslim
holidays are legally observed within the area of jurisdiction of the present Autonomous Region
for Muslim Mindanao (ARMM), particularly in the provinces of Maguindanao, Lanao del Sur,
Sulu and Tawi-Tawi. It is only upon Presidential Proclamation that Muslim holidays may be
officially observed outside the Autonomous Region and generally extends to Muslims to enable
them the observe said holidays.[11]
The decision has no consequence to issues before us, and as aptly declared by
Undersecretary Espaol, it can never be a benchmark nor a guideline to the present case x x x.[12]
WHEREFORE, in view of the foregoing, the petition is DISMISSED.
SO ORDERED.

G.R. No. 118289 December 13, 1999

TRANS-ASIA PHILS. EMPLOYEES ASSOCIATION (TAPEA) and ARNEL
GALVEZ, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, TRANS-ASIA (PHILS.) and
ERNESTO S. DE CASTRO,respondents.

KAPUNAN, J.:
This petition for certiorari under Rule 65 of the Rules of Court seeks to reverse and set aside the
Resolutions, dated 23 November 1993 and 13 September 1994 of the National Labor Relations
Commission ("NLRC") which dismissed petitioners' appeal from the adverse decision of the
labor arbiter and denied petitioners' motion for reconsideration, respectively.
The antecedents of this case are as follows:
On 7 July 1988, Trans-Asia Philippines Employees Association (TAPEA), the duly-recognized
collective bargaining agent of the monthly-paid rank-and-file employees of Trans-Asia (Phils.),
entered into a Collective Bargaining Agreement ("CBA") with their employer. The CBA, which
was to be effective from 1 April 1988 up to 31 March 1991, provided for, among others, the
payment of holiday pay with a stipulation that if an employee is permitted to work on a legal
holiday, the said employee will receive a salary equivalent to 200% of the regular daily wage
plus a 60% premium pay.
Despite the conclusion of the CBA, however, an issue was still left unresolved with regard to the
claim of TAPEA for payment of holiday pay covering the period from January of 1985 up to
December of 1987. Thus, the parties underwent preventive mediation meetings with a
representative from the National Mediation and Conciliation Board in order to settle their
disagreement on this particular issue. Since the parties were not able to arrive at an amicable
settlement despite the conciliation meetings, TAPEA, led by its President, petitioner Arnie
Galvez, filed a complaint before the labor arbiter, on 18 August 1988, for the payment of their
holiday pay in arrears. On 18 September 1988, petitioners amended their complaint to include
the payment of holiday pay for the duration of the recently concluded CBA (from 1988 to 1991),
unfair labor practice, damages and attorney's fees.
In their Position Paper, petitioners contended that their claim for holiday pay in arrears is based
on the non-inclusion of the same in their monthly pay. In this regard, petitioners cited certain
circumstances which, according to them, would support their claim for past due holiday pay.
First, petitioners presented Trans-Asia's Employees' Manual which requires, as a pre-condition
for the payment of holiday pay, that the employee should have worked or was on authorized
leave with pay on the day immediately preceding the legal holiday. Petitioners argued that "if the
intention [of Trans-Asia] was not to pay holiday pay in addition to the employee's monthly pay,
then there would be no need to impose or specify the pre-condition for the payment." 1 Second,

petitioners proffered as evidence their appointment papers which do not contain any stipulation
on the inclusion of holiday pay in their monthly salary. According to petitioners, the absence of
such stipulation is an indication that the mandated holiday pay is not incorporated in the monthly
salary. Third, petitioners noted the inclusion of a provision in the CBA for the payment of an
amount equivalent to 200% of the regular daily wage plus 60% premium pay to employees who
are permitted to work on a regular holiday. Petitioners claimed that this very generous provision
was the remedy availed of by Trans-Asia to allow its employees to recoup the holiday pay in
arrears and, as such, is a tacit admission of the non-payment of the same during the period prior
to the current CBA.
Finally, petitioners cited the current CBA provision which obligates Trans-Asia to give holiday
pay. Petitioners asserted that this provision is an acknowledgment by Trans-Asia of its failure to
pay the same in the past since, if it was already giving holiday pay prior to the CBA, there was
no need to stipulate on the said obligation in the current CBA.
With regard to the claim for the payment of holiday pay for the duration of the CBA, the
accusation of unfair labor practice and the claim for damages and attorney's fees, petitioners
asserted that Trans-Asia is guilty of bad faith in negotiating and executing the current CBA
since, after it recognized the right of the employees to receive holiday pay, Trans-Asia allegedly
refused to honor the CBA provision on the same.
In response to petitioner's contentions, Trans-Asia refuted the same in seriatim. With regard to
the pre-condition for the payment of holiday pay stated in the Employees' Manual and the
absence of a stipulation on holiday pay in the employees' appointment papers, Trans-Asia
asserted that the above circumstances are not indicative of its non-payment of holiday pay since
it has always honored the labor law provisions on holiday pay by incorporating the same in the
payment of the monthly salaries of its employees. In support of this claim, Trans-Asia pointed
out that it has long been the standing practice of the company to use the divisor of "286" days in
computing for its employees' overtime pay and daily rate deductions for absences. Trans-Asia
explained that this divisor is arrived at through the following formula:
52 x 44
= 286 days
8
Where: 52 = number of weeks in a year
44 = number of work hours per week
8 = number of work hours per day
Trans-Asia further clarified that the "286" days divisor already takes into account the ten
(10) regular holidays in a year since it only subtracts from the 365 calendar days the
unworked and unpaid 52 Sundays and 26 Saturdays (employees are required to work

half-day during Saturdays). Trans-Asia claimed that if the ten (10) regular holidays were
not included in the computation of their employees' monthly salary, the divisor which
they would have used would only be 277 days which is arrived at by subtracting 52
Sundays, 26 Saturdays and the 10 legal holidays from 365 calendar days. Furthermore,
Trans-Asia explained that the "286" days divisor is based on Republic Act No.
6640, 2 wherein the divisor of 262 days (composed of the 252 working days and the 10
legal holidays) is used in computing for the monthly rate of workers who do not work and
are not considered paid on Saturdays and Sundays or rest days. According to Trans-Asia,
if the additional 26 working Saturdays in a year is factored-in to the divisor provided by
Republic Act No. 6640, the resulting divisor would be "286" days.
On petitioners' contention with regard to the CBA provision on the allegedly generous holiday
pay rate of 260%, Trans-Asia explained that this holiday pay rate was included in the CBA in
order to comply with Section 4, Rule IV, Book III of the Omnibus Rules Implementing the Labor
Code. The aforesaid provision reads:
Sec. 4. Compensation for holiday work. Any employee who is permitted or
suffered to work on any regular holiday, not exceeding eight (8) hours, shall be
paid at least two hundred percent (200%) of his regular daily wage. If the holiday
falls on the scheduled rest day of the employee, he shall be entitled to an
additional premium pay of at least 30% of his regular holiday rate of 200% based
on his regular wage rate.
On the contention that Trans-Asia's acquiescence to the inclusion of a holiday pay provision in
the CBA is an admission of non-payment of the same in the past, Trans-Asia reiterated that it is
simply a recognition of the mandate of the Labor Code that employees are entitled to holiday
pay. It clarified that the company's firm belief in the payment of holiday pay to employees led it
to agree to the inclusion of the holiday pay provision in the CBA.
With regard to the accusation of unfair labor practice because of Trans-Asia's act of allegedly
bargaining in bad faith and refusal to give holiday pay in accordance with the CBA, Trans-Asia
explained that what petitioners would like the company to do is to give double holiday pay since,
as previously stated, the company has already included the same in its employees monthly salary
and, yet, petitioners want it to pay a second set of holiday pay.
On 13 February 1989, the labor arbiter rendered a decision dismissing the complaint, to wit:
After considering closely the arguments of the parties in support of their
respective claims and defenses, this Branch upholds a different view from that
espoused by the complainants.
Just like in the Chartered Bank Case (L-44717), August 28, 1985, 138 SCRA 273,
which is cited by the complainants in their Position Paper, there appears to be no
clear agreement between the parties in the instant case, whether verbal or in
writing, that the monthly salary of the employees included the mandated holiday
pay. In the absence of such agreement, the Supreme Court in said Chartered Bank

Case took into consideration existing practices in the bank in resolving the issue,
such as employment by the bank of a divisor of 251 days which is the result of
subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total
number of calendar days in a year. Further, the Court took note of the fact that the
bank used conflicting or different divisors in computing salary-related benefits as
well as the employees' absence from work. In the case at bar, not only did the
CBA between the complainants and respondents herein provides (sic) that the ten
(10) legal holidays are recognized by the Company as full holiday with pay. What
is more, there can be no doubt that since 1977 up to the execution of the CBA, the
Trans-Asia, unlike that obtaining in the Chartered Bank Case, never used
conflicting or different divisors but consistently employed the divisor of 286 days,
which as earlier pointed out, was arrived at by subtracting only the unworked 52
Sundays and the 26 half-day-worked Saturdays from the total number of days in a
year. The consistency in the established practice of the Trans-Asia, which
incidentally is not disputed by complainants, did not give rise to any doubt which
could have been resolved in favor of complainants.
Besides, the respondents unlike the respondent bank in the Chartered Bank
Employees Association vs. Hon. Blas F. Ople, et al. (supra) citing also the case
of IBAAEU vs. Hon. Amado Inciong (132 SCRA 663) which case have (sic)
invalidated Section 2, Rule IV, Book III of the Implementing Rules of the Labor
Code and Policy Instruction No. 9, have never relied on the said invalidated rule
and Policy Instruction.
The complainants' arguments and juxtapositions in claiming that they were denied
payment of their holiday pay paled in the face of the prevailing company practices
and circumstances abovestated.
Also, for the reasons adverted to above, the complainants charge of unfair labor
practice claiming that respondents in bad faith refused to comply with their
contractual obligation under the CBA by not paying the complainants' holiday
pay, must fail. Since respondents have nothing more to pay by way of legal
holiday pay as it has already been included in their monthly salaries, the provision
in the CBA relative to holiday pay is just but a recognition of the complainants
right to payment of legal holiday pay as mandated by the Labor Code.
WHEREFORE, all the foregoing premises being considered, judgment is hereby
rendered dismissing the complaint for lack of merit.
SO ORDERED. 3
Petitioners appealed to the National Labor Relations Commission. In its Resolution, dated 23
November 1993, the NLRC dismissed the appeal and affirmed the decision of the labor arbiter,
to wit:

We find no cogent reason to change or disturb the decision appealed from, the
same being substantially supported by the facts and evidence on record. "It is a
well-settled rule that findings of facts of administrative bodies, if based on
substantial evidence are controlling on the reviewing authority." (Planters
Products, Inc. vs. NLRC, G.R. No. 78524 & 78739, January 20, 1989; 169 SCRA
328).
We find no abuse of discretion and/or error in the assailed decision.
WHEREFORE, the appeal are (sic) hereby DISMISSED for lack of merit and the
decision appealed from is AFFIRMED.
SO ORDERED. 4
Petitioners' motion for reconsideration was, likewise, denied by the NLRC in its Resolution,
dated 13 September 1994.
Petitioners are now before us faulting the NLRC with the following assignment of errors:
I
PUBLIC RESPONDENT ACTED WITH GRAVE ABUSE OF DISCRETION IN
UPHOLDING THE LABOR ARBITER'S DECISION DESPITE THE LACK OF
SUBSTANTIAL EVIDENCE TO SUPPORT IT
II
IN UPHOLDING THE LABOR ARBITER'S DECISION DESPITE THE LACK
OF SUBSTANTIAL EVIDENCE TO SUPPORT IT, PUBLIC RESPONDENT
NLRC VIOLATED THE CONSTITUTIONAL AND LEGAL MANDATE TO
RESOLVE ALL DOUBTS IN SOCIAL LEGISLATION IN FAVOR OF
LABOR. 5
Petitioners, in furtherance of their first assignment of error, assert that the NLRC "blatantly and
unashamedly disregarded" the numerous evidence in support of their claim and relied merely on
the sole evidence presented by Trans-Asia, the "286" days divisor, in dismissing their appeal
and, in so doing, is guilty of grave abuse of discretion. 6
We do not agree.
Trans-Asia's inclusion of holiday pay in petitioners' monthly salary is clearly established by its
consistent use of the divisor of "286" days in the computation of its employees' benefits and
deductions. The use by Trans-Asia of the "286" days divisor was never disputed by petitioners.
A simple application of mathematics would reveal that the ten (10) legal holidays in a year are
already accounted for with the use of the said divisor. As explained by Trans-Asia, if one is to
deduct the unworked 52 Sundays and 26 Saturdays (derived by dividing 52 Saturdays in half

since petitioners are required to work half-day on Saturdays) from the 365 calendar days in a
year, the resulting divisor would be 286 days (should actually be 287 days). Since the ten (10)
legal holidays were never included in subtracting the unworked and unpaid days in a calendar
year, the only logical conclusion would be that the payment for holiday pay is already
incorporated into the said divisor. Thus, when viewed against this very convincing piece of
evidence, the arguments put forward by petitioners to support their claim of non-payment of
holiday pay, i.e., the pre-condition stated in the Employees' Manual for entitlement to holiday
pay, the absence of a stipulation in the employees' appointment papers for the inclusion of
holiday pay in their monthly salary, the stipulation in the CBA recognizing the entitlement of the
petitioners to holiday pay with a concomitant provision for the granting of an "allegedly" very
generous holiday pay rate, would appear to be merely inferences and suppositions which, in the
apropos words of the labor arbiter, "paled in the face of the prevailing company practices and
circumstances abovestated."
Hence, it is on account of the convincing and legally sound arguments and evidence of TransAsia that the labor arbiter rendered a decision adverse to petitioners. Acknowledging that the
decision of the labor arbiter was based on substantial evidence, the NLRC affirmed the former's
disposition. It is also with this acknowledgment that the Court affirms the questioned resolutions
of the NLRC. As aptly put by the Solicitor General, citing Sunset View Condominium
Corporation vs. NLRC, 7 "findings of fact of administrative bodies should not be disturbed in the
absence of grave abuse of discretion or unless the findings are not supported by substantial
evidence." 8 In this regard, the Solicitor General observed: "As said above, public respondent
acted on the basis of substantial evidence, hence, grave abuse of discretion is ruled out." 9
However, petitioners insist that the agreement of Trans-Asia in the CBA to give a generous
260% holiday pay rate to employees who work on a holiday is conclusive proof that the monthly
pay of petitioners does not include holiday pay. 10 Petitioners cite as basis the case of Chartered
Bank Employees Association vs. Ople, 11 which reads:
Any remaining doubts which may arise from the conflicting or different divisors
used in the computation of overtime pay and employees' absences are resolved by
the manner in which work actually rendered on holidays is paid. Thus, whenever
monthly paid employees work on a holiday, they are given an additional 100%
base pay on top of a premium pay of 50%. If the employees' monthly pay already
includes their salaries for holidays, they should be paid only premium pay but not
both base pay and premium pay. 12
We are not convinced. The cited case cannot be relied upon by petitioners since the facts
obtaining in the Chartered Bank case are very different from those in the present case. In the
Chartered Bank case, the bank used different divisors in computing for its employees benefits
and deductions. For computing overtime compensation, the bank used 251 days as its divisor. On
the other hand, for computing deductions due to absences, the bank used 365 days as divisor.
Due to this confusing situation, the Court declared that there existed a doubt as to whether
holiday pay is already incorporated in the employees' monthly salary. Since doubts should be
resolved in favor of labor, the Court in the Chartered Bank case ruled in favor of the employees
and further stated that its conclusion is fortified by the manner in which the employees are

remunerated for work rendered on holidays. In the present case, however, there is no confusion
with regard to the divisor used by Trans-Asia in computing for petitioners' benefits and
deductions. Trans-Asia consistently used a "286" days divisor for all its computations.
Nevertheless, petitioners' cause is not entirely lost. The Court notes that there is a need to adjust
the divisor used by Trans-Asia to 287 days, instead of only 286 days, in order to properly
account for the entirety of regular holidays and special days in a year as prescribed by Executive
Order No. 203 13 in relation to Section 6 of the Rules Implementing Republic Act 6727. 14
Sec. 1 of Executive Order No. 203 provides:
Sec. 1. Unless otherwise modified by law, order or proclamation, the following
regular holidays and special days shall be observed in the country:
A. Regular Holidays
New Year's Day January 1
Maundy Thursday Movable Date
Good Friday Movable Date
Araw ng Kagitingan April 9
(Bataan and Corregidor Day)
Labor Day May 1
Independence Day June 12
National Heroes Day Last Sunday of August
Bonifacio Day November 30
Christmas Day December 25
Rizal Day December 30
B. Nationwide Special Days
All Saints Day November 1
Last Day of the Year December 31
On the other hand, Section 6 of the Implementing Rules and Regulations of Republic Act No.
6727 provides:

Sec. 6. Suggested Formula in Determining the Equivalent Monthly Statutory

Minimum Wage Rates. Without prejudice from existing company practices,
agreements or policies, the following formulas may be used as guides in
determining the equivalent monthly statutory minimum wage rates:
xxx xxx xxx
d) For those who do not work and are not considered paid on Saturdays and
Sundays or rest days:
Equivalent Monthly = Average Daily Wage Rate x 262 days
Rate (EMR) 12
Where 262 days =
250 days Ordinary working days
10 days Regular holidays
2 days Special days (If considered paid; if actually
worked, this is equivalent to 2.6 days)

262 days Total equivalent number of days

Based on the above, the proper divisor that should be used for a situation wherein the employees
do not work and are not considered paid on Saturdays and Sundays or rest days is 262 days. In
the present case, since the employees of Trans-Asia are required to work half-day on Saturdays,
26 days should be added to the divisor of 262 days, thus, resulting to 288 days. However, due to
the fact that the rest days of petitioners fall on a Sunday, the number of unworked but paid legal
holidays should be reduced to nine (9), instead of ten (10), since one legal holiday under E.O.
No. 203 always falls on the last Sunday of August, National Heroes Day. Thus, the divisor that
should be used in the present case should be 287 days.
However, the Court notes that if the divisor is increased to 287 days, the resulting daily rate for
purposes of overtime pay, holiday pay and conversions of accumulated leaves would be
diminished. To illustrate, if an employee receives P8,000.00 as his monthly salary, his daily rate
would be P334.49, computed as follows:
P8,000.00 x 12 months
= P334.49/day

287 days
Whereas if the divisor used is only 286 days, the employee's daily rate would be P335.66,
computed as follows:
P8,000.00 x 12 months
= P335.66/day
286 days
Clearly, this muddled situation would be violative of the proscription on the nondiminution of benefits under Section 100 of the Labor Code. On the other hand, the use
of the divisor of 287 days would be to the advantage of petitioners if it is used for
purposes of computing for deductions due to the employee's absences. In view of this
situation, the Court rules that the adjusted divisor of 287 days should only be used by
Trans-Asia for computations which would be advantageous to petitioners, i.e., deductions
for absences, and not for computations which would diminish the existing benefits of the
employees, i.e., overtime pay, holiday pay and leave conversions.
For their second assignment of error, petitioners argue that, since they provided the NLRC with
"overwhelming proof" of their claim against Trans-Asia, the least that the NLRC could have
done was to declare that there existed an ambiguity with regard to Trans-Asia's payment of
holiday pay. Petitioners then posits that if the NLRC had only done so, this ambiguity would
have been resolved in their favor because of the constitutional mandate to resolve doubts in favor
of labor.
We are not persuaded. As previously stated, the decision of the labor arbiter and the resolutions
of the NLRC were based on substantial evidence and, as such, no ambiguity or doubt exists
which could be resolved in petitioners' favor.
WHEREFORE, premises considered, the Resolutions of the NLRC, dated 23 November 1993
and 13 September 1994, are hereby AFFIRMED with the MODIFICATION that Trans-Asia is
hereby ordered to adjust its divisor to 287 days and pay the resulting holiday pay in arrears
brought about by this adjustment starting from 30 June 1987, the date of effectivity of E.O. No.
203.
SO ORDERED.

[G.R. No. 100701. March 28, 2001]

PRODUCERS BANK OF THE PHILIPPINES, petitioner, vs. NATIONAL LABOR

RELATIONS COMMISSION and PRODUCERS BANK EMPLOYEES
ASSOCIATION,[1]respondents.
DECISION
GONZAGA-REYES, J.:
Before us is a special civil action for certiorari with prayer for preliminary injunction and/or
restraining order seeking the nullification of (1) the decision of public respondent in NLRC-NCR
Case No. 02-00753-88, entitled Producers Bank Employees Association v. Producers Bank of
the Philippines, promulgated on 30 April 1991, reversing the Labor Arbiters dismissal of private
respondents complaint and (2) public respondents resolution dated 18 June 1991 denying
petitioners motion for partial reconsideration.
The present petition originated from a complaint filed by private respondent on 11 February
1988 with the Arbitration Branch, National Capital Region, National Labor Relations
Commission (NLRC), charging petitioner with diminution of benefits, non-compliance with
Wage Order No. 6 and non-payment of holiday pay. In addition, private respondent prayed for
damages.[2]
On 31 March 1989, Labor Arbiter Nieves V. de Castro found private respondents claims to
be unmeritorious and dismissed its complaint.[3] In a complete reversal, however, the
NLRC[4] granted all of private respondents claims, except for damages.[5] The dispositive portion
of the NLRCs decision provides
WHEREFORE, premises considered, the appealed Decision is, as it is hereby, SET ASIDE and
another one issued ordering respondent-appellee to pay complainant-appellant:
1. The unpaid bonus (mid-year and Christmas bonus) and 13th month pay;
2. Wage differentials under Wage Order No. 6 for November 1, 1984 and the corresponding
adjustment thereof; and
3. Holiday pay under Article 94 of the Labor Code, but not to exceed three (3) years.
The rest of the claims are dismissed for lack of merit.
SO ORDERED.
Petition filed a Motion for Partial Reconsideration, which was denied by the NLRC in a
Resolution issued on 18 June 1991. Hence, recourse to this Court.
Petitioner contends that the NLRC gravely abused its discretion in ruling as it did for the
succeeding reasons stated in its Petition

1. On the alleged diminution of benefits, the NLRC gravely abused its discretion when (1) it
contravened the Supreme Court decision in Traders Royal Bank v. NLRC, et al., G.R. No.
88168, promulgated on August 30, 1990, (2) its ruling is not justified by law and Art. 100 of the
Labor Code, (3) its ruling is contrary to the CBA, and (4) the so-called company practice
invoked by it has no legal and moral bases (p. 2, Motion for Partial Reconsideration, Annex H);
2. On the alleged non-compliance with Wage Order No. 6, the NLRC again gravely abused its
discretion when it patently and palpably erred in holding that it is more inclined to adopt the
stance of appellant (private respondent UNION) in this issue since it is more in keeping with the
law and its implementing provisions and the intendment of the parties as revealed in their CBA
without giving any reason or justification for such conclusions as the stance of appellant (private
respondent UNION) does not traverse the clear and correct finding and conclusion of the Labor
Arbiter.
Furthermore, the petitioner, under conservatorship and distressed, is exempted under Wage
Order No. 6.
Finally, the wage differentials under Wage Order No. 6 for November 1, 1984 and the
corresponding adjustment thereof (par. 2, dispositive portion, NLRC Decision), has prescribed
(p. 12, Motion for Partial Reconsideration, Annex H).
3. On the alleged non-payment of legal holiday pay, the NLRC again gravely abused its
discretion when it patently and palpably erred in approving and adopting the position of
appellant (private respondent UNION) without giving any reason or justification therefor which
position does not squarely traverse or refute the Labor Arbiters correct finding and ruling (p. 18,
Motion for Partial Reconsideration, Annex H).[6]
On 29 July 1991, the Court granted petitioners prayer for a temporary restraining order
enjoining respondents from executing the 30 April 1991 Decision and 18 June 1991 Resolution
of the NLRC.[7]
Coming now to the merits of the petition, the Court shall discuss the issues ad seriatim.
Bonuses
As to the bonuses, private respondent declared in its position paper[8] filed with the NLRC
that
1. Producers Bank of the Philippines, a banking institution, has been providing several benefits
to its employees since 1971 when it started its operation. Among the benefits it had been
regularly giving is a mid-year bonus equivalent to an employees one-month basic pay and a
Christmas bonus equivalent to an employees one whole month salary (basic pay plus allowance);
2. When P.D. 851, the law granting a 13th month pay, took effect, the basic pay previously being
given as part of the Christmas bonus was applied as compliance to it (P.D. 851), the allowances
remained as Christmas bonus;

3. From 1981 up to 1983, the bank continued giving one month basic pay as mid-year bonus, one
month basic pay as 13th month pay but the Christmas bonus was no longer based on the
allowance but on the basic pay of the employees which is higher;
4. In the early part of 1984, the bank was placed under conservatorship but it still provided the
traditional mid-year bonus;
5. By virtue of an alleged Monetary Board Resolution No. 1566, the bank only gave a one-half
(1/2) month basic pay as compliance of the 13th month pay and none for the Christmas bonus. In
a tabular form, here are the banks violations:
YEAR
previous
years
1984

MID-YEAR
BONUS
one mo. basic

CHRISTMAS
BONUS
one mo. basic

13TH MO. PAY

[one mo. basic]

- none -

one-half
mo.
basic
one-half
mo.
basic
one mo. basic
one mo. basic

1985

one-half mo. basic - none -

1986
1987

one-half mo. basic one-half mo. basic

one-half mo. basic one-half mo. basic

one mo. basic

Private respondent argues that the mid-year and Christmas bonuses, by reason of their
having been given for thirteen consecutive years, have ripened into a vested right and, as such,
can no longer be unilaterally withdrawn by petitioner without violating Article 100 of
Presidential Decree No. 442[9] which prohibits the diminution or elimination of benefits already
being enjoyed by the employees. Although private respondent concedes that the grant of a bonus
is discretionary on the part of the employer, it argues that, by reason of its long and regular
concession, it may become part of the employees regular compensation.[10]
On the other hand, petitioner asserts that it cannot be compelled to pay the alleged bonus
differentials due to its depressed financial condition, as evidenced by the fact that in 1984 it was
placed under conservatorship by the Monetary Board. According to petitioner, it sustained losses
in the millions of pesos from 1984 to 1988, an assertion which was affirmed by the labor
arbiter. Moreover, petitioner points out that the collective bargaining agreement of the parties
does not provide for the payment of any mid-year or Christmas bonus. On the contrary, section 4
of the collective bargaining agreement states that
Acts of Grace. Any other benefits or privileges which are not expressly provided in this
Agreement, even if now accorded or hereafter accorded to the employees, shall be deemed
purely acts of grace dependent upon the sole judgment and discretion of the BANK to grant,
modify or withdraw.[11]
A bonus is an amount granted and paid to an employee for his industry and loyalty which
contributed to the success of the employers business and made possible the realization of profits.
It is an act of generosity granted by an enlightened employer to spur the employee to greater
efforts for the success of the business and realization of bigger profits.[12] The granting of a

bonus is a management prerogative, something given in addition to what is ordinarily received

by or strictly due the recipient.[13] Thus, a bonus is not a demandable and enforceable
obligation,[14] except when it is made part of the wage, salary or compensation of the
employee.[15]
However, an employer cannot be forced to distribute bonuses which it can no longer afford
to pay. To hold otherwise would be to penalize the employer for his past generosity. Thus, in
Traders Royal Bank v. NLRC,[16] we held that
It is clear x x x that the petitioner may not be obliged to pay bonuses to its employees. The
matter of giving them bonuses over and above their lawful salaries and allowances is entirely
dependent on the profits, if any, realized by the Bank from its operations during the past year.
From 1979-1985, the bonuses were less because the income of the Bank had decreased. In 1986,
the income of the Bank was only 20.2 million pesos, but the Bank still gave out the usual two (2)
months basic mid-year and two months gross year-end bonuses. The petitioner pointed out,
however, that the Bank weakened considerably after 1986 on account of political developments
in the country. Suspected to be a Marcos-owned or controlled bank, it was placed under
sequestration by the present administration and is now managed by the Presidential Commission
on Good Government (PCGG).
In light of these submissions of the petitioner, the contention of the Union that the granting of
bonuses to the employees had ripened into a company practice that may not be adjusted to the
prevailing financial condition of the Bank has no legal and moral bases. Its fiscal condition
having declined, the Bank may not be forced to distribute bonuses which it can no longer afford
to pay and, in effect, be penalized for its past generosity to its employees.
Private respondents contention, that the decrease in the mid-year and year-end bonuses
constituted a diminution of the employees salaries, is not correct, for bonuses are not part of
labor standards in the same class as salaries, cost of living allowances, holiday pay, and leave
benefits, which are provided by the Labor Code.
This doctrine was reiterated in the more recent case of Manila Banking Corporation v.
NLRC[17] wherein the Court made the following pronouncements
By definition, a bonus is a gratuity or act of liberality of the giver which the recipient has no
right to demand as a matter of right. It is something given in addition to what is ordinarily
received by or strictly due the recipient. The granting of a bonus is basically a management
prerogative which cannot be forced upon the employer who may not be obliged to assume the
onerous burden of granting bonuses or other benefits aside from the employees basic salaries or
wages, especially so if it is incapable of doing so.
xxx xxx xxx
Clearly then, a bonus is an amount given ex gratia to an employee by an employer on account of
success in business or realization of profits. How then can an employer be made liable to pay

additional benefits in the nature of bonuses to its employees when it has been operating on
considerable net losses for a given period of time?
Records bear out that petitioner Manilabank was already in dire financial straits in the mid80s. As early as 1984, the Central Bank found that Manilabank had been suffering financial
losses. Presumably, the problems commenced even before their discovery in 1984. As earlier
chronicled, the Central Bank placed petitioner bank under comptrollership in 1984 because of
liquidity problems and excessive interbank borrowings. In 1987, it was placed under receivership
and ordered to close operation. In 1988, it was ordered liquidated.
It is evident, therefore, that petitioner bank was operating on net losses from the years 1984,
1985 and 1986, thus, resulting to its eventual closure in 1987 and liquidation in 1988. Clearly,
there was no success in business or realization of profits to speak of that would warrant the
conferment of additional benefits sought by private respondents. No company should be
compelled to act liberally and confer upon its employees additional benefits over and above
those mandated by law when it is plagued by economic difficulties and financial losses. No act
of enlightened generosity and self-interest can be exacted from near empty, if not empty coffers.
It was established by the labor arbiter[18] and the NLRC[19] and admitted by both
parties[20] that petitioner was placed under conservatorship by the Monetary Board, pursuant to
its authority under Section 28-A of Republic Act No. 265,[21] as amended by Presidential Decree
No. 72,[22] which provides
Sec. 28-A. Appointment of conservator. - Whenever, on the basis of a report submitted by the
appropriate supervising and examining department, the Monetary Board finds that a bank is in a
state of continuing inability or unwillingness to maintain a condition of solvency and liquidity
deemed adequate to protect the interest of depositors and creditors, the Monetary Board may
appoint a conservator to take charge of the assets, liabilities, and the management of that banking
institution, collect all monies and debts due said bank and exercise all powers necessary to
preserve the assets of the bank, reorganize the management thereof and restore its viability. He
shall have the power to overrule or revoke the actions of the previous management and board of
directors of the bank, any provision of law to the contrary notwithstanding, and such other
powers as the Monetary Board shall deem necessary.
xxx xxx xxx
Under Section 28-A, the Monetary Board may place a bank under the control of a
conservator when it finds that the bank is continuously unable or unwilling to maintain a
condition of solvency or liquidity. In Central Bank of the Philippines v. Court of Appeals,[23] the
Court declared that the order placing petitioner herein under conservatorship had long become
final and its validity could no longer be litigated upon. Also, in the same case, the Court found
that sometime in August, 1983, some news items triggered a bank-run in petitioner which
resulted in continuous over-drawings on petitioners demand deposit account with the Central
Bank; the over-drawings reached P143.955 million by 17 January 1984; and as of 13 February
1990, petitioner had over-drawings of up to P1.233 billion, which evidences petitioners
continuing inability to maintain a condition of solvency and liquidity, thus justifying the

conservatorship. Our findings in the Central Bank case coincide with petitioners claims that it
continuously suffered losses from 1984 to 1988 as follows YEAR NET LOSSES IN MILLIONS OF PESOS
1984 P 144.418
1985 P 144.940
1986 P 132.940
1987 P 84.182
January-February 1988 P 9.271
These losses do not include the interest expenses on the overdraft loan of the petitioner to the
Central Bank, which interest as of July 31, 1987, amounted to P610.065 Million, and penalties
on reserve deficiencies which amounted to P89.029 Million. The principal balance of the
overdraft amounted to P971.632 Million as of March 16, 1988.[24]
Petitioner was not only experiencing a decline in its profits, but was reeling from
tremendous losses triggered by a bank-run which began in 1983. In such a depressed financial
condition, petitioner cannot be legally compelled to continue paying the same amount of bonuses
to its employees. Thus, the conservator was justified in reducing the mid-year and Christmas
bonuses of petitioners employees. To hold otherwise would be to defeat the reason for the
conservatorship which is to preserve the assets and restore the viability of the financially
precarious bank. Ultimately, it is to the employees advantage that the conservatorship achieve its
purposes for the alternative would be petitioners closure whereby employees would lose not only
their benefits, but their jobs as well.
13th Month Pay
With regard to the 13th month pay, the NLRC adopted the position taken by private
respondent and held that the conservator was not justified in diminishing or not paying the
13th month pay and that petitioner should have instead applied for an exemption, in accordance
with section 7 of Presidential Decree No. 851 (PD 851), as amended by Presidential Decree No.
1364, but that it did not do so.[25] The NLRC held that the actions of the conservator ran counter
to the provisions of PD 851.
In its position paper,[26] private respondent claimed that petitioner made the following
payments to its members
YEAR MID-YEAR
BONUS
1984 1 month basic
1985 month basic
1986 month basic
1987 month basic

13th MONTH PAY CHRISTMAS BONUS

month basic
month basic
1 month basic
1 month basic

None
None
month basic
month basic

However, in its Memorandum[27] filed before this Court, private respondent revised its claims as
follows
YEAR MID-YEAR 13th MONTH PAY CHRISTMAS
BONUS
BONUS
1984 1 month basic None
month basic
1985 month basic None
month basic
1986 month basic month basic
1 month basic
1987 month basic month basic
1 month basic
1988 month basic month basic
1 month basic
Petitioner argues that it is not covered by PD 851 since the mid-year and Christmas bonuses it
has been giving its employees from 1984 to 1988 exceeds the basic salary for one month (except
for 1985 where a total of one month basic salary was given). Hence, this amount should be
applied towards the satisfaction of the 13th month pay, pursuant to Section 2 of PD 851.[28]
PD 851, which was issued by President Marcos on 16 December 1975, requires all
employers to pay their employees receiving a basic salary of not more than P1,000 a
month,[29] regardless of the nature of the employment, a 13th month pay, not later than December
24 of every year.[30] However, employers already paying their employees a 13th month pay or its
equivalent are not covered by the law. Under the Revised Guidelines on the Implementation of
the 13th-Month Pay Law,[31] the term equivalent shall be construed to include Christmas bonus,
mid-year bonus, cash bonuses and other payments amounting to not less than 1/12 of the basic
salary. The intention of the law was to grant some relief not to all workers but only to those not
actually paid a 13th month salary or what amounts to it, by whatever name called. It was not
envisioned that a double burden would be imposed on the employer already paying his
employees a 13th month pay or its equivalent whether out of pure generosity or on the basis of a
binding agreement. To impose upon an employer already giving his employees the equivalent of
a 13th month pay would be to penalize him for his liberality and in all probability, the employer
would react by withdrawing the bonuses or resist further voluntary grants for fear that if and
when a law is passed giving the same benefits, his prior concessions might not be given due
credit.[32]
In the case at bar, even assuming the truth of private respondents claims as contained in its
position paper or Memorandum regarding the payments received by its members in the form of
13th month pay, mid-year bonus and Christmas bonus, it is noted that, for each and every year
involved, the total amount given by petitioner would still exceed, or at least be equal to, one
month basic salary and thus, may be considered as an equivalent of the 13th month pay mandated
by PD 851. Thus, petitioner is justified in crediting the mid-year bonus and Christmas bonus as
part of the 13th month pay.
Wage Order No. 6
Wage Order No. 6, which came into effect on 1 November 1984, increased the statutory
minimum wage of workers, with different increases being specified for agricultural plantation
and non-agricultural workers. The bone of contention, however, involves Section 4 thereof
which reads All wage increase in wage and/or allowance granted by employers between June 17, 1984 and
the effectivity of this Order shall be credited as compliance with the minimum wage and

allowance adjustments prescribed herein provided that where the increases are less than the
applicable amount provided in this Order, the employer shall pay the difference. Such increases
shall not include anniversary wage increases provided in collective bargaining agreements unless
the agreement expressly provide otherwise.
On 16 November 1984, the parties entered into a collective bargaining agreement providing
for the following salary adjustments
Article VIII. Section 1. Salary Adjustments. Cognizant of the effects of, among others, price
increases of oil and other commodities on the employees wages and earnings, and the certainty
of continued governmental or statutory actions adjusting employees minimum wages, earnings,
allowances, bonuses and other fringe benefits, the parties have formulated and agreed on the
following highly substantial packaged increases in salary and allowance which take into account
and cover (a) any deflation in income of employees because of such price increases and inflation
and (b) the expected governmental response thereto in the form of statutory adjustments in
wages, allowances and benefits, during the next three (3) years of this Agreement:
(i) Effective March 1, 1984 P225.00 per month as salary increase plus P100.00 per month as
increase in allowance to employees within the bargaining unit on March 1, 1984.
(ii) Effective March 1, 1985 P125.00 per month as salary increase plus P100.00 per month as
increase in allowance to employees within the bargaining unit on March 1, 1985.
(iii) Effective March 1, 1986 P125.00 per month as salary increase plus P100.00 per month as
increase in allowance to employees within the bargaining unit on March 1, 1986.
In addition, the collective bargaining agreement of the parties also included a provision on
the chargeability of such salary or allowance increases against government-ordered or legislated
income adjustments
Section 2. Pursuant to the MOLE Decision dated October 2, 1984 and Order dated October 24,
1984, the first-year salary and allowance increases shall be chargeable against adjustments under
Wage Order No. 5, which took effect on June 16, 1984. The chargeability of the foregoing salary
increases against government-ordered or legislated income adjustments subsequent to Wage
Order No. 5 shall be determined on the basis of the provisions of such government orders or
legislation.
Petitioner argues that it complied with Wage Order No. 6 because the first year salary and
allowance increase provided for under the collective bargaining agreement can be credited
against the wage and allowance increase mandated by such wage order. Under Wage Order No.
6, all increases in wages or allowances granted by the employer between 17 June 1984 and 1
November 1984 shall be credited as compliance with the wage and allowance adjustments
prescribed therein. Petitioner asserts that although the collective bargaining agreement was
signed by the parties on 16 November 1984, the first year salary and allowance increase was
made to take effect retroactively, beginning from 1 March 1984 until 28 February
1985. Petitioner maintains that this period encompasses the period of creditability provided for

under Wage Order No. 6 and that, therefore, the balance remaining after applying the first year
salary and allowance increase in the collective bargaining agreement to the increase mandated by
Wage Order No. 5, in the amount of P125.00, should be made chargeable against the increase
prescribed by Wage Order No. 6, and if not sufficient, petitioner is willing to pay the
difference.[33]
On the other hand, private respondent contends that the first year salary and allowance
increases under the collective bargaining agreement cannot be applied towards the satisfaction of
the increases prescribed by Wage Order No. 6 because the former were not granted within the
period of creditability provided for in such wage order. According to private respondent, the
significant dates with regard to the granting of the first year increases are 9 November 1984 the
date of issuance of the MOLE Resolution, 16 November 1984 the date when the collective
bargaining agreement was signed by the parties and 1 March 1984 the retroactive date of
effectivity of the first year increases.Private respondent points out that none of these dates fall
within the period of creditability under Wage Order No. 6 which is from 17 June 1984 to 1
November 1984. Thus, petitioner has not complied with Wage Order No. 6.[34]
The creditability provision in Wage Order No. 6 is based on important public policy, that is,
the encouragement of employers to grant wage and allowance increases to their employees
higher than the minimum rates of increases prescribed by statute or administrative
regulation. Thus, we held in Apex Mining Company, Inc. v. NLRC[35] that
[t]o obliterate the creditability provisions in the Wage Orders through interpretation or
otherwise, and to compel employers simply to add on legislated increases in salaries or
allowances without regard to what is already being paid, would be to penalize employers
who grant their workers more than the statutorily prescribed minimum rates of increases.
Clearly, this would be counter-productive so far as securing the interest of labor is
concerned. The creditability provisions in the Wage Orders prevent the penalizing of
employers who are industry leaders and who do not wait for statutorily prescribed increases
in salary or allowances and pay their workers more than what the law or regulations require.
Section 1 of Article VIII of the collective bargaining agreement of the parties states that the
parties have formulated and agreed on the following highly substantial packaged increases in
salary and allowance which take into account and cover (a) any deflation in income of
employees because of such price increases and inflation and (b) the expected governmental
response thereto in the form of statutory adjustments in wages, allowances and benefits, during
the next three (3) years of this Agreement The unequivocal wording of this provision manifests
the clear intent of the parties to apply the wage and allowance increases stipulated in the
collective bargaining agreement to any statutory wage and allowance adjustments issued during
the effectivity of such agreement - from 1 March 1984 to 28 February 1987. Furthermore,
contrary to private respondents contentions, there is nothing in the wording of Section 2 of
Article VIII of the collective bargaining agreement that would prevent petitioner from crediting
the first year salary and allowance increases against the increases prescribed by Wage Order No.
6.
It would be inconsistent with the abovestated rationale underlying the creditability provision
of Wage Order No. 6 if, after applying the first year increase to Wage Order No. 5, the balance
was not made chargeable to the increases under Wage Order No. 6 for the fact remains that

petitioner actually granted wage and allowance increases sufficient to cover the increases
mandated by Wage Order No. 5 and part of the increases mandated by Wage Order No. 6.
Holiday Pay
Article 94 of the Labor Code provides that every worker shall be paid his regular daily wage
during regular holidays[36] and that the employer may require an employee to work on any
holiday but such employee shall be paid a compensation equivalent to twice his regular rate. In
this case, the Labor Arbiter found that the divisor used by petitioner in arriving at the employees
daily rate for the purpose of computing salary-related benefits is 314.[37] This finding was not
disputed by the NLRC.[38] However, the divisor was reduced to 303 by virtue of an inter-office
memorandum issued on 13 August 1986, to wit To increase the rate of overtime pay for rank and filers, we are pleased to inform that effective
August 18, 1986, the acting Conservator approved the use of 303 days as divisor in the
computation of Overtime pay. The present Policy of 314 days as divisor used in the computation
for cash conversion and determination of daily rate, among others, still remain, Saturdays,
therefore, are still considered paid rest days.
Corollarily, the Acting Convservator also approved the increase of meal allowance from P25.00
to P30.00 for a minimum of four (4) hours of work for Saturdays.
Proceeding from the unambiguous terms of the above quoted memorandum, the Labor
Arbiter observed that the reduction of the divisor to 303 was for the sole purpose of increasing
the employees overtime pay and was not meant to replace the use of 314 as the divisor in the
computation of the daily rate for salary-related benefits.[39]
Private respondent admits that, prior to 18 August 1986, petitioner used a divisor of 314 in
arriving at the daily wage rate of monthly-salaried employees. Private respondent also concedes
that the divisor was changed to 303 for purposes of computing overtime pay only. In its
Memorandum, private respondent states that
49. The facts germane to this issue are not debatable. The Memorandum Circular issued by the
Acting Conservator is clear. Prior to August 18, 1986, the petitioner bank used a divisor of 314
days in arriving at the daily wage rate of the monthly-salaried employees. Effective August 18,
1986, this was changed. It adopted the following formula:
Basic salary x 12 months = Daily Wage Rate
303 days
50. By utilizing this formula even up to the present, the conclusion is inescapable that the
petitioner bank is not actually paying its employees the regular holiday pay mandated by
law. Consequently, it is bound to pay the salary differential of its employees effective November
1, 1974 up to the present.
xxx xxx xxx

54. Since it is a question of fact, the Inter-office Memorandum dated August 13, 1986 (Annex E)
provides for a divisor of 303 days in computing overtime pay. The clear import of this document
is that from the 365 days in a year, we deduct 52 rest days which gives a total of 313 days. Now,
if 313 days is the number of working days of the employees then, there is a disputable
presumption that the employees are paid their holiday pay. However, this is not so in the case at
bar. The bank uses 303 days as its divisor. Hence, it is not paying its employees their
corresponding holiday pay.[40]
In Union of Filipro Employees v. Vivar, Jr.[41] the Court held that [t]he divisor assumes an
important role in determining whether or not holiday pay is already included in the monthly paid
employees salary and in the computation of his daily rate. This was also our ruling in Chartered
Bank Employees Association v. Ople,[42] as follows
It is argued that even without the presumption found in the rules and in the policy instruction, the
company practice indicates that the monthly salaries of the employees are so computed as to
include the holiday pay provided by law.The petitioner contends otherwise.
One strong argument in favor of the petitioners stand is the fact that the Chartered Bank, in
computing overtime compensation for its employees, employs a divisor of 251 days. The 251
working days divisor is the result of subtracting all Saturdays, Sundays and the ten (10) legal
holidays form the total number of calendar days in a year. If the employees are already paid for
all non-working days, the divisor should be 365 and not 251.
Apparently, the divisor of 314 is arrived at by subtracting all Sundays from the total number
of calendar days in a year, since Saturdays are considered paid rest days, as stated in the interoffice memorandum. Thus, the use of 314 as a divisor leads to the inevitable conclusion that the
ten legal holidays are already included therein.
We agree with the labor arbiter that the reduction of the divisor to 303 was done for the sole
purpose of increasing the employees overtime pay, and was not meant to exclude holiday pay
from the monthly salary of petitioners employees. In fact, it was expressly stated in the interoffice memorandum - also referred to by private respondent in its pleadings - that the divisor of
314 will still be used in the computation for cash conversion and in the determination of the daily
rate. Thus, based on the records of this case and the parties own admissions, the Court holds that
petitioner has complied with the requirements of Article 94 of the Labor Code.
Damages
As to private respondents claim for damages, the NLRC was correct in ruling that there is no
basis to support the same.
WHEREFORE, for the reasons above stated, the 30 April 1991 Decision of public
respondent in NLRC-NCR Case No. 02-00753-88, entitled Producers Bank Employees
Association v. Producers Bank of the Philippines, and its 18 June 1991 Resolution issued in the
same case are hereby SET ASIDE, with the exception of public respondents ruling on damages.
SO ORDERED.

LEYTE IV ELECTRIC
COOPERATIVE, INC.,
Petitioner,

- versus -

G.R. No. 157775

Present:
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

LEYECO IV Employees UnionPromulgated:

ALU,
*
Respondent.
October 19, 2007
x------------------------------------------------x

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court assailing the Resolution[1] dated September 4, 2002 of the Court of Appeals (CA) in CAG.R. SP No. 72336 which dismissed outright petitioner's Petition for Certiorari for adopting a
wrong mode of appeal and the CA Resolution[2] dated February 28, 2003 which denied
petitioner's Motion for Reconsideration.
The facts:
On April 6, 1998, Leyte IV Electric Cooperative, Inc. (petitioner) and Leyeco IV
Employees Union-ALU (respondent) entered into a Collective Bargaining Agreement
(CBA)[3] covering petitioner rank-and-file employees, for a period of five (5) years
effective January 1, 1998.
On June 7, 2000, respondent, through its Regional Vice-President, Vicente P. Casilan,
sent a letter to petitioner demanding holiday pay for all employees, as provided for in the CBA.[4]
On June 20, 2000, petitioner, through its legal counsel, sent a letter-reply to Casilan,
explaining that after perusing all available pay slips, it found that it had paid all employees all the
holiday pays enumerated in the CBA.[5]

After exhausting the procedures of the grievance machinery, the parties agreed to submit
the issues of the interpretation and implementation of Section 2, Article VIII of the CBA on the
payment of holiday pay, for arbitration of the National Conciliation and Mediation Board
(NCMB), Regional Office No. VIII in Tacloban City.[6] The parties were required to submit their
respective position papers, after which the dispute was submitted for decision.
While admitting in its Position Paper[7] that the employees were paid all of the days of the
month even if there was no work, respondent alleged that it is not prevented from making
separate demands for the payment of regular holidays concomitant with the provisions of the
CBA, with its supporting documents consisting of a letter demanding payment of holiday pay,
petitioner's reply thereto and respondent's rejoinder, a computation in the amount
of P1,054,393.07 for the unpaid legal holidays, and several pay slips.
Petitioner, on the other hand, in its Position Paper,[8] insisted payment of the holiday pay
in compliance with the CBA provisions, stating that payment was presumed since the formula
used in determining the daily rate of pay of the covered employees is Basic Monthly Salary
divided by 30 days or Basic Monthly Salary multiplied by 12 divided by 360 days, thus with said
formula, the employees are already paid their regular and special days, the days when no work is
done, the 51 un-worked Sundays and the 51 un-worked Saturdays.
On March 1, 2001, Voluntary Arbitrator Antonio C. Lopez, Jr. rendered a Decision[9] in
favor of respondent, holding petitioner liable for payment of unpaid holidays from 1998 to 2000
in the sum of P1,054,393.07. He reasoned that petitioner miserably failed to show that it
complied with the CBA mandate that holiday pay be reflected during any payroll period of
occurrence since the payroll slips did not reflect any payment of the paid holidays. He found
unacceptable not only petitioner's presumption of payment of holiday pay based on a formula
used in determining and computing the daily rate of each covered employee, but also petitioner's
further submission that the rate of its employees is not less than the statutory minimum wage
multiplied by 365 days and divided by twelve.
On April 11, 2001, petitioner filed a Motion for Reconsideration[10] but it was denied by
the Voluntary Arbitrator in a Resolution[11] dated June 17, 2002. Petitioner received said
Resolution on June 27, 2002.[12]
Thirty days later, or on July 27, 2002,[13] petitioner filed a Petition for Certiorari[14] in the
CA, ascribing grave abuse of discretion amounting to lack of jurisdiction to the Voluntary

Arbitrator: (a) for ignoring that in said company the divisor for computing the applicable daily
rate of rank-and-file employees is 360 days which already includes payment of 13 un-worked
regular holidays under Section 2, Article VIII of the CBA;[15] and (b) for holding the petitioner
liable for the unpaid holidays just because the payroll slips submitted as evidence did not show
any payment for the regular holidays.[16]
In a Resolution[17] dated September 4, 2002, the CA dismissed outright petitioner's
Petition for Certiorari for adopting a wrong mode of appeal. It reasoned:
Considering that what is assailed in the present recourse is a Decision of a
Voluntary Arbitrator, the proper remedy is a petition for review under Rule 43 of
the 1997 Rules of Civil Procedure; hence, the present petition for certiorari under
Rule 65 filed on August 15, 2002, should be rejected, as such a petition cannot be
a substitute for a lost appeal. And in this case, the period for appeal via a petition
for review has already lapsed since the petitioner received a copy of the
Resolution denying its motion for reconsideration on June 27, 2002, so that its last
day to appeal lapsed on July 12, 2002.
x x x x[18]
Petitioner filed a Motion for Reconsideration[19] but it was denied by the CA in a
Resolution[20] dated February 28, 2003.
Hence, the present petition anchored on the following grounds:
(1) The Honorable Court of Appeals erred in rejecting the petition for certiorari
under Rule 65 of the Rules of Court filed by herein petitioner to assail the
Decision of the Voluntary Arbitrator.[21]
(2) Even if decisions of voluntary arbitrator or panel of voluntary arbitrators
are appealable to the Honorable Court of Appeals under Rule 43, a petition
for certiorari under Rule 65 is still available if it is grounded on grave abuse
of discretion. Hence, the Honorable Court of Appeals erred in rejecting the
petition for certiorari under Rule 65 of the Rules of Court filed by herein
petitioner.[22]
(3) The Honorable Court of Appeals erred in refusing to rule on the legal issue
presented by herein petitioner in the petition for certiorari that it had filed and
in putting emphasis instead on a technicality of procedure.The legal issues
needs a clear-cut ruling by this Honorable Court for the guidance of herein
petitioner and private respondent.[23]

Petitioner contends that Rule 65 of the Rules of Court is the applicable mode of appeal to
the CA from judgments issued by a voluntary arbitrator since Rule 43 only allows appeal from
judgments of particular quasi-judicial agencies and voluntary arbitrators authorized by law and
not those judgments and orders issued under the Labor Code; that the petition before the CA did
not raise issues of fact but was founded on jurisdictional issues and,
therefore, reviewable through a special civil action for certiorari under Rule 65; that
technicalities of law and procedure should not be utilized to subvert the ends of substantial
justice.
In its Comment,[24] respondent avers that Luzon Development Bank v. Association of
Luzon Development Bank Employees[25] laid down the prevailing rule that judgments of the
Voluntary Arbitrator are appealable to the CA under Section 1, Rule 43 of the Rules of Court;
that having failed to file the appropriate remedy due to the lapse of the appeal period, petitioner
cannot simply invoke Rule 65 for its own convenience, as an alternative remedy.
In its Reply,[26] petitioner submits that the ruling in Luzon Development Bank does not
expressly exclude the filing of a petition for certiorari under Rule 65 of the Rules of Court to
assail a decision of a voluntary arbitrator. It reiterates that technicalities of law and procedure
should not be utilized to subvert the ends of substantial justice.
It has long been settled in the landmark case Luzon Development Bank that a voluntary arbitrator,
whether acting solely or in a panel, enjoys in law the status of a quasi-judicial agency; hence, his
decisions and awards are appealable to the CA. This is so because the awards of voluntary
arbitrators become final and executory upon the lapse of the period to appeal;[27] and since their
awards determine the rights of parties, their decisions have the same effect as judgments of a
court. Therefore, the proper remedy from an award of a voluntary arbitrator is a petition for
review to the CA, following Revised Administrative Circular No. 1-95, which provided for a
uniform procedure for appellate review of all adjudications of quasi-judicial entities, which is
now embodied in Section 1, Rule 43 of the 1997 Rules of Civil Procedure, which reads:
SECTION 1. Scope. This Rule shall apply to appeals from judgments or
final orders of the Court of Tax Appeals and from awards, judgments, final orders
or resolutions of or authorized by any quasi-judicial agency in the exercise of its
quasi-judicial functions. Among these agencies are the Civil Service Commission,
Central Board of Assessment Appeals, Securities and Exchange Commission,
Office of the President, Land Registration Authority, Social Security
Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and

Technology Transfer, National Electrification Administration, Energy Regulatory

Board, National Telecommunications Commission, Department of Agrarian
Reform under Republic Act No. 6657, Government Service Insurance System,
Employees Compensation Commission, Agricultural Inventions Board, Insurance
Commission, Philippine Atomic Energy Commission, Board of Investments,
Construction
Industry
Arbitration
Commission,
and voluntary
[28]
arbitrators authorized by law. (Emphasis supplied)
Section 2, Rule 43 of the 1997 Rules of Civil Procedure which provides that:
SEC. 2. Cases not covered. - This Rule shall not apply to judgments or
final orders issued under the Labor Code of the Philippines.
did not alter the Court's ruling in Luzon Development Bank. Section 2, Rule 42 of the 1997 Rules
of Civil Procedure, is nothing more than a reiteration of the exception to the exclusive appellate
jurisdiction of the CA,[29] as provided for in Section 9, Batas Pambansa Blg. 129,[30] as amended
by Republic Act No. 7902:[31]
(3) Exclusive appellate jurisdiction over all final judgments, decisions,
resolutions, orders or awards of Regional Trial Courts and quasi-judicial agencies,
instrumentalities, boards or commissions, including the Securities and Exchange
Commission, the Employees Compensation Commission and the Civil Service
Commission, except those falling within the appellate jurisdiction of the
Supreme Court in accordance with the Constitution, the Labor Code of the
Philippines under Presidential Decree No. 442, as amended, the provisions of
this Act and of subparagraph (1) of the third paragraph and subparagraph (4) of
the fourth paragraph of Section 17 of the Judiciary Act of 1948.

The Court took into account this exception in Luzon Development Bank but, nevertheless,
held that the decisions of voluntary arbitrators issued pursuant to the Labor Code do not come
within its ambit, thus:
x x x. The fact that [the voluntary arbitrators] functions and powers are
provided for in the Labor Code does not place him within the exceptions to said
Sec. 9 since he is a quasi-judicial instrumentality as contemplated therein. It will
be noted that, although the Employees Compensation Commission is also
provided for in the Labor Code, Circular No. 1-91, which is the forerunner of the
present Revised Administrative Circular No. 1-95, laid down the procedure for
the appealability of its decisions to the Court of Appeals under the foregoing
rationalization, and this was later adopted by Republic Act No. 7902 in amending
Sec. 9 of B.P. 129.
A fortiori, the decision or award of the voluntary arbitrator or panel of
arbitrators should likewise be appealable to the Court of Appeals, in line with the

procedure outlined in Revised Administrative Circular No. 1-95, just like those of
the quasi-judicial agencies, boards and commissions enumerated therein.
This would be in furtherance of, and consistent with, the original purpose
of Circular No. 1-91 to provide a uniform procedure for the appellate review of
adjudications of all quasi-judicial entities not expresslyexcepted from the
coverage of Sec. 9 of B.P. 129 by either the Constitution or another statute. Nor
will it run counter to the legislative intendment that decisions of the
NLRC be reviewable directly by the Supreme Court since, precisely, the cases
within the adjudicative competence of the voluntary arbitrator are excluded from
the jurisdiction of the NLRC or the labor arbiter.[32]
This ruling has been repeatedly reiterated in subsequent cases[33] and continues to be the
controlling doctrine. Thus, the general rule is that the proper remedy from decisions of voluntary
arbitrators is a petition for review under Rule 43 of the Rules of Court.
Nonetheless, a special civil action for certiorari under Rule 65 of the Rules of Court is
the proper remedy for one who complains that the tribunal, board or officer exercising judicial or
quasi-judicial functions acted in total disregard of evidence material to or decisive of the
controversy.[34] As this Court elucidated in Garcia v. National Labor Relations Commission[35] [I]n Ong v. People, we ruled that certiorari can be properly resorted
to where the factual findings complained of are not supported by the
evidence on record. Earlier, in Gutib v. Court of Appeals, we emphasized thus:
[I]t has been said that a wide breadth of discretion is
granted a court of justice in certiorari proceedings. The cases in
which certiorari will issue cannot be defined, because to do so
would be to destroy its comprehensiveness and usefulness. So wide
is the discretion of the court that authority is not wanting to show
that certiorari is more discretionary than either prohibition or
mandamus. In the exercise of our superintending control over
inferior courts, we are to be guided by all the circumstances of
each particular case as the ends of justice may require. So it is that
the writ will be granted where necessary to prevent a
substantial wrong or to do substantial justice. [36]
In addition, while the settled rule is that an independent action for certiorari may be
availed of only when there is no appeal or any plain, speedy and adequate remedy in the ordinary
course of law[37] and certiorari is not a substitute for the lapsed remedy of appeal,[38] there are a
few significant exceptions when the extraordinary remedy of certiorari may be resorted to

despite the availability of an appeal, namely: (a) when public welfare and the advancement of
public policy dictate; (b) when the broader interests of justice so require; (c) when the writs
issued are null; and (d) when the questioned order amounts to an oppressive exercise of judicial
authority.[39]
In this case, while the petition was filed on July 27, 2002,[40] 15 days after July 12, 2002,
the expiration of the 15-day reglementary period for filing an appeal under Rule 43, the broader
interests of justice warrant relaxation of the rules on procedure. Besides, petitioner alleges that
the Voluntary Arbitrators conclusions have no basis in fact and in law; hence, the petition should
not be dismissed on procedural grounds.
The Voluntary Arbitrator gravely abused its discretion in giving a strict or literal
interpretation of the CBA provisions that the holiday pay be reflected in the payroll slips. Such
literalinterpretation ignores the admission of respondent in its Position Paper[41] that the
employees were paid all the days of the month even if not worked. In light of such admission,
petitioner's submission of its 360 divisor in the computation of employees salaries gains
significance.
In Union of Filipro Employees v. Vivar, Jr.[42] the Court held that [t]he divisor assumes
an important role in determining whether or not holiday pay is already included in the monthly
paid employees salary and in the computation of his daily rate. This ruling was applied
in Wellington Investment and Manufacturing Corporation v. Trajano,[43] Producers Bank of
the Philippines v. National Labor Relations Commission[44] and Odango v. National Labor
Relations Commission,[45] among others.[46]
In Wellington,[47] the monthly salary was fixed by Wellington to provide for
compensation for every working day of the year including the holidays specified by law and
excluding only Sundays. In fixing the salary, Wellington used what it called the 314 factor; that
is, it simply deducted 51 Sundays from the 365 days normally comprising a year and used the
difference, 314, as basis for determining the monthly salary. The monthly salary thus fixed
actually covered payment for 314 days of the year, including regular and special holidays, as
well as days when no work was done by reason of fortuitous cause, such as transportation strike,
riot, or typhoon or other natural calamity, or cause not attributable to the employees.
In Producers Bank,[48] the employer used the divisor 314 in arriving at the daily wage rate
of monthly salaried employees. The divisor 314 was arrived at by subtracting all Sundays from

the total number of calendar days in a year, since Saturdays are considered paid rest days. The
Court held that the use of 314 as a divisor leads to the inevitable conclusion that the ten legal
holidays are already included therein.
In Odango v. National Labor Relations Commission,[49] the Court ruled that the use of a
divisor that was less than 365 days cannot make the employer automatically liable for
underpayment of holiday pay. In said case, the employees were required to work only from
Monday to Friday and half of Saturday. Thus, the minimum allowable divisor is 287, which is
the result of 365 days, less 52 Sundays and less 26 Saturdays (or 52 half Saturdays). Any divisor
below 287 days meant that the employees were deprived of their holiday pay for some or all of
the ten legal holidays. The 304-day divisor used by the employer was clearly above the minimum
of 287 days.
In this case, the employees are required to work only from Monday to Friday. Thus, the
minimum allowable divisor is 263, which is arrived at by deducting 51 un-worked Sundays and
51 un-worked Saturdays from 365 days. Considering that petitioner used the 360-day divisor,
which is clearly above the minimum, indubitably, petitioner's employees are being given their
holiday pay.
Thus, the Voluntary Arbitrator should not have simply brushed aside petitioner's divisor
formula. In granting respondent's claim of non-payment of holiday pay, a double burden was
imposed upon petitioner because it was being made to pay twice for its employees' holiday pay
when payment thereof had already been included in the computation of their monthly
salaries. Moreover, it is absurd to grant respondent's claim of non-payment when they in fact
admitted that they were being paid all of the days of the month even if not worked. By granting
respondent's claim, the Voluntary Arbitrator sanctioned unjust enrichment in favor of the
respondent and caused unjust financial burden to the petitioner. Obviously, the Court cannot
allow this.
While the Constitution is committed to the policy of social justice[50] and the protection of
the working class,[51] it should not be supposed that every labor dispute would automatically be
decided in favor of labor. Management also has it own rights which, as such, are entitled to
respect and enforcement in the interest of simple fair play. Out of concern for those with less
privileges in life, this Court has inclined more often than not toward the worker and upheld his
cause in his conflicts with the employer. Such favoritism, however, has not blinded us to the rule

that justice is in every case for the deserving, to be dispensed in the light of the established facts
and the applicable law and doctrine.[52]
WHEREFORE, the petition for review is GRANTED. The Resolutions dated September 4,
2002 and February 28, 2003 of the Court of Appeals in CA-G.R. SP No. 72336 are REVERSED
and SET ASIDE. The Decision dated March 1, 2001 and Resolution dated June 17, 2002 of the
Voluntary Arbitrator are declared NULL and VOID.
SO ORDERED.

G.R. No. L-65482 December 1, 1987

JOSE
RIZAL
COLLEGE, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND NATIONAL ALLIANCE OF
TEACHERS/OFFICE WORKERS, respondents.

PARAS, J.:
This is a petition for certiorari with prayer for the issuance of a writ of preliminary injunction,
seeking the annulment of the decision of the National Labor Relations Commission * in NLRC
Case No. RB-IV 23037-78 (Case No. R4-1-1081-71) entitled "National Alliance of Teachers and
Office Workers and Juan E. Estacio, Jaime Medina, et al. vs. Jose Rizal College" modifying the
decision of the Labor Arbiter as follows:
WHEREFORE, in view of the foregoing considerations, the decision appealed
from is MODIFIED, in the sense that teaching personnel paid by the hour are
hereby declared to be entitled to holiday pay.
SO ORDERED.
The factual background of this case which is undisputed is as follows:
Petitioner is a non-stock, non-profit educational institution duly organized and existing under the
laws of the Philippines. It has three groups of employees categorized as follows: (a) personnel on
monthly basis, who receive their monthly salary uniformly throughout the year, irrespective of
the actual number of working days in a month without deduction for holidays; (b) personnel on
daily basis who are paid on actual days worked and they receive unworked holiday pay and (c)
collegiate faculty who are paid on the basis of student contract hour. Before the start of the
semester they sign contracts with the college undertaking to meet their classes as per schedule.
Unable to receive their corresponding holiday pay, as claimed, from 1975 to 1977, private
respondent National Alliance of Teachers and Office Workers (NATOW) in behalf of the faculty
and personnel of Jose Rizal College filed with the Ministry of Labor a complaint against the
college for said alleged non-payment of holiday pay, docketed as Case No. R04-10-81-72. Due
to the failure of the parties to settle their differences on conciliation, the case was certified for
compulsory arbitration where it was docketed as RB-IV-23037-78 (Rollo, pp. 155-156).
After the parties had submitted their respective position papers, the Labor Arbiter ** rendered a
decision on February 5, 1979, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered as follows:

1. The faculty and personnel of the respondent Jose Rizal College who are paid
their salary by the month uniformly in a school year, irrespective of the number of
working days in a month, without deduction for holidays, are presumed to be
already paid the 10 paid legal holidays and are no longer entitled to separate
payment for the said regular holidays;
2. The personnel of the respondent Jose Rizal College who are paid their wages
daily are entitled to be paid the 10 unworked regular holidays according to the
pertinent provisions of the Rules and Regulations Implementing the Labor Code;
3. Collegiate faculty of the respondent Jose Rizal College who by contract are
paid compensation per student contract hour are not entitled to unworked regular
holiday pay considering that these regular holidays have been excluded in the
programming of the student contact hours. (Rollo. pp. 26-27)
On appeal, respondent National Labor Relations Commission in a decision promulgated on June
2, 1982, modified the decision appealed from, in the sense that teaching personnel paid by the
hour are declared to be entitled to holiday pay (Rollo. p. 33).
Hence, this petition.
The sole issue in this case is whether or not the school faculty who according to their contracts
are paid per lecture hour are entitled to unworked holiday pay.
Labor Arbiter Julio Andres, Jr. found that faculty and personnel employed by petitioner who are
paid their salaries monthly, are uniformly paid throughout the school year regardless of working
days, hence their holiday pay are included therein while the daily paid employees are
renumerated for work performed during holidays per affidavit of petitioner's treasurer (Rollo, pp.
72-73).
There appears to be no problem therefore as to the first two classes or categories of petitioner's
workers.
The problem, however, lies with its faculty members, who are paid on an hourly basis, for while
the Labor Arbiter sustains the view that said instructors and professors are not entitled to holiday
pay, his decision was modified by the National Labor Relations Commission holding the
contrary. Otherwise stated, on appeal the NLRC ruled that teaching personnel paid by the hour
are declared to be entitled to holiday pay.
Petitioner maintains the position among others, that it is not covered by Book V of the Labor
Code on Labor Relations considering that it is a non- profit institution and that its hourly paid
faculty members are paid on a "contract" basis because they are required to hold classes for a
particular number of hours. In the programming of these student contract hours, legal holidays
are excluded and labelled in the schedule as "no class day. " On the other hand, if a regular week
day is declared a holiday, the school calendar is extended to compensate for that day. Thus
petitioner argues that the advent of any of the legal holidays within the semester will not affect

the faculty's salary because this day is not included in their schedule while the calendar is
extended to compensate for special holidays. Thus the programmed number of lecture hours is
not diminished (Rollo, pp. 157- 158).
The Solicitor General on the other hand, argues that under Article 94 of the Labor Code (P.D.
No. 442 as amended), holiday pay applies to all employees except those in retail and service
establishments. To deprive therefore employees paid at an hourly rate of unworked holiday pay
is contrary to the policy considerations underlying such presidential enactment, and its precursor,
the Blue Sunday Law (Republic Act No. 946) apart from the constitutional mandate to grant
greater rights to labor (Constitution, Article II, Section 9). (Reno, pp. 76-77).
In addition, respondent National Labor Relations Commission in its decision promulgated on
June 2, 1982, ruled that the purpose of a holiday pay is obvious; that is to prevent diminution of
the monthly income of the workers on account of work interruptions. In other words, although
the worker is forced to take a rest, he earns what he should earn. That is his holiday pay. It is no
excuse therefore that the school calendar is extended whenever holidays occur, because such
happens only in cases of special holidays (Rollo, p. 32).
Subject holiday pay is provided for in the Labor Code (Presidential Decree No. 442, as
amended), which reads:
Art. 94. Right to holiday pay (a) Every worker shall be paid his regular daily
wage during regular holidays, except in retail and service establishments regularly
employing less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but such
employee shall be paid a compensation equivalent to twice his regular rate; ... "
and in the Implementing Rules and Regulations, Rule IV, Book III, which reads:
SEC. 8. Holiday pay of certain employees. (a) Private school teachers,
including faculty members of colleges and universities, may not be paid for the
regular holidays during semestral vacations. They shall, however, be paid for the
regular holidays during Christmas vacations. ...
Under the foregoing provisions, apparently, the petitioner, although a non-profit institution is
under obligation to give pay even on unworked regular holidays to hourly paid faculty members
subject to the terms and conditions provided for therein.
We believe that the aforementioned implementing rule is not justified by the provisions of the
law which after all is silent with respect to faculty members paid by the hour who because of
their teaching contracts are obliged to work and consent to be paid only for work actually done
(except when an emergency or a fortuitous event or a national need calls for the declaration of
special holidays). Regular holidays specified as such by law are known to both school and
faculty members as no class days;" certainly the latter do not expect payment for said unworked
days, and this was clearly in their minds when they entered into the teaching contracts.

On the other hand, both the law and the Implementing Rules governing holiday pay are silent as
to payment on Special Public Holidays.
It is readily apparent that the declared purpose of the holiday pay which is the prevention of
diminution of the monthly income of the employees on account of work interruptions is defeated
when a regular class day is cancelled on account of a special public holiday and class hours are
held on another working day to make up for time lost in the school calendar. Otherwise stated,
the faculty member, although forced to take a rest, does not earn what he should earn on that day.
Be it noted that when a special public holiday is declared, the faculty member paid by the hour is
deprived of expected income, and it does not matter that the school calendar is extended in view
of the days or hours lost, for their income that could be earned from other sources is lost during
the extended days. Similarly, when classes are called off or shortened on account of typhoons,
floods, rallies, and the like, these faculty members must likewise be paid, whether or not
extensions are ordered.
Petitioner alleges that it was deprived of due process as it was not notified of the appeal made to
the NLRC against the decision of the labor arbiter.
The Court has already set forth what is now known as the "cardinal primary" requirements of due
process in administrative proceedings, to wit: "(1) the right to a hearing which includes the right
to present one's case and submit evidence in support thereof; (2) the tribunal must consider the
evidence presented; (3) the decision must have something to support itself; (4) the evidence must
be substantial, and substantial evidence means such evidence as a reasonable mind might accept
as adequate to support a conclusion; (5) the decision must be based on the evidence presented at
the hearing, or at least contained in the record and disclosed to the parties affected; (6) the
tribunal or body of any of its judges must act on its or his own independent consideration of the
law and facts of the controversy, and not simply accept the views of a subordinate; (7) the board
or body should in all controversial questions, render its decisions in such manner that the parties
to the proceeding can know the various issues involved, and the reason for the decision rendered.
" (Doruelo vs. Commission on Elections, 133 SCRA 382 [1984]).
The records show petitioner JRC was amply heard and represented in the instant proceedings. It
submitted its position paper before the Labor Arbiter and the NLRC and even filed a motion for
reconsideration of the decision of the latter, as well as an "Urgent Motion for Hearing En Banc"
(Rollo, p. 175). Thus, petitioner's claim of lack of due process is unfounded.
PREMISES CONSIDERED, the decision of respondent National Labor Relations Commission is
hereby set aside, and a new one is hereby RENDERED:
(a) exempting petitioner from paying hourly paid faculty members their pay for regular holidays,
whether the same be during the regular semesters of the school year or during semestral,
Christmas, or Holy Week vacations;
(b) but ordering petitioner to pay said faculty members their regular hourly rate on days declared
as special holidays or for some reason classes are called off or shortened for the hours they are
supposed to have taught, whether extensions of class days be ordered or not; in case of

extensions said faculty members shall likewise be paid their hourly rates should they teach
during said extensions.
SO ORDERED.

G.R. No. L-44717 August 28, 1985

THE
CHARTERED
BANK
EMPLOYEES
ASSOCIATION, petitioner,
vs.
HON. BLAS F. OPLE, in his capacity as the Incumbent Secretary of Labor, and THE
CHARTERED BANK,respondents.

GUTIERREZ, JR., J.:

This is a petition for certiorari seeking to annul the decision of the respondent Secretary, now
Minister of Labor which denied the petitioner's claim for holiday pay and its claim for premium
and overtime pay differentials. The petitioner claims that the respondent Minister of Labor acted
contrary to law and jurisprudence and with grave abuse of discretion in promulgating Sec. 2,
Rule IV, Book III of the Integrated Rules and in issuing Policy Instruction No. 9, both referring
to holidays with pay.
On May 20, 1975, the Chartered Bank Employees Association, in representation of its monthly
paid employees/members, instituted a complaint with the Regional Office No. IV, Department of
Labor, now Ministry of Labor and Employment (MOLE) against private respondent Chartered
Bank, for the payment of ten (10) unworked legal holidays, as well as for premium and overtime
differentials for worked legal holidays from November 1, 1974.
The memorandum for the respondents summarizes the admitted and/or undisputed facts as
follows:
l. The work force of respondent bank consists of 149 regular employees, all of
whom are paid by the month;
2. Under their existing collective bargaining agreement, (Art. VII thereof) said
monthly paid employees are paid for overtime work as follows:
Section l. The basic work week for all employees excepting security guards who
by virtue of the nature of their work are required to be at their posts for 365 days
per year, shall be forty (40) hours based on five (5) eight (8) hours days, Monday
to Friday.
Section 2. Time and a quarter hourly rate shall be paid for authorized work
performed in excess of eight (8) hours from Monday through Friday and for any
hour of work performed on Saturdays subject to Section 5 hereof.
Section 3. Time and a half hourly rate shall be paid for authorized work
performed on Sundays, legal and special holidays.
xxx xxx xxx

xxx xxx xxx

Section 5. The provisions of Section I above notwithstanding the BANK may
revert to the six (6) days work week, to include Saturday for a four (4) hour day,
in the event the Central Bank should require commercial banks to open for
business on Saturday.
3. In computing overtime pay and premium pay for work done during regular
holidays, the divisor used in arriving at the daily rate of pay is 251 days although
formerly the divisor used was 303 days and this was when the respondent bank
was still operating on a 6-day work week basis. However, for purposes of
computing deductions corresponding to absences without pay the divisor used is
365 days.
4. All regular monthly paid employees of respondent bank are receiving salaries
way beyond the statutory or minimum rates and are among the highest paid
employees in the banking industry.
5. The salaries of respondent bank's monthly paid employees suffer no deduction
for holidays occurring within the month.
On the bases of the foregoing facts, both the arbitrator and the National Labor Relations
Commission (NLRC) ruled in favor of the petitioners ordering the respondent bank to pay its
monthly paid employees, holiday pay for the ten (10) legal holidays effective November 1, 1974
and to pay premium or overtime pay differentials to all employees who rendered work during
said legal holidays. On appeal, the Minister of Labor set aside the decision of the NLRC and
dismissed the petitioner's claim for lack of merit basing its decision on Section 2, Rule IV, Book
Ill of the Integrated Rules and Policy Instruction No. 9, which respectively provide:
Sec. 2. Status of employees paid by the month. Employees who are uniformly
paid by the month, irrespective of the number of working days therein, with a
salary of not less than the statutory or established minimum wage shall be
presumed to be paid for all days in the month whether worked or not.
POLICY INSTRUCTION NO. 9
TO: All Regional Directors
SUBJECT: PAID LEGAL HOLIDAYS
The rules implementing PD 850 have clarified the policy in the implementation of
the ten (10) paid legal holidays. Before PD 850, the number of working days a
year in a firm was considered important in determining entitlement to the benefit.
Thus, where an employee was working for at least 313 days, he was considered
definitely already paid. If he was working for less than 313, there was no certainty
whether the ten (10) paid legal holidays were already paid to him or not.

The ten (10) paid legal holidays law, to start with, is intended to benefit
principally daily employees. In the case of monthly, only those whose monthly
salary did not yet include payment for the ten (10) paid legal holidays are entitled
to the benefit.
Under the rules implementing PD 850, this policy has been fully clarified to
eliminate controversies on the entitlement of monthly paid employees. The new
determining rule is this: 'If the monthly paid employee is receiving not less than
P240, the maximum monthly minimum wage, and his monthly pay is uniform
from January to December, he is presumed to be already paid the ten (10) paid
legal holidays. However, if deductions are made from his monthly salary on
account of holidays in months where they occur, then he is still entitled to the ten
(10) paid legal holidays.
These new interpretations must be uniformly and consistently upheld.
This issuance shall take effect immediately.
The issues are presented in the form of the following assignments of errors:
First Error
Whether or not the Secretary of Labor erred and acted contrary to
law in promulgating Sec. 2, Rule IV, Book III of the Integrated
Rules and Policy Instruction No. 9.
Second Error
Whether or not the respondent Secretary of Labor abused his
discretion and acted contrary to law in applying Sec. 2, Rule IV of
the Integrated Rules and Policy Instruction No. 9 abovestated to
private respondent's monthly-paid employees.
Third Error
Whether or not the respondent Secretary of Labor, in not giving
due credence to the respondent bank's practice of paying its
employees base pay of 100% and premium pay of 50% for work
done during legal holidays, acted contrary to law and abused his
discretion in denying the claim of petitioners for unworked
holidays and premium and overtime pay differentials for worked
holidays.
The petitioner contends that the respondent Minister of Labor gravely abused his discretion in
promulgating Section 2, Rule IV, Book III of the Integrated Rules and Policy Instruction No. 9
as guidelines for the implementation of Articles 82 and 94 of the Labor Code and in applying

said guidelines to this case. It maintains that while it is true that the respondent Minister has the
authority in the performance of his duty to promulgate rules and regulations to implement,
construe and clarify the Labor Code, such power is limited by provisions of the statute sought to
be implemented, construed or clarified. According to the petitioner, the so-called "guidelines"
promulgated by the respondent Minister totally contravened and violated the Code by excluding
the employees/members of the petitioner from the benefits of the holiday pay, when the Code
itself did not provide for their expanding the Code's clear and concise conclusion and
notwithstanding the Code's clear and concise phraseology defining those employees who are
covered and those who are excluded from the benefits of holiday pay.
On the other hand, the private respondent contends that the questioned guidelines did not deprive
the petitioner's members of the benefits of holiday pay but merely classified those monthly paid
employees whose monthly salary already includes holiday pay and those whose do not, and that
the guidelines did not deprive the employees of holiday pay. It states that the question to be
clarified is whether or not the monthly salaries of the petitioner's members already includes
holiday pay. Thus, the guidelines were promulgated to avoid confusion or misconstruction in the
application of Articles 82 and 94 of the Labor Code but not to violate them. Respondent explains
that the rationale behind the promulgation of the questioned guidelines is to benefit the daily paid
workers who, unlike monthly-paid employees, suffer deductions in their salaries for not working
on holidays. Hence, the Holiday Pay Law was enacted precisely to countervail the disparity
between daily paid workers and monthly-paid employees.
The decision in Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong (132
SCRA 663) resolved a similar issue. Significantly, the petitioner in that case was also a union of
bank employees. We ruled that Section 2, Rule IV, Book III of the Integrated Rules and Policy
Instruction No. 9, are contrary to the provisions of the Labor Code and, therefore, invalid This
Court stated:
It is elementary in the rules of statutory construction that when the language of the
law is clear and unequivocal the law must be taken to mean exactly what it says.
In the case at bar, the provisions of the Labor Code on the entitlement to the
benefits of holiday pay are clear and explicit it provides for both the coverage of
and exclusion from the benefit. In Policy Instruction No. 9, the then Secretary of
Labor went as far as to categorically state that the benefit is principally intended
for daily paid employees, when the law clearly states that every worker shall be
paid their regular holiday pay. This is flagrant violation of the mandatory
directive of Article 4 of the Labor Code, which states that 'All doubts in the
implementation and interpretation of the provisions of this Code, including its
implementing rules and regulations, shall be resolved in favor of labor.'
Moreover, it shall always be presumed that the legislature intended to enact a
valid and permanent statute which would have the most beneficial effect that its
language permits (Orlosky v. Hasken, 155 A. 112)
Obviously, the Secretary (Minister) of Labor had exceeded his statutory authority
granted by Article 5 of the Labor Code authorizing him to promulgate the
necessary implementing rules and regulations.

We further ruled:
While it is true that the contemporaneous construction placed upon a statute by
executive officers whose duty is to enforce it should be given great weight by the
courts, still if such construction is so erroneous, as in the instant case, the same
must be declared as null and void. It is the role of the Judiciary to refine and,
when necessary correct constitutional (and/or statutory) interpretation, in the
context of the interactions of the three branches of the government, almost always
in situations where some agency of the State has engaged in action that stems
ultimately from some legitimate area of governmental power (The Supreme Court
in Modern Role, C.B. Swisher 1958, p. 36).
xxx xxx xxx
In view of the foregoing, Section 2, Rule IV, Book III of the Rules to implement
the Labor Code and Policy Instruction No. 9 issued by the then Secretary of Labor
must be declared null and void. Accordinglyl public respondent Deputy Minister
of Labor Amado G. Inciong had no basis at all to deny the members of petitioner
union their regular holiday pay as directed by the Labor Code.
Since the private respondent premises its action on the invalidated rule and policy instruction, it
is clear that the employees belonging to the petitioner association are entitled to the payment of
ten (10) legal holidays under Articles 82 and 94 of the Labor Code, aside from their monthly
salary. They are not among those excluded by law from the benefits of such holiday pay.
Presidential Decree No. 850 states who are excluded from the holiday provisions of that law. It
states:
ART. 82. Coverage. The provision of this Title shall apply to employees in all
establishments and undertakings, whether for profit or not, but not to government
employees, managerial employees, field personnel members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined
by the Secretary of Labor in appropriate regulations. (Emphasis supplied).
The questioned Section 2, Rule IV, Book III of the Integrated Rules and the Secretary's Policy
Instruction No. 9 add another excluded group, namely, "employees who are uniformly paid by
the month." While the additional exclusion is only in the form of a presumption that all monthly
paid employees have already been paid holiday pay, it constitutes a taking away or a deprivation
which must be in the law if it is to be valid. An administrative interpretation which diminishes
the benefits of labor more than what the statute delimits or withholds is obviously ultra vires.
It is argued that even without the presumption found in the rules and in the policy instruction, the
company practice indicates that the monthly salaries of the employees are so computed as to
include the holiday pay provided by law. The petitioner contends otherwise.

One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in
computing overtime compensation for its employees, employs a "divisor" of 251 days. The 251
working days divisor is the result of subtracting all Saturdays, Sundays and the ten (10) legal
holidays from the total number of calendar days in a year. If the employees are already paid for
all non-working days, the divisor should be 365 and not 251.
The situation is muddled somewhat by the fact that, in computing the employees' absences from
work, the respondent bank uses 365 as divisor. Any slight doubts, however, must be resolved in
favor of the workers. This is in keeping with the constitutional mandate of promoting social
justice and affording protection to labor (Sections 6 and 9, Article II, Constitution). The Labor
Code, as amended, itself provides:
ART. 4. Construction in favor of labor. All doubts in the implementation and
interpretation of the provisions of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor.
Any remaining doubts which may arise from the conflicting or different divisors used in the
computation of overtime pay and employees' absences are resolved by the manner in which work
actually rendered on holidays is paid. Thus, whenever monthly paid employees work on a
holiday, they are given an additional 100% base pay on top of a premium pay of 50%. If the
employees' monthly pay already includes their salaries for holidays, they should be paid only
premium pay but not both base pay and premium pay.
The contention of the respondent that 100% base pay and 50% premium pay for work actually
rendered on holidays is given in addition to monthly salaries only because the collective
bargaining agreement so provides is itself an argument in favor of the petitioner stand. It shows
that the Collective Bargaining Agreement already contemplated a divisor of 251 days for holiday
pay computations before the questioned presumption in the Integrated Rules and the Policy
Instruction was formulated. There is furthermore a similarity between overtime pay, which is
computed on the basis of 251 working days a year, and holiday pay, which should be similarly
treated notwithstanding the public respondents' issuances. In both cases overtime work and
holiday work- the employee works when he is supposed to be resting. In the absence of an
express provision of the CBA or the law to the contrary, the computation should be similarly
handled.
We are not unmindful of the fact that the respondent's employees are among the highest paid in
the industry. It is not the intent of this Court to impose any undue burdens on an employer which
is already doing its best for its personnel. we have to resolve the labor dispute in the light of the
parties' own collective bargaining agreement and the benefits given by law to all workers. When
the law provides benefits for "employees in all establishments and undertakings, whether for
profit or not" and lists specifically the employees not entitled to those benefits, the administrative
agency implementing that law cannot exclude certain employees from its coverage simply
because they are paid by the month or because they are already highly paid. The remedy lies in a
clear redrafting of the collective bargaining agreement with a statement that monthly pay already
includes holiday pay or an amendment of the law to that effect but not an administrative rule or a
policy instruction.

WHEREFORE, the September 7, 1976 order of the public respondent is hereby REVERSED and
SET ASIDE. The March 24, 1976 decision of the National Labor Relations Commission which
affirmed the October 30, 1975 resolution of the Labor Arbiter but deleted interest payments is
REINSTATED.
SO ORDERED.

[G.R. No. 147420. June 10, 2004]

CEZAR ODANGO in his behalf and in behalf of 32 complainants, petitioners,

vs. NATIONAL LABOR RELATIONS COMMISSION and ANTIQUE ELECTRIC
COOPERATIVE, INC., respondents.
DECISION
CARPIO, J.:

The Case
Before the Court is a petition for review[1] assailing the Court of Appeals Resolutions of 27
September 2000[2] and 7 February 2001 in CA-G.R. SP No. 51519. The Court of Appeals upheld
the Decision[3]dated 27 November 1997 and the Resolution dated 30 April 1998 of the National
Labor Relations Commission (NLRC) in NLRC Case No. V-0048-97. The NLRC reversed the
Labor Arbiters Decision of 29 November 1996, which found respondent Antique Electric
Cooperative (ANTECO) liable for petitioners wage differentials amounting to P1,017,507.73
plus attorneys fees of 10%.

Antecedent Facts
Petitioners are monthly-paid employees of ANTECO whose workdays are from Monday to
Friday and half of Saturday. After a routine inspection, the Regional Branch of the Department
of Labor and Employment (DOLE) found ANTECO liable for underpayment of the monthly
salaries of its employees. On 10 September 1989, the DOLE directed ANTECO to pay its
employees wage differentials amounting toP1,427,412.75. ANTECO failed to pay.
Thus, on various dates in 1995, thirty-three (33) monthly-paid employees filed complaints
with the NLRC Sub-Regional Branch VI, Iloilo City, praying for payment of wage differentials,
damages and attorneys fees. Labor Arbiter Rodolfo G. Lagoc (Labor Arbiter) heard the
consolidated complaints.
On 29 November 1996, the Labor Arbiter rendered a Decision in favor of petitioners
granting them wage differentials amounting to P1,017,507.73 and attorneys fees of
10%. Florentino Tongson, whose case the Labor Arbiter dismissed, was the sole exception.
ANTECO appealed the Decision to the NLRC on 24 December 1996. On 27 November
1997, the NLRC reversed the Labor Arbiters Decision. The NLRC denied petitioners motion for
reconsideration in its Resolution dated 30 April 1998. Petitioners then elevated the case to this
Court through a petition for certiorari, which the Court dismissed for petitioners failure to
comply with Section 11, Rule 13 of the Rules of Court. On petitioners motion for

reconsideration, the Court on 13 January 1999 set aside the dismissal. Following the doctrine
in St. Martin Funeral Home v. NLRC,[4] the Court referred the case to the Court of Appeals.
On 27 September 2000, the Court of Appeals issued a Resolution dismissing the petition for
failure to comply with Section 3, Rule 46 of the Rules of Court. The Court of Appeals explained
that petitioners failed to allege the specific instances where the NLRC abused its discretion. The
appellate court denied petitioners motion for reconsideration on 7 February 2001.
Hence, this petition.

The Labor Arbiters Ruling

The Labor Arbiter reasoned that ANTECO failed to refute petitioners argument that
monthly-paid employees are considered paid for all the days in a month under Section 2, Rule IV
of Book 3 of the Implementing Rules of the Labor Code (Section 2).[5] Petitioners claim that this
includes not only the 10 legal holidays, but also their un-worked half of Saturdays and all of
Sundays.
The Labor Arbiter gave credence to petitioners arguments on the computation of their wages
based on the 304 divisor used by ANTECO in converting the leave credits of its employees. The
Labor Arbiter agreed with petitioners that ANTECOs use of 304 as divisor is an admission that it
is paying its employees for only 304 days a year instead of the 365 days as specified in Section
2. The Labor Arbiter concluded that ANTECO owed its employees the wages for 61 days, the
difference between 365 and 304, for every year.

The NLRCs Ruling

On appeal, the NLRC reversed the Labor Arbiters ruling that ANTECO underpaid its
employees. The NLRC pointed out that the Labor Arbiters own computation showed that the
daily wage rates of ANTECOs employees were above the minimum daily wage of P124. The
lowest paid employee of ANTECO was then receiving a monthly wage of P3,788. The NLRC
applied the formula in Section 2 [(Daily Wage Rate = (Wage x 12)/365)] to the monthly wage
of P3,788 to arrive at a daily wage rate of P124.54, an amount clearly above the minimum wage.
The NLRC noted that while the reasoning in the body of the Labor Arbiters decision
supported the view that ANTECO did not underpay, the conclusion arrived at was the opposite.
Finally, the NLRC ruled that the use of 304 as a divisor in converting leave credits is more
favorable to the employees since a lower divisor yields a higher rate of pay.

The Ruling of the Court of Appeals

The Court of Appeals held that the petition was insufficient in form and substance since it
does not allege the essential requirements of the extra-ordinary special action of certiorari. The

Court of Appeals faulted petitioners for failing to recite where and in what specific instance
public respondent abused its discretion. The appellate court characterized the allegations in the
petition as sweeping and clearly falling short of the requirement of Section 3, Rule 46 of the
Rules of Court.

The Issues
Petitioners raise the following issues:
I
WHETHER THE COURT OF APPEALS IS CORRECT IN DISMISSING THE
CASE.
II
WHETHER PETITIONERS ARE ENTITLED TO THEIR MONEY CLAIM.[6]

The Ruling of the Court

The petition has no merit.

On the sufficiency of the petition

Petitioners argue that the Court of Appeals erred in dismissing their petition because this
Court had already ruled that their petition is sufficient in form and substance. They argue that
this precludes any judgment to the contrary by the Court of Appeals. Petitioners cite this Courts
Resolution dated 13 January 1999 as their basis. This Resolution granted petitioners motion for
reconsideration and set aside the dismissal of their petition for review.
Petitioners reliance on our 16 September 1998 Resolution is misplaced. In our Resolution,
we dismissed petitioners case for failure to comply with Section 11, Rule 13 of the Rules of
Court.[7] The petition lacked a written explanation on why service was made through registered
mail and not personally.
The error petitioners committed before the Court of Appeals is different. The appellate court
dismissed their petition for failure to comply with the first paragraph of Section 3 of Rule 46[8] in
relation to Rule 65 of the Rules of Court, outlining the necessary contents of a petition for
certiorari. This is an entirely different ground. The previous dismissal was due to petitioners
failure to explain why they resorted to service by registered mail. This time the content of the
petition itself is deficient. Petitioners failed to allege in their petition the specific instances where
the actions of the NLRC amounted to grave abuse of discretion.
There is nothing in this Courts Resolution dated 13 January 1999 that remotely supports
petitioners argument. What we resolved then was to reconsider the dismissal of the petition due

to a procedural defect and to refer the case to the Court of Appeals for its proper disposition. We
did not in any way rule that the petition is sufficient in form and substance.
Petitioners also argue that their petition is clear and specific in its allegation of grave abuse
of discretion. They maintain that they have sufficiently complied with the requirement in Section
3, Rule 46 of the Rules of Court.
Again, petitioners are mistaken.
We quote the relevant part of their petition:
REASONS RELIED UPON FOR ALLOWANCE OF PETITION
12. This Honorable court can readily see from the facts and circumstances of this case, the
petitioners were denied of their rights to be paid of 4 hours of each Saturday, 51 rest days and 10
legal holidays of every year since they started working with respondent ANTECO.
13. The respondent NLRC while with open eyes knew that the petitioners are entitled to salary
differentials consisting of 4 hours pay on Saturdays, 51 rest days and 10 legal holidays plus 10%
attorneys fees as awarded by the Labor Arbiter in the above-mentioned decision, still contrary to
law, contrary to existing jurisprudence issued arbitrary, without jurisdiction and in excess of
jurisdiction the decision vacating and setting aside the said decision of the Labor Arbiter, to the
irreparable damage and prejudice of the petitioners.
14. That the respondent NLRC in grave abuse of discretion in the exercise of its function, by way
of evasion of positive duty in accordance with existing labor laws, illegally refused to reconsider
its decision dismissing the petitioners complaints.
15. That there is no appeal, nor plain, speedy and adequate remedy in law from the abovementioned decision and resolution of respondent NLRC except this petition for certiorari.[9]
These four paragraphs comprise the petitioners entire argument. In these four paragraphs
petitioners ask that a writ of certiorari be issued in their favor. We find that the Court of Appeals
did not err in dismissing the petition outright. Section 3, Rule 46 of the Rules of Court requires
that a petition for certiorari must state the grounds relied on for the relief sought. A simple
perusal of the petition readily shows that petitioners failed to meet this requirement.
The appellate courts jurisdiction to review a decision of the NLRC in a petition for certiorari
is confined to issues of jurisdiction or grave abuse of discretion.[10] An extraordinary remedy, a
petition for certiorari is available only and restrictively in truly exceptional cases. The sole office
of the writ of certiorari is the correction of errors of jurisdiction including the commission of
grave abuse of discretion amounting to lack or excess of jurisdiction.[11] It does not include
correction of the NLRCs evaluation of the evidence or of its factual findings. Such findings are
generally accorded not only respect but also finality.[12] A party assailing such findings bears the
burden of showing that the tribunal acted capriciously and whimsically or in total disregard of
evidence material to the controversy, in order that the extraordinary writ of certiorari will lie.[13]
We agree with the Court of Appeals that nowhere in the petition is there any acceptable
demonstration that the NLRC acted either with grave abuse of discretion or without or in excess

of its jurisdiction.Petitioners merely stated generalizations and conclusions of law. Rather than
discussing how the NLRC acted capriciously, petitioners resorted to a litany of generalizations.
Petitions that fail to comply with procedural requisites, or are unintelligible or clearly
without legal basis, deserve scant consideration. Section 6, Rule 65 of the Rules of Court
requires that every petition be sufficient in form and substance before a court may take further
action. Lacking such sufficiency, the court may dismiss the petition outright.
The insufficiency in substance of this petition provides enough reason to end our discussion
here. However, we shall discuss the issues raised not so much to address the merit of the petition,
for there is none, but to illustrate the extent by which petitioners have haphazardly pursued their
claim.

On the right of the petitioners to wage differentials

Petitioners claim that the Court of Appeals gravely erred in denying their claim for wage
differentials. Petitioners base their claim on Section 2, Rule IV of Book III of the Omnibus Rules
Implementing the Labor Code. Petitioners argue that under this provision monthly-paid
employees are considered paid for all days of the month including un-worked days. Petitioners
assert that they should be paid for all the 365 days in a year. They argue that since in the
computation of leave credits, ANTECO uses a divisor of 304, ANTECO is not paying them 61
days every year.

Petitioners claim is without basis

We have long ago declared void Section 2, Rule IV of Book III of the Omnibus Rules
Implementing the Labor Code. In Insular Bank of Asia v. Inciong,[14] we ruled as follows:
Section 2, Rule IV, Book III of the Implementing Rules and Policy Instructions No. 9 issued by
the Secretary (then Minister) of Labor are null and void since in the guise of clarifying the Labor
Codes provisions on holiday pay, they in effect amended them by enlarging the scope of their
exclusion.
The Labor Code is clear that monthly-paid employees are not excluded from the benefits of
holiday pay. However, the implementing rules on holiday pay promulgated by the then Secretary
of Labor excludes monthly-paid employees from the said benefits by inserting, under Rule IV,
Book III of the implementing rules, Section 2 which provides that monthly-paid employees are
presumed to be paid for all days in the month whether worked or not.
Thus, Section 2 cannot serve as basis of any right or claim. Absent any other legal basis,
petitioners claim for wage differentials must fail.
Even assuming that Section 2, Rule IV of Book III is valid, petitioners claim will still
fail. The basic rule in this jurisdiction is no work, no pay. The right to be paid for un-worked
days is generally limited to the ten legal holidays in a year.[15] Petitioners claim is based on a

mistaken notion that Section 2, Rule IV of Book III gave rise to a right to be paid for un-worked
days beyond the ten legal holidays. In effect, petitioners demand that ANTECO should pay them
on Sundays, the un-worked half of Saturdays and other days that they do not work at
all. Petitioners line of reasoning is not only a violation of the no work, no pay principle, it also
gives rise to an invidious classification, a violation of the equal protection clause. Sustaining
petitioners argument will make monthly-paid employees a privileged class who are paid even if
they do not work.
The use of a divisor less than 365 days cannot make ANTECO automatically liable for
underpayment. The facts show that petitioners are required to work only from Monday to Friday
and half of Saturday. Thus, the minimum allowable divisor is 287, which is the result of 365
days, less 52 Sundays and less 26 Saturdays (or 52 half Saturdays). Any divisor below 287 days
means that ANTECOs workers are deprived of their holiday pay for some or all of the ten legal
holidays. The 304 days divisor used by ANTECO is clearly above the minimum of 287 days.
Finally, petitioners cite Chartered Bank Employees Association v. Ople[16] as an analogous
situation. Petitioners have misread this case.
In Chartered Bank, the workers sought payment for un-worked legal holidays as a right
guaranteed by a valid law. In this case, petitioners seek payment of wages for un-worked nonlegal holidays citing as basis a void implementing rule. The circumstances are also markedly
different. In Chartered Bank, there was a collective bargaining agreement that prescribed the
divisor. No CBA exists in this case. InChartered Bank, the employer was liable for
underpayment because the divisor it used was 251 days, a figure that clearly fails to account for
the ten legal holidays the law requires to be paid. Here, the divisor ANTECO uses is 304 days.
This figure does not deprive petitioners of their right to be paid on legal holidays.
A final note. ANTECOs defense is likewise based on Section 2, Rule IV of Book III of the
Omnibus Rules Implementing the Labor Code although ANTECOs interpretation of this
provision is opposite that of petitioners. It is deplorable that both parties premised their
arguments on an implementing rule that the Court had declared void twenty years ago
in Insular Bank. This case is cited prominently in basic commentaries.[17] And yet, counsel for
both parties failed to consider this. This does not speak well of the quality of representation they
rendered to their clients. This controversy should have ended long ago had either counsel first
checked the validity of the implementing rule on which they based their contentions.
WHEREFORE, the petition is DENIED. The Resoution
Appeals DISMISSING CA-G.R. SP No. 51519 is AFFIRMED.
SO ORDERED.

of

the

Court

of

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

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

MAKASIAR, J.:
Before US are consolidated petitions to review the Court of industrial Relations en
banc resolution dated October 9, 1969 in CIR Case No. 43-IPA.
In G.R. No. L-31341 (PALEA vs. PAL), petitioners question the date of effectivity of the
adjudicated pay differentials due to the monthly-salaried employees of Philippine Air Lines, Inc.
In G.R. No. L-31343 (PAL vs. PALEA), petitioner assails the reversal by the Court of Industrial
Relations of its earlier resolution on the method employed by the Philippine Air Lines in
computing the basic daily and hourly rate of its monthly salaried employees.
On February 14, 1963, the Philippine Air Lines Employees' Association (PALEA) and the
Philippine Air Lines Supervisors' Association (PALSA) petitioners in G.R. No. L-31341 and
respondents in G.R. No. 31343 commenced an action against the Philippine Air Lines (PAL)
in the Court of Industrial Relations, praying that PAL be ordered to revise its method of
computing the basic daily and hourly rate of its monthly salaried employees, and necessarily, to
pay them their accrued sala differentials.
Sought to be revised is PAL's formula in computing wages of its employees:
Monthly salary x 12 365 (No. of calendar = x (Basic dailr rate) days in a year)
x 8 = Basic hourly rate

The unions would like PAL to modify the above formula in this wise:
Monthly salary x 12 No. of actual working = x (Basic daily rate) days
x 8 = Basic hourly rate
On May 23, 1964, the Court of Industrial Relations, through Presiding Judge Jose S. Bautista,
issued an order denying the unions' prayer for a modified wage formula. Pertinent portion of the
order reads:
On the issue of rate of pay, PALSA and PALEA seek to change the long standing
method in PAL of computing the basic daily and hourly rate of monthly salaried
employees for the purpose of determining overtime pay, Sunday and legal holiday
premium pay, night differential pay, vacation and sick leave pay, to wit, the
monthly salary multiplied by 12 and dividing the product thereof by 365 and then
the quotient by 8. PALEA and PALSA claim that the method of computing the
basic daily and hourly rate of monthly salaried employees of PAL prior to the
implementation of the 40-hour week schedule in PAL should be by dividing the
monthly salary by 26 working days, and after the 40-hour week schedule, by
dividing the monthly salary by 20 working days, and then dividing the quotient
thereof in each case by 8. From the records, however, it appears that for may
years since 1952, and even previously, PAL has been consistently and regularly
determining the basic and hourly rates of monthly salaried employees by
multiplying the monthly salary by 12 momths and dividing the product by 365
days to arive at the basic daily rate, and dividing the quotient by 8 to compute the
basic hourly rate. There has been no attempt to revise this formula
notwithstanding the various negotiations PAL and with the unions ever since its
operations, and it was only on July 18, 1962, when PALSA, for the first time,
proposed that it be changed in accordance with what is now alleged in the
petition. This, however, was a mere proposal by PALSA for the adoption of a new
formula; it was not a demand for the application of a formula claimed to be
correct under the law. Under this circumstance, PALSA and PALEA are estopped
from questioning the correctness and propriety of PAL's method of determining
the basic hourly and daily rate of pay of its monthly salaried personnel, and
considering the long period of time that elapsed before they brought their petition,
are barred from insisting or demanding a different rate of pay formula.
xxx xxx xxx
Upon the foregoing, the Court, therefore, declares PAL's method of computing
the basic daily and hourly rate of its monthly salaried employees as legal and
proper, and denies the petition of PALSA and PALEA.
xxx xxx xxx
(pp. 47-48, 49, rec. G.R. No. L-31343).

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

From the above resolution, both parties appealed to this COURT. The Philippine Air Lines filed
its appeal petition on December 13, 1969, while PALEA filed its petition for review on certiorari
on January 3, 1970.
I
For easy comprehension, WE start with the Philippine Air Lines, Inc. versus Philippine Air Lines
Employees Association, Philippine Air Lines Supervisors Association, and the Court of
Industrial Relations, G.R. No. L-31343.
In this appeal PAL emphasizes three assignments of error, to wit:
1. RESPONDENT CIR ERRED AND COMMITTED GRAVE ABUSE OF
DISCRETION IN HOLDING THAT THE METHOD OF COMPUTATION
USED BY PAL IN DETERMINING TIIE BASIC DAILY OR HOURLY RATE
OF ITS MONTLY SALARIED EMPLOYEES WHICH IS:
MONTHLY SALARY x 1 365 (NO. OF CALENDAR DAYS IN YEAR) = x
(BASIC DAILY RATE)
x 8 = BASIC HOURLY RATE 8
IS NOT CORRECT, CONSIDERING THAT PAL, A PUBLIC UTILITY
WHERE THERE IS WORK EVERYDAY OF THE WEEK FOR MANY
YEARS EVEN BEFORE REPUBLIC ACT 602 AND WITH THE CONSENT
AND APPROVAL OF THE EMPLOYEES, CONSISTENT WITH SECTION 19
OF REPUBLIC ACT 602 PROHIBITING REDUCTION OF WAGES FOR OFF
DAYS-WHICH WAS SUSTAINED BY THIS HONORABLE COURT
IN AUTOMOTIVE PARTS & EQUIPMENT CO., INC. VS. JOSE B.
LINGAD, G.R. NO. L- 26406, OCTOBER 31, 1969 HAS BEEN TREATING
OFFSITE DAYS, 11 AS SATURDAYS, SUNDAYS, COMPANY OBSERVED
HOLIDAYS OR ANY OTHER DESIGNATED HOLIDAYS AS PAID DAYS.
2. RESPONDENT CIR ERRED AND COMMITTED GRAVE ABUSE OF
DISCRETION IN NOT FINDING. THAT RESPONDENT UNIONS, BY THEIR
LONG PERIOD OF CONSENT, ACQUIESCENCE, INACTION AND
ACCEPTANCE OF BENEFITS THEREUNDER, ARE ESTOPPED AND
BARRED FROM CLAIMING THAT PAL'S FORMULA FOR DETERMINING
THE BASIC DAILY AND HOURLY RATE OF PAY IS INCORRECT.
3. RESPONDENT CIR ERED AND ACTED IN EXCESS OF ITS
JURISDICTION IN SENTENCING PAL TO PAY DIFFERENTIALS FOR
OVERTIME WORK, NIGHTWORK, HOLIDAY AND SUNDAY PAY FROM
JULY 1, 1957 CONSIDERING THAT UNDER THE THREE-YEAR
PRESCRIPTIVE
PERIOD
PROVIDED
IN
SECTION
7-a
OF
COMMONWEALTH ACT NO. 444, AS AMENDED, THE EIGHT-HOUR

LABOR LAW, RESPONDENT UNIONS, ASSUMING THEY HAD ANY

CAUSE OF ACTION, COULD RECOVER ONLY FROM FEBRUARY 14,
1960 UP TO THE PRESENT, SINCE RESPONDENT UNIONS FILED THEIR
ACTION ONLY ON FEBRUARY 14, 1963.
A
PAL's maiden argument has a strong tendency to mislead. In an effort to emphasize that off-days
are paid and therefore should be reckoned with in determing the divisor for computing daily and
hourly rate, PAL leans heavily on what it considers as additional payment of 125% or 137 %,
as the case may be, of an employee's basic hourly rate, given to a worker who worked on his offdays. PAL would like us to believe that the word "Additional" all but accentuates the existence
of a regular basic rate; otherwise, the 125% or 137% shall be in addition to what?
The industrial court, however, had this to say:
Moreover, it will be noted that before September 4, 1961, a monthly salaried
employee of PAL had to work 304 days only in a year,a nd after said date, he had
to work only 258 days in ayear, to be entitled to his equivalent yearly
salary. When he worked on his off-day, he was paid accordingly (125% or 137%),
indicating that his off-days were not with pay. It seems illogical for said employe
to be paid 125% or 137 % of his basic daily rate, if such off-days are already
wtih pay, as indicated by the company (p. 107, rec., G.R. No. L-31343, emphasis
supplied).
WE agree.
There should hardly be any doubt that off-days are not paid days, Precisely, off-days are rest
days for the worker. He is not required to work on such days. This finds support not only in the
basic principle in labor that the basis of remuneration or compensation is actual service rendered,
but in the ever pervading labor spirit aimed at humanizing the conditions of hie working man.
Since during his off-days an employee is not compelled to work he cannot, conversely, demand
for his corresponding pay. If, however, a worker works on his off-day, our welfare laws duly
reward him with a premium higher than what he would receive when he works on his regular
working day.
Such being the case, the divisor in computing an employee's basic daily rate should be the actual
working days in a yar The number of off-days are not to be counted precisely because on such
off-days, an employee is not required to work.
Simple common sense dictates that should an employee opt not to work which he can legally
do on an off-day, and for such he gets no pay, he would be unduly robbed of a portion of his
legitimate pay if and when in computing his basic daily and hourly rate, such off-day is deemed
subsumed by the divisor. For it is elementary in the fundamental process of division that with a
constant dividend, the bigger your divisor is, the smaller our quotient will be.

It bears emphasis that OUR view above constitutes the rationale behind the landmark ruling,
surprisingly, by the same trial Judge Jose S. Bautista of the Court of Industrial Relations, in
National Waterworks and Sewerage Authority vs. NWSA Consolidated Unions, et al., (G.R. No.
L-18938, August 31, 1964, 11 SCRA 766, 793-794), to which decision WE gave OUR
affirmance.
PAL maintains that the NAWASA doctrine should not apply to a public utility like PAL which,
from the nature of its operations, requires a whole-year-round, uninterrupted work by personnel.
What PAL apparently forgets is that just like it, NAWASA is also a public utility which likewise
requires its workers to work the whole year round. Moreover, the NAWASA is a governmentowned corporation to which PAL is akin, it being a government-controlled corporation.
As will later be stated herein, PAL inked with the representative unions of the employees
collective bargaining agreements wherein it bound itself to duly compensate employer working
on their off-days. The same situation obtained in the NAWASA case, wherein WE held:
And in the collective bargaining agreement entered into between the NAWASA
and respondent unions it was agreed that all existing benefits enjoyed by the
employees and laborers prior to its effectivity shall remain in force and shall form
part of the agreement, among which certainly is the 25% additional compensation
for work on Sundays and legal holidays theretofore enjoyed by said laborers and
employees. It may, therefore, be said that while under Commonwealth Act No.
444 a public utility is not required to pay additional compensation to its
employees and workers for work done on Sundays and legal holidays, there is,
however, no prohibition ofr it to pay such additional compensation if it
voluntarily agrees to do so. The NAWASA committed itself to pay this additional
compensation. It must pay not because of compulsion of law but because of
contractual obligation (11 SCRA 766, 776).
The settled NAWASA doctrine should not be disturbed.
B
PAL also vigorously argues that the unions' longstanding silence with respect, and acquiescence,
to PAL's method of computation has placed them in estoppel to impugn the correctness of the
questioned wage formula. PAL furthermore contends that laches has likewise set in precisely
because of stich long-standing inaction.
Our jurisprudence on estoppel is, however, to the effect that:
... (I)t is meet to recall that "mere innocent silence will not work estoppel. There
must also be some element of turpitude or neglignece connected with the silence
by which another is misled to his injury" (Civil Code of the philippines by
Tolentino, Vol. IV, p. 600) ... [Beronilla vs. GSISK, G.R. No. L-21723, Nov. 26,
1970, 36 SCRA 44, 46, 55, emphasis supplied].

In the case befor US, it is not denied that PAL's formula of determining daily and hourly rate of
pay has been decided and adopted by it unilaterally without the knowedge and express consent
of the employees. It was only later on that the employees came to know of the formula's
irregularity and its being violative of the collective bargaining agreements previously executed
by PAL and the unions. Precisely, PALSA immediately proposed that PAL and the unions.
Precisely, PALSA immediately proposed that PAL use the correct method of computation, which
proposa PAL chose to ignore.
Clearly, therefore, the alleged long-standing silence by the PAL employees is in truth and in
fact innocent silence,which cannot place a party in estoppel.
The rationale for this is not difficult to see. The doctrine of estoppel had its origin in equity. As
such, its applicability depends, to a large extent, on the circumstances surrounding a particular
case. Where, therefore, the neglect or omission alleged to haveplaced a party in estoppel cannot
be invoked. This was the essence of OUR ruling in the case of Mirasol vs. Municipality of
Tabaco (43 Phil. 610, 614). And this, in quintessence, was the compelling reason why
in Lodovica vs. Court of Appeals (L-29678, July 18, 1975, 65 SCRA 154, 158), WE held that a
party who had no knowledge of or gave no consent to a transaction may not be estopped by it.
Furthermore, jurisprudence likewise fortifies the position that in the interest of public policy,
estoppel and laches cannot arrest recover of evertime compensation. The case of Manila
Terminal Co. vs. CIR (G.R. NO. L-9265, April 29, 1957, 91 Phil. 625), is squarely in point. In
this case We intoned.
The principle of estoppel and laches cannot well be invoked agains the
Association. In the first place, it would be contrary to the spirit of the Eight-Hour
Labor Law, under which, as already seen, the laborers cannot waive their right to
extra compensation. In the second place, the law principally obligates the
employer to observe it, as much so that it punishes the employer for its employer
for its violation and leaves the employee or laborer is in such a disadvantageous
position as to be naturally reluctant or even apprehensive in asserting any claim
which may cause the employher to devise a way for exercising his right to
terminate the employment.
If the principle of estoppel and laches is to be applied, it may bring about a
situation, whereby theemployee or laborer, who cannot expressly renounce their
right to extra compensation under the Eight-Hour Labor Law, may be compelled
to accomplish the same thing by mere silence or lapse of time, thereby frustrating
the purpose of the law by indirection (91 Phil. 625, 633, emphasis supplied).
In another count, the unilateral adoption by PAL of an irregular wage formula being an act
against public policy, the doctrine of estoppel cannot give validity to the same (Auyong Hian vs.
Court of Tax Appeals, 59 SCRA 110, 112).
II

G.R. No. L-31341 is an appeal from that portion of the en banc resolution of the Court of
Industrial Relations dated October 9, 1969 in case 43-IPA making the payment of the
adjudicated pay differentials effective only from July 1, 1957.
In their lone assignment of error, February 14, 1953, or ten (10) years from the date of the filing
of their original complaint; because the claim for pay differentials is based on written contracts
i.e., the collective bargaining agreements between PAL and the employees' representative
uniuons and under Article 1144(1) of the Civil Code, actions based on written contracts
prescribe in ten (10) years.
PAL, on the other hand, maintains that the employees' claim for pay differential is"an action to
enforce a cause of action under the Eight-Hour Labor Law (CA No. 444, as amended): (p. 592,
rec., G.R. No. L-31341). As such, the applicable provision is Section 7-a of CA No. 4444, which
reads:
Sec. 7-a. Any action to enforce any cause of action under this Act shall be
commenced within three years after the cause of action accrued, otherwise such
action shall be forever barred; provided, however, that actions already
commenced before the effecitve date of this Act shall not be affected by the
period herein prescribed (As amended by Rep. Act No. 1993, approved June 22,
1957, emphasis supplied).
Moreover, PAL argues that even assuming that the issue calls for the application of Article
1144(1) of the New Civil Code, a general law, still in case of conflict, Commonwealth ACt No.
444, as amended, should prevail because the latter is a special law.
WE believe that the present case calls for the application of the Civil Code provisions on the
prescriptive period in the filing of actions based on written contracts. The rason should be fairly
obvious. Petitioners' claim fundamentally involves the strict compliance by PAL of the pvosions
on wage computation embodied in the collective bargaining agreements inked between it and the
employees representative unions. These collective bargaining agreements were: the PAS-PALEA
collective bargaining agreement of 1952-53; the PAL-PALEA collective bargaining agreement
of 1956-59; the PAL-PALEA collective bargaining agreement of 1959-61 (with Article VI as
supplement); the PAL-PALEA agreement of September 4, 1961; the PAL-ACAP collective
bargaining agreement of 1952-54; the PAL-ACAP collective bargaining agreement of September
6, 1955; the PAL-ACAP collective bargaining agreement of 1959-61; the PAL-PALSA
collective bargaining agreement of 1959-62; and the supplementary PAL-PALSA collective
bargaining agreement (pp. 54-55, rec., G.R. No. L-31343).
The three-year prescribed period fixed in the Eight-Hour Labor Law (CA No. 444, as amended)
will apply, if the claim for differentials for overtime work is solely based on said law, and not on
a collective bargaining agreement or any other contract. In the instant cases, the claim for
overtime compensation is not so much because of Commonwealth Act No. 444, as amended, but
because the claim is a demandable right of the employees, by reason of the above-mentioned
collective bargaining agreements. That is precisely why petitioners did not make any reference as
to the computation for overtime work under the Eight-Hour Labor Law (Secs. 3 and 4, CA No.

444), and instead inissited that work computation provided in the collective bargaining
agreements between the parties be observed. Since the claim for pay differentials is principally
anchored on the written contracts between the litigants, the ten-year prescriptive period between
the litigants, the ten-year prescriptive period provided by Art. 1144(1) of the New Civil Code
should govern. (General Insurance and Surety Corp. vs. Republic, L-13873, January 31, 1963, 7
SCRA 4; Heirs of the Deceased Juan Sindiong vs. Committee on Burnt Areas and Improvements
of Cebu, L-15975, April 30, 1964, 10 SCRA 715; Conde vs. Cuenca and Malaga, L-9405, July
31, 1956; Veluz vs. Veluz, L-23261, July 31, 1968, 24 SCRA 559).
Finally, granting arguendo that there is doubt as to what labor legislation to apply to the
grievances of the employees in the cases at bar, it is OUR view that that legislation which would
enhance the plight of the workers should be followed, consonant with the express
pronouncement of the New Civil Code that:
In case of doubt, all labor legislation and labor contracts should be construed in
favor of the safety and decent living of the laborer (Article 1702).
WHEREFORE, THE APPEALED RESOLUTION IS HEREBY AFFIRMED, WITH THE
MODIFICATION THAT PAY DIFFERENTIALS BE PAID EFFECTIVE FEBRUARY 14,
1953. WITH COSTS AGAINST PHILIPPINE AIR LINES, INC. IN BOTH CASES.
Teehankee (Chairman), Esguerra, Muoz Palma and Martin, JJ., concur.

SECOND DIVISION
G.R. No. 198935

November 27, 2013

MAYNILAD WATER SUPERVISORS ASSOCIATION, represented by ROBERTA

ESTINO, Petitioners,
vs.
MAYNILAD WATER SERVICES, INC., Respondent.
DECISION
PEREZ, J.:
For resolution is a Petition for Review on Certiorari1 under Rule 45 of the Rules of
Court, seeking to reverse, annul and set aside the Amended Decision and Resolution
issued by the Court of Appeals (CA) in CA-G.R. S.P. No. 101911, specifically the (a)
Amended Decision2 dated 31 January 2011 which reversed its earlier Decision dated 31
May 2010 and (b) Resolution3 dated 12 September 2011 which denied petitioner s
Motion for Reconsideration.
Culled from the records are the following antecedent facts:4
Petitioner Maynilad Water Supervisors Association (MWSA) is an association composed
of former supervisory employees of Metropolitan Waterworks and Sewerage System
(MWSS). These employees claim that during their employment with MWSS, they were
receiving a monthly cost of living allowance (COLA) equivalent to 40% of their basic
pay.
The payment of these allowances and other additional compensation, including the
COLA were, however, discontinued without qualification effective 1 November 1989
when the Department of Budget and Management (DBM) issued Corporate
Compensation Circular No. 10 (CCC No. 10). In 1997, MWSS was privatized and part of
it, MWSS West, was acquired by Maynilad Water Services, Inc. (Maynilad). Some of the
employees of MWSS, which included members of MWSA, were absorbed by Maynilad
subject to the terms and conditions of a Concession Agreement, a portion of which
reads:
Article 6.1.1 (ii)
One month prior to the Commencement Date, the Concessionaire shall make an offer to
employ each Concessionaire Employee, subject to a probationary period of six months
following the Commencement Date, at a salary or pay scale and with benefits at least
equal to those enjoyed by such Employee on the date of his or her separation from
MWSS. x x x
xxxx
Article 6.1.3. Non-Diminution of Benefits
The Concessionaire shall grant to all Concessionaire Employees employee benefits no
less favorable than those granted to such employees by the MWSS at the time of their
separation from MWSS, particularly those set forth in Exhibit F and the following:

224

xxxx
The payment of COLA was not among those listed as benefits in Exhibit "F."
In 1998, the Supreme Court promulgated a Decision5 declaring DBM CCC No.10
ineffective for failure to comply with the publication requirement. Consequently, MWSS
partially released the COLA payments for its employees, including members of MWSA,
covering the years 1989 to 1997, and up to year 1999 for its retained employees.
In 2002, MWSA filed a complaint before the Labor Arbiter praying for the payment of
their COLA from the year 1997, the time its members were absorbed by Maynilad, up to
the present. MWSA argued that since DBM CCC No. 10 was rendered ineffective, the
COLA should be paid as part of the benefits enjoyed by their members at the time of
their separation from MWSS, and which should form part of their salaries and benefits
with Maynilad.
In a decision dated 10 November 2006, the Labor Arbiter granted MWSAs claim and
directed Maynilad to pay the COLA of the supervisors retroactive to the date when they
were hired in 1997, with legal interest from the date of promulgation of the decision. It
also directed Maynilad to take necessary measures to ensure that the benefit is
incorporated in the employees monthly compensation.6
On 11 December 2006, Maynilad appealed the decision before the National Labor
Relations Commission (NLRC) and filed an Urgent Manifestation and Motion to Reduce
Bond.
The NLRC granted Maynilads motion and reversed on appeal the decision of the Labor
Arbiter. On 28 September 2007, MWSA filed a motion for reconsideration but this was
denied by the NLRC in its 23 October 2007 resolution.
Aggrieved, MWSA filed a petition for certiorari with the CA on 11 January 2008.
In a Decision7 dated 31 May 2010, the CA Ninth Division annulled and set aside the
decision of the NLRC. It thus reinstated the decision of the Labor Arbiter.
Maynilad filed a motion for reconsideration of the 31 May 2010 CA Decision.
On 31 January 2011, the CA Ninth Division reconsidered its earlier Decision. The
decretal portion of the amended decision reads:
WHEREFORE, premises considered, the Motion for Reconsideration is GRANTED.
Consequently, the Courts 31 May 2010 Decision is REVERSED and SET ASIDE, and the
07 September 2007 Decision and 23 October 2007 Resolution of the NLRC are
AFFIRMED, and are thus REINSTATED.8
MWSA filed a Motion for Reconsideration of the amended decision. Pending resolution 225
of the Motion for Reconsideration, MWSA moved for the inhibition of the members of
the Ninth Division of the CA. The members of the division recused from the case in a
Resolution dated 3 June 2011. Thereafter, the Second Division of the CA, to which the
case was raffled, issued a Resolution9 on 12 September 2011 denying MWSAs Motion
for Reconsideration.

Hence, this Petition for Review on Certiorari under Rule 45 of the Rules of Court.
ISSUES
Whether the CA erred in not holding that the MWSA members are entitled to COLA
under the Concession Agreement.
Whether the CA erred in not finding grave abuse of discretion on the part of NLRC when
the latter granted Maynilads appeal despite insufficiency of the appeal bond.
OUR RULING
Simply stated, the main issue in this case is whether Maynilad bound itself under the
Concession Agreement to pay the COLA of the employees it absorbed from MWSS. A
careful review of the Concession Agreement led us to conclude that both MWSS and
Maynilad never intended to include COLA as one of the benefits to be granted to the
absorbed employees.
The benefits agreed upon by the parties are stated in Exhibit "F" of the Concession
Agreement, to wit:
Existing MWSS Fringe Benefits
A. ALLOWANCES
PERA - P500.00 Salary Grade 1 to 23 except those with RATA
ACA P500.00 Salary Grade 1 to 25
RATA- 40% of basic Supervisory Level, Section Chiefs and up or equivalent ranks.
Technical and Executive Assistants
Medical 2,500/year
Rice 500/month
Uniform 2,000/year
Meal 25.00/day (for medical personnel P30.00/day)
Longevity 50.00/year of service/month
Children 30.00/child/month, maximum four (4) children below 21 years old
Hazard 50.00/month
B. BONUSES
Year-End Financial Assistance One (1) month Gross pay (Basic Salary plus PERA, ACA, 226
rice, meal, longevity, Children and RATA

Mid-Year One (1) month Gross Pay Christmas Bonus and Cash Gift One (1) month
Basic salary plus P1,000 cash gift
Anniversary (Bigay-pala) 4,000.00 or 50% of basic, whichever is greater
Productivity as of December 1995 Amount equivalent to P5,000 or 60% of gross pay,
exclusive of RATA, whichever is higher
C. PREMIUMS
Graveyard 50% (12MN 6:00 AM)
Nightwork 25% (6PM 6AM)
Holiday 125%
Sunday 150%
Overtime 125%
Distress 25% of basic pay (For Sewerage Department only)
D. PAID LEAVES
Vacation 15 days/year
Sick 15 days/year
Maternity 60 calendar days
Paternity 7 working days
Emergency Leave - 3 days/year
(Birthday/Funeral/Mourning/Graduation/Enrollment/Wedding/
Anniversary/Hospitalization/Accident/Relocation)
E. STUDY LEAVE
- Study now pay later scheme
- Grant (with contract to serve MWSS)10
It is clear from the aforesaid enumeration that COLA is not among the benefits to be
received by the absorbed employees. Contrary to the contention of MWSA, the
declaration by the Court of the ineffectiveness of DBM CCC No. 10 due to its nonpublication in the Official Gazette or in a newspaper of general circulation in the
country,11 did not give rise to the employees right to demand payment of the subject
benefit from Maynilad.
227
As far as their employment relationship with Maynilad is concerned, the same is not
affected by the De Jesus ruling because it is governed by a separate compensation

package provided for under the Concession Agreement. It would be erroneous to

presume that had the COLA been received during the time of the execution of the
contract, the benefit would have been included in Exhibit "F." First of all, we note that
the Courts ruling in the De Jesus case applies only to government-owned and
controlled corporations and not to private entities. Secondly, the parties to the
Concession Agreement could not have thought of including the COLA in Exhibit "F"
because as early as 1989, the government already resolved to remove the COLA,
among others, from the list of allowances being received by government employees.
Hence, the enactment of Republic Act R.A. No. 6758 or the Compensation and Position
Classification Act of 198912 which integrated the COLA into the standardized salary
rate. Section 12 thereof provides:
Consolidation of Allowances and Compensation. All allowances, except for
representation and transportation allowances; clothing and laundry allowances;
subsistence allowance of marine officers and crew on board government vessels and
hospital personnel; hazard pay; allowances of foreign service personnel stationed
abroad; and such other additional compensation not otherwise specified herein as may
be determined by the DBM, shall be deemed included in the standardized salary rates
herein prescribed. x x x
From the aforesaid provision, we note that all allowances were deemed integrated into
the standardized salary rates except:
(1) representation and transportation allowances;
(2) clothing and laundry allowances;
(3) subsistence allowances of marine officers and crew on board government vessels;
(4) subsistence allowances of hospital personnel;
(5) hazard pay;
(6) allowances of foreign service personnel stationed abroad; and
(7) such other additional compensation not otherwise specified in Section 12 as may be
determined by the DBM.
In Gutierrez v. DBM,13 which is a consolidated case involving over 20 governmentowned and controlled corporations, the Court found proper the inclusion of COLA in the
standardized salary rates. It settled that COLA, not being an enumerated exclusion, was
deemed already incorporated in the standardized salary rates of government employees
under the general rule of integration. In explaining its inclusion in the standardized
salary rates, the Court cited its ruling in National Tobacco Administration v. COA,14 in
that the enumerated fringe benefits in items (1) to (6) have one thing in common
they belong to one category of privilege called allowances which are usually granted to
officials and employees of the government to defray or reimburse the expenses incurred
in the performance of their official functions. Consequently, if these allowances are
228
consolidated with the standardized salary rates, then the government official or
employee will be compelled to spend his personal funds in attending to his duties. On
the other hand, item (7) is a "catch-all proviso" for benefits in the nature of allowances
similar to those enumerated.15

Clearly, COLA is not in the nature of an allowance intended to reimburse expenses

incurred by officials and employees of the government in the performance of their
official functions. It is not payment in consideration of the fulfillment of official duty.16
As defined, cost of living refers to "the level of prices relating to a range of everyday
items"17 or "the cost of purchasing those goods and services which are included in an
accepted standard level of consumption."18 Based on this premise, COLA is a benefit
intended to cover increases in the cost of living. Thus, it is and should be integrated
into the standardized salary rates.
From the aforesaid discussion, it is evident therefore, that at the time the MWSS
employees were absorbed by Maynilad in 1997, the COLA was already part and parcel
of their monthly salary. The non-publication of DBM CCC No. 10 in the Official Gazette
or newspaper of general circulation did not nullify the integration of COLA into the
standardized salary rates upon the effectivity of R.A. No. 6758.19 As held by this Court
in Phil. International Trading Corp. v. COA,20 the validity of R.A. No. 6758 should not be
made to depend on the validity of its implementing rules. To grant COLA to herein
petitioners now would create an absurd situation wherein they would be receiving an
additional COLA in the amount equivalent to 40% of their basic salary even if the Court
has already ruled that the COLA is already integrated in the employees basic salary.
Such conclusion would give the absorbed employees far greater rights than their former
co-employees or other government employees from whom COLA was eventually
disallowed.
The ruling of the Labor Arbiter which MWSA insists on is also erroneous in that it seeks
to have the COLA incorporated in the monthly compensation to be received by the
absorbed employees. It failed to consider that the employment contracts of the MWSA
members with MWSS were terminated prior to their employment with MAYNILAD.
Although they may have continued performing the same function, their employment is
already covered by an entirely new employment contract.
This Court has ruled that unless expressly assumed, labor contracts such as
employment contracts and collective bargaining agreements are not enforceable against
a transferee of an enterprise, labor contracts being in personam, thus binding only
between the parties.21 In the instant case, the only commitment of Maynilad under the
Concession Agreement it entered with MWSS was to provide the absorbed employees
with a compensation package "no less favorable than those granted to [them] by the
MWSS at the time of their separation from MWSS, particularly those set forth in Exhibit
F x x x."22 It is undisputed that Maynilad complied with such commitment. It cannot,
however, be compelled to assume the payment of an allowance which was not agreed
upon. Such would not only be unreasonable but also unfair for Maynilad. MWSS and
Maynilad could not have presumed that the COLA was part of the agreement when it
was no longer being received by the employees at the time of the execution of the
contract, which is the reckoning point of their new employment.
In Norton Resources and Development Corporation v. All Asia Bank Corporation,23 this 229
Court ruled that the agreement or contract between the parties is the formal expression
of the parties rights, duties and obligations. It is the best evidence of the intention of
the parties. Thus, when the terms of an agreement have been reduced to writing, it is
considered as containing all the terms agreed upon and there can be no evidence of
such terms other than the contents of the written agreement between the parties and
their successors in interest. Time and again, we have stressed the rule that a contract is

the law between the parties, and courts have no choice but to enforce such contract so
long as it is not contrary to law, morals, good customs or public policy. Otherwise,
courts would be interfering with the freedom of contract of the parties. Simply put,
courts cannot stipulate for the parties or amend the latters agreement, for to do so
would be to alter the real intention of the contracting parties when the contrary function
of courts is to give force and effect to the intention of the parties.
In fine, contrary to the allegation of MWSA, there is no ambiguity in the Concession
Agreement.1wphi1 Thus, there is nothing to be construed.
Anent the issue of the insufficiency of the appeal bond posted by Maynilad, we agree
with the NLRC that there was merit in the arguments forwarded in support of the prayer
for the reduction of the appeal bond. Maynilad sought the reduction of the appeal bond
to ten percent (10%) for the following reasons: a) that it had filed a Petition for
Rehabilitation before the Regional Trial Court of Quezon City; and b) that as a result
thereof, the Rehabilitation Court issued a Stay Order prohibiting it from selling,
encumbering, transferring or disposing in any manner any of its properties making it
impossible for it to fully comply with the appeal bond requirement.24 Our ruling in
Garcia, et al. v. KJ Commercial25 that the requirement on appeals may be relaxed when
there is substantial compliance with the Rules of Procedure of the NLRC or when the
appellant shows willingness to post a partial bond. Here, we note that Maynilad s
appeal was accompanied by an appeal bond in the amount of Twenty Five Million Pesos
(P25,000,000.00) with an Urgent Manifestation and Motion to Reduce Bond on the
ground that the labor arbiter failed to specify the exact amount of monetary award from
which the amount of the appeal bond is to be based.
In University Plans v. Solano,26 this Court reiterated the guidelines which the NLRC
must exercise in considering the motions for reduction of bond:
The bond requirement on appeals involving monetary awards has been and may be
relaxed in meritorious cases. These cases include instances in which (1) there was
substantial compliance with the Rules, (2) surrounding facts and circumstances
constitute meritorious grounds to reduce the bond, (3) a liberal interpretation of the
requirement of an appeal bond would serve the desired objective of resolving
controversies on the merits, or (4) the appellants, at the very least, exhibited their
willingness and/or good faith by posting a partial bond during the reglementary period.
It is evident that the aforesaid instances are present in the instant case.
WHEREFORE, premises considered, the instant Petition is hereby DENIED and the 31
January 2011 Amended Decision and 12 September 2011 Resolution of the Court of
Appeals in CA-G.R. SP No. 101911 is AFFIRMED in toto.
SO ORDERED.

SECOND DIVISION
G.R. No. 189404

December 11, 2013

WILGEN LOON, JERRY ARCILLA, ALBERTPEREYE, ARNOLD PEREYE,

EDGARDO OBOSE, ARNEL MALARAS, PATROCINO TOETIN, EVELYN
LEONARDO, ELMER GLOCENDA, RUFO CUNAMAY, ROLANDOSAJOL, ROLANDO
ABUCAYON, JENNIFER NATIVIDAD, MARITESS TORION, ARMANDO
LONZAGA, RIZAL GELLIDO, EVIRDE HAQUE,1 MYRNA VINAS, RODELITO
AYALA, WINELITO OJEL, RENATO RODREGO, NENA ABINA, EMALYN
OLIVEROS, LOUIE ILAGAN, JOEL ENTIG, ARNEL ARANETA, BENJAMIN COSE,
WELITO LOON and WILLIAM ALIPAO, Petitioners,
vs.
POWER MASTER, INC., TRI-C GENERAL SERVICES, and SPOUSES HOMER and
CARINA ALUMISIN, Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari,2 filed by petitioners Wilgen Loon, Jerry
Arcilla, Albert Pereye, Arnold Pereye, Edgardo Obose, Arnel Malaras, Patrocino Toetin,
Evelyn Leonardo, Elmer Glocenda, Rufo Cunamay, Rolando Sajol, Rolando Abucayon,
Jennifer Natividad, Maritess Torion, Armando Lonzaga, Rizal Gellido, Evirde Haque,
Myrna Vinas, Rodelito Ayala, Winelito Ojel, Renato Rodrego, Nena Abina, Emalyn
Oliveros, Louie Ilagan, Joel Entig, Arnel Araneta, Benjamin Cose, Welito Loon, William
Alipao (collectively, the petitioners), to challenge the June 5, 2009 decision3 and the
August 28, 2009 resolution4 of the Court of Appeals (CA) in CA-G.R. SP No. 95182.
The Factual Antecedents
Respondents Power Master, Inc. and Tri-C General Services employed and assigned the
petitioners as janitors and leadsmen in various Philippine Long Distance Telephone
Company (PLDT) offices in Metro Manila area. Subsequently, the petitioners filed a
complaint for money claims against Power Master, Inc., Tri-C General Services and their
officers, the spouses Homer and Carina Alumisin (collectively, the respondents). The
petitioners alleged in their complaint that they were not paid minimum wages,
overtime, holiday, premium, service incentive leave, and thirteenth month pays. They
further averred that the respondents made them sign blank payroll sheets. On June 11,
2001, the petitioners amended their complaint and included illegal dismissal as their
cause of action. They claimed that the respondents relieved them from service in
retaliation for the filing of their original complaint.
Notably, the respondents did not participate in the proceedings before the Labor Arbiter
except on April 19, 2001 and May 21, 2001 when Mr. Romulo Pacia, Jr. appeared on the
respondents behalf.5 The respondents counsel also appeared in a preliminary 231
mandatory conference on July 5, 2001.6 However, the respondents neither filed any
position paper nor proffered pieces of evidence in their defense despite their knowledge
of the pendency of the case.
The Labor Arbiters Ruling

In a decision7 dated March 15, 2002, Labor Arbiter (LA) Elias H. Salinas partially ruled
in favor of the petitioners. The LA awarded the petitioners salary differential, service
incentive leave, and thirteenth month pays. In awarding these claims, the LA stated
that the burden of proving the payment of these money claims rests with the employer.
The LA also awarded attorneys fees in favor of the petitioners, pursuant to Article 111
of the Labor Code.8
However, the LA denied the petitioners claims for backwages, overtime, holiday, and
premium pays. The LA observed that the petitioners failed to show that they rendered
overtime work and worked on holidays and rest days without compensation. The LA
further concluded that the petitioners cannot be declared to have been dismissed from
employment because they did not show any notice of termination of employment. They
were also not barred from entering the respondents premises.
The Proceedings before the NLRC
Both parties appealed the LAs ruling with the National Labor Relations Commission. The
petitioners disputed the LAs denial of their claim for backwages, overtime, holiday and
premium pays. Meanwhile, the respondents questioned the LAs ruling on the ground
that the LA did not acquire jurisdiction over their persons.
The respondents insisted that they were not personally served with summons and other
processes. They also claimed that they paid the petitioners minimum wages, service
incentive leave and thirteenth month pays. As proofs, they attached photocopied and
computerized copies of payroll sheets to their memorandum on appeal.9 They further
maintained that the petitioners were validly dismissed. They argued that the petitioners
repeated defiance to their transfer to different workplaces and their violations of the
company rules and regulations constituted serious misconduct and willful
disobedience.10
On January 3, 2003, the respondents filed an unverified supplemental appeal. They
attached photocopied and computerized copies of list of employees with automated
teller machine (ATM) cards to the supplemental appeal. This list also showed the
amounts allegedly deposited in the employees ATM cards.11 They also attached
documentary evidence showing that the petitioners were dismissed for cause and had
been accorded due process.
On January 22, 2003, the petitioners filed an Urgent Manifestation and Motion12 where
they asked for the deletion of the supplemental appeal from the records because it
allegedly suffered from infirmities. First, the supplemental appeal was not verified.
Second, it was belatedly filed six months from the filing of the respondents notice of
appeal with memorandum on appeal. The petitioners pointed out that they only agreed
to the respondents filing of a responsive pleading until December 18, 2002.13 Third
the attached documentary evidence on the supplemental appeal bore the petitioners
forged signatures.
They reiterated these allegations in an Urgent Motion to Resolve Manifestation and
Motion (To Expunge from the Records Respondents Supplemental Appeal, Reply and/or 232
Rejoinder) dated January 31, 2003.14 Subsequently, the petitioners filed an Urgent
Manifestation with Reiterating Motion to Strike-Off the Record Supplemental
Appeal/Reply, Quitclaims and Spurious Documents Attached to Respondents Appeal
dated August 7, 2003.15 The petitioners argued in this last motion that the payrolls

should not be given probative value because they were the respondents fabrications.
They reiterated that the genuine payrolls bore their signatures, unlike the respondents
photocopies of the payrolls. They also maintained that their signatures in the
respondents documents (which showed their receipt of thirteenth month pay) had been
forged.
The NLRC Ruling
In a resolution dated November 27, 2003, the NLRC partially ruled in favor of the
respondents.16 The NLRC affirmed the LAs awards of holiday pay and attorneys fees.
It also maintained that the LA acquired jurisdiction over the persons of the respondents
through their voluntary appearance.
However, it allowed the respondents to submit pieces of evidence for the first time on
appeal on the ground that they had been deprived of due process. It found that the
respondents did not actually receive the LAs processes. It also admitted the
respondents unverified supplemental appeal on the ground that technicalities may be
disregarded to serve the greater interest of substantial due process. Furthermore, the
Rules of Court do not require the verification of a supplemental pleading.
The NLRC also vacated the LAs awards of salary differential, thirteenth month and
service incentive leave pays. In so ruling, it gave weight to the pieces of evidence
attached to the memorandum on appeal and the supplemental appeal. It maintained
that the absence of the petitioners signatures in the payrolls was not an indispensable
factor for their authenticity. It pointed out that the payment of money claims was
further evidenced by the list of employees with ATM cards. It also found that the
petitioners signatures were not forged. It took judicial notice that many people use at
least two or more different signatures.
The NLRC further ruled that the petitioners were lawfully dismissed on grounds of
serious misconduct and willful disobedience. It found that the petitioners failed to
comply with various memoranda directing them to transfer to other workplaces and to
attend training seminars for the intended reorganization and reshuffling.
The NLRC denied the petitioners motion for reconsideration in a resolution dated April
28, 2006.17 Aggrieved, the petitioners filed a petition for certiorari under Rule 65 of the
Rules of Court before the CA.18
The CA Ruling
The CA affirmed the NLRCs ruling. The CA held that the petitioners were afforded
substantive and procedural due process. Accordingly, the petitioners deliberately did not
explain their side. Instead, they continuously resisted their transfer to other PLDT 233
offices and violated company rules and regulations. It also upheld the NLRCs findings
on the petitioners monetary claims.
The CA denied the petitioners motion for reconsideration in a resolution dated August
28, 2009, prompting the petitioners to file the present petition.19
The Petition
In the petition before this Court, the petitioners argue that the CA committed a

reversible error when it did not find that the NLRC committed grave abuse of discretion.
They reiterate their arguments before the lower tribunals and the CA in support of this
conclusion. They also point out that the respondents posted a bond from a surety that
was not accredited by this Court and by the NLRC. In effect, the respondents failed to
perfect their appeal before the NLRC. They further insist that the NLRC should not have
admitted the respondents unverified supplemental appeal.20
The Respondents Position
In their Comments, the respondents stress that the petitioners only raised the issue of
the validity of the appeal bond for the first time on appeal. They also reiterate their
arguments before the NLRC and the CA. They additionally submit that the petitioners
arguments have been fully passed upon and found unmeritorious by the NLRC and the
CA.21
The Issues
This case presents to us the following issues:
1) Whether the CA erred when it did not find that the NLRC committed grave abuse of
discretion in giving due course to the respondents appeal;
a) Whether the respondents perfected their appeal before the NLRC; and
b) Whether the NLRC properly allowed the respondents supplemental appeal
2) Whether the respondents were estopped from submitting pieces of evidence for the
first time on appeal;
3) Whether the petitioners were illegally dismissed and are thus entitled to backwages;
4) Whether the petitioners are entitled to salary differential, overtime, holiday,
premium, service incentive leave, and thirteenth month pays; and
5) Whether the petitioners are entitled to attorneys fees.
The Courts Ruling
The respondents perfected their
appeal with the NLRC because the
revocation of the bonding company's
authority has a prospective
application
Paragraph 2, Article 223 of the Labor Code provides that "[i]n case of a judgment 234
involving a monetary award, an appeal by the employer may be perfected only upon
the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Commission in the amount equivalent to the monetary award in the
judgment appealed from."
Contrary to the respondents claim, the issue of the appeal bonds validity may be raised
for the first time on appeal since its proper filing is a jurisdictional requirement.22 The

requirement that the appeal bond should be issued by an accredited bonding company
is mandatory and jurisdictional. The rationale of requiring an appeal bond is to
discourage the employers from using an appeal to delay or evade the employees' just
and lawful claims. It is intended to assure the workers that they will receive the money
judgment in their favor upon the dismissal of the employers appeal.23
In the present case, the respondents filed a surety bond issued by Security Pacific
Assurance Corporation (Security Pacific) on June 28, 2002. At that time, Security Pacific
was still an accredited bonding company. However, the NLRC revoked its accreditation
on February 16, 2003.24 Nonetheless, this subsequent revocation should not prejudice
the respondents who relied on its then subsisting accreditation in good faith. In Del
Rosario v. Philippine Journalists, Inc.,25 we ruled that a bonding companys revocation
of authority is prospective in application.
However, the respondents should post a new bond issued by an accredited bonding
company in compliance with paragraph 4, Section 6, Rule 6 of the NLRC Rules of
Procedure. This provision states that "[a] cash or surety bond shall be valid and
effective from the date of deposit or posting, until the case is finally decided, resolved
or terminated or the award satisfied."
The CA correctly ruled that the
NLRC properly gave due course to
the respondents supplemental
appeal
The CA also correctly ruled that the NLRC properly gave due course to the respondents
supplemental appeal. Neither the laws nor the rules require the verification of the
supplemental appeal.26 Furthermore, verification is a formal, not a jurisdictional,
requirement. It is mainly intended for the assurance that the matters alleged in the
pleading are true and correct and not of mere speculation.27 Also, a supplemental
appeal is merely an addendum to the verified memorandum on appeal that was earlier
filed in the present case; hence, the requirement for verification has substantially been
complied with.
The respondents also timely filed their supplemental appeal on January 3, 2003. The
records of the case show that the petitioners themselves agreed that the pleading shall
be filed until December 18, 2002. The NLRC further extended the filing of the
supplemental pleading until January 3, 2003 upon the respondents motion for
extension.
A party may only adduce evidence
for the first time on appeal if he
adequately explains his delay in the
submission of evidence and he
sufficiently proves the allegations
sought to be proven
In labor cases, strict adherence to the technical rules of procedure is not required. Time 235
and again, we have allowed evidence to be submitted for the first time on appeal with
the NLRC in the interest of substantial justice.28 Thus, we have consistently supported
the rule that labor officials should use all reasonable means to ascertain the facts in
each case speedily and objectively, without regard to technicalities of law or procedure,

in the interest of due process.29

However, this liberal policy should still be subject to rules of reason and fairplay. The
liberality of procedural rules is qualified by two requirements: (1) a party should
adequately explain any delay in the submission of evidence; and (2) a party should
sufficiently prove the allegations sought to be proven.30 The reason for these
requirements is that the liberal application of the rules before quasi-judicial agencies
cannot be used to perpetuate injustice and hamper the just resolution of the case.
Neither is the rule on liberal construction a license to disregard the rules of
procedure.31
Guided by these principles, the CA grossly erred in ruling that the NLRC did not commit
grave abuse of discretion in arbitrarily admitting and giving weight to the respondents
pieces of evidence for the first time on appeal.
A. The respondents failed to
adequately explain their delay
in the submission of evidence
We cannot accept the respondents cavalier attitude in blatantly disregarding the NLRC
Rules of Procedure. The CA gravely erred when it overlooked that the NLRC blindly
admitted and arbitrarily gave probative value to the respondents evidence despite their
failure to adequately explain their delay in the submission of evidence. Notably, the
respondents delay was anchored on their assertion that they were oblivious of the
proceedings before the LA. However, the respondents did not dispute the LAs finding
that Mr. Romulo Pacia, Jr. appeared on their behalf on April 19, 2001 and May 21,
2001.32 The respondents also failed to contest the petitioners assertion that the
respondents counsel appeared in a preliminary mandatory conference on July 5,
2001.33
Indeed, the NLRC capriciously and whimsically admitted and gave weight to the
respondents evidence despite its finding that they voluntarily appeared in the
compulsory arbitration proceedings. The NLRC blatantly disregarded the fact that the
respondents voluntarily opted not to participate, to adduce evidence in their defense
and to file a position paper despite their knowledge of the pendency of the proceedings
before the LA. The respondents were also grossly negligent in not informing the LA of
the specific building unit where the respondents were conducting their business and
their counsels address despite their knowledge of their non-receipt of the processes.34
B. The respondents failed to
sufficiently prove the
allegations sought to be
proven
Furthermore, the respondents failed to sufficiently prove the allegations sought to be
proven. Why the respondents photocopied and computerized copies of documentary
evidence were not presented at the earliest opportunity is a serious question that lends
credence to the petitioners claim that the respondents fabricated the evidence for
purposes of appeal. While we generally admit in evidence and give probative value to
photocopied documents in administrative proceedings, allegations of forgery and
fabrication should prompt the adverse party to present the original documents for
inspection.35 It was incumbent upon the respondents to present the originals,

236

especially in this case where the petitioners had submitted their specimen signatures.
Instead, the respondents effectively deprived the petitioners of the opportunity to
examine and controvert the alleged spurious evidence by not adducing the originals.
This Court is thus left with no option but to rule that the respondents failure to present
the originals raises the presumption that evidence willfully suppressed would be adverse
if produced.36
It was also gross error for the CA to affirm the NLRCs proposition that "[i]t is of
common knowledge that there are many people who use at least two or more different
signatures."37 The NLRC cannot take judicial notice that many people use at least two
signatures, especially in this case where the petitioners themselves disown the
signatures in the respondents assailed documentary evidence.38 The NLRCs position is
unwarranted and is patently unsupported by the law and jurisprudence.
Viewed in these lights, the scales of justice must tilt in favor of the employees. This
conclusion is consistent with the rule that the employers cause can only succeed on the
strength of its own evidence and not on the weakness of the employees evidence.39
The petitioners are entitled to
backwages
Based on the above considerations, we reverse the NLRC and the CAs finding that the
petitioners were terminated for just cause and were afforded procedural due process. In
termination cases, the burden of proving just and valid cause for dismissing an
employee from his employment rests upon the employer. The employers failure to
discharge this burden results in the finding that the dismissal is unjustified.40 This is
exactly what happened in the present case.
The petitioners are entitled to salary
differential, service incentive,
holiday, and thirteenth month pays
We also reverse the NLRC and the CAs finding that the petitioners are not entitled to
salary differential, service incentive, holiday, and thirteenth month pays. As in illegal
dismissal cases, the general rule is that the burden rests on the defendant to prove
payment rather than on the plaintiff to prove non-payment of these money claims.41
The rationale for this rule is that the pertinent personnel files, payrolls, records,
remittances and other similar documents which will show that differentials, service
incentive leave and other claims of workers have been paid are not in the possession
of the worker but are in the custody and control of the employer.42
The petitioners are not entitled to
overtime and premium pays
However, the CA was correct in its finding that the petitioners failed to provide sufficient 237
factual basis for the award of overtime, and premium pays for holidays and rest days.
The burden of proving entitlement to overtime pay and premium pay for holidays and
rest days rests on the employee because these are not incurred in the normal course of
business.43 In the present case, the petitioners failed to adduce any evidence that
would show that they actually rendered service in excess of the regular eight working
hours a day, and that they in fact worked on holidays and rest days.

The petitioners are entitled to

attorneys fees
The award of attorneys fees is also warranted under the circumstances of this
case.1wphi1 An employee is entitled to an award of attorneys fees equivalent to ten
percent (10%) of the amount of the wages in actions for unlawful withholding of
wages.44
As a final note, we observe that Rodelito Ayala, Winelito Ojel, Renato Rodrego and
Welito Loon are also named as petitioners in this case. However, we deny their petition
for the reason that they were not part of the proceedings before the CA. Their failure to
timely seek redress before the CA precludes this Court from awarding them monetary
claims.
All told, we find that the NLRC committed grave abuse of discretion in admitting and
giving probative value to the respondents' evidence on appeal, which errors the CA
replicated when it upheld the NLRC rulings.
WHEREFORE, based on these premises, we REVERSE and SET ASIDE the decision
dated June 5, 2009, and the resolution dated August 28, 2009 of the Court of Appeals
in CA-G.R. SP No. 95182. This case is REMANDED to the Labor Arbiter for the sole
purpose of computing petitioners' (Wilgen Loon, Jerry Arcilla, Albert Pereye, Arnold
Pereye, Edgardo Obose, Arnel Malaras, Patrocino Toetin, Evelyn Leonardo, Elmer
Glocenda, Rufo Cunamay, Rolando Sajol, Rolando Abucayon, Jennifer Natividad,
Maritess Torion, Ammndo Lonzaga, Rizal Gellido, Evirdly Haque, Myrna Vinas, Nena
Abina, Emalyn Oliveros, Louie Ilagan, Joel Entig, Amel Araneta, Benjamin Cose and
William Alipao) full backwages (computed from the date of their respective dismissals
up to the finality of this decision) and their salary differential, service incentive leave,
holiday, thirteenth month pays, and attorney's fees equivalent to ten percent (10%) of
the withheld wages. The respondents are further directed to immediately post a
satisfactory bond conditioned on the satisfaction of the awards affirmed in this Decision.
SO ORDERED.
SECOND DIVISION
G.R. No. 195466

July 2, 2014

ARIEL L. DAVID, doing business under the name and style "YIELS HOG
DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the November 22, 238
2010 decision2 and the January 31, 2011 resolution3 of the Court of Appeals (CA) in
CA-G.R. SP No. 116003. The CA decision annulled and set aside the May 26, 2010
decision4 of the National Labor Relations Commission (NLRC)5 which, in turn, affirmed
the April 30, 2009 Decision6 of the Labor Arbiter (LA). The LA's decision dismissed

respondent John G. Macasio's monetary claims.

The Factual Antecedents
In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L.
David, doing business under the name and style "Yiels Hog Dealer," for non-payment of
overtime pay, holiday pay and 13th month pay. He also claimed payment for moral and
exemplary damages and attorneys fees. Macasio also claimed payment for service
incentive leave (SIL).8
Macasio alleged9 before the LA that he had been working as a butcher for David since
January 6, 1995. Macasio claimed that David exercised effective control and supervision
over his work, pointing out that David: (1) set the work day, reporting time and hogs to
be chopped, as well as the manner by which he was to perform his work; (2) daily paid
his salary of P700.00, which was increased from P600.00 in 2007, P500.00 in 2006 and
P400.00 in 2005; and (3) approved and disapproved his leaves. Macasio added that
David owned the hogs delivered for chopping, as well as the work tools and
implements; the latter also rented the workplace. Macasio further claimed that David
employs about twenty-five (25) butchers and delivery drivers.
In his defense,10 David claimed that he started his hog dealer business in 2005 and
that he only has ten employees. He alleged that he hired Macasio as a butcher or
chopper on "pakyaw" or task basis who is, therefore, not entitled to overtime pay,
holiday pay and 13th month pay pursuant to the provisions of the Implementing Rules
and Regulations (IRR) of the Labor Code. David pointed out that Macasio: (1) usually
starts his work at 10:00 p.m. and ends at 2:00 a.m. of the following day or earlier,
depending on the volume of the delivered hogs; (2) received the fixed amount of
P700.00 per engagement, regardless of the actual number of hours that he spent
chopping the delivered hogs; and (3) was not engaged to report for work and,
accordingly, did not receive any fee when no hogs were delivered.
Macasio disputed Davids allegations.11 He argued that, first, David did not start his
business only in 2005. He pointed to the Certificate of Employment12 that David issued
in his favor which placed the date of his employment, albeit erroneously, in January
2000. Second, he reported for work every day which the payroll or time record could
have easily proved had David submitted them in evidence.
Refuting Macasios submissions,13 David claims that Macasio was not his employee as
he hired the latter on "pakyaw" or task basis. He also claimed that he issued the
Certificate of Employment, upon Macasios request, only for overseas employment 239
purposes. He pointed to the "Pinagsamang Sinumpaang Salaysay,"14 executed by
Presbitero Solano and Christopher (Antonio Macasios co-butchers), to corroborate his
claims.
In the April 30, 2009 decision,15 the LA dismissed Macasios complaint for lack of merit.
The LA gave credence to Davids claim that he engaged Macasio on "pakyaw" or task
basis. The LA noted the following facts to support this finding: (1) Macasio received the
fixed amount of P700.00 for every work done, regardless of the number of hours that
he spent in completing the task and of the volume or number of hogs that he had to
chop per engagement; (2) Macasio usually worked for only four hours, beginning from
10:00 p.m. up to 2:00 a.m. of the following day; and (3) the P700.00 fixed wage far
exceeds the then prevailing daily minimum wage of P382.00. The LA added that the

nature of Davids business as hog dealer supports this "pakyaw" or task basis
arrangement.
The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not
entitled to overtime, holiday, SIL and 13th month pay.
The NLRCs Ruling
In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed
that David did not require Macasio to observe an eight hour work schedule to earn the
fixed P700.00 wage; and that Macasio had been performing a non-time work, pointing
out that Macasio was paid a fixed amount for the completion of the assigned task,
irrespective of the time consumed in its performance. Since Macasio was paid by result
and not in terms of the time that he spent in the workplace, Macasio is not covered by
the Labor Standards laws on overtime, SIL and holiday pay, and 13th month pay under
the Rules and Regulations Implementing the 13th month pay law.18
Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11,
2010 resolution,20 prompting Macasio to elevate his case to the CA via a petition for
certiorari.21
The CAs Ruling
In its November 22, 2010 decision,22 the CA partly granted Macasios certiorari petition
and reversed the NLRCs ruling for having been rendered with grave abuse of discretion.
While the CA agreed with the LAand the NLRC that Macasio was a task basis employee,
it nevertheless found Macasio entitled to his monetary claims following the doctrine laid
down in Serrano v. Severino Santos Transit.23 The CA explained that as a task basis
employee, Macasio is excluded from the coverage of holiday, SIL and 13th month pay
only if he is likewise a "field personnel." As defined by the Labor Code, a "field
personnel" is one who performs the work away from the office or place of work and
whose regular work hours cannot be determined with reasonable certainty. In Macasios
case, the elements that characterize a "field personnel" are evidently lacking as he had
been working as a butcher at Davids "Yiels Hog Dealer" business in Sta. Mesa, Manila
under Davids supervision and control, and for a fixed working schedule that starts at
10:00 p.m.
Accordingly, the CA awarded Macasios claim for holiday, SIL and 13th month pay for
three years, with 10% attorneys fees on the total monetary award. The CA, however,
denied Macasios claim for moral and exemplary damages for lack of basis.
David filed the present petition after the CA denied his motion for reconsideration24 in
the CAs January 31, 2011 resolution.25
The Petition
In this petition,26 David maintains that Macasios engagement was on a "pakyaw" or 240
task basis. Hence, the latter is excluded from the coverage of holiday, SIL and 13th
month pay. David reiterates his submissions before the lower tribunals27 and adds that
he never had any control over the manner by which Macasio performed his work and he
simply looked on to the "end-result." He also contends that he never compelled Macasio

to report for work and that under their arrangement, Macasio was at liberty to choose
whether to report for work or not as other butchers could carry out his tasks. He points
out that Solano and Antonio had, in fact, attested to their (David and Macasios)
established "pakyawan" arrangement that rendered a written contract unnecessary. In
as much as Macasio is a task basis employee who is paid the fixed amount of P700.00
per engagement regardless of the time consumed in the performance David argues
that Macasio is not entitled to the benefits he claims. Also, he posits that because he
engaged Macasio on "pakyaw" or task basis then no employer-employee relationship
exists between them.
Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain
finality especially when, as in this case, they are supported by substantial evidence.
Hence, David posits that the CA erred in reversing the labor tribunals findings and
granting the prayed monetary claims.
The Case for the Respondent
Macasio counters that he was not a task basis employee or a "field personnel" as David
would have this Court believe.28 He reiterates his arguments before the lower tribunals
and adds that, contrary to Davids position, the P700.00 fee that he was paid for each
day that he reported for work does not indicate a "pakyaw" or task basis employment
as this amount was paid daily, regardless of the number or pieces of hogs that he had
to chop. Rather, it indicates a daily-wage method of payment and affirms his regular
employment status. He points out that David did not allege or present any evidence as
regards the quota or number of hogs that he had to chop as basis for the "pakyaw" or
task basis payment; neither did David present the time record or payroll to prove that
he worked for less than eight hours each day. Moreover, David did not present any
contract to prove that his employment was on task basis. As David failed to prove the
alleged task basis or "pakyawan" agreement, Macasio concludes that he was Davids
employee. Procedurally, Macasio points out that Davids submissions in the present
petition raise purely factual issues that are not proper for a petition for review on
certiorari. These issues whether he (Macasio) was paid by result or on "pakyaw"
basis; whether he was a "field personnel"; whether an employer-employee relationship
existed between him and David; and whether David exercised control and supervision
over his work are all factual in nature and are, therefore, proscribed in a Rule 45
petition. He argues that the CAs factual findings bind this Court, absent a showing that
such findings are not supported by the evidence or the CAs judgment was based on a
misapprehension of facts. He adds that the issue of whether an employer-employee
relationship existed between him and David had already been settled by the LA29 and
the NLRC30 (as well as by the CA per Macasios manifestation before this Court dated
November 15, 2012),31 in his favor, in the separate illegal case that he filed against
David.
The Issue
The issue revolves around the proper application and interpretation of the labor law 241
provisions on holiday, SIL and 13th month pay to a worker engaged on "pakyaw" or
task basis. In the context of the Rule 65 petition before the CA, the issue is whether the
CA correctly found the NLRC in grave abuse of discretion in ruling that Macasio is
entitled to these labor standards benefits.
The Courts Ruling

We partially grant the petition.

Preliminary considerations: the Montoya ruling and the factual-issue-bar rule
In this Rule 45 petition for review on certiorari of the CAs decision rendered under a
Rule 65 proceeding, this Courts power of review is limited to resolving matters
pertaining to any perceived legal errors that the CA may have committed in issuing the
assailed decision. This is in contrast with the review for jurisdictional errors, which we
undertake in an original certiorari action. In reviewing the legal correctness of the CA
decision, we examine the CA decision based on how it determined the presence or
absence of grave abuse of discretion in the NLRC decision before it and not on the basis
of whether the NLRC decision on the merits of the case was correct.32 In other words,
we have to be keenly aware that the CA undertook a Rule 65 review, not a review on
appeal, of the NLRC decision challenged before it.33
Moreover, the Courts power in a Rule 45 petition limits us to a review of questions of
law raised against the assailed CA decision.34
In this petition, David essentially asks the question whether Macasio is entitled to
holiday, SIL and 13th month pay. This one is a question of law. The determination of
this question of law however is intertwined with the largely factual issue of whether
Macasio falls within the rule on entitlement to these claims or within the exception. In
either case, the resolution of this factual issue presupposes another factual matter, that
is, the presence of an employer-employee relationship between David and Macasio.
In insisting before this Court that Macasio was not his employee, David argues that he
engaged the latter on "pakyaw" or task basis. Very noticeably, David confuses
engagement on "pakyaw" or task basis with the lack of employment relationship.
Impliedly, David asserts that their "pakyawan" or task basis arrangement negates the
existence of employment relationship.
At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or
task basis does not characterize the relationship that may exist between the parties,
i.e., whether one of employment or independent contractorship. Article 97(6) of the
Labor Code defines wages as "xxx 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[.]"35 In relation to Article 97(6), Article 10136 of the Labor Code speaks of
workers paid by results or those whose pay is calculated in terms of the quantity or
quality of their work output which includes "pakyaw" work and other non-time work.
More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or
task basis negates employer-employee relationship, David would want the Court to
engage on a factual appellate review of the entire case to determine the presence or 242
existence of that relationship. This approach however is not authorized under a Rule 45
petition for review of the CA decision rendered under a Rule 65 proceeding.
First, the LA and the NLRC denied Macasios claim not because of the absence of an
employer-employee but because of its finding that since Macasio is paid on pakyaw or

task basis, then he is not entitled to SIL, holiday and 13th month pay. Second, we
consider it crucial, that in the separate illegal dismissal case Macasio filed with the LA,
the LA, the NLRC and the CA uniformly found the existence of an employer-employee
relationship.37
In other words, aside from being factual in nature, the existence of an employeremployee relationship is in fact a non-issue in this case. To reiterate, in deciding a Rule
45 petition for review of a labor decision rendered by the CA under 65, the narrow
scope of inquiry is whether the CA correctly determined the presence or absence of
grave abuse of discretion on the part of the NLRC. In concrete question form, "did the
NLRC gravely abuse its discretion in denying Macasios claims simply because he is paid
on a non-time basis?"
At any rate, even if we indulge the petitioner, we find his claim that no employeremployee relationship exists baseless. Employing the control test,38 we find that such a
relationship exist in the present case.
Even a factual review shows that Macasio is Davids employee
To determine the existence of an employer-employee relationship, four elements
generally need to be considered, namely: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employees conduct. These elements or indicators comprise the so-called
"four-fold" test of employment relationship. Macasios relationship with David satisfies
this test.
First, David engaged the services of Macasio, thus satisfying the element of "selection
and engagement of the employee." David categorically confirmed this fact when, in his
"Sinumpaang Salaysay," he stated that "nag apply po siya sa akin at kinuha ko siya na
chopper[.]"39 Also, Solano and Antonio stated in their "Pinagsamang Sinumpaang
Salaysay"40 that "[k]ami po ay nagtratrabaho sa Yiels xxx na pag-aari ni Ariel David
bilang butcher" and "kilalanamin si xxx Macasio na isa ring butcher xxx ni xxx David at
kasama namin siya sa aming trabaho."
Second, David paid Macasios wages.Both David and Macasio categorically stated in
their respective pleadings before the lower tribunals and even before this Court that the
former had been paying the latter P700.00 each day after the latter had finished the
days task. Solano and Antonio also confirmed this fact of wage payment in their
"Pinagsamang Sinumpaang Salaysay."41 This satisfies the element of "payment of
wages."
Third, David had been setting the day and time when Macasio should report for work.
This power to determine the work schedule obviously implies power of control. By
having the power to control Macasios work schedule, David could regulate Macasios
work and could even refuse to give him any assignment, thereby effectively dismissing
him.
And fourth, David had the right and power to control and supervise Macasios work as
to the means and methods of performing it. In addition to setting the day and time 243
when Macasio should report for work, the established facts show that David rents the
place where Macasio had been performing his tasks. Moreover, Macasio would leave the
workplace only after he had finished chopping all of the hog meats given to him for the

days task. Also, David would still engage Macasios services and have him report for
work even during the days when only few hogs were delivered for butchering.
Under this overall setup, all those working for David, including Macasio, could naturally
be expected to observe certain rules and requirements and David would necessarily
exercise some degree of control as the chopping of the hog meats would be subject to
his specifications. Also, since Macasio performed his tasks at Davids workplace, David
could easily exercise control and supervision over the former. Accordingly, whether or
not David actually exercised this right or power to control is beside the point as the law
simply requires the existence of this power to control 4243 or, as in this case, the
existence of the right and opportunity to control and supervise Macasio.44
In sum, the totality of the surrounding circumstances of the present case sufficiently
points to an employer-employee relationship existing between David and Macasio.
Macasio is engaged on "pakyaw" or task basis
At this point, we note that all three tribunals the LA, the NLRC and the CA found
that Macasio was engaged or paid on "pakyaw" or task basis. This factual finding binds
the Court under the rule that factual findings of labor tribunals when supported by the
established facts and in accord with the laws, especially when affirmed by the CA, is
binding on this Court.
A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to
straight-hour wage payment, is the non-consideration of the time spent in working. In a
task-basis work, the emphasis is on the task itself, in the sense that payment is
reckoned in terms of completion of the work, not in terms of the number of time spent
in the completion of work.45 Once the work or task is completed, the worker receives a
fixed amount as wage, without regard to the standard measurements of time generally
used in pay computation.
In Macasios case, the established facts show that he would usually start his work at
10:00 p.m. Thereafter, regardless of the total hours that he spent at the workplace or of
the total number of the hogs assigned to him for chopping, Macasio would receive the
fixed amount of P700.00 once he had completed his task. Clearly, these circumstances
show a "pakyaw" or task basis engagement that all three tribunals uniformly found.
In sum, the existence of employment relationship between the parties is determined by
applying the "four-fold" test; engagement on "pakyaw" or task basis does not determine
the parties relationship as it is simply a method of pay computation. Accordingly,
Macasio is Davids employee, albeit engaged on "pakyaw" or task basis.
As an employee of David paid on pakyaw or task basis, we now go to the core issue of
whether Macasio is entitled to holiday, 13th month, and SIL pay.
On the issue of Macasios entitlement to holiday, SIL and 13th month pay
The LA dismissed Macasios claims pursuant to Article 94 of the Labor Code in relation 244
to Section 1, Rule IV of the IRR of the Labor Code, and Article 95 of the Labor Code, as
well as Presidential Decree (PD) No. 851. The NLRC, on the other hand, relied on Article
82 of the Labor Code and the Rules and Regulations Implementing PD No. 851.
Uniformly, these provisions exempt workers paid on "pakyaw" or task basis from the

coverage of holiday, SIL and 13th month pay.

In reversing the labor tribunals rulings, the CA similarly relied on these provisions, as
well as on Section 1, Rule V of the IRR of the Labor Code and the Courts ruling in
Serrano v. Severino Santos Transit.46 These labor law provisions, when read together
with the Serrano ruling, exempt those engaged on "pakyaw" or task basis only if they
qualify as "field personnel."
In other words, what we have before us is largely a question of law regarding the
correct interpretation of these labor code provisions and the implementing rules;
although, to conclude that the worker is exempted or covered depends on the facts and
in this sense, is a question of fact: first, whether Macasio is a "field personnel"; and
second, whether those engaged on "pakyaw" or task basis, but who are not "field
personnel," are exempted from the coverage of holiday, SIL and 13th month pay.
To put our discussion within the perspective of a Rule 45 petition for review of a CA
decision rendered under Rule 65 and framed in question form, the legal question is
whether the CA correctly ruled that it was grave abuse of discretion on the part of the
NLRC to deny Macasios monetary claims simply because he is paid on a non-time basis
without determining whether he is a field personnel or not.
To resolve these issues, we need tore-visit the provisions involved.
Provisions governing SIL and holiday pay
Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book
III of the Labor Code - provisions governing working conditions and rest periods.
Art. 82. Coverage. The provisions of [Title I] shall apply to employees in all
establishments and undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
xxxx
"Field personnel" shall refer to non-agricultural employees who regularly perform their
duties away from the principal place of business or branch office of the employer and
whose actual hours of work in the field cannot be determined with reasonable certainty. 245
[emphases and underscores ours]
Among the Title I provisions are the provisions on holiday pay (under Article 94 of the
Labor Code) and SIL pay (under Article 95 of the Labor Code). Under Article 82,"field
personnel" on one hand and "workers who are paid by results" on the other hand, are
not covered by the Title I provisions. The wordings of Article82 of the Labor Code
additionally categorize workers "paid by results" and "field personnel" as separate and
distinct types of employees who are exempted from the Title I provisions of the Labor
Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding provision in
the IRR47 reads:

Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage
during regular holidays, except in retail and service establishments regularly employing
less than (10) workers[.] [emphasis ours]
xxxx
SECTION 1. Coverage. This Rule shall apply to all employees except:
xxxx
(e)Field personnel and other employees whose time and performance is unsupervised
by the employer including those who are engaged on task or contract basis, purely
commission basis, or those who are paid a fixed amount for performing work
irrespective of the time consumed in the performance thereof. [emphases ours]
On the other hand, Article 95 of the Labor Code and its corresponding provision in the
IRR48 pertinently provides:
Art. 95. Right to service incentive. (a) Every employee who has rendered at least one
year of service shall be entitled to a yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein
provided, those enjoying vacation leave with pay of at least five days and those
employed in establishments regularly employing less than ten employees or in
establishments exempted from granting this benefit by the Secretary of Labor and
Employment after considering the viability or financial condition of such establishment.
[emphases ours]
xxxx
Section 1. Coverage. This rule shall apply to all employees except:
xxxx
(e) Field personnel and other employees whose performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely commission
basis, or those who are paid a fixed amount for performing work irrespective of the
time consumed in the performance thereof. [emphasis ours]
Under these provisions, the general rule is that holiday and SIL pay provisions cover all
employees. To be excluded from their coverage, an employee must be one of those that
these provisions expressly exempt, strictly in accordance with the exemption. Under the 246
IRR, exemption from the coverage of holiday and SIL pay refer to "field personnel and
other employees whose time and performance is unsupervised by the employer
including those who are engaged on task or contract basis[.]" Note that unlike Article 82
of the Labor Code, the IRR on holiday and SIL pay do not exclude employees "engaged
on task basis" as a separate and distinct category from employees classified as "field
personnel." Rather, these employees are altogether merged into one classification of
exempted employees.
Because of this difference, it may be argued that the Labor Code may be interpreted to

mean that those who are engaged on task basis, per se, are excluded from the SIL and
holiday payment since this is what the Labor Code provisions, in contrast with the IRR,
strongly suggest. The arguable interpretation of this rule may be conceded to be within
the discretion granted to the LA and NLRC as the quasi-judicial bodies with expertise on
labor matters.
However, as early as 1987 in the case of Cebu Institute of Technology v. Ople49 the
phrase "those who are engaged on task or contract basis" in the rule has already been
interpreted to mean as follows:
[the phrase] should however, be related with "field personnel" applying the rule on
ejusdem generis that general and unlimited terms are restrained and limited by the
particular terms that they follow xxx Clearly, petitioner's teaching personnel cannot be
deemed field personnel which refers "to non-agricultural employees who regularly
perform their duties away from the principal place of business or branch office of the
employer and whose actual hours of work in the field cannot be determined with
reasonable certainty. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim
that private respondents are not entitled to the service incentive leave benefit cannot
therefore be sustained.
In short, the payment of an employee on task or pakyaw basis alone is insufficient to
exclude one from the coverage of SIL and holiday pay. They are exempted from the
coverage of Title I (including the holiday and SIL pay) only if they qualify as "field
personnel." The IRR therefore validly qualifies and limits the general exclusion of
"workers paid by results" found in Article 82 from the coverage of holiday and SIL pay.
This is the only reasonable interpretation since the determination of excluded workers
who are paid by results from the coverage of Title I is "determined by the Secretary of
Labor in appropriate regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport
Systems, Inc., v. Bautista:
A careful perusal of said provisions of law will result in the conclusion that the grant of
service incentive leave has been delimited by the Implementing Rules and Regulations
of the Labor Code to apply only to those employees not explicitly excluded by Section 1
of Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply
to employees classified as "field personnel." The phrase "other employees whose
performance is unsupervised by the employer" must not be understood as a separate
classification of employees to which service incentive leave shall not be granted. Rather,
it serves as an amplification of the interpretation of the definition of field personnel
under the Labor Code as those "whose actual hours of work in the field cannot be
determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or contract
basis, purely commission basis." Said phrase should be related with "field personnel,"
applying the rule on ejusdem generis that general and unlimited terms are restrained
and limited by the particular terms that they follow.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited
in support of granting Macasios petition.
247
In Serrano, the Court, applying the rule on ejusdem generis50 declared that "employees

engaged on task or contract basis xxx are not automatically exempted from the grant of
service incentive leave, unless, they fall under the classification of field personnel."51
The Court explained that the phrase "including those who are engaged on task or
contract basis, purely commission basis" found in Section 1(d), Rule V of Book III of the
IRR should not be understood as a separate classification of employees to which SIL
shall not be granted. Rather, as with its preceding phrase - "other employees whose
performance is unsupervised by the employer" - the phrase "including those who are
engaged on task or contract basis" serves to amplify the interpretation of the Labor
Code definition of "field personnel" as those "whose actual hours of work in the field
cannot be determined with reasonable certainty."
In contrast and in clear departure from settled case law, the LA and the NLRC still
interpreted the Labor Code provisions and the IRR as exempting an employee from the
coverage of Title I of the Labor Code based simply and solely on the mode of payment
of an employee. The NLRCs utter disregard of this consistent jurisprudential ruling is a
clear act of grave abuse of discretion.52 In other words, by dismissing Macasios
complaint without considering whether Macasio was a "field personnel" or not, the
NLRC proceeded based on a significantly incomplete consideration of the case. This
action clearly smacks of grave abuse of discretion.
Entitlement to holiday pay
Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC
had only taken counsel from Serrano and earlier cases, they would have correctly
reached a similar conclusion regarding the payment of holiday pay since the rule
exempting "field personnel" from the grant of holiday pay is identically worded with the
rule exempting "field personnel" from the grant of SIL pay. To be clear, the phrase
"employees engaged on task or contract basis "found in the IRR on both SIL pay and
holiday pay should be read together with the exemption of "field personnel."
In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled
to holiday and SIL pay, the presence (or absence) of employer supervision as regards
the workers time and performance is the key: if the worker is simply engaged on
pakyaw or task basis, then the general rule is that he is entitled to a holiday pay and
SIL pay unless exempted from the exceptions specifically provided under Article 94
(holiday pay) and Article95 (SIL pay) of the Labor Code. However, if the worker
engaged on pakyaw or task basis also falls within the meaning of "field personnel"
under the law, then he is not entitled to these monetary benefits.
Macasio does not fall under the classification of "field personnel"
Based on the definition of field personnel under Article 82, we agree with the CA that
Macasio does not fall under the definition of "field personnel." The CAs finding in this
regard is supported by the established facts of this case: first, Macasio regularly 248
performed his duties at Davids principal place of business; second, his actual hours of
work could be determined with reasonable certainty; and, third, David supervised his
time and performance of duties. Since Macasio cannot be considered a "field
personnel," then he is not exempted from the grant of holiday, SIL pay even as he was
engaged on "pakyaw" or task basis.
Not being a "field personnel," we find the CA to be legally correct when it reversed the
NLRCs ruling dismissing Macasios complaint for holiday and SIL pay for having been

rendered with grave abuse of discretion.

Entitlement to 13th month pay
With respect to the payment of 13th month pay however, we find that the CA legally
erred in finding that the NLRC gravely abused its discretion in denying this benefit to
Macasio.1wphi1
The governing law on 13th month pay is PD No. 851.53
As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an
employee must be one of those expressly enumerated to be exempted. Section 3 of the
Rules and Regulations Implementing P.D. No. 85154 enumerates the exemptions from
the coverage of 13th month pay benefits. Under Section 3(e), "employers of those who
are paid on xxx task basis, and those who are paid a fixed amount for performing a
specific work, irrespective of the time consumed in the performance thereof"55 are
exempted.
Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the
Rules and Regulations Implementing PD No. 851 exempts employees "paid on task
basis" without any reference to "field personnel." This could only mean that insofar as
payment of the 13th month pay is concerned, the law did not intend to qualify the
exemption from its coverage with the requirement that the task worker be a "field
personnel" at the same time.
WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition
insofar as the payment of 13th month pay to respondent is concerned. In all other
aspects, we AFFIRM the decision dated November 22, 2010 and the resolution dated
January 31, 2011 of the Court of Appeals in CA-G.R. SP No. 116003.
SO ORDERED.
THIRD DIVISION
LETRAN CALAMBA FACULTY G.R. NO. 156225
and EMPLOYEES ASSOCIATION,
Petitioner,
Present:
- versus NATIONAL LABOR RELATIONS
COMMISSION and COLEGIO DE SAN
JUAN DE LETRAN CALAMBA, INC.,
Respondents.
Promulgated:January 29, 2008
DECISION
AUSTRIA-MARTINEZ, J.:
Assailed in the present Petition for Review on Certiorari under Rule 45 of the Rules of
Court is the Decision[1] of the Court of Appeals (CA) promulgated on May 14, 2002 in

249

CA-G.R. SP No. 61552 dismissing the special civil action for certiorari filed before it; and
the Resolution[2] dated November 28, 2002, denying petitioner's Motion for
Reconsideration.
The facts of the case are as follows:
On October 8, 1992, the Letran Calamba Faculty and Employees Association (petitioner)
filed with Regional Arbitration Branch No. IV of the National Labor Relations Commission
(NLRC) a Complaint[3] against Colegio de San Juan de Letran, Calamba, Inc.
(respondent) for collection of various monetary claims due its members. Petitioner
alleged in its Position Paper that:
xxxx
2) [It] has filed this complaint in behalf of its members whose names and positions
appear in the list hereto attached as Annex A.
3) In the computation of the thirteenth month pay of its academic personnel,
respondent does not include as basis therefor their compensation for overloads. It only
takes into account the pay the faculty members receive for their teaching loads not
exceeding eighteen (18) units. The teaching overloads are rendered within eight (8)
hours a day.
4) Respondent has not paid the wage increases required by Wage Order No. 5 to its
employees who qualify thereunder.
5) Respondent has not followed the formula prescribed by DECS Memorandum Circular
No. 2 dated March 10, 1989 in the computation of the compensation per unit of excess
load or overload of faculty members. This has resulted in the diminution of the
compensation of faculty members.
6) The salary increases due the non-academic personnel as a result of job grading has
not been given. Job grading has been an annual practice of the school since 1980; the
same is done for the purpose of increasing the salaries of non-academic personnel and
as the counterpart of the ranking systems of faculty members.
7) Respondent has not paid to its employees the balances of seventy (70%) percent of
the tuition fee increases for the years 1990, 1991 and 1992.
8) Respondent has not also paid its employees the holiday pay for the ten (10) regular
holidays as provided for in Article 94 of the Labor Code.
9) Respondent has refused without justifiable reasons and despite repeated demands to
pay its obligations mentioned in paragraphs 3 to 7 hereof.
x x x x[4]
The complaint was docketed as NLRC Case No. RAB-IV-10-4560-92-L.
On January 29, 1993, respondent filed its Position Paper denying all the allegations of
petitioner.

250

On March 10, 1993, petitioner filed its Reply.

Prior to the filing of the above-mentioned complaint, petitioner filed a separate
complaint against the respondent for money claims with Regional Office No. IV of the
Department of Labor and Employment (DOLE).
On the other hand, pending resolution of NLRC Case No. RAB-IV-10-4560-92-L,
respondent filed with Regional Arbitration Branch No. IV of the NLRC a petition to
declare as illegal a strike staged by petitioner in January 1994.
Subsequently, these three cases were consolidated. The case for money claims
originally filed by petitioner with the DOLE was later docketed as NLRC Case No. RABIV-11-4624-92-L, while the petition to declare the subject strike illegal filed by
respondent was docketed as NLRC Case No. RAB-IV-3-6555-94-L.
On September 28, 1998, the Labor Arbiter (LA) handling the consolidated cases
rendered a Decision with the following dispositive portion:
WHEREFORE, premises considered, judgment is hereby rendered, as follows:
1. The money claims cases (RAB-IV-10-4560-92-L and RAB-IV-11-4624-92-L) are
hereby dismissed for lack of merit;
2. The petition to declare strike illegal (NLRC Case No. RAB-IV-3-6555-94-L) is hereby
dismissed, but the officers of the Union, particularly its President, Mr. Edmundo F.
Marifosque, Sr., are hereby reprimanded and sternly warned that future conduct similar
to what was displayed in this case will warrant a more severe sanction from this Office.
SO ORDERED.[5]
Both parties appealed to the NLRC.
On July 28, 1999, the NLRC promulgated its Decision[6] dismissing both appeals.
Petitioner filed a Motion for Reconsideration[7] but the same was denied by the NLRC in
its Resolution[8] dated June 21, 2000.
Petitioner then filed a special civil action for certiorari with the CA assailing the abovementioned NLRC Decision and Resolution.
On May 14, 2002, the CA rendered the presently assailed judgment dismissing the
petition.
Petitioner filed a Motion for Reconsideration but the CA denied it in its Resolution
promulgated on November 28, 2002.
Hence, herein petition for review based on the following assignment of errors:
I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE FACTUAL FINDINGS
OF THE NATIONAL LABOR RELATIONS COMMISSION CANNOT BE REVIEWED IN
CERTIORARI PROCEEDINGS.
II

251

THE COURT OF APPEALS GRAVELY ERRED IN REFUSING TO RULE SQUARELY ON THE

ISSUE OF WHETHER OR NOT THE PAY OF FACULTY MEMBERS FOR TEACHING
OVERLOADS SHOULD BE INCLUDED AS BASIS IN THE COMPUTATION OF THEIR
THIRTEENTH MONTH PAY.
III
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE DECISION OF THE
NATIONAL LABOR RELATIONS COMMISSION IS SUPPORTED BY SUBSTANTIAL
EVIDENCE AND IN NOT GRANTING PETITIONER'S MONETARY CLAIMS.[9]
Citing Agustilo v. Court of Appeals,[10] petitioner contends that in a special civil action
for certiorari brought before the CA, the appellate court can review the factual findings
and the legal conclusions of the NLRC.
As to the inclusion of the overloads of respondent's faculty members in the computation
of their 13th-month pay, petitioner argues that under the Revised Guidelines on the
Implementation of the 13th-Month Pay Law, promulgated by the Secretary of Labor on
November 16, 1987, the basic pay of an employee includes remunerations or earnings
paid by his employer for services rendered, and that excluded therefrom are the cash
equivalents of unused vacation and sick leave credits, overtime, premium, night
differential, holiday pay and cost-of-living allowances. Petitioner claims that since the
pay for excess loads or overloads does not fall under any of the enumerated exclusions
and considering that the said overloads are being performed within the normal working
period of eight hours a day, it only follows that the overloads should be included in the
computation of the faculty members' 13th-month pay.
To support its argument, petitioner cites the opinion of the Bureau of Working
Conditions of the DOLE that payment of teaching overload performed within eight hours
of work a day shall be considered in the computation of the 13th-month pay.[11]
Petitioner further contends that DOLE-DECS-CHED-TESDA Order No. 02, Series of 1996
(DOLE Order) which was relied upon by the LA and the NLRC in their respective
Decisions cannot be applied to the instant case because the DOLE Order was issued
long after the commencement of petitioner's complaints for monetary claims; that the
prevailing rule at the time of the commencement of petitioner's complaints was to
include compensations for overloads in determining a faculty member's 13th-month
pay; that to give retroactive application to the DOLE Order issued in 1996 is to deprive
workers of benefits which have become vested and is a clear violation of the
constitutional mandate on protection of labor; and that, in any case, all doubts in the
implementation and interpretation of labor laws, including implementing rules and
regulations, should be resolved in favor of labor.
Lastly, petitioner avers that the CA, in concluding that the NLRC Decision was supported
by substantial evidence, failed to specify what constituted said evidence. Thus,
petitioner asserts that the CA acted arbitrarily in affirming the Decision of the NLRC.
In its Comment, respondent contends that the ruling in Agustilo is an exception rather
than the general rule; that the general rule is that in a petition for certiorari, judicial 252
review by this Court or by the CA in labor cases does not go so far as to evaluate the
sufficiency of the evidence upon which the proper labor officer or office based his or its
determination but is limited only to issues of jurisdiction or grave abuse of discretion

amounting to lack of jurisdiction; that before a party may ask that the CA or this Court
review the factual findings of the NLRC, there must first be a convincing argument that
the NLRC acted in a capricious, whimsical, arbitrary or despotic manner; and that in its
petition for certiorari filed with the CA, herein petitioner failed to prove that the NLRC
acted without or in excess of jurisdiction or with grave abuse of discretion.
Respondent argues that Agustilo is not applicable to the present case because in the
former case, the findings of fact of the LA and the NLRC are at variance with each
other; while in the present case, the findings of fact and conclusions of law of the LA
and the NLRC are the same.
Respondent also avers that in a special civil action for certiorari, the discretionary power
to review factual findings of the NLRC rests upon the CA; and that absent any findings
by the CA of the need to resolve any unclear or ambiguous factual findings of the NLRC,
the grant of the writ of certiorari is not warranted.
Further, respondent contends that even granting that the factual findings of the CA,
NLRC and the LA may be reviewed in the present case, petitioner failed to present valid
arguments to warrant the reversal of the assailed decision.
Respondent avers that the DOLE Order is an administrative regulation which interprets
the 13th-Month Pay Law (P.D. No. 851) and, as such, it is mandatory for the LA to apply
the same to the present case.
Moreover, respondent contends that the Legal Services Office of the DOLE issued an
opinion dated March 4, 1992,[12] that remunerations for teaching in excess of the
regular load, which includes overload pay for work performed within an eight-hour work
day, may not be included as part of the basic salary in the computation of the 13thmonth pay unless this has been included by company practice or policy; that petitioner
intentionally omitted any reference to the above-mentioned opinion of the Legal
Services Office of the DOLE because it is fatal to its cause; and that the DOLE Order is
an affirmation of the opinion rendered by the said Office of the DOLE.
Furthermore, respondent claims that, contrary to the asseveration of petitioner, prior to
the issuance of the DOLE Order, the prevailing rule is to exclude excess teaching load,
which is akin to overtime, in the computation of a teacher's basic salary and, ultimately,
in the computation of his 13th-month pay.
As to respondent's alleged non-payment of petitioner's consolidated money claims,
respondent contends that the findings of the LA regarding these matters, which were
affirmed by the NLRC and the CA, have clear and convincing factual and legal bases to
stand on.
The Courts Ruling
The Court finds the petition bereft of merit.
As to the first and third assigned errors, petitioner would have this Court review the 253
factual findings of the LA as affirmed by the NLRC and the CA, to wit.
With respect to the alleged non-payment of benefits under Wage Order No. 5, this
Office is convinced that after the lapse of the one-year period of exemption from
compliance with Wage Order No. 5 (Exhibit 1-B), which exemption was granted by then
Labor Minister Blas Ople, the School settled its obligations to its employees,

conformably with the agreement reached during the management-employees meeting

of June 26, 1985 (Exhibits 4-B up to 4-D, also Exhibit 6-x-1). The Union has presented
no evidence that the settlement reached during the June 26, 1985 meeting was the
result of coercion. Indeed, what is significant is that the agreement of June 26, 1985
was signed by Mr. Porferio Ferrer, then Faculty President and an officer of the
complaining Union. Moreover, the samples from the payroll journal of the School,
identified and offered in evidence in these cases (Exhibits 1-C and 1-D), shows that the
School paid its employees the benefits under Wage Order No. 5 (and even Wage Order
No. 6) beginning June 16, 1985.
Under the circumstances, therefore, the claim of the Union on this point must likewise
fail.
The claim of the Union for salary differentials due to the improper computation of
compensation per unit of excess load cannot hold water for the simple reason that
during the Schoolyears in point there were no classes from June 1-14 and October 1731. This fact was not refuted by the Union. Since extra load should be paid only when
actually performed by the employees, no salary differentials are due the Union
members.
The non-academic members of the Union cannot legally insist on wage increases due to
Job Grading. From the records it appears that Job Grading is a system adopted by the
School by which positions are classified and evaluated according to the prescribed
qualifications therefor. It is akin to a merit system whereby salary increases are made
dependent upon the classification, evaluation and grading of the position held by an
employee.
The system of Job Grading was initiated by the School in Schoolyear 1989-1990. In
1992, just before the first of the two money claims was filed, a new Job Grading
process was initiated by the School.
Under the circumstances obtaining, it cannot be argued that there were repeated grants
of salary increases due to Job Grading to warrant the conclusion that some benefit was
granted in favor of the non-academic personnel that could no longer be eliminated or
banished under Article 100 of the Labor Code. Since the Job Grading exercises of the
School were neither consistent nor for a considerable period of time, the monetary
claims attendant to an increase in job grade are non-existent.
The claim of the Union that its members were not given their full share in the tuition fee
increases for the Schoolyears 1989-1990, 1990-1991 and 1991-1992 is belied by the
evidence presented by the School which consists of the unrefuted testimony of its
Accounting Coordinator, Ms. Rosario Manlapaz, and the reports extrapolated from the
journals and general ledgers of the School (Exhibits 2, 2-A up to 2-G). The evidence
indubitably shows that in Schoolyear 1989-1990, the School incurred a deficit of
P445,942.25, while in Schoolyears 1990-1991 and 1991-1992, the School paid out, 91%
and 77%, respectively, of the increments in the tuition fees collected.
As regards the issue of non-payment of holiday pay, the individual pay records of the
School's employees, a sample of which was identified and explained by Ms. Rosario 254
Manlapaz (Exhibit 3), shows that said School employees are paid for all days worked in
the year. Stated differently, the factor used in computing the salaries of the employees
is 365, which indicates that their regular monthly salary includes payment of wages

during all legal holidays.[13]

This Court held in Odango v. National Labor Relations Commission[14] that:
The appellate courts jurisdiction to review a decision of the NLRC in a petition for
certiorari is confined to issues of jurisdiction or grave abuse of discretion. An
extraordinary remedy, a petition for certiorari is available only and restrictively in truly
exceptional cases. The sole office of the writ of certiorari is the correction of errors of
jurisdiction including the commission of grave abuse of discretion amounting to lack or
excess of jurisdiction. It does not include correction of the NLRCs evaluation of the
evidence or of its factual findings. Such findings are generally accorded not only respect
but also finality. A party assailing such findings bears the burden of showing that the
tribunal acted capriciously and whimsically or in total disregard of evidence material to
the controversy, in order that the extraordinary writ of certiorari will lie.[15]
In the instant case, the Court finds no error in the ruling of the CA that since nowhere
in the petition is there any acceptable demonstration that the LA or the NLRC acted
either with grave abuse of discretion or without or in excess of its jurisdiction, the
appellate court has no reason to look into the correctness of the evaluation of evidence
which supports the labor tribunals' findings of fact.
Settled is the rule that the findings of the LA, when affirmed by the NLRC and the CA,
are binding on the Supreme Court, unless patently erroneous.[16] It is not the function
of the Supreme Court to analyze or weigh all over again the evidence already
considered in the proceedings below.[17] In a petition for review on certiorari, this
Courts jurisdiction is limited to reviewing errors of law in the absence of any showing
that the factual findings complained of are devoid of support in the records or are
glaringly erroneous.[18] Firm is the doctrine that this Court is not a trier of facts, and
this applies with greater force in labor cases.[19] Findings of fact of administrative
agencies and quasi-judicial bodies, which have acquired expertise because their
jurisdiction is confined to specific matters, are generally accorded not only great respect
but even finality.[20] They are binding upon this Court unless there is a showing of
grave abuse of discretion or where it is clearly shown that they were arrived at
arbitrarily or in utter disregard of the evidence on record.[21] We find none of these
exceptions in the present case.
In petitions for review on certiorari like the instant case, the Court invariably sustains
the unanimous factual findings of the LA, the NLRC and the CA, specially when such
findings are supported by substantial evidence and there is no cogent basis to reverse 255
the same, as in this case.[22]
The second assigned error properly raises a question of law as it involves the
determination of whether or not a teacher's overload pay should be considered in the
computation of his or her 13th-month pay. In resolving this issue, the Court is
confronted with conflicting interpretations by different government agencies.
On one hand is the opinion of the Bureau of Working Conditions of the DOLE dated
December 9, 1991, February 28, 1992 and November 19, 1992 to the effect that if
overload is performed within a teacher's normal eight-hour work per day, the
remuneration that the teacher will get from the additional teaching load will form part
of the basic wage.[23]

This opinion is affirmed by the Explanatory Bulletin on the Inclusion of Teachers'

Overload Pay in the 13th-Month Pay Determination issued by the DOLE on December 3,
1993 under then Acting DOLE Secretary Cresenciano B. Trajano. Pertinent portions of
the said Bulletin read as follows:
1. Basis of the 13th-month pay computation
The Revised Implementing Guidelines of the 13th-Month Pay Law (P.D. 851, as
amended) provides that an employee shall be entitled to not less than 1/12 of the total
basic salary earned within a calendar year for the purpose of computing such
entitlement. The basic wage of an employee shall include:
x x x all remunerations or earnings paid by his employer for services rendered but do
not include allowances or monetary benefits which are not considered or integrated as
part of the regular or basic salary, such as the cash equivalent of unused vacation and
sick leave credits, overtime, premium, night differential and holiday pay, and cost-ofliving allowances. However, these salary-related benefits should be included as part of
the basic salary in the computation of the 13th month pay if by individual or collective
agreement, company practice or policy, the same are treated as part of the basic salary
of the employees.
Basic wage is defined by the Implementing Rules of RA 6727 as follows:
Basic Wage means all remuneration or earnings paid by an employer to a worker for
services rendered on normal working days and hours but does not include cost of living
allowances, 13th-month pay or other monetary benefits which are not considered as
part of or integrated into the regular salary of the workers xxx.
The foregoing definition was based on Article 83 of the Labor Code which provides that
the normal hours of work of any employee shall not exceed eight (8) hours a day. This
means that the basic salary of an employee for the purpose of computing the 13thmonth pay shall include all remunerations or earnings paid by an employer for services
rendered during normal working hours.
2. Overload work/pay
Overload on the other hand means the load in excess of the normal load of private
school teachers as prescribed by the Department of Education, Culture and Sports
(DECS) or the policies, rules and standards of particular private schools. In recognition 256
of the peculiarities of the teaching profession, existing DECS and School Policies and
Regulations for different levels of instructions prescribe a regular teaching load, the
total actual teaching or classroom hours of which a teacher can generally perform in
less than eight (8) hours per working day. This is because teaching may also require the
teacher to do additional work such as handling an advisory class, preparation of lesson
plans and teaching aids, evaluation of students and other related activities. Where,
however a teacher is engaged to undertake actual additional teaching work after
completing his/her regular teaching load, such additional work is generally referred to
as overload. In short, additional work in excess of the regular teaching load is overload
work. Regular teaching load and overload work, if any, may constitute a teacher's
working day.
Where a teacher is required to perform such overload within the eight (8) hours normal

working day, such overload compensation shall be considered part of the basic pay for
the purpose of computing the teacher's 13th-month pay. Overload work is sometimes
misunderstood as synonymous to overtime work as this term is used and understood in
the Labor Code. These two terms are not the same because overtime work is work
rendered in excess of normal working hours of eight in a day (Art. 87, Labor Code).
Considering that overload work may be performed either within or outside eight hours
in a day, overload work may or may not be overtime work.
3. Concluding Statement
In the light of the foregoing discussions, it is the position of this Department that all
basic salary/wage representing payments earned for actual work performed during or
within the eight hours in a day, including payments for overload work within eight
hours, form part of basic wage and therefore are to be included in the computation of
13th-month pay mandated by PD 851, as amended.[24] (Underscoring supplied)
On the other hand, the Legal Services Department of the DOLE holds in its opinion of
March 4, 1992 that remunerations for teaching in excess of the regular load shall be
excluded in the computation of the 13th-month pay unless, by school policy, the same
are considered as part of the basic salary of the qualified teachers.[25]
This opinion is later affirmed by the DOLE Order, pertinent portions of which are quoted
below:
xxxx
2. In accordance with Article 83 of the Labor Code of the Philippines, as amended, the
normal hours of work of school academic personnel shall not exceed eight (8) hours a
day. Any work done in addition to the eight (8) hours daily work shall constitute
overtime work.
3. The normal hours of work of teaching or academic personnel shall be based on their
normal or regular teaching loads. Such normal or regular teaching loads shall be in
accordance with the policies, rules and standards prescribed by the Department of
Education, Culture and Sports, the Commission on Higher Education and the Technical
Education and Skills Development Authority. Any teaching load in excess of the normal
or regular teaching load shall be considered as overload. Overload partakes of the
nature of temporary extra assignment and compensation therefore shall be considered
as an overload honorarium if performed within the 8-hour work period and does not
form part of the regular or basic pay. Overload performed beyond the eight-hour daily
work is overtime work.[26] (Emphasis supplied)
It was the above-quoted DOLE Order which was used by the LA as basis for ruling
against herein petitioner.
The petitioners claim that the DOLE Order should not be made to apply to the present
case because said Order was issued only in 1996, approximately four years after the 257
present case was initiated before the Regional Arbitration Branch of the NLRC, is not
without basis. The general rule is that administrative rulings and circulars shall not be
given retroactive effect.[27]
Nevertheless, it is a settled rule that when an administrative or executive agency

renders an opinion or issues a statement of policy, it merely interprets a pre-existing

law and the administrative interpretation is at best advisory for it is the courts that
finally determine what the law means.[28]
In the present case, while the DOLE Order may not be applicable, the Court finds that
overload pay should be excluded from the computation of the 13th-month pay of
petitioner's members.
In resolving the issue of the inclusion or exclusion of overload pay in the computation of
a teacher's 13th-month pay, it is decisive to determine what basic salary includes and
excludes.
In this respect, the Court's disquisition in San Miguel Corporation v. Inciong[29] is
instructive, to wit:
Under Presidential Decree 851 and its implementing rules, the basic salary of an
employee is used as the basis in the determination of his 13th month pay. Any
compensations or remunerations which are deemed not part of the basic pay is
excluded as basis in the computation of the mandatory bonus.

Under the Rules and Regulations Implementing Presidential Decree 851, the following
compensations are deemed not part of the basic salary:
a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of
Instruction No. 174;
b) Profit sharing payments;
c) All allowances and monetary benefits which are not considered or integrated as part
of the regular basic salary of the employee at the time of the promulgation of the
Decree on December 16, 1975.
Under a later set of Supplementary Rules and Regulations Implementing Presidential
Decree 851 issued by the then Labor Secretary Blas Ople, overtime pay, earnings and
other remunerations are excluded as part of the basic salary and in the computation of
the 13th-month pay.
The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of
Instruction No. 174 and profit sharing payments indicate the intention to strip basic
salary of other payments which are properly considered as fringe benefits. Likewise, the 258
catch-all exclusionary phrase all allowances and monetary benefits which are not
considered or integrated as part of the basic salary shows also the intention to strip
basic salary of any and all additions which may be in the form of allowances or fringe
benefits.
Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree
851 is even more emphatic in declaring that earnings and other remunerations which
are not part of the basic salary shall not be included in the computation of the 13thmonth pay.

While doubt may have been created by the prior Rules and Regulations Implementing
Presidential Decree 851 which defines basic salary to include all remunerations or
earnings paid by an employer to an employee, this cloud is dissipated in the later and
more controlling Supplementary Rules and Regulations which categorically, exclude
from the definition of basic salary earnings and other remunerations paid by employer
to an employee. A cursory perusal of the two sets of Rules indicates that what has
hitherto been the subject of a broad inclusion is now a subject of broad exclusion. The
Supplementary Rules and Regulations cure the seeming tendency of the former rules to
include all remunerations and earnings within the definition of basic salary.
The all-embracing phrase earnings and other remunerations which are deemed not part
of the basic salary includes within its meaning payments for sick, vacation, or maternity
leaves, premium for works performed on rest days and special holidays, pay for regular
holidays and night differentials. As such they are deemed not part of the basic salary
and shall not be considered in the computation of the 13th-month pay. If they were not
so excluded, it is hard to find any earnings and other remunerations expressly excluded
in the computation of the 13th-month pay. Then the exclusionary provision would prove
to be idle and with no purpose.
This conclusion finds strong support under the Labor Code of the Philippines. To cite a
few provisions:
Art. 87 Overtime work. Work may be performed beyond eight (8) hours a day provided
that the employee is paid for the overtime work, additional compensation equivalent to
his regular wage plus at least twenty-five (25%) percent thereof.
It is clear that overtime pay is an additional compensation other than and added to the
regular wage or basic salary, for reason of which such is categorically excluded from the
definition of basic salary under the Supplementary Rules and Regulations Implementing
Presidential Decree 851.
In Article 93 of the same Code, paragraph
c.) work performed on any special holiday shall be paid an additional compensation of
at least thirty percent (30%) of the regular wage of the employee.

It is likewise clear that premium for special holiday which is at least 30% of the regular
wage is an additional compensation other than and added to the regular wage or basic
salary. For similar reason it shall not be considered in the computation of the 13th
-month pay.[30]
In the same manner that payment for overtime work and work performed during
special holidays is considered as additional compensation apart and distinct from an
employee's regular wage or basic salary, an overload pay, owing to its very nature and 259
definition, may not be considered as part of a teacher's regular or basic salary, because
it is being paid for additional work performed in excess of the regular teaching load.
The peculiarity of an overload lies in the fact that it may be performed within the
normal eight-hour working day. This is the only reason why the DOLE, in its explanatory
bulletin, finds it proper to include a teacher's overload pay in the determination of his or
her 13th-month pay. However, the DOLE loses sight of the fact that even if it is

performed within the normal eight-hour working day, an overload is still an additional or
extra teaching work which is performed after the regular teaching load has been
completed. Hence, any pay given as compensation for such additional work should be
considered as extra and not deemed as part of the regular or basic salary.
Moreover, petitioner failed to refute private respondent's contention that excess
teaching load is paid by the hour, while the regular teaching load is being paid on a
monthly basis; and that the assignment of overload is subject to the availability of
teaching loads. This only goes to show that overload pay is not integrated with a
teacher's basic salary for his or her regular teaching load. In addition, overload varies
from one semester to another, as it is dependent upon the availability of extra teaching
loads. As such, it is not legally feasible to consider payments for such overload as part
of a teacher's regular or basic salary. Verily, overload pay may not be included as basis
for determining a teacher's 13th-month pay.
WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of
the Court of Appeals are AFFIRMED.
SO ORDERED.
260