PART II

BOOK III - Conditions of Employment

A. Coverage/Types of Employees
Art. 82, LCP and IRR; R.A. No. 10361, RA 8972,
Cases:
1. Union of Filipro Employees v. Vivar Jr., 205 SCRA 200

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 79255 January 20, 1992

UNION OF FILIPRO EMPLOYEES (UFE), petitioner,

vs.
BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION and NESTL
PHILIPPINES, INC. (formerly FILIPRO, INC.), respondents.

Jose C. Espinas for petitioner.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

GUTIERREZ, JR., J.:

This labor dispute stems from the exclusion of sales personnel from the holiday pay award and the
change of the divisor in the computation of benefits from 251 to 261 days.

On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the National
Labor Relations Commission (NLRC) a petition for declaratory relief seeking a ruling on its rights and
obligations respecting claims of its monthly paid employees for holiday pay in the light of the Court's
decision in Chartered Bank Employees Association v. Ople (138 SCRA 273 [1985]).

Both Filipro and the Union of Filipino Employees (UFE) agreed to submit the case for voluntary
arbitration and appointed respondent Benigno Vivar, Jr. as voluntary arbitrator.

On January 2, 1980, Arbitrator Vivar rendered a decision directing Filipro to:

pay its monthly paid employees holiday pay pursuant to Article 94 of the Code,
subject only to the exclusions and limitations specified in Article 82 and such other
legal restrictions as are provided for in the Code. (Rollo,
p. 31)
Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2)
the exclusion of salesmen, sales representatives, truck drivers, merchandisers and medical
representatives (hereinafter referred to as sales personnel) from the award of the holiday pay, and
(3) deduction from the holiday pay award of overpayment for overtime, night differential, vacation
and sick leave benefits due to the use of 251 divisor. (Rollo, pp. 138-145)

Petitioner UFE answered that the award should be made effective from the date of effectivity of the
Labor Code, that their sales personnel are not field personnel and are therefore entitled to holiday
pay, and that the use of 251 as divisor is an established employee benefit which cannot be
diminished.

On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of the
holiday pay award shall retroact to November 1, 1974, the date of effectivity of the Labor Code. He
adjudged, however, that the company's sales personnel are field personnel and, as such, are not
entitled to holiday pay. He likewise ruled that with the grant of 10 days' holiday pay, the divisor
should be changed from 251 to 261 and ordered the reimbursement of overpayment for overtime,
night differential, vacation and sick leave pay due to the use of 251 days as divisor.

Both Nestle and UFE filed their respective motions for partial reconsideration. Respondent Arbitrator
treated the two motions as appeals and forwarded the case to the NLRC which issued a resolution
dated May 25, 1987 remanding the case to the respondent arbitrator on the ground that it has no
jurisdiction to review decisions in voluntary arbitration cases pursuant to Article 263 of the Labor
Code as amended by Section 10, Batas Pambansa Blg. 130 and as implemented by Section 5 of the
rules implementing B.P. Blg. 130.

However, in a letter dated July 6, 1987, the respondent arbitrator refused to take cognizance of the
case reasoning that he had no more jurisdiction to continue as arbitrator because he had resigned
from service effective May 1, 1986.

Hence, this petition.

The petitioner union raises the following issues:

1) Whether or not Nestle's sales personnel are entitled to holiday pay; and

2) Whether or not, concomitant with the award of holiday pay, the divisor should be changed from
251 to 261 days and whether or not the previous use of 251 as divisor resulted in overpayment for
overtime, night differential, vacation and sick leave pay.

The petitioner insists that respondent's sales personnel are not field personnel under Article 82 of
the Labor Code. The respondent company controverts this assertion.

Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel
as "non-agritultural 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."

The controversy centers on the interpretation of the clause "whose actual hours of work in the field
cannot be determined with reasonable certainty."
It is undisputed that these sales personnel start their field work at 8:00 a.m. after having reported to
the office and come back to the office at 4:00 p.m. or 4:30 p.m. if they are Makati-based.

The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the sales
personnel's working hours which can be determined with reasonable certainty.

The Court does not agree. The law requires that the actual hours of work in the field be reasonably
ascertained. The company has no way of determining whether or not these sales personnel, even if
they report to the office before 8:00 a.m. prior to field work and come back at 4:30 p.m, really spend
the hours in between in actual field work.

We concur with the following disquisition by the respondent arbitrator:

The requirement for the salesmen and other similarly situated employees to report
for work at the office at 8:00 a.m. and return at 4:00 or 4:30 p.m. is not within the
realm of work in the field as defined in the Code but an exercise of purely
management prerogative of providing administrative control over such personnel.
This does not in any manner provide a reasonable level of determination on the
actual field work of the employees which can be reasonably ascertained. The
theoretical analysis that salesmen and other similarly-situated workers regularly
report for work at 8:00 a.m. and return to their home station at 4:00 or 4:30 p.m.,
creating the assumption that their field work is supervised, is surface projection.
Actual field work begins after 8:00 a.m., when the sales personnel follow their field
itinerary, and ends immediately before 4:00 or 4:30 p.m. when they report back to
their office. The period between 8:00 a.m. and 4:00 or 4:30 p.m. comprises their
hours of work in the field, the extent or scope and result of which are subject to their
individual capacity and industry and which "cannot be determined with reasonable
certainty." This is the reason why effective supervision over field work of salesmen
and medical representatives, truck drivers and merchandisers is practically a
physical impossibility. Consequently, they are excluded from the ten holidays with
pay award. (Rollo, pp. 36-37)

Moreover, the requirement that "actual hours of work in the field cannot be determined with
reasonable certainty" must be read in conjunction with Rule IV, Book III of the Implementing Rules
which provides:

Rule IV Holidays with Pay

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

xxx xxx xxx

(e) Field personnel and other employees whose time and performance is
unsupervised by the employer . . . (Emphasis supplied)

While contending that such rule added another element not found in the law (Rollo, p. 13), the
petitioner nevertheless attempted to show that its affected members are not covered by the
abovementioned rule. The petitioner asserts that the company's sales personnel are strictly
supervised as shown by the SOD (Supervisor of the Day) schedule and the company circular dated
March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-55).
Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did not add
another element to the Labor Code definition of field personnel. The clause "whose time and
performance is unsupervised by the employer" did not amplify but merely interpreted and expounded
the clause "whose actual hours of work in the field cannot be determined with reasonable certainty."
The former clause is still within the scope and purview of Article 82 which defines field personnel.
Hence, in deciding whether or not an employee's actual working hours in the field can be determined
with reasonable certainty, query must be made as to whether or not such employee's time and
performance is constantly supervised by the employer.

The SOD schedule adverted to by the petitioner does not in the least signify that these sales
personnel's time and performance are supervised. The purpose of this schedule is merely to ensure
that the sales personnel are out of the office not later than 8:00 a.m. and are back in the office not
earlier than 4:00 p.m.

Likewise, the Court fails to see how the company can monitor the number of actual hours spent in
field work by an employee through the imposition of sanctions on absenteeism contained in the
company circular of March 15, 1984.

The petitioner claims that the fact that these sales personnel are given incentive bonus every quarter
based on their performance is proof that their actual hours of work in the field can be determined
with reasonable certainty.

The Court thinks otherwise.

The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume based on sales
target; (2) good collection performance; (3) proper compliance with good market hygiene; (4) good
merchandising work; (5) minimal market returns; and (6) proper truck maintenance. (Rollo, p. 190).

The above criteria indicate that these sales personnel are given incentive bonuses precisely
because of the difficulty in measuring their actual hours of field work. These employees are
evaluated by the result of their work and not by the actual hours of field work which are hardly
susceptible to determination.

In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613 [1963]), the Court had
occasion to discuss the nature of the job of a salesman. Citing the case of Jewel Tea
Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, the Court stated:

The reasons for excluding an outside salesman are fairly apparent. Such a
salesman, to a greater extent, works individually. There are no restrictions respecting
the time he shall work and he can earn as much or as little, within the range of his
ability, as his ambition dictates. In lieu of overtime he ordinarily receives
commissions as extra compensation. He works away from his employer's place of
business, is not subject to the personal supervision of his employer, and his
employer has no way of knowing the number of hours he works per day.

While in that case the issue was whether or not salesmen were entitled to overtime pay, the same
rationale for their exclusion as field personnel from holiday pay benefits also applies.

The petitioner union also assails the respondent arbitrator's ruling that, concomitant with the award
of holiday pay, the divisor should be changed from 251 to 261 days to include the additional 10
holidays and the employees should reimburse the amounts overpaid by Filipro due to the use of 251
days' divisor.
Arbitrator Vivar's rationale for his decision is as follows:

. . . The new doctrinal policy established which ordered payment of ten holidays
certainly adds to or accelerates the basis of conversion and computation by ten days.
With the inclusion of ten holidays as paid days, the divisor is no longer 251 but 261
or 262 if election day is counted. This is indeed an extremely difficult legal question
of interpretation which accounts for what is claimed as falling within the concept of
"solutio indebti."

When the claim of the Union for payment of ten holidays was granted, there was a
consequent need to abandon that 251 divisor. To maintain it would create an
impossible situation where the employees would benefit with additional ten days with
pay but would simultaneously enjoy higher benefits by discarding the same ten days
for purposes of computing overtime and night time services and considering sick and
vacation leave credits. Therefore, reimbursement of such overpayment with the use
of 251 as divisor arises concomitant with the award of ten holidays with pay. (Rollo,
p. 34)

The divisor assumes an important role in determining whether or not holiday pay is already included
in the monthly paid employee's salary and in the computation of his daily rate. This is the thrust of
our pronouncement in Chartered Bank Employees Association v. Ople (supra). In that case, We
held:

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.

In the petitioner's case, its computation of daily ratio since September 1, 1980, is as follows:

monthly rate x 12 months

251 days

Following the criterion laid down in the Chartered Bank case, the use of 251 days' divisor by
respondent Filipro indicates that holiday pay is not yet included in the employee's salary, otherwise
the divisor should have been 261.

It must be stressed that the daily rate, assuming there are no intervening salary increases, is a
constant figure for the purpose of computing overtime and night differential pay and commutation of
sick and vacation leave credits. Necessarily, the daily rate should also be the same basis for
computing the 10 unpaid holidays.
The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower
daily rate which is violative of the prohibition on non-diminution of benefits found in Article 100 of the
Labor Code. To maintain the same daily rate if the divisor is adjusted to 261 days, then the dividend,
which represents the employee's annual salary, should correspondingly be increased to incorporate
the holiday pay. To illustrate, if prior to the grant of holiday pay, the employee's annual salary is
P25,100, then dividing such figure by 251 days, his daily rate is P100.00 After the payment of 10
days' holiday pay, his annual salary already includes holiday pay and totals P26,100 (P25,100 +
1,000). Dividing this by 261 days, the daily rate is still P100.00. There is thus no merit in respondent
Nestle's claim of overpayment of overtime and night differential pay and sick and vacation leave
benefits, the computation of which are all based on the daily rate, since the daily rate is still the same
before and after the grant of holiday pay.

Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its use of 251 days
as divisor must fail in light of the Labor Code mandate that "all doubts in the implementation and
interpretation of this Code, including its implementing rules and regulations, shall be resolved in
favor of labor." (Article 4). Moreover, prior to September 1, 1980, when the company was on a 6-day
working schedule, the divisor used by the company was 303, indicating that the 10 holidays were
likewise not paid. When Filipro shifted to a 5-day working schebule on September 1, 1980, it had the
chance to rectify its error, if ever there was one but did not do so. It is now too late to allege payment
by mistake.

Nestle also questions the voluntary arbitrator's ruling that holiday pay should be computed from
November 1, 1974. This ruling was not questioned by the petitioner union as obviously said decision
was favorable to it. Technically, therefore, respondent Nestle should have filed a separate petition
raising the issue of effectivity of the holiday pay award. This Court has ruled that an appellee who is
not an appellant may assign errors in his brief where his purpose is to maintain the judgment on
other grounds, but he cannot seek modification or reversal of the judgment or affirmative relief
unless he has also appealed. (Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989], citing
La Campana Food Products, Inc. v. Philippine Commercial and Industrial Bank, 142 SCRA 394
[1986]). Nevertheless, in order to fully settle the issues so that the execution of the Court's decision
in this case may not be needlessly delayed by another petition, the Court resolved to take up the
matter of effectivity of the holiday pay award raised by Nestle.

Nestle insists that the reckoning period for the application of the holiday pay award is 1985 when
the Chartered Bank decision, promulgated on August 28, 1985, became final and executory, and not
from the date of effectivity of the Labor Code. Although the Court does not entirely agree with Nestle,
we find its claim meritorious.

In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132 SCRA 663 [1984],
hereinafter referred to as the IBAA case, the Court declared that Section 2, Rule IV, Book III of the
implementing rules and Policy Instruction No. 9, issued by the then Secretary of Labor on February
16, 1976 and April 23, 1976, respectively, and which excluded monthly paid employees from holiday
pay benefits, are null and void. The Court therein reasoned that, in the guise of clarifying the Labor
Code's provisions on holiday pay, the aforementioned implementing rule and policy instruction
amended them by enlarging the scope of their exclusion. The Chartered Bank case reiterated the
above ruling and added the "divisor" test.

However, prior to their being declared null and void, the implementing rule and policy instruction
enjoyed the presumption of validity and hence, Nestle's non-payment of the holiday benefit up to the
promulgation of the IBAA case on October 23, 1984 was in compliance with these presumably valid
rule and policy instruction.
In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the Court discussed
the effect to be given to a legislative or executive act subsequently declared invalid:

xxx xxx xxx

. . . It does not admit of doubt that prior to the declaration of nullity such challenged
legislative or executive act must have been in force and had to be complied with.
This is so as until after the judiciary, in an appropriate case, declares its invalidity, it
is entitled to obedience and respect. Parties may have acted under it and may have
changed their positions. What could be more fitting than that in a subsequent
litigation regard be had to what has been done while such legislative or executive act
was in operation and presumed to be valid in all respects. It is now accepted as a
doctrine that prior to its being nullified, its existence as a fact must be reckoned with.
This is merely to reflect awareness that precisely because the judiciary is the
government organ which has the final say on whether or not a legislative or executive
measure is valid, a period of time may have elapsed before it can exercise the power
of judicial review that may lead to a declaration of nullity. It would be to deprive the
law of its quality of fairness and justice then, if there be no recognition of what had
transpired prior to such adjudication.

In the language of an American Supreme Court decision: "The actual existence of a

statute, prior to such a determination of [unconstitutionality], is an operative fact and
may have consequences which cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects, with respect to particular
relations, individual and corporate, and particular conduct, private and official."
(Chicot County Drainage Dist. v. Baxter States Bank, 308 US 371, 374 [1940]). This
language has been quoted with approval in a resolution in Araneta v. Hill (93 Phil.
1002 [1952]) and the decision in Manila Motor Co., Inc. v. Flores (99 Phil. 738
[1956]). An even more recent instance is the opinion of Justice Zaldivar speaking for
the Court in Fernandez v. Cuerva and Co. (21 SCRA 1095 [1967]. (At pp. 434-435)

The "operative fact" doctrine realizes that in declaring a law or rule null and void, undue harshness
and resulting unfairness must be avoided. It is now almost the end of 1991. To require various
companies to reach back to 1975 now and nullify acts done in good faith is unduly harsh. 1984 is a
fairer reckoning period under the facts of this case.

Applying the aforementioned doctrine to the case at bar, it is not far-fetched that Nestle, relying on
the implicit validity of the implementing rule and policy instruction before this Court nullified them,
and thinking that it was not obliged to give holiday pay benefits to its monthly paid employees, may
have been moved to grant other concessions to its employees, especially in the collective bargaining
agreement. This possibility is bolstered by the fact that respondent Nestle's employees are among
the highest paid in the industry. With this consideration, it would be unfair to impose additional
burdens on Nestle when the non-payment of the holiday benefits up to 1984 was not in any way
attributed to Nestle's fault.

The Court thereby resolves that the grant of holiday pay be effective, not from the date of
promulgation of the Chartered Bank case nor from the date of effectivity of the Labor Code, but from
October 23, 1984, the date of promulgation of the IBAA case.
WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED. The divisor to be used in
computing holiday pay shall be 251 days. The holiday pay as above directed shall be computed from
October 23, 1984. In all other respects, the order of the respondent arbitrator is hereby AFFIRMED.

SO ORDERED.
 2. Carlos v Villegas, 24 SCRA 831

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-24394 August 30, 1968

JUANITO CARLOS, petitioner-appellant,

vs.
ANTONIO J. VILLEGAS, as Mayor, City of Manila and/or EULOGIO SAMIO, as Chief, Manila
Fire Department and/or MANUEL CUDIAMAT, as Treasurer, City of Manila, respondents-
appellees.

Juanito Carlos for and in his behalf as petitioner-appellant.

Assistant City Fiscal Olimpio R. Navarro for respondents-appellees.

ANGELES, J.:

This is an appeal from the decision of the Court of First Instance of Manila dismissing the petition
for mandamus(Civil Case No. 53514) seeking to order the respondents to cause the City of Manila to
pay petitioner and other members of the Uniformed Force Division of the Manila Fire Department
(MFD) for overtime services rendered from January 1, 1962, up to the date when the petition was
filed January 4, 1963; to enforce immediately the 40-Hour a Week Work Law to petitioner and said
other members of the MFD; and to pay damages sustained by them as a consequence of the acts
complained of. 1wph1.t

The facts of the case are set forth in the stipulation of facts submitted by the parties in the lower
court, to wit: .

1. Under Sec. 15 of the Revised Charter of the City of Manila (Rep. Act 409, as amended),
"there shall be a chief of the Fire Department, ... who shall have the management and
control of all matters relating to the administration of said department, and the organization,
government, discipline, and disposition of fire forces; ... [Emphasis supplied]

2. Pursuant to the foregoing provision, from September 16, 1957, to the present, the
petitioner and other members of the Uniformed Force Division of the Manila Fire Department
have been required and ordered by the Chief of the Manila Fire Department, upon approval
of the City Mayor, the Commissioner of the Civil Service and the Office of the President, to
be 24 hours on duty and 24 hours off duty, alternately; that is, a member of the MFD
Uniformed Force Division reports to his station at 8:00 o'clock in the morning and continues
on duty until 8:00 o'clock of the following morning for 24 hours; he is then off duty for the next
24 hours immediately thereafter; this schedule continuous throughout the days of the week
regardless of Saturdays, Sundays and holidays; for an average of eighty-four (84) hours a
week the firemen stay at the station and while there, their duties are to clean and maintain
the station, fire engines or apparatuses and equipment to respond to fire and to perform
other duties required by ordinances and laws; during the 24 hours' stay in the station, unless
they are out working to fight and extinguish fires, the firemen are given time to rest from
 12:00 noon to 4:00 o'clock in the afternoon, and time to sleep from 9:00 o'clock in the
evening to 6:00 o'clock the following morning.

3. On July 10, 1957, the Chief of the Manila Fire Department requested the Office of the
President for authority, in the interest of the service, for the members of the Uniformed Force
Division and of the Fire Alarm and Radio Division of the department to render service without
overtime pay beyond the 40-hour-5-day a week requirement of the law.

4. On December 9, 1962, a petition was addressed to the Mayor, City of Manila, through the
Chief, Fire Department, Manila, claiming payment for overtime services rendered effective
January 1, 1962 and demanding the enforcement of the 40-hour a week work law with
respect to the Uniformed Force Division of the Manila Fire Department, and the reply thereto
was that services rendered beyond a regular period fixed by R.A. No. 1880 will not entitle the
employee to overtime pay as a matter of legal right, citing Opinion No. 218, Series of 1957,
of the Secretary of Justice.

5. On December 26, 1962, petitioner addressed a petition to His Excellency, the President of
the Philippines, petitioning also the latter to order the City of Manila to pay petitioner and
other members of the MFD Uniformed Force Division for overtime services rendered during
1962 and caused to be enforced the 40-hour a week law and there was no favorable reply.
"6. The parties herein reserve the right to submit additional evidence should a necessity
therefor arise. "
1wph1.t

No additional evidence was submitted thereafter, and upon the foregoing stipulation of facts and the
law applicable thereon, the lower court dismissed the petition.

The issue for adjudication is whether the petitioner-appellant and other firemen similarly situated are
entitled to collect overtime pay for overtime services rendered by them since January 1, 1962.

The provisions of law that resolve the issue are neither those of Republic Act 1880, otherwise known
as the Forty Hour Week Work Law, nor Commonwealth Act 444, the Eight-Hour Labor Law, as
suggested by the petitioner-appellant, but the following sections of the Revised Administrative Code,
to wit: .

SEC. 566. Extension of hours and requirement of overtime work. When the interests of
the public service so require, the head of any Department, Bureau, or Office may extend the
daily hours of labor, in what manner so ever fixed, for any or all of the employees under him,
and may likewise require any or all of them to do overtime work not only on work days but
also on holidays.".

SEC. 259. Inhibition against payment of extra compensation. In the absence of special
provision, persons regularly and permanently appointed under the Civil Service Law or
whose salary, wages or emoluments are fixed by law or regulation shall not, for any service
rendered or labor done by them on holidays or for other overtime work, receive or be paid
any additional compensation; nor, in the absence of special provision, shall any officer or
employee in an branch of the Government service receive additional compensation on
account of the discharge of duties pertaining to the position of another or for the performance
of any public service whatever, whether such service is rendered voluntarily or exacted of
him under authority of law." .

The petitioner-appellant contends that the above-quoted portions of the Revised Administrative
Code have been repealed by the provisions of Commonwealth Act 444, in so far as the provisions of
the former are inconsistent with the latter. The contention is erroneous. This Court has explicitly
declared1 that the Eight-Hour Labor Law was not intended to apply to civil service employees who
are still governed by the above provisions of the Revised Administrative Code. As there appears to
be no debate over the employment of petitioner-appellant and the other firemen similarly situated as
falling under the civil service, they being employees of the City of Manila, a municipal corporation, in
its governmental capacity, We perceive no reason to deviate from said ruling. And as We hold that
the above sections of the Revised Administrative Code are still legally in force, it necessarily follows
that Rule XV, section 3 of the Civil Service Rules, a similar provision promulgated pursuant to that of
Section 16(e) of the Civil Service Act of 1959 (Republic Act No. 2260) is likewise applicable to
petitioner-appellant. Said provision reads:.

SEC. 3. When the nature of the duties to be performed or the interest of the public service so
requires, the head of any Department or agency may extend the daily hours of work
specified for any or all the employees under him, and such extension shall be without
additional compensation unless otherwise provided by law. Office and employees may be
required by the head of the Department or agency to work on Saturdays, Sundays and public
holidays also, without additional compensation unless otherwise specifically authorized by
law.

It needs no lengthy explanation that the nature of work of a fireman requires him to be always on the
alert to respond to fire alarms which may occur at any time of the day, for the exigency of the service
necessitates a round-the-clock observance of his duties, which situation excepts him from the
applicability of Section 562 of the Revised Administrative Code, as amended by Republic Act 18809
the Forty-Hour a Week Work Law, which provides, in part: . 1w ph1.t

Such hours, except for schools, courts, hospitals and health clinics or where the exigencies
of service so require, shall be as prescribed in the Civil Service Rules and as otherwise from
time to time disposed in temporary executive orders in the discretion of the President of the
Philippines but shall be eight (8) hours a day, for five (5) days a week or a total of forty (40)
hours a week, exclusive of the time for lunch. [Emphasis supplied].

Parallel to the instant case are the circumstances obtaining in Department of Public Services Labor
Union vs. CIR, et al.,2 where this Court held that in view of the exigency of the service, garbage
collectors in Manila are not entitled to the benefits of the Forty-Hour a Week Work Law.

In the light of the foregoing, the conclusion is inevitable that the petitioner-appellant and other
firemen of his situation are not entitled to overtime pay and to the coverage of the said Forty-Hour a
Week Work Law.

Parenthetically, a side issue has come up in this appeal during its pendency, and that is whether or
not the City Fiscal of Manila should continue his appearance for the respondents-appellees, despite
the creation of the office and subsequent appointment of a City Legal Officer of Manila, pursuant to
Republic Act 5185, known as the Decentralization Act of 1967, to take charge of civil cases
concerning the City. We believe this is not the proper forum to first pass upon the question since the
motion for withdrawal of appearance filed by the City Fiscal and the opposition thereto put at issue
the validity of an ordinance3 passed by the City Council of Manila which is alleged to be in conflict
with the said Decentralization Act. Anyway, the said motion for withdrawal of appearance was filed
only on May 19, 1968, long after August 18, 1965, when the case had been rested for resolution and
when there was no more need for further representation in behalf of the parties.

IN VIEW OF THE FOREGOING, the decision appealed from is hereby affirmed. For equitable
considerations, no costs. 1wph1.t
 3. NAWASA v NAWASA Consolidated Union, 11 SCRA 766

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-18939 August 31, 1964

NATIONAL WATERWORKS and SEWERAGE AUTHORITY, petitioner,

vs.
NWSA CONSOLIDATED UNIONS, ET AL., respondents.

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 government- function 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 profit-sharing payments made in
addition to the normal basic pay (56 C.J.S., pp. 704-705), and it was also held that the higher rate for
night, Sunday and holiday work is just as much a regular rate as the lower rate for daytime work.
The higher rate is merely an inducement to accept employment at times which are not as desirable
from a 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 No. 9
Series of 1957

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.

Bengzon, C.J., Concepcion, Reyes, J.B.L., Paredes, Regala and Makalintal, JJ., concur.
 4. Franklin Baker Co. of the Phils., v. Trajano, 157 SCRA 416

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 75039 January 28, 1988

FRANKLIN BAKER COMPANY OF THE PHILIPPINES, petitioner,

vs.
HONORABLE CRESENCIO B. TRAJANO, DIRECTOR OF BUREAU OF LABOR RELATIONS,
FRANKLIN BAKER BROTHERHOOD ASSOCIATION (TECHNICAL AND OFFICE EMPLOYEES)-
ASSOCIATION OF TRADE UNIONS (ATU), respondents.

PARAS, J.:

This is a petition for certiorari seeking the annulment of. (a) the Order of Mediator-Arbiter Conchita J. Martinez of the Ministry of Labor and
Employment, Davao City, dated September 17, 1984 in LRD Case No. R-22 MED-ROXI-UR-28-84 entitled "In Re: Petition for Certification
Election Among the Office and Technical Employees of Franklin Baker Company of the Philippines, Davao Plant at Coronan, Sta. Cruz,
Davao del Sur, Franklin Baker Company of the Philippines, Davao Plant, Employer, Franklin Baker Brotherhood Association (Technical and
Office Employees)-Association of Trade Unions (ATU)," insofar as it includes the managerial employees (inspectors, foremen and
supervisors) in the certification election; (b) the Order of April 7, 1986 of Director Cresencio B. Trajano, also of the MOLE, dismissing the
appeal of aforesaid Order of September 17, 1985 for lack of merit; and (c) the Order of June 6, 1986 of said Director denying reconsideration
of his Order of April 7, 1986 and affirming the same in toto (Rollo, p. 90).

In brief, the undisputed facts of this case are as follows:

On April 23, 1984, private respondent Franklin Baker Brotherhood Association-(ATU) filed a petition
for certification election among the office and technical employees of petitioner company with the
Ministry of Labor and Employment, Regional Office No. XI, Davao City, docketed as LRD No. R-22,
MED-ROXI-UR-2884. Among other things, it alleges that Franklin Baker Company of the Phils.
Davao Plant, had in its employ approximately ninety (90) regular technical and office employees,
which group is separate and distinct from the regular rank and file employees and is excluded from
the coverage of existing Collective Bargaining Agreement.

Petitioner company did not object to the holding of such an election but manifested that out of the
ninety (90) employees sought to be represented by the respondent union, seventy four (74) are
managerial employees while two (2) others are confidential employees, hence, must be excluded
from the certification election and from the bargaining unit that may result from such election (Rollo,
p. 3).

Hearings were held and thereafter, the parties agreed to file their respective memoranda. Likewise,
petitioner filed a reply to private respondent's Memorandum (Rollo, p. 4).

Subsequently, on September 17, 1984, Med-Arbiter Conchita J. Martinez issued an order, the
dispositive part of which reads:

Accordingly, the petition is hereby granted and a certification election among the
office and technical employees of Franklin Baker Company of the Philippines, Davao
 Plant is ordered within twenty (20) days from receipt hereof. The choices shall be the
following:

1. Franklin Baker Brotherhood Association-(ATU)

2. No Union

The representation officer assigned shall call the parties for a pre-election
conference at least five (5) days before the date of the election to thresh out the
mechanics of the election, the finalization of the list of voters, the posting of notices
and other relevant matters.

The company's latest payroll shall be the basis for determining the office and
technical workers qualified to vote.

SO ORDERED. (Rollo, pp. 47-48).

From the aforequoted order petitioner Company appealed to the Bureau of Labor Relations,
docketed as BLR Case No. A-22884, praying that the appealed order be set aside and another be
issued declaring the seventy four (74) inspectors, foremen and supervisors as managerial
employees.

During the pendency of the appeal, sixty one (61) of the employees involved, filed a Motion to
Withdraw the petition for certification election praying therein for their exclusion from the Bargaining
Unit and for a categorical declaration that they are managerial employees, as they are performing
managerial functions (Rollo, p. 4).

On April 7, 1986, public respondent Bureau of Labor Relations Cresencio B. Trajano issued a
Resolution affirming the order dated September 17, 1984, the dispositive part of which reads:

WHEREFORE, the appealed Order dated September 17, 1985 is hereby affirmed
and the appeal dismissed for lack of merit. Let the certification election among the
office and technical employees of Franklin Baker Company of the Philippines
proceed without delay.

The latest payrolls of the company shall be used as basis of determining the list of
eligible voters. (Rollo, p. 77),

Petitioner company sought the reconsideration of the aforequoted resolution but its motion was
denied by Director Cresencio B. Trajano in his order dated June 6, 1986, the dispositive part of
which reads:

WHEREFORE, the appeal of respondent company is, dismissed for lack of merit and
the Bureau's Resolution dated April 1986 affirmed in toto.

Let, therefore, the pertinent papers of this case be immediately forwarded to the
Office of origin for the conduct of the certification election. (Rollo, p. 90).

Hence, this petition.

In the resolution of July 30, 1986, the Second Division of this Court without giving due course to the
petition required the respondents to file their comment (Rollo, p. 91). On August 28, 1986, public
respondent filed its comment (Rollo, pp. 99 to 102). Likewise private respondent filed its comment on
September 5, 1986 (Rollo, pp. 104 to 107).

In the resolution of September 8, 1986, petitioner was required to file its reply to public respondent's
comment (Rollo, p. 119) which reply was filed on September 18, 1986 (Rollo, pp. 122-127).

On October 20, 1986, this Court resolved to give due course to the petition and required the parties
to file their respective Memoranda (Rollo, p. 133). In compliance with said resolution, petitioner and
private respondent filed their Memoranda on December 8, 1986 and December 29, 1986,
respectively (Rollo, pp. 183-187). On the other hand, public respondent filed with this Court a
manifestation (Rollo, p. 153) to the effect that it is adopting as its memorandum its comment dated
August 18, 1986 (Rollo, p. 99) which manifestation was noted by this Court in its resolution dated
November 26, 1986
(Rollo, p. 155).

The lone assignment of error raised by petitioner states:

Public respondent acted with grave abuse of discretion amounting to lack of

jurisdiction when he ruled that the 76 employees subject of this petition are not
managerial employees (inspectors, foremen, supervisors and the like) and therefore,
may participate in the certification election among the office and technical
employees. Such ruling is contrary to jurisprudence and to the factual evidence
presented by petitioner which was not rebutted by private respondent union and is
therefore patently baseless.

From this assigned error two questions are raised by petitioner, namely: (1) whether or not subject
employees are managerial employees under the purview of the Labor Code and its Implementing
Rules; and (2) whether the Director of the Bureau of Labor Relations acted with abuse of discretion
in affirming the order of Mediator-Arbiter Conchita J. Martinez.

There is no question that there are in the DAVAO Plant of petitioner company approximately 90
regular technical and office employees which form a unit, separate and distinct from the regular rank
and file employees and are excluded from the coverage of existing Collective Bargaining Agreement;
that said group of employees organized themselves as Franklin Baker Brotherhood Association
(technical and office employees) and affiliated with the local chapter of the Association of trade
Unions (ATU), a legitimate labor organization with Registration Permit No. 8745 (Fed) LC and with
office located at the 3rd Floor of Antwell Bldg., Sta. Ana, Davao City; that petitioner company did not
object to the holding of such certification, but only sought the exclusion of inspectors, foremen and
supervisors, members of Franklin Baker Brotherhood Association (technical and office employees)
numbering 76 from the certification election on the ground that they are managerial employees.

A managerial employee is defined as one "who is vested with powers or prerogatives to lay down
and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign
or discipline employees, or to effectively recommend such managerial actions." (Reynolds Phil.
Corp. v. Eslava, 137 SCRA [1985], citing Section 212 (K), Labor Code.

Also pertinent thereto is Section 1 (M) of the Implementing Rules and Regulations, which is
practically a restatement of the above provision of law.
To sustain its posture, that the inspectors, foreman and supervisors numbering 76 are managerial
employees, petitioner painstakingly demonstrates that subject employees indeed participate in the
formulation and execution of company policies and regulations as to the conduct of work in the plant,
exercised the power to hire, suspend or dismiss subordinate employees and effectively recommend
such action, by citing concrete cases, among which are: (1) Mr. Ponciano Viola, a wet process
inspector, who while in the performance of his duty, found Mr. Enrique Asuncion, a trimmer "forging",
falsifying and simulating a company time card (timesheet) resulting in payroll padding, immediately
recommended the dismissal of said erring employee, resulting in the latter's discharge. (Employer's
Memo, Rollo, p.18); (2) Mr. Manuel Alipio, an opening inspector, recommended for suspension Nut
Operator Ephraim Dumayos who was caught in the act of surreptitiously transferring to a co-worker's
bin some whole nuts which act constitutes a violation of company policy; (3) Mr. Sofronio Abangan,
a line inspector, censured and thereafter recommended the suspension of Mr. Romeo Fullante, for
being remiss in the proper and accurate counting of nuts; (4) Binleader Dionisio Agtang was required
to explain his inefficiency of Mr. Saturnino Bangkas, Bin Loading Inspector; (5) for disobeying the
orders of Bin Loading Inspector Mauricio Lumanog's order, Macario Mante, Eduardo Adaptor,
Rodolfo Irene and George Rellanos were all recommended for suspension which culminated in an
investigation conducted by Lumanog's higher bosses (Ibid., p. 20).

It has also been shown that subject employees have the power to hire, as evidenced by the hiring of
Rolando Asis, Roy Layson, Arcadio Gaudicos and Felix Arciaga, upon the recommendation of
Opening Inspector Serafin Suelo, Processing Inspector Leonardo Velez and Laureano C. Lim,
Opening Inspector (Ibid., p. 21).

It will be noted, however, that in the performance of their duties and functions and in the exercise of
their recommendatory powers, subject employees may only recommend, as the ultimate power to
hire, fire or suspend as the case may be, rests upon the plant personnel manager.

The test of "supervisory" or "managerial status" depends on whether a person possesses authority
to act in the interest of his employer in the matter specified in Article 212 (k) of the Labor Code and
Section 1 (m) of its Implementing Rules and whether such authority is not merely routinary or clerical
in nature, but requires the use of independent judgment. Thus, where such recommendatory powers
as in the case at bar, are subject to evaluation, review and final action by the department heads and
other higher executives of the company, the same, although present, are not effective and not an
exercise of independent judgment as required by law (National Warehousing Corp. v. CIR, 7 SCRA
602-603 [1963]).

Furthermore, in line with the ruling of this Court, subject employees are not managerial employees
because as borne by the records, they do not participate in policy making but are given ready
policies to execute and standard practices to observe, thus having little freedom of action (National
Waterworks and Sewerage Authority v. NWSA Consolidated, L-18938, 11 SCRA 766 [1964]).

Petitioner's contention that the Director of the Bureau of Labor Relations acted with abuse of
discretion amounting to lack of jurisdiction in holding that the 76 employees are not managerial
employees and must be included in the certification election has no basis in fact and in law. Neither
is its contention that the use of the word's "and/or" categorically shows that performance of the
functions enumerated in the law qualifies an employee as a managerial employee.

It is well settled that the findings of fact of the Ministry of Labor and National Labor Relations
Commission are entitled to great respect, unless the findings of fact and the conclusions made
therefrom, are not supported by substantial evidence, or when there is grave abuse of discretion
committed by said public official (Kapisanan ng Manggagawa sa Camara Shoes, 2nd Heirs of
Santos Camara, et al., 111 SCRA 477 [1982]; International hardwood and Veneer Co. of the
Philippines v. Leonardo, 117 SCRA 967 [1982]; Pan-Phil-Life, Inc. v. NLRC, 114 SCRA 866 [1982];
Pepsi-Cola Labor Union-BF LUTUPAS Local Chapter N-896 v. NLRC, 114 SCRA 930 [1982];
Egyptair v. NLRC, 148 SCRA 125 [1987]; RJL Martinez Fishing Corp. v. NLRC, G.R. Nos. 63550-51,
127 SCRA 455 [1984]; and Reyes v. Phil. Duplicators, G.R. No. 54996, 109 SCRA 489 [1981]).

By "grave abuse of discretion" is meant, such capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction. The abuse of discretion must be grave as where the power is
exercised in an arbitrary or despotic manner by reason of passion or personal hostility and must be
so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the
duty enjoined by or to act at all in contemplation of law (G.R. No. 59880, George Arguelles [Hda.
Emma Arguelles v. Romeo Yang, etc.], September 11, 1987).

Moreover, this Court has ruled that findings of administrative agencies which have acquired
expertise, like the Labor Ministry, are accorded respect and finality (Special Events and Central
Shipping Office Workers Union v. San Miguel Corp., 122 SCRA 557 [1983] and that the remedy of
certiorari does not lie in the absence of any showing of abuse or misuse of power properly vested in
the Ministry of Labor and Employment (Buiser v. Leogardo, Jr., 131 SCRA 151 [1984]).

After a careful review of the records, no plausible reason could be found to disturb the findings of
fact and the conclusions of law of the Ministry of Labor.

Even if We regard the employees concerned as "managerial employees," they can still join the union
of the rank and file employees. They cannot however form their own exclusive union as "managerial
employees" (Bulletin Publishing Corporation v. Sanchez, 144 SCRA 628).

PREMISES CONSIDERED, the petition is DISMISSED, and the assailed resolution and orders are
AFFIRMED.

SO ORDERED.
 5. Orozco v. Fifth Division of the CA, G.R. No.155207, April 29, 2005

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 155207 August 13, 2008

WILHELMINA S. OROZCO, petitioner,

vs.
THE FIFTH DIVISION OF THE HONORABLE COURT OF APPEALS, PHILIPPINE
DAILY INQUIRER, and LETICIA JIMENEZ MAGSANOC, respondents.

DECISION

NACHURA, J.:

The case before this Court raises a novel question never before decided in our
jurisdiction whether a newspaper columnist is an employee of the newspaper which
publishes the column.

In this Petition for Review under Rule 45 of the Revised Rules on Civil Procedure,
petitioner Wilhelmina S. Orozco assails the Decision1 of the Court of Appeals (CA) in
CA-G.R. SP No. 50970 dated June 11, 2002 and its Resolution2 dated September 11,
2002 denying her Motion for Reconsideration. The CA reversed and set aside the
Decision3 of the National Labor Relations Commission (NLRC), which in turn had
affirmed the Decision4 of the Labor Arbiter finding that Orozco was an employee of
private respondent Philippine Daily Inquirer (PDI) and was illegally dismissed as
columnist of said newspaper.

In March 1990, PDI engaged the services of petitioner to write a weekly column for its
Lifestyle section. She religiously submitted her articles every week, except for a six-
month stint in New York City when she, nonetheless, sent several articles through mail.
She received compensation of P250.00 later increased to P300.00 for every column
published.5

On November 7, 1992, petitioners column appeared in the PDI for the last time.
Petitioner claims that her then editor, Ms. Lita T. Logarta,6 told her that respondent
Leticia Jimenez Magsanoc, PDI Editor in Chief, wanted to stop publishing her column
for no reason at all and advised petitioner to talk to Magsanoc herself. Petitioner
narrates that when she talked to Magsanoc, the latter informed her that it was PDI
Chairperson Eugenia Apostol who had asked to stop publication of her column, but that
in a telephone conversation with Apostol, the latter said that Magsanoc informed her
(Apostol) that the Lifestyle section already had many columnists.7
On the other hand, PDI claims that in June 1991, Magsanoc met with the Lifestyle
section editor to discuss how to improve said section. They agreed to cut down the
number of columnists by keeping only those whose columns were well-written, with
regular feedback and following. In their judgment, petitioners column failed to improve,
continued to be superficially and poorly written, and failed to meet the high standards of
the newspaper. Hence, they decided to terminate petitioners column. 8

Aggrieved by the newspapers action, petitioner filed a complaint for illegal dismissal,
backwages, moral and exemplary damages, and other money claims before the NLRC.

On October 29, 1993, Labor Arbiter Arthur Amansec rendered a Decision in favor
of petitioner, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered, finding complainant to be an

employee of respondent company; ordering respondent company to reinstate her
to her former or equivalent position, with backwages.

Respondent company is also ordered to pay her 13th month pay and service
incentive leave pay.

Other claims are hereby dismissed for lack of merit.

SO ORDERED.9

The Labor Arbiter found that:

[R]espondent company exercised full and complete control over the means and
method by which complainants work that of a regular columnist had to be
accomplished. This control might not be found in an instruction, verbal or oral,
given to complainant defining the means and method she should write her
column. Rather, this control is manifested and certained (sic) in respondents
admitted prerogative to reject any article submitted by complainant for
publication.

By virtue of this power, complainant was helplessly constrained to adopt her

subjects and style of writing to suit the editorial taste of her editor. Otherwise, off
to the trash can went her articles.

Moreover, this control is already manifested in column title, "Feminist Reflection"

allotted complainant. Under this title, complainants writing was controlled and
limited to a womans perspective on matters of feminine interests. That
respondent had no control over the subject matter written by complainant is
strongly belied by this observation. Even the length of complainants articles were
set by respondents.
 Inevitably, respondents would have no control over when or where complainant
wrote her articles as she was a columnist who could produce an article in thirty
(3) (sic) months or three (3) days, depending on her mood or the amount of
research required for an article but her actions were controlled by her obligation
to produce an article a week. If complainant did not have to report for work eight
(8) hours a day, six (6) days a week, it is because her task was mainly mental.
Lastly, the fact that her articles were (sic) published weekly for three (3) years
show that she was respondents regular employee, not a once-in-a-blue-moon
contributor who was not under any pressure or obligation to produce regular
articles and who wrote at his own whim and leisure.10

PDI appealed the Decision to the NLRC. In a Decision dated August 23, 1994, the
NLRC Second Division dismissed the appeal thereby affirming the Labor Arbiters
Decision. The NLRC initially noted that PDI failed to perfect its appeal, under Article 223
of the Labor Code, due to non-filing of a cash or surety bond. The NLRC said that the
reason proffered by PDI for not filing the bond that it was difficult or impossible to
determine the amount of the bond since the Labor Arbiter did not specify the amount of
the judgment award was not persuasive. It said that all PDI had to do was compute
based on the amount it was paying petitioner, counting the number of weeks from
November 7, 1992 up to promulgation of the Labor Arbiters decision.11

The NLRC also resolved the appeal on its merits. It found no error in the Labor Arbiters
findings of fact and law. It sustained the Labor Arbiters reasoning that respondent PDI
exercised control over petitioners work.

PDI then filed a Petition for Review12 before this Court seeking the reversal of the NLRC
Decision. However, in a Resolution13 dated December 2, 1998, this Court referred the
case to the Court of Appeals, pursuant to our ruling in St. Martin Funeral Homes v.
National Labor Relations Commission.14

The CA rendered its assailed Decision on June 11, 2002. It set aside the NLRC
Decision and dismissed petitioners Complaint. It held that the NLRC misappreciated
the facts and rendered a ruling wanting in substantial evidence. The CA said:

The Court does not agree with public respondent NLRCs conclusion. First,
private respondent admitted that she was and [had] never been considered by
petitioner PDI as its employee. Second, it is not disputed that private respondent
had no employment contract with petitioner PDI. In fact, her engagement to
contribute articles for publication was based on a verbal agreement between her
and the petitioners Lifestyle Section Editor. Moreover, it was evident that private
respondent was not required to report to the office eight (8) hours a day. Further,
it is not disputed that she stayed in New York for six (6) months without
petitioners permission as to her leave of absence nor was she given any
disciplinary action for the same. These undisputed facts negate private
respondents claim that she is an employee of petitioner.
 Moreover, with regards (sic) to the control test, the public respondent NLRCs
ruling that the guidelines given by petitioner PDI for private respondent to follow,
e.g. in terms of space allocation and length of article, is not the form of control
envisioned by the guidelines set by the Supreme Court. The length of the article
is obviously limited so that all the articles to be featured in the paper can be
accommodated. As to the topic of the article to be published, it is but logical that
private respondent should not write morbid topics such as death because she is
contributing to the lifestyle section. Other than said given limitations, if the same
could be considered limitations, the topics of the articles submitted by private
respondent were all her choices. Thus, the petitioner PDI in deciding to publish
private respondents articles only controls the result of the work and not the
means by which said articles were written.

As such, the above facts failed to measure up to the control test necessary for an
employer-employee relationship to exist.15

Petitioners Motion for Reconsideration was denied in a Resolution dated September

11, 2002. She then filed the present Petition for Review.

In a Resolution dated April 29, 2005, the Court, without giving due course to the petition,
ordered the Labor Arbiter to clarify the amount of the award due petitioner and,
thereafter, ordered PDI to post the requisite bond. Upon compliance therewith, the
petition would be given due course. Labor Arbiter Amansec clarified that the award
under the Decision amounted to P15,350.00. Thus, PDI posted the requisite bond on
January 25, 2007.16

We shall initially dispose of the procedural issue raised in the Petition.

Petitioner argues that the CA erred in not dismissing outright PDIs Petition
for Certiorari for PDIs failure to post a cash or surety bond in violation of Article 223 of
the Labor Code.

This issue was settled by this Court in its Resolution dated April 29, 2005. 17 There, the
Court held:

But while the posting of a cash or surety bond is jurisdictional and is a condition
sine qua non to the perfection of an appeal, there is a plethora of jurisprudence
recognizing exceptional instances wherein the Court relaxed the bond
requirement as a condition for posting the appeal.

xxxx

In the case of Taberrah v. NLRC, the Court made note of the fact that the
assailed decision of the Labor Arbiter concerned did not contain a computation of
the monetary award due the employees, a circumstance which is likewise
present in this case. In said case, the Court stated,
 As a rule, compliance with the requirements for the perfection of an appeal
within the reglamentary (sic) period is mandatory and jurisdictional.
However, in National Federation of Labor Unions v. Ladrido as well as in
several other cases, this Court relaxed the requirement of the posting of
an appeal bond within the reglementary period as a condition for
perfecting the appeal. This is in line with the principle that substantial
justice is better served by allowing the appeal to be resolved on the merits
rather than dismissing it based on a technicality.

The judgment of the Labor Arbiter in this case merely stated that petitioner was
entitled to backwages, 13th month pay and service incentive leave pay without
however including a computation of the alleged amounts.

xxxx

In the case of NFLU v. Ladrido III, this Court postulated that "private respondents
cannot be expected to post such appeal bond equivalent to the amount of the
monetary award when the amount thereof was not included in the decision of the
labor arbiter." The computation of the amount awarded to petitioner not having
been clearly stated in the decision of the labor arbiter, private respondents had
no basis for determining the amount of the bond to be posted.

Thus, while the requirements for perfecting an appeal must be strictly followed as
they are considered indispensable interdictions against needless delays and for
orderly discharge of judicial business, the law does admit of exceptions when
warranted by the circumstances. Technicality should not be allowed to stand in
the way of equitably and completely resolving the rights and obligations of the
parties. But while this Court may relax the observance of reglementary periods
and technical rules to achieve substantial justice, it is not prepared to give due
course to this petition and make a pronouncement on the weighty issue obtaining
in this case until the law has been duly complied with and the requisite appeal
bond duly paid by private respondents.18

Records show that PDI has complied with the Courts directive for the posting of the
bond;19 thus, that issue has been laid to rest.

We now proceed to rule on the merits of this case.

The main issue we must resolve is whether petitioner is an employee of PDI, and if the
answer be in the affirmative, whether she was illegally dismissed.

We rule for the respondents.

The existence of an employer-employee relationship is essentially a question of

fact.20 Factual findings of quasi-judicial agencies like the NLRC are generally accorded
respect and finality if supported by substantial evidence.21
Considering, however, that the CAs findings are in direct conflict with those of the Labor
Arbiter and NLRC, this Court must now make its own examination and evaluation of the
facts of this case.

It is true that petitioner herself admitted that she "was not, and [had] never been
considered respondents employee because the terms of works were arbitrarily decided
upon by the respondent."22 However, the employment status of a person is defined and
prescribed by law and not by what the parties say it should be. 23

This Court has constantly adhered to the "four-fold test" to determine whether there
exists an employer-employee relationship between parties.24 The four elements of an
employment relationship are: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employers power to control
the employees conduct.25

Of these four elements, it is the power of control which is the most crucial 26 and most
determinative factor,27 so important, in fact, that the other elements may even be
disregarded.28 As this Court has previously held:

the significant factor in determining the relationship of the parties is the presence
or absence of supervisory authority to control the method and the details of
performance of the service being rendered, and the degree to which the principal
may intervene to exercise such control.29

In other words, the test is whether the employer controls or has reserved the right to
control the employee, not only as to the work done, but also as to the means and
methods by which the same is accomplished.30

Petitioner argues that several factors exist to prove that respondents exercised control
over her and her work, namely:

a. As to the Contents of her Column The PETITIONER had to insure that the
contents of her column hewed closely to the objectives of its Lifestyle Section
and the over-all principles that the newspaper projects itself to stand for. As
admitted, she wanted to write about death in relation to All Souls Day but was
advised not to.

b. As to Time Control The PETITIONER, as a columnist, had to observe the

deadlines of the newspaper for her articles to be published. These deadlines
were usually that time period when the Section Editor has to "close the pages" of
the Lifestyle Section where the column in located. "To close the pages" means to
prepare them for printing and publication.

As a columnist, the PETITIONERs writings had a definite day on which it was

going to appear. So she submitted her articles two days before the designated
day on which the column would come out.
 This is the usual routine of newspaper work. Deadlines are set to fulfill the
newspapers obligations to the readers with regard to timeliness and freshness of
ideas.

c. As to Control of Space The PETITIONER was told to submit only two or

three pages of article for the column, (sic) "Feminist Reflections" per week. To go
beyond that, the Lifestyle editor would already chop off the article and publish the
rest for the next week. This shows that PRIVATE RESPONDENTS had control
over the space that the PETITIONER was assigned to fill.

d. As to Discipline Over time, the newspaper readers eyes are trained or

habituated to look for and read the works of their favorite regular writers and
columnists. They are conditioned, based on their daily purchase of the
newspaper, to look for specific spaces in the newspapers for their favorite write-
ups/or opinions on matters relevant and significant issues aside from not being
late or amiss in the responsibility of timely submission of their articles.

The PETITIONER was disciplined to submit her articles on highly relevant and
significant issues on time by the PRIVATE RESPONDENTS who have a say on
whether the topics belong to those considered as highly relevant and significant,
through the Lifestyle Section Editor. The PETITIONER had to discuss the topics
first and submit the articles two days before publication date to keep her column
in the newspaper space regularly as expected or without miss by its readers. 31

Given this discussion by petitioner, we then ask the question: Is this the form of control
that our labor laws contemplate such as to establish an employer-employee relationship
between petitioner and respondent PDI?

It is not.

Petitioner has misconstrued the "control test," as did the Labor Arbiter and the NLRC.

Not all rules imposed by the hiring party on the hired party indicate that the latter is an
employee of the former. Rules which serve as general guidelines towards the
achievement of the mutually desired result are not indicative of the power of
control.32 Thus, this Court has explained:

It should, however, be obvious that not every form of control that the hiring party
reserves to himself over the conduct of the party hired in relation to the services
rendered may be accorded the effect of establishing an employer-employee
relationship between them in the legal or technical sense of the term. A line must
be drawn somewhere, if the recognized distinction between an employee and an
individual contractor is not to vanish altogether. Realistically, it would be a rare
contract of service that gives untrammelled freedom to the party hired and
eschews any intervention whatsoever in his performance of the engagement.
 Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the
means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The
first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means
used to achieve it. x x x.33

The main determinant therefore is whether the rules set by the employer are meant to
control not just the results of the work but also the means and method to be used by the
hired party in order to achieve such results. Thus, in this case, we are to examine the
factors enumerated by petitioner to see if these are merely guidelines or if they indeed
fulfill the requirements of the control test.

Petitioner believes that respondents acts are meant to control how she executes her
work. We do not agree. A careful examination reveals that the factors enumerated by
the petitioner are inherent conditions in running a newspaper. In other words, the so-
called control as to time, space, and discipline are dictated by the very nature of the
newspaper business itself.

We agree with the observations of the Office of the Solicitor General that:

The Inquirer is the publisher of a newspaper of general circulation which is widely

read throughout the country. As such, public interest dictates that every article
appearing in the newspaper should subscribe to the standards set by the
Inquirer, with its thousands of readers in mind. It is not, therefore, unusual for the
Inquirer to control what would be published in the newspaper. What is important
is the fact that such control pertains only to the end result, i.e., the submitted
articles. The Inquirer has no control over [petitioner] as to the means or method
used by her in the preparation of her articles. The articles are done by [petitioner]
herself without any intervention from the Inquirer.34

Petitioner has not shown that PDI, acting through its editors, dictated how she was to
write or produce her articles each week. Aside from the constraints presented by the
space allocation of her column, there were no restraints on her creativity; petitioner was
free to write her column in the manner and style she was accustomed to and to use
whatever research method she deemed suitable for her purpose. The apparent
limitation that she had to write only on subjects that befitted the Lifestyle section did not
translate to control, but was simply a logical consequence of the fact that her column
appeared in that section and therefore had to cater to the preference of the readers of
that section.

The perceived constraint on petitioners column was dictated by her own choice of her
columns perspective. The column title "Feminist Reflections" was of her own choosing,
as she herself admitted, since she had been known as a feminist writer.35 Thus,
respondent PDI, as well as her readers, could reasonably expect her columns to speak
from such perspective.

Contrary to petitioners protestations, it does not appear that there was any actual
restraint or limitation on the subject matter within the Lifestyle section that she could
write about. Respondent PDI did not dictate how she wrote or what she wrote in her
column. Neither did PDIs guidelines dictate the kind of research, time, and effort she
put into each column. In fact, petitioner herself said that she received "no comments on
her articlesexcept for her to shorten them to fit into the box allotted to her column."
Therefore, the control that PDI exercised over petitioner was only as to the finished
product of her efforts, i.e., the column itself, by way of either shortening or outright
rejection of the column.

The newspapers power to approve or reject publication of any specific article she wrote
for her column cannot be the control contemplated in the "control test," as it is but
logical that one who commissions another to do a piece of work should have the right to
accept or reject the product. The important factor to consider in the "control test" is still
the element of control over how the work itself is done, not just the end result thereof.

In contrast, a regular reporter is not as independent in doing his or her work for the
newspaper. We note the common practice in the newspaper business of assigning its
regular reporters to cover specific subjects, geographical locations, government
agencies, or areas of concern, more commonly referred to as "beats." A reporter must
produce stories within his or her particular beat and cannot switch to another beat
without permission from the editor. In most newspapers also, a reporter must inform the
editor about the story that he or she is working on for the day. The story or article must
also be submitted to the editor at a specified time. Moreover, the editor can easily pull
out a reporter from one beat and ask him or her to cover another beat, if the need
arises.

This is not the case for petitioner. Although petitioner had a weekly deadline to meet,
she was not precluded from submitting her column ahead of time or from submitting
columns to be published at a later time. More importantly, respondents did not dictate
upon petitioner the subject matter of her columns, but only imposed the general
guideline that the article should conform to the standards of the newspaper and the
general tone of the particular section.

Where a person who works for another performs his job more or less at his own
pleasure, in the manner he sees fit, not subject to definite hours or conditions of work,
and is compensated according to the result of his efforts and not the amount thereof, no
employer-employee relationship exists.36

Aside from the control test, this Court has also used the economic reality test. The
economic realities prevailing within the activity or between the parties are examined,
taking into consideration the totality of circumstances surrounding the true nature of the
relationship between the parties.37 This is especially appropriate when, as in this case,
there is no written agreement or contract on which to base the relationship. In our
jurisdiction, the benchmark of economic reality in analyzing possible employment
relationships for purposes of applying the Labor Code ought to be the economic
dependence of the worker on his employer.38

Petitioners main occupation is not as a columnist for respondent but as a womens

rights advocate working in various womens organizations.39 Likewise, she herself
admits that she also contributes articles to other publications.40 Thus, it cannot be said
that petitioner was dependent on respondent PDI for her continued employment in
respondents line of business.41

The inevitable conclusion is that petitioner was not respondent PDIs employee but an
independent contractor, engaged to do independent work.

There is no inflexible rule to determine if a person is an employee or an independent

contractor; thus, the characterization of the relationship must be made based on the
particular circumstances of each case.42 There are several factors43 that may be
considered by the courts, but as we already said, the right to control is the dominant
factor in determining whether one is an employee or an independent contractor. 44

In our jurisdiction, the Court has held that an independent contractor is one who carries
on a distinct and independent business and undertakes to perform the job, work, or
service on ones own account and under ones own responsibility according to ones
own manner and method, free from the control and direction of the principal in all
matters connected with the performance of the work except as to the results thereof. 45

On this point, Sonza v. ABS-CBN Broadcasting Corporation46 is enlightening. In that

case, the Court found, using the four-fold test, that petitioner, Jose Y. Sonza, was not
an employee of ABS-CBN, but an independent contractor. Sonza was hired by ABS-
CBN due to his "unique skills, talent and celebrity status not possessed by ordinary
employees," a circumstance that, the Court said, was indicative, though not conclusive,
of an independent contractual relationship. Independent contractors often present
themselves to possess unique skills, expertise or talent to distinguish them from
ordinary employees.47 The Court also found that, as to payment of wages, Sonzas
talent fees were the result of negotiations between him and ABS-CBN.48 As to the
power of dismissal, the Court found that the terms of Sonzas engagement were
dictated by the contract he entered into with ABS-CBN, and the same contract provided
that either party may terminate the contract in case of breach by the other of the terms
thereof.49 However, the Court held that the foregoing are not determinative of an
employer-employee relationship. Instead, it is still the power of control that is most
important.

On the power of control, the Court found that in performing his work, Sonza only needed
his skills and talent how he delivered his lines, appeared on television, and sounded
on radio were outside ABS-CBNs control.50 Thus:
We find that ABS-CBN was not involved in the actual performance that produced
the finished product of SONZAs work. ABS-CBN did not instruct SONZA how to
perform his job. ABS-CBN merely reserved the right to modify the program
format and airtime schedule "for more effective programming." ABS-CBNs sole
concern was the quality of the shows and their standing in the ratings. Clearly,
ABS-CBN did not exercise control over the means and methods of performance
of SONZAs work.

SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-
CBNs power over the means and methods of the performance of his work.
Although ABS-CBN did have the option not to broadcast SONZAs show, ABS-
CBN was still obligated to pay SONZAs talent fees... Thus, even if ABS-CBN
was completely dissatisfied with the means and methods of SONZAs
performance of his work, or even with the quality or product of his work, ABS-
CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is
not to broadcast SONZAs show but ABS-CBN must still pay his talent fees in
full.

Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by

the obligation to continue paying in full SONZAs talent fees, did not amount to
control over the means and methods of the performance of SONZAs work. ABS-
CBN could not terminate or discipline SONZA even if the means and methods of
performance of his work - how he delivered his lines and appeared on television -
did not meet ABS-CBNs approval. This proves that ABS-CBNs control was
limited only to the result of SONZAs work, whether to broadcast the final product
or not. In either case, ABS-CBN must still pay SONZAs talent fees in full until the
expiry of the Agreement.

In Vaughan, et al. v. Warner, et al., the United States Circuit Court of Appeals
ruled that vaudeville performers were independent contractors although the
management reserved the right to delete objectionable features in their shows.
Since the management did not have control over the manner of performance of
the skills of the artists, it could only control the result of the work by deleting
objectionable features.

SONZA further contends that ABS-CBN exercised control over his work by
supplying all equipment and crew. No doubt, ABS-CBN supplied the equipment,
crew and airtime needed to broadcast the "Mel & Jay" programs. However, the
equipment, crew and airtime are not the "tools and instrumentalities" SONZA
needed to perform his job. What SONZA principally needed were his talent or
skills and the costumes necessary for his appearance. Even though ABS-CBN
provided SONZA with the place of work and the necessary equipment, SONZA
was still an independent contractor since ABS-CBN did not supervise and control
his work. ABS-CBNs sole concern was for SONZA to display his talent during
the airing of the programs.
 A radio broadcast specialist who works under minimal supervision is an
independent contractor. SONZAs work as television and radio program host
required special skills and talent, which SONZA admittedly possesses. The
records do not show that ABS-CBN exercised any supervision and control over
how SONZA utilized his skills and talent in his shows.51

The instant case presents a parallel to Sonza. Petitioner was engaged as a columnist
for her talent, skill, experience, and her unique viewpoint as a feminist advocate. How
she utilized all these in writing her column was not subject to dictation by respondent.
As in Sonza, respondent PDI was not involved in the actual performance that produced
the finished product. It only reserved the right to shorten petitioners articles based on
the newspapers capacity to accommodate the same. This fact, we note, was not unique
to petitioners column. It is a reality in the newspaper business that space constraints
often dictate the length of articles and columns, even those that regularly appear
therein.

Furthermore, respondent PDI did not supply petitioner with the tools and
instrumentalities she needed to perform her work. Petitioner only needed her talent and
skill to come up with a column every week. As such, she had all the tools she needed to
perform her work.

Considering that respondent PDI was not petitioners employer, it cannot be held guilty
of illegal dismissal.

WHEREFORE, the foregoing premises considered, the Petition is DISMISSED. The

Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 50970 are
hereby AFFIRMED.

SO ORDERED.
 6. Salazar v. NLRC, G.R. No. 109210, 17 April 1996

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 109210 April 17, 1996

ENGINEER LEONCIO V. SALAZAR, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and H.L. CARLOS
CONSTRUCTION, CO. INC., respondents.

KAPUNAN, J.:p

This is a petition for certiorari * to annul the decision of the National Labor Relations Commission in NLRC Case No. 002855-92 dated 27
.November 1992 which affirmed in toto the decision of the Labor Arbiter in NLRC NCR-00-09-05335-91 dated 29 January 1992 dismissing
the complaint filed by petitioner for lack of merit. The NLRC's resolution dated 22 February 1993 is similarly impugned for denying petitioner's
motion for reconsideration.

The antecedent facts are as follows:

On 17 April 1990, private respondent, at a monthly salary of P4,500.00, employed petitioner as

construction/project engineer for the construction of the Monte de Piedad building in Cubao, Quezon
City. Allegedly, by virtue of an oral contract, petitioner would also receive a share in the profits after
completion of the project and that petitioner's services in excess of eight (8) hours on regular days
and services rendered on weekends and legal holidays shall be compensable overtime at the rate of
P27.85 per hour.

On 16 April 1991, petitioner received a memorandum issued by private respondent's project

manager, Engr. Nestor A. Delantar informing him of the termination of his services effective on 30
April 1991. Reproduced hereunder is the abovementioned memorandum:

April 16, 1991

MEMORANDUM TO:

LEONCIO V. SALAZAR
Project Engineer
MONTE DE PIEDAD BLDG. PROJECT
Quezon City

Due to the impending completion of the aforementioned project and the lack of up-
coming contracted works for our company in the immediate future, volume of work
for our engineering and technical personnel has greatly been diminished.
 In view of this, you are hereby advised to wind up all technical reports including
accomplishments, change orders, etc.

Further, you are advised that your services are being terminated effective at the
close of office hours on April 30, 1991.

This, however, has no prejudice to your re-employment in this company in its local
and overseas projects should the need for your services arises.

Thank you for your invaluable services rendered to this company.

(Sgd.)
NEST
OR A.
DELAN
TAR
Project
manag
er

Noted By:

(Sgd.) Mario B. Cornista

Vice President 1

On 13 September 1991, petitioner filed a complaint against private respondent for illegal dismissal,
unfair labor practice, illegal deduction,
non-payment of wages, overtime rendered, service incentive leave pay, commission, allowances,
profit-sharing and separation pay with the NLRC-NCR Arbitration Branch, Manila. 2

On 29 January 1992, Labor Arbiter Raul T. Aquino rendered a decision, the dispositive portion of
which reads, thus:

WHEREFORE, responsive to the foregoing, the instant case is hereby DISMISSED

for lack of merits.

SO ORDERED. 3

The Labor Arbiter ruled that petitioner was a managerial employee and therefore exempt from
payment of benefits such as overtime pay, service incentive leave pay and premium pay for holidays
and rest days. Petitioner, Labor Arbiter Aquino further declared, was also not entitled to separation
pay. He was hired as a project employee and his services were terminated due to the completion of
the project. 4

The Labor Arbiter, likewise, denied petitioner's claim for a share in the project's profits,
reimbursement of legal expenses and unpaid wages for lack of basis. 5

On 14 April 1992, petitioner appealed to the National Labor Relations Commission (NLRC).

On 27 November 1992, the NLRC rendered the assailed decision, the dispositive portion of which
reads as follows:
 WHEREFORE, premises considered, the appeal is hereby Dismissed and the
assailed decision is Affirmed en toto.

SO ORDERED. 6

On 29 January 1993, petitioner filed a motion for reconsideration which the NLRC denied for lack of
merit on 22 February 1993. 7

Hence, the instant petition wherein the following issues were raised:

I. Granting for the sake of argument without conceding, that complainant-petitioner

herein was a managerial employee, was his verbal contract to be paid his overtime
services as stated in paragraph 2(b) of this Petition invalid? and the payments of
such overtime services as evidenced by Exhibits "B" to "B-24" (the genuineness and
authenticity of which are not disputed) are they not evidentiary and of corroborative
value to the true unwritten agreement between the parties in this case?

II. Is there any portion of the Labor Code that prohibits contracts between employer
and employee giving the latter the benefit of being paid overtime services, as in this
particular case?

III. Where an employee was induced to accept a low or distorted salary or wage
level, because of an incentive promise to receive a bigger compensation than that
which would be his true and correct wage level as shown by documents for the
payment of his distorted wages and overtime services, is it not legally proper, in the
alternative to claim payment of the differential of his undistorted salary or wage level
when the promised incentive compensation is denied by his employer after the
completion of the job for which he has employed?

IV. Is the Certificate of employment issued to an employee by his employer,

assailable by mere affidavits of denials to the effect that said Certificate was issued
because of the insistence of the employee that it be made to include a period he did
not work, but which such fact of insistence or request is also denied by the
employee, because he really worked during the period included in said Certificate?

V. Is the employer liable for the payment of the attorney's pay incurred by his
employee in a work connected criminal prosecution against him for an act done by
another employee assigned by same employer to do the act which was the subject of
the criminal prosecution? 8

Petitioner prays that judgment be rendered, thus:

1. That the decision of the NLRC and its resolution denying the Motion for Reconsideration be set
aside on grounds of grave abuse of discretion and;

2. That private respondent be ordered to pay petitioner the following:

a. the premium pays for his overtime services of 368 hours on ordinary days at 25%;
272 hours on Saturdays at 30%; 272 hours on Sundays plus 24 hours on legal
holidays at 200% computed at the rate of P27.85 per hour of undistorted wage level;
 b. in the alternative, to pay at least one (1) percent of 4.5 million pesos profit share,
or the sum total of the differential of his salaries, in the amount of P2,184.00 per
month, since April 17, 1990 to April 30, 1991, his undistorted salary being P6,684.00
per month; and to pay his unpaid salary for 15 days - May 1 to 15, 1991, with his
undistorted salary rate;

c. the amount of P3,000.00 reimbursement for what he paid his defense counsel in
that criminal action which should have instead been against respondent's general
manager;

d. Separation pay of at least one month salary, he having been terminated

unreasonably without cause, and three days service incentive leave pay; and to pay
the costs; 9

Before proceeding to the merits of the petition, we shall first resolve the procedural objection raised.
Private respondent prays for the outright dismissal of the instant petition on grounds of wrong mode
of appeal, it being in the form of a petition for review on certiorari (Rule 45 of the Revised Rules of
Court) and not a special civil action for certiorari (Rule 65 thereof) which is the correct mode of
appeal from decisions of the NLRC.

Although we agree with private respondent that appeals to the Supreme Court from decisions of the
NLRC should be in the form of a special civil action for certiorari under Rule 65 of the Revised Rules
of Court, this rule is not inflexible. In a number of cases, 10 this Court has resolved to treat as special
civil actions for certiorari petitions erroneously captioned as petitions for review on certiorari "in the
interest of justice." In People's Security, Inc. v. NLRC, 11 we elaborated, thus:

Indeed, this Court has time and again declared that the only way by which a labor
case may reach the Supreme Court is through a petition for certiorari under Rule 65
of the Rules of Court alleging lack or excess of jurisdiction or grave abuse of
discretion (Pearl S. Buck Foundation v. NLRC, 182 SCRA 446 [1990]).

This petition should not be dismissed on a mere technicality however. "Dismissal of

appeal purely on technical grounds is frowned upon where the policy of the courts is
to encourage hearings of appeal on their merits. The rules of procedure ought not to
be applied in a very rigid technical sense, rules of procedure are used only to help
secure, not override substantial justice. If a technical and rigid enforcement of the
rules is made, their aim would be defeated" (Tamayo v. Court of Appeals, 209 SCRA
518, 522 [1992] citing Gregorio v. Court of Appeals, 72 SCRA 120
[1976]). Consequently, in the interest of justice, the instant petition for review shall be
treated as a special civil action on certiorari. (Emphasis ours.)

Moving on to the merits, stated differently, the issues for our resolution are the following:

1) Whether or not petitioner is entitled to overtime pay, premium pay for services rendered on rest
days and holidays and service incentive leave pay, pursuant to Articles 87, 93, 94 and 95 of the
Labor Code;

2) Whether or not petitioner is entitled to a share in the profits of the construction project;.

3) Whether or not petitioner rendered services from 1 May to 15 May 1991 and is, therefore, entitled
to unpaid wages;
4) Whether or not private respondent is liable to reimburse petitioner's legal expenses and;

5) Whether or not petitioner is entitled to separation pay.

On the first issue, the NLRC concurred with the Labor Arbiter's ruling that petitioner was a
managerial employee and, therefore, exempt from payment of overtime pay, premium pay for
holidays and rest days and service incentive leave pay under the law. The NLRC declared that:

Book III on conditions of employment exempts managerial employees from its

coverage on the grant of certain economic benefits, which are the ones the
complainant-appellant was demanding from respondent. It is an undisputed fact that
appellant was a managerial employee and such, he was not entitled to the economic
benefits he sought to recover. 12

Petitioner claims that since he performs his duties in the project site or away from the principal place
of business of his employer (herein private respondent), he falls under the category of "field
personnel." However, petitioner accentuates that his case constitutes the exception to the exception
because his actual working hours can be determined as evidenced by the disbursement vouchers
containing payments of petitioner's salaries and overtime services. 13 Strangely, petitioner is of the
view that field personnel may include managerial employees.

We are constrained to disagree with petitioner.

In his original complaint, petitioner stated that the nature of his work is "supervisory-
engineering." 14 Similarly, in his own petition and in other pleadings submitted to this Court, petitioner
confirmed that his job was to supervise the laborers in the construction project 15 Hence, although
petitioner cannot strictly be classified as a managerial employee under Art. 82 of the Labor
Code, 16 and sec. 2(b), Rule I, Book III of the Omnibus Rules Implementing the Labor
Code, 17 nonetheless he is still not entitled to payment of the aforestated benefits because he falls
squarely under another exempt category "officers or members of a managerial staff" as defined
under sec. 2(c) of the abovementioned implementing rules:

Sec. 2. Exemption. The provisions of this Rule shall not apply to the following
persons if they qualify for exemption under the condition set forth herein:

xxx xxx xxx

(c) Officers or members of a managerial staff if they perform the following duties and
responsibilities:

(1) The primary duty consists of the performance of work directly

related to management policies of their employer;

(2) Customarily and regularly exercise discretion and independent

judgment;

(3) [i] Regularly and directly assist a proprietor or a managerial

employee whose primary duty consists of the management of the
establishment in which he is employed or subdivision thereof; or [ii]
execute under general supervision work along specialized or
technical lines requiring special training, experience, or knowledge; or
 [iii] execute under general supervision special assignments and
tasks; and

(4) who do not devote more than 20 percent of their hours worked in
a work-week to activities which are not directly and closely related to
the performance of the work described in paragraphs (1), (2), and (3)
above.

A case in point is National Sugar Refineries Corporation v. NLRC. 18 On the issue of "whether
supervisory employees, as defined in Article 212 (m), Book V of the Labor Code, should be
considered as officers or members of the managerial staff under Article 82, Book III of the same
Code and hence not entitled to overtime, rest day and holiday pay," 19 this Court ruled:

A cursory perusal of the Job Value Contribution Statements of the union members
will readily show that these supervisory employees are under the direct supervision
of their respective department superintendents and that generally they assist the
latter in planning, organizing, staffing, directing, controlling, communicating and in
making decisions in attaining the company's set goals and objectives. These
supervisory employees are likewise responsible for the effective and efficient
operation of their respective departments. . . .

xxx xxx xxx

From the foregoing, it is apparent that the members of respondent union discharge
duties and responsibilities which ineluctably qualify them as officers or members of
the managerial staff, as defined in Section 2, Rule I, Book III of the aforestated Rules
to Implement the Labor Code, viz.: (1) their primary duty consists of the performance
of work directly related to management policies of their employer; (2) they
customarily and regularly exercise discretion and independent judgment; (3) they
regularly and directly assist the managerial employee whose primary duty consists of
the management of a department of the establishment in which they are employed;
(4) they execute, under general supervision, work along specialized or technical lines
requiring special training, experience, or knowledge; (5) they execute, under general
supervision, special assignments and tasks; and (6) they do not devote more than
20% of their hours worked in a work-week to activities which are not directly and
clearly related to the performance of their work hereinbefore described.

Under the facts obtaining in this case, we are constrained to agree with petitioner
that the union members should be considered as officers or members of the
managerial staff and are, therefore, exempt from the coverage of Article 82. Perforce,
they are not entitled to overtime, rest day and holiday pay. 20

The aforequoted rationale equally applies to petitioner herein considering in the main his supervisory
duties as private respondent's project engineer, duties which, it is significant to note, petitioner does
not dispute.

Petitioner, likewise, claims that the NLRC failed to give due weight and consideration to the fact that
private respondent compensated him for his overtime services as indicated in the various
disbursement vouchers he submitted as evidence.

Petitioner's contention is unmeritorious. That petitioner was paid overtime benefits does not
automatically and necessarily denote that petitioner is entitled to such benefits. Art. 82 of the Labor
Code specifically delineates who are entitled to the overtime premiums and service incentive leave
pay provided under Art. 87, 93, 94 and 95 of the Labor Code and the exemptions thereto. As
previously determined, petitioner falls under the exemptions and therefore has no legal claim to the
said benefits. It is well and good that petitioner was compensated for his overtime services.
However, this does not translate into a right on the part of petitioner to demand additional payment
when, under the law, petitioner is clearly exempted therefrom.

Going to the second issue, petitioner insists that private respondent promised him a share in the
profits after completion of the construction project. It is because of this oral agreement, petitioner
elucidates, that he agreed to a monthly salary of P4,500.00, an amount which he claims is too low
for a professional civil engineer like him with the rank of project engineer.

Arguing further, petitioner states that payment of his overtime services, as shown by the
aforementioned disbursement vouchers, proves the existence of this verbal agreement since
payment of his overtime services constitutes part of this so-called understanding.

We cannot accede to petitioner's demand. Nowhere in the disbursement vouchers can we find even
the remotest hint of a profit-sharing agreement between petitioner and private respondent.
Petitioner's rationalization stretches the imagination way too far.

Thus, we concur with the ruling of the Labor Arbiter:

As to the issue of profit sharing, we simply cannot grant the same on the mere basis
of complainant's allegation that respondent verbally promised him that he is entitled
to a share in the profits derive(d) from the projects. Benefits or privileges of this
nature (are) usually in writing, besides complainant failed to (establish) that said
benefits or privileges (have) been given to any of respondent('s) employees as a
matter of practice or policy. 21 (Words in parenthesis supplied.)

Anent the third issue, petitioner alleges that on 30 April 1991, before closing hours, private
respondent's project manager, Engineer Nestor Delantar advised him to continue supervising the
"finishing touches on many parts of the building which took him and the assisting laborers until 15
May 1991." 22

As proof of his extended service, petitioner presented the certificate of service issued by Engr.
Delantar attesting to petitioner's employment as project engineer from April 1990 to May 1991. 23

In contrast, private respondent argues that the abovementioned certificate was issued solely to
accommodate petitioner who needed the same for his work application abroad. It further stressed
that petitioner failed to prove he actually worked during the aforestated period.

On this score, we rule for the petitioner. The purpose for which the said certificate was issued
becomes irrelevant. The fact remains that private respondent knowingly and voluntarily issued the
certificate. Mere denials and self-serving statements to the effect that petitioner allegedly promised
not to use the certificate against private respondent are not sufficient to overturn the same. Hence,
private respondent is estopped from assailing the contents of its own certificate of service.

During the construction of the Monte de Piedad building, a criminal complaint for unjust vexation was
filed by one Salvador Flores against the officers of the Monte de Piedad & Savings Bank, the owner
thereof, for constructing a bunkhouse in front of his (Flores) apartment and making it difficult for him
to enter the same.
Petitioner avers that he was implicated in the complaint for the sole reason that he was the
construction engineer of the project. Hence, private respondent, being the employer, is obligated to
pay petitioner's legal expenses, particularly, reimbursement of the fees petitioner paid his counsel
amounting to P3,000.00. Petitioner argues that private respondent's act of giving allowances to
enable petitioner to attend the hearings, as shown in the disbursement voucher submitted as
evidence, 24 constitutes an admission of the aforestated obligation.

We agree with petitioner. Although not directly implicated in the criminal complaint, private
respondent is nonetheless obligated to defray petitioner's legal expenses. Petitioner was included in
the complaint not in his personal capacity but in his capacity as project engineer of private
respondent and the case arose in connection with his work as such. At the construction site,
petitioner is the representative of private respondent being its employee and he acts for and in
behalf of private respondent. Hence, the inclusion of petitioner in the complaint for unjust vexation,
which was work-related, is equivalent to inclusion of private respondent itself.

On the last issue, we rule that petitioner is a project employee and, therefore, not entitled to
separation pay.

The applicable provision is Article 280 of the Labor Code which defines the term "project employee,"
thus:

Art. 280. Regular and Casual Employment. The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged
to perform activities which are usually necessary or desirable in the usual business
or trade of the employer, except where the employment has been fixed for a specific
period or undertaking the completion or termination of which has been determined at
the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the
season. (Emphasis ours.) 25

In the case at bench, it was duly established that private respondent hired petitioner as project or
construction engineer specifically for its Monte de Piedad building project. In his own words,
petitioner declared:

xxx xxx xxx

2. That complainant-petitioner herein, by virtue of an oral agreement entered into

with private respondent herein through its proprietor, president and general manager,
Engr. Honorio L. Carlos, on April 17, 1990, began to work as a licensed Civil
Engineer as construction or engineer of its contracted project, the Monte de Piedad
Bank Building, at Cubao, Quezon City, on the following terms and conditions, to wit:

. . . (Emphasis ours.) 26

Accordingly, as project employee, petitioner's services are deemed coterminous with the project, that
is, petitioner's services may be terminated as soon as the project for which he was hired is
completed. 27

There can be no dispute that petitioner's dismissal was due to the completion of the construction of
the Monte de Piedad building. Petitioner himself stated that it took him and his assisting laborers
until 15 May 1991 to complete the "finishing touches" on the said building. 28
Petitioner, thus, has no legal right to demand separation pay. 29 Policy Instruction No. 20 entitled
"Stabilizing Employer-Employee Relations in the Construction Industry" explicitly mandates that:

xxx xxx xxx

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 a clearance from the Secretary of Labor in connection with such termination.
What is required of the company is a report to the nearest Public Employment Office
for statistical purposes.

xxx xxx xxx

Department Order No. 19 of the Department of Labor and Employment (DOLE) entitled "Guidelines
Governing the Employment of Workers in the Construction Industry" promulgated on 1 April 1993,
reiterates the same rule. 30

WHEREFORE, premises considered, the assailed decision is hereby MODIFIED as follows:

1) Private respondent is ordered to pay petitioner for services rendered from 1 May to 15 May 1991;
and,

2) Private respondent is ordered to reimburse petitioner's legal expenses in the amount of

P3,000.00.

In all other respects, the impugned decision is hereby AFFIRMED.

SO ORDERED.
 7. Apex Mining Co., Inc. v NLRC, 196 SCRA 251

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 94951 April 22, 1991

APEX MINING COMPANY, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and SINCLITICA CANDIDO, respondents.

Bernabe B. Alabastro for petitioner.

Angel Fernandez for private respondent.

GANCAYCO, J.:

Is the househelper in the staff houses of an industrial company a domestic helper or a regular
employee of the said firm? This is the novel issue raised in this petition.

Private respondent Sinclita Candida was employed by petitioner Apex Mining Company, Inc. on May
18, 1973 to perform laundry services at its staff house located at Masara, Maco, Davao del Norte. In
the beginning, she was paid on a piece rate basis. However, on January 17, 1982, she was paid on
a monthly basis at P250.00 a month which was ultimately increased to P575.00 a month.

On December 18, 1987, while she was attending to her assigned task and she was hanging her
laundry, she accidentally slipped and hit her back on a stone. She reported the accident to her
immediate supervisor Mila de la Rosa and to the personnel officer, Florendo D. Asirit. As a result of
the accident she was not able to continue with her work. She was permitted to go on leave for
medication. De la Rosa offered her the amount of P 2,000.00 which was eventually increased to
P5,000.00 to persuade her to quit her job, but she refused the offer and preferred to return to work.
Petitioner did not allow her to return to work and dismissed her on February 4, 1988.

On March 11, 1988, private respondent filed a request for assistance with the Department of Labor
and Employment. After the parties submitted their position papers as required by the labor arbiter
assigned to the case on August 24, 1988 the latter rendered a decision, the dispositive part of which
reads as follows:

WHEREFORE, Conformably With The Foregoing, judgment is hereby rendered ordering the
respondent, Apex Mining Company, Inc., Masara, Davao del Norte, to pay the complainant,
to wit:

1 Salary

Differential P16,289.20
 2. Emergency Living

Allowance 12,430.00

3. 13th Month Pay

Differential 1,322.32

4. Separation Pay

(One-month for

every year of

service [1973-19881) 25,119.30

or in the total of FIFTY FIVE THOUSAND ONE HUNDRED SIXTY ONE PESOS AND 42/100
(P55,161.42).

SO ORDERED.1

Not satisfied therewith, petitioner appealed to the public respondent National Labor Relations
Commission (NLRC), wherein in due course a decision was rendered by the Fifth Division thereof on
July 20, 1989 dismissing the appeal for lack of merit and affirming the appealed decision. A motion
for reconsideration thereof was denied in a resolution of the NLRC dated June 29, 1990.

Hence, the herein petition for review by certiorari, which appopriately should be a special civil action
for certiorari, and which in the interest of justice, is hereby treated as such.2 The main thrust of the
petition is that private respondent should be treated as a mere househelper or domestic servant and
not as a regular employee of petitioner.

The petition is devoid of merit.

Under Rule XIII, Section l(b), Book 3 of the Labor Code, as amended, the terms "househelper" or
"domestic servant" are defined as follows:

The term "househelper" as used herein is synonymous to the term "domestic servant" and
shall refer to any person, whether male or female, who renders services in and about the
employer's home and which services are usually necessary or desirable for the maintenance
and enjoyment thereof, and ministers exclusively to the personal comfort and enjoyment of
the employer's family.3

The foregoing definition clearly contemplates such househelper or domestic servant who is
employed in the employer's home to minister exclusively to the personal comfort and enjoyment of
the employer's family. Such definition covers family drivers, domestic servants, laundry women,
yayas, gardeners, houseboys and other similar househelps.

The definition cannot be interpreted to include househelp or laundrywomen working in staffhouses of

a company, like petitioner who attends to the needs of the company's guest and other persons
availing of said facilities. By the same token, it cannot be considered to extend to then driver,
houseboy, or gardener exclusively working in the company, the staffhouses and its premises. They
may not be considered as within the meaning of a "househelper" or "domestic servant" as above-
defined by law.

The criteria is the personal comfort and enjoyment of the family of the employer in the home of said
employer. While it may be true that the nature of the work of a househelper, domestic servant or
laundrywoman in a home or in a company staffhouse may be similar in nature, the difference in their
circumstances is that in the former instance they are actually serving the family while in the latter
case, whether it is a corporation or a single proprietorship engaged in business or industry or any
other agricultural or similar pursuit, service is being rendered in the staffhouses or within the
premises of the business of the employer. In such instance, they are employees of the company or
employer in the business concerned entitled to the privileges of a regular employee.

Petitioner contends that it is only when the househelper or domestic servant is assigned to certain
aspects of the business of the employer that such househelper or domestic servant may be
considered as such as employee. The Court finds no merit in making any such distinction. The mere
fact that the househelper or domestic servant is working within the premises of the business of the
employer and in relation to or in connection with its business, as in its staffhouses for its guest or
even for its officers and employees, warrants the conclusion that such househelper or domestic
servant is and should be considered as a regular employee of the employer and not as a mere
family househelper or domestic servant as contemplated in Rule XIII, Section l(b), Book 3 of the
Labor Code, as amended.

Petitioner denies having illegally dismissed private respondent and maintains that respondent
abandoned her work. This argument notwithstanding, there is enough evidence to show that
1wphi1

because of an accident which took place while private respondent was performing her laundry
services, she was not able to work and was ultimately separated from the service. She is, therefore,
entitled to appropriate relief as a regular employee of petitioner. Inasmuch as private respondent
appears not to be interested in returning to her work for valid reasons, the payment of separation
pay to her is in order.

WHEREFORE, the petition is DISMISSED and the appealed decision and resolution of public
respondent NLRC are hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.
 8. Villuga v. NLRC, G.R. No. L-75038, 23 August 1993

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-75038 August 23, 1993

ELIAS VILLUGA, RENATO ABISTADO, JILL MENDOZA, ANDRES ABAD, BENJAMIN

BRIZUELA, NORLITO LADIA, MARCELO AGUILAN, DAVID ORO, NELIA BRIZUELA, FLORA
ESCOBIDO, JUSTILITA CABANIG, and DOMINGO SAGUIT, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION) and BROAD STREET
TAILORING and/or RODOLFO ZAPANTA, respondents.

Balguma, Macasaet & Associates for petitioners.

Teresita Gandionco Oledan for private respondents.

NOCON, J.:

A basic factor underlying the exercise of rights and the filing of claims for benefits under the Labor
Code and other presidential issuances or labor legislations is the status and nature of one's
employment. Whether an employer-employee relationship exist and whether such employment is
managerial in character or that of a rank and file employee are primordial considerations before
extending labor benefits. Thus, petitioners in this case seek a definitive ruling on the status and
nature of their employment with Broad Street Tailoring and pray for the nullification of the resolution
dated May 12, 1986 of the National Labor Relations Commissions in NLRC Case No. RB-IV- 21558-
78-T affirming the decision of Labor Arbiter Ernilo V. Pealosa dated May 28, 1979, which held
eleven of them as independent contractors and the remaining one as employee but of managerial
rank.

The facts of the case shows that petitioner Elias Villuga was employed as cutter in the tailoring shop
owned by private respondent Rodolfo Zapanta and known as Broad Street Tailoring located at Shaw
Boulevard, Mandaluyong, Metro Manila. As cutter, he was paid a fixed monthly salary of P840.00
and a monthly transportation allowance of P40.00. In addition to his work as cutter, Villuga was
assigned the chore of distributing work to the shop's tailors or sewers when both the shop's manager
and assistant manager would be absent. He saw to it that their work conformed with the pattern he
had prepared and if not, he had them redone, repaired or resewn.

The other petitioners were either ironers, repairmen and sewers. They were paid a fixed amount for
every item ironed, repaired or sewn, regardless of the time consumed in accomplishing the task.
Petitioners did not fill up any time record since they did not observe regular or fixed hours of work.
They were allowed to perform their work at home especially when the volume of work, which
depended on the number of job orders, could no longer be coped up with.
From February 17 to 22, 1978, petitioner Villuga failed to report for work allegedly due to illness. For
not properly notifying his employer, he was considered to have abandoned his work.

In a complaint dated March 27, 1978, filed with the Regional Office of the Department of Labor,
Villuga claimed that he was refused admittance when he reported for work after his absence,
allegedly due to his active participation in the union organized by private respondent's tailors. He
further claimed that he was not paid overtime pay, holiday pay, premium pay for work done on rest
days and holidays, service incentive leave pay and 13th month pay.

Petitioners Renato Abistado, Jill Mendoza, Benjamin Brizuela and David Oro also claimed that they
were dismissed from their employment because they joined the Philippine Social Security Labor
Union (PSSLU). Petitioners Andres Abad, Norlito Ladia, Marcelo Aguilan, Nelia Brizuela, Flora
Escobido, Justilita Cabaneg and Domingo Saguit claimed that they stopped working because private
respondents gave them few pieces of work to do after learning of their membership with PSSLU. All
the petitioners laid claims under the different labor standard laws which private respondent allegedly
violated.

On May 28, 1979, Labor Arbiter Ernilo V. Pealosa rendered a decision ordering the dismissal of the
complaint for unfair labor practices, illegal dismissal and other money claims except petitioner
Villuga's claim for 13th month pay for the years 1976, 1977 and 1980. The dispositive portion of the
decision states as follows:

WHEREFORE, premises considered, the respondent Broad Street Tailoring and/or

Rodolfo Zapanta are hereby ordered to pay complainant Elias Villuga the sum of
ONE THOUSAND TWO HUNDRED FORTY-EIGHT PESOS AND SIXTY-SIX
CENTAVOS (P1,248.66) representing his 13th month pay for the years 1976, 1977
and 1978. His other claims in this case are hereby denied for lack of merit.

The complaint insofar as the other eleven (11) complainants are concerned should
be, as it is hereby dismissed for want of jurisdiction.1

On appeal, the National Labor Relations Commission affirmed the questioned decision in a
resolution dated May 12, 1986, the dispositive portion of which states as follows:

WHEREFORE, premises considered, the decision appealed from is, as it is hereby

AFFIRMED, and the appeal dismissed. 2

Presiding Commissioner Guillermo C. Medina merely concurred in the result while Commissioner
Gabriel M. Gatchalian rendered a dissenting opinion which states as follows:

I am for upholding employer-employee relationship as argued by the complainants

before the Labor Arbiter and on appeal. The further fact that the proposed decision
recognizes complainant's status as piece-rate worker all the more crystallizes
employer-employee relationship the benefits prayed for must be granted. 3

Hence, petitioners filed this instant certiorari case on the following grounds:

1. That the respondent National Labor Relations Commission abused its discretion
when it ruled that petitioner/complainant, Elias Villuga falls within the category of a
managerial employee;
 2. . . . when it ruled that the herein petitioners were not dismissed by reason of their
union activities;

3. . . . when it ruled that petitioners Andres Abad, Benjamin Brizuela, Norlito Ladia,
Marcelo Aguilan, David Oro, Nelia Brizuela, Flora Escobido, Justilita Cabaneg and
Domingo Saguit were not employees of private respondents but were contractors.

4. . . . when it ruled that petitioner Elias Villuga is not entitled to overtime pay and
services for Sundays and Legal Holidays; and

5. . . . when it failed to grant petitioners their respective claims under the provisions
of P.D. Nos. 925, 1123 and 851.4

Under Rule 1, Section 2(c), Book III of the Implementing Rules of Labor Code, to be a member of a
managerial staff, the following elements must concur or co-exist, to wit: (1) that his primary duty
consists of the performance of work directly related to management policies; (2) that he customarily
and regularly exercises discretion and independent judgment in the performance of his functions; (3)
that he regularly and directly assists in the management of the establishment; and (4) that he does
not devote his twenty per cent of his time to work other than those described above.

Applying the above criteria to petitioner Elias Villuga's case, it is undisputed that his primary work or
duty is to cut or prepare patterns for items to be sewn, not to lay down or implement any of the
management policies, as there is a manager and an assistant manager who perform said functions.
It is true that in the absence of the manager the assistant manager, he distributes and assigns work
to employees but such duty, though involving discretion, is occasional and not regular or customary.
He had also the authority to order the repair or resewing of defective item but such authority is part
and parcel of his function as cutter to see to it that the items cut are sewn correctly lest the defective
nature of the workmanship be attributed to his "poor cutting." Elias Villuga does not participate in
policy-making. Rather, the functions of his position involve execution of approved and established
policies. In Franklin Baker Company of the Philippines v. Trajano, 5 it was held that employees who
do not participate in policy-making but are given ready policies to execute and standard practices to
observe are not managerial employees. The test of "supervisory or managerial status" depends on
whether a person possesses authority that is not merely routinary or clerical in nature but one that
requires use of independent judgment. In other words, the functions of the position are not
managerial in nature if they only execute approved and established policies leaving little or no
discretion at all whether to implement said policies or not. 6

Consequently, the exclusion of Villuga from the benefits claimed under Article 87 (overtime pay and
premium pay for holiday and rest day work), Article 94, (holiday pay), and Article 95 (service
incentive leave pay) of the Labor Code, on the ground that he is a managerial employee is
unwarranted. He is definitely a rank and file employee hired to perform the work of the cutter and not
hired to perform supervisory or managerial functions. The fact that he is uniformly paid by the month
does not exclude him from the benefits of holiday pay as held in the case of Insular Bank of America
Employees Union v. Inciong.7 He should therefore be paid in addition to the 13th month pay, his
overtime pay, holiday pay, premium pay for holiday and rest day, and service incentive leave pay.

As to the dismissal of the charge for unfair labor practices of private respondent consisting of
termination of employment of petitioners and acts of discrimination against members of the labor
union, the respondent Commission correctly held the absence of evidence that Mr. Zapanta was
aware of petitioners' alleged union membership on February 22, 1978 as the notice of union
existence in the establishment with proposal for recognition and collective bargaining negotiation
was received by management only an March 3, 1978. Indeed, self-serving allegations without
concrete proof that the private respondent knew of their membership in the union and accordingly
reacted against their membership do not suffice.

Nor is private respondent's claim that petitioner Villuga abandoned his work acceptable. For
abandonment to constitute a valid cause for dismissal, there must be a deliberate and unjustified
refusal of the employee to resume his employment. Mere absence is not sufficient, it must be
accompanied by overt acts unerringly pointing to the fact that the employee simply does not want to
work anymore.8 At any rate, dismissal of an employee due to his prolonged absence without leave by
reason of illness duly established by the presentation of a medical certificate is not justified.9 In the
case at bar, however, considering that petitioner Villuga absented himself for four (4) days without
leave and without submitting a medical certificate to support his claim of illness, the imposition of a
sanction is justified, but surely, not dismissal, in the light of the fact that this is petitioner's first
offense. In lieu of reinstatement, petitioner Villuga should be paid separation pay where
reinstatement can no longer be effected in view of the long passage of time or because of the
realities of the situation. 10 But petitioner should not be granted backwages in addition to
reinstatement as the same is not just and equitable under the circumstances considering that he was
not entirely free from blame. 11

As to the other eleven petitioners, there is no clear showing that they were dismissed because the
circumstances surrounding their dismissal were not even alleged. However, we disagree with the
finding of respondent Commission that the eleven petitioners are independent contractors.

For an employer-employee relationship to exist, the following elements are generally considered:
"(1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal and (4) the power to control the employee's
conduct." 12

Noting that the herein petitioners were oftentimes allowed to perform their work at home and were
paid wages on a piece-rate basis, the respondent Commission apparently found the second and
fourth elements lacking and ruled that "there is no employer-employee relationship, for it is clear that
respondents are interested only in the result and not in the means and manner and how the result is
obtained."

Respondent Commission is in error. The mere fact that petitioners were paid on a piece-rate basis is
no argument that herein petitioners were not employees. The term "wage" has been broadly defined
in Article 97 of the Labor Code as remuneration or earnings, capable of being expressed in terms of
money whether fixed or ascertained on a time, task, piece or commission
basis. . . ." The facts of this case indicate that payment by the piece is just a method of
compensation and does not define the essence of the
relation. 13 The petitioners were allowed to perform their work at home does not likewise imply
absence of control and supervision. The control test calls merely for the existence of a right to
control the manner of doing the work, not the actual exercise of the right. 14

In determining whether the relationship is that of employer and employee or one of an independent
contractor, "each case must be determined on its own facts and all the features of the relationship
are to be considered." 15Considering that petitioners who are either sewers, repairmen or ironer, have
been in the employ of private respondent as early as 1972 or at the latest in 1976, faithfully
rendering services which are desirable or necessary for the business of private respondent, and
observing management's approved standards set for their respective lines of work as well as the
customers' specifications, petitioners should be considered employees, not independent contractors.
Independent contractors are those who exercise independent employment, contracting to do a piece
of work according to their own methods and without being subjected to control of their employer
except as to the result of their work. By the nature of the different phases of work in a tailoring shop
where the customers' specifications must be followed to the letter, it is inconceivable that the
workers therein would not be subjected to control.

In Rosario Brothers, Inc. v. Ople, 16 this Court ruled that tailors and similar workers hired in the
tailoring department, although paid weekly wages on piece work basis, are employees not
independent contractors. Accordingly, as regular employees, paid on a piece-rate basis, petitioners
are not entitled to overtime pay, holiday pay, premium pay for holiday/rest day and service incentive
leave pay. Their claim for separation pay should also be defined for lack of evidence that they were
in fact dismissed by private respondent. They should be paid, however, their 13th month pay under
P.D. 851, since they are employees not independent contractors.

WHEREFORE, in view of the foregoing reasons, the assailed decision of respondent National Labor
Relations Commission is hereby MODIFIED by awarding

(a) in favor of petitioner Villuga, overtime pay, holiday pay, premium pay for holiday and rest day,
service incentive leave pay and separation pay, in addition to his 13th month pay; and

(b) in favor of the rest of the petitioners, their respective 13th month pay.

The case is hereby REMANDED to the National Labor Relations Commission for the computation of
the claims herein-above mentioned.

SO ORDERED.
 A. Working Conditions: Arts. 83 to 96, LCP, IRR, Rules 1-VI
Cases:
9. San Juan de Dios Hospital Employees Association v. NLRC, G.R. No. 126383, Nov. 28,
1997

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 126383 November 28, 1997

SAN JUAN DE DIOS HOSPITAL EMPLOYEES ASSOCIATION-AFW/MA. CONSUELO

MACQUILING LEONARDO MARTINEZ, DOMINGO ELA, JR., RODOLFO CALUCIN, JR., PERLA
MENDOZA, REX RAPHAEL REYES, ROGELIO BELMONTE, and 375 other EMPLOYEE-UNION
MEMBERS, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, and SAN JUAN DE DIOS
HOSPITAL, respondents.

FRANCISCO, J.:

Petitioners, the rank-and-file employee-union officers and members of San Juan De Dios Hospital
Employees Association, sent on July 08, 1991, a "four (4)-page letter with attached support
signatures . . . requesting and pleading for the expeditious implementation and payment by
respondent" Juan De Dios Hospital "of the '40-HOURS/5-DAY WORKWEEK' with compensable
weekly two (2) days off provided for by Republic Act 5901 as clarified for enforcement by the
Secretary of Labor's Policy Instructions No. 54 dated April 12, 1988." 1 Respondent hospital failed to
give a favorable response; thus, petitioners filed a complaint regarding their "claims for statutory
benefits under the above-cited law and policy issuance" 2, docketed as NLRC NCR Case No. 00-08-
04815-19. On February 26, 1992, the Labor Arbiter 3 dismissed the complaint. Petitioners appealed
before public respondent National Labor Relations Commission 4 (NLRC), docketed as NLRC NCR
CA 003028-92, which affirmed the Labor Arbiter's decision. Petitioners' subsequent motion for
reconsideration was denied; hence, this petition under Rule 65 of the Rules of Court ascribing grave
abuse of discretion on the part of NLRC in concluding that Policy Instructions No. 54 "proceeds from
a wrong interpretation of RA 5901" 5 and Article 83 of the Labor Code.

As the Court sees it, the core issue is whether Policy Instructions No. 54 issued by then Labor
Secretary (now Senator) Franklin M. Drilon is valid or not.

The policy instruction in question provides in full as follows:

Policy Instruction No. 54

To: All Concerned

Subject: Working Hours and Compensation of Hospital/Clinic Personnel

This issuance clarifies the enforcement policy of this Department on the working
hours and compensation of personnel employed by hospitals/clinics with a bed
capacity of 100 or more and those located in cities and municipalities with a
population of one million or more.

Republic Act 5901 took effect on 21 June 1969 prescribes a 40-hour/5 day work
week for hospital/clinic personnel. At the same time, the Act prohibits the diminution
of the compensation of these workers who would suffer a reduction in their weekly
wage by reason of the shortened workweek prescribed by the Act. In effect, RA 5901
requires that the covered hospital workers who used to work seven (7) days a week
should be paid for such number of days for working only 5 days or 40 hours a week.

The evident intention of RA 5901 is to reduce the number of hospital personnel,

considering the nature of their work, and at the same time guarantee the payment to
them of a full weekly wage for seven (7) days. This is quite clear in the Exemplary
Note of RA 5901 which states:

As compared with the other employees and laborers, these hospital

and health clinic personnel are over-worked despite the fact that their
duties are more delicate in nature. If we offer them better working
conditions, it is believed that the "brain drain", that our country suffers
nowadays as far as these personnel are concerned will be
considerably lessened. The fact that these hospitals and health
clinics personnel perform duties which are directly concerned with the
health and lives of our people does not mean that they should work
for a longer period than most employees and laborers. They are also
entitled to as much rest as other workers. Making them work longer
than is necessary may endanger, rather than protect the health of
their patients. Besides, they are not receiving better pay than the
other workers. Therefore, it is just and fair that they may be made to
enjoy the privileges of equal working hours with other workers except
those excepted by law. (Sixth Congress of the Republic of the
Philippines, Third Session, House of Representatives, H. No. 16630)

The Labor Code in its Article 83 adopts and incorporates the basic provisions of RA
5901 and retains its spirit and intent which is to shorten the workweek of covered
hospital personnel and at the same time assure them of a full weekly wage.

Consistent with such spirit and intent, it is the position of the Department that
personnel in subject hospital and clinics are entitled to a full weekly wage for seven
(7) days if they have completed the 40-hour/5-day workweek in any given workweek.

All enforcement and adjudicatory agencies of this Department shall be guided by this
issuance in the disposition of cases involving the personnel of covered hospitals and
clinics.

Done in the City of Manila, this 12th day of April, 1988.

(Sgd.) FRANKLIN M. DRILON

Secretary
 (Emphasis Added)

We note that Policy Instruction No. 54 relies and purports to implement Republic Act No. 5901,
otherwise known as "An Act Prescribing Forty Hours A Week Of Labor For Government and Private
Hospitals Or Clinic Personnel", enacted on June 21, 1969. Reliance on Republic Act No. 5901,
however, is misplaced for the said statute, as correctly ruled by respondent NLRC, has long been
repealed with the passage of the Labor Code on May 1, 1974, Article 302 of which explicitly
provides: "All labor laws not adopted as part of this Code either directly or by reference are hereby
repealed. All provisions of existing laws, orders, decree, rules and regulations inconsistent herewith
are likewise repealed." Accordingly, only Article 83 of the Labor Code which appears to have
substantially incorporated or reproduced the basic provisions of Republic Act No. 5901 may support
Policy Instructions No. 54 on which the latter's validity may be gauged. Article 83 of the Labor Code
states:

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

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

A cursory reading of Article 83 of the Labor Code betrays petitioners' position that "hospital
employees" are entitled to "a full weekly salary with paid two (2) days' off if they have completed the
40-hour/5-day workweek". 6 What Article 83 merely provides are: (1) the regular office hour of eight
hours a day, five days per week for health personnel, and (2) where the exigencies of service require
that health personnel work for six days or forty-eight hours then such health personnel shall be
entitled to an additional compensation of at least thirty percent of their regular wage for work on the
sixth day. There is nothing in the law that supports then Secretary of Labor's assertion that
"personnel in subject hospitals and clinics are entitled to a full weekly wage for seven (7) days if they
have completed the 40-hour/5-day workweek in any given workweek". Needless to say, the
Secretary of Labor exceeded his authority by including a two days off with pay in contravention of
the clear mandate of the statute. Such act the Court shall not countenance. Administrative
interpretation of the law, we reiterate, is at best merely advisory, 7 and the Court will not hesitate to
strike down an administrative interpretation that deviates from the provision of the statute.

Indeed, even if we were to subscribe with petitioners' erroneous assertion that Republic Act No.
5901 has neither been amended nor repealed by the Labor Code, we nevertheless find Policy
Instructions No. 54 invalid. A perusal of Republic Act No. 5901 8 reveals nothing therein that gives
two days off with pay for health personnel who complete a 40-hour work or 5-day workweek. In fact,
the Explanatory Note of House Bill No. 16630 (later passed into law as Republic Act No. 5901)
explicitly states that the bill's sole purpose is to shorten the working hours of health personnel and
not to dole out a two days off with pay.

Hence:
 The accompanying bill seeks to grant resident physicians, staff nurses, nutritionist,
midwives, attendants and other hospital and health clinic personnel of public and
private hospitals and clinics, the privilege of enjoying the eight hours a week
exclusive of time for lunch granted by law to all government employees and workers
except those employed in schools and in courts. At present those hospitals and
clinics, work six days a week, 8 hours a day or 48 hours a week.

As compared with the other employees and laborers, these hospital and health clinic
personnel are over-worked despite the fact that their duties are more delicate in
nature. If we offer them better working conditions, it is believed that the "brain drain",
that our country suffers nowadays as far as these personnel are concerned will be
considerably lessened. The fact that these hospitals and health clinic personnel
perform duties which are directly concerned with the health and lives of our people
does not mean that they should work for a longer period than most employees and
laborers. They are also entitled to as much rest as other workers. Making them work
longer than is necessary may endanger, rather than protect, the health of their
patients. Besides, they are not receiving better pay than the other workers.
Therefore, it is just and fair that they be made to enjoy the privileges of equal working
hours with other workers except those excepted by law.

In the light of the foregoing, approval of this bill is strongly recommended.

(SGD.) SERGIO H. LOYOLA

"Congressman, 3rd District

Manila" (Annex "F" of petition, emphasis supplied)

Further, petitioners' position is also negated by the very rules and regulations promulgated
by the Bureau of Labor Standards which implement Republic Act No. 5901. Pertinent
portions of the implementing rules provide:

RULES AND REGULATIONS IMPLEMENTING

REPUBLIC ACT NO. 5901

By virtue of Section 79 of the Revised Administrative Code, as modified by section

18 of Implementation Report for Reorganization Plan No. 20-A on Labor, vesting in
the Bureau of Labor Standards the authority to promulgate rules and regulations to
implement wage and hour laws, the following rules and regulations to are hereby
issued for the implementation of Republic Act No. 5901.

CHAPTER I Coverage

Sec. 1. General Statement on Coverage. Republic Act No. 5901, hereinafter referred
to as the Act, shall apply to:

(a) All hospitals and clinics, including those with a bed capacity of less than one
hundred, which are situated in cities or municipalities with a population of one million
or more; and to

(b) All hospitals and clinics with a bed capacity of at least one hundred, irrespective
of the size of population of the city or municipality where they may be situated.
 xxx xxx xxx

Sec. 7. Regular Working Day. The regular working days of covered employees shall
be not more than five days in a workweek. The workweek may begin at any hour and
on any day, including Saturday or Sunday, designated by the employer.

Employers are not precluded from changing the time at which the workday or
workweek begins, provided that the change is not intended to evade the
requirements of these regulations on the payment of additional compensation.

xxx xxx xxx

Sec. 15. Additional Pay Under the Act and C.A. No. 444. (a) Employees of covered
hospitals and clinics who are entitled to the benefits provided under the Eight-Hour
Labor Law, as amended, shall be paid an additional compensation equivalent to their
regular rate plus at least twenty-five percent thereof for work performed on Sunday
and Holidays, not exceeding eight hours, such employees shall be entitled to an
additional compensation of at least 25% of their regular rate.

(b) For work performed in excess of forty hours a week, excluding those rendered in
excess of eight hours a day during the week, employees covered by the Eight-Hour
Labor Law shall be entitled to an additional straight-time pay which must be
equivalent at least to their regular rate.

If petitioners are entitled to two days off with pay, then there appears to be no sense at all why
Section 15 of the implementing rules grants additional compensation equivalent to the regular rate
plus at least twenty-five percent thereof for work performed on Sunday to health personnel, or an
"additional straight-time pay which must be equivalent at least to the regular rate" "[f]or work
performed in excess of forty hours a week. . . . Policy Instructions No. 54 to our mind unduly
extended the statute. The Secretary of Labor moreover erred in invoking the "spirit and intent" of
Republic Act No. 5901 and Article 83 of the Labor Code for it is an elementary rule 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. 9 No additions or revisions may be permitted. Policy Instructions No. 54
being inconsistent with and repugnant to the provision of Article 83 of the Labor Code, as well as to
Republic Act No. 5901, should be, as it is hereby, declared void.

WHEREFORE, the decision appealed from is AFFIRMED. No costs.

SO ORDERED.
 10. Manila Terminal Co. v. CIR, L-4148, 16 July 1952

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-4148 July 16, 1952

MANILA TERMINAL COMPANY, INC., petitioner,

vs.
THE COURT OF INDUSTRIAL RELATIONS and MANILA TERMINAL RELIEF AND MUTUAL AID
ASSOCIATION, respondents.

Perkins, Ponce Enrile and Contreras for petitioner.

Antonio V. Raquiza, Honesto Ricobal and Perfecto E. Llacarfor respondent Association.
Mariano R. Padilla for respondent Court of Industrial Relations.

PARAS, C. J.:

On September 1, 1945, the Manila Terminal Company, Inc. hereinafter to be referred as to the
petitioner, undertook the arrastre service in some of the piers in Manila's Port Area at the request
and under the control of the United States Army. The petitioner hired some thirty men as watchmen
on twelve-hour shifts at a compensation of P3 per day for the day shift and P6 per day for the night
shift. On February 1, 1946, the petitioner began the postwar operation of the arrastre service at the
present at the request and under the control of the Bureau of Customs, by virtue of a contract
entered into with the Philippine Government. The watchmen of the petitioner continued in the service
with a number of substitutions and additions, their salaries having been raised during the month of
February to P4 per day for the day shift and P6.25 per day for the nightshift. On March 28, 1947,
Dominador Jimenez, a member of the Manila Terminal Relief and Mutual Aid Association, sent a
letter to the Department of Labor, requesting that the matter of overtime pay be investigated, but
nothing was done by the Department. On April 29, 1947, Victorino Magno Cruz and five other
employees, also member of the Manila Transit Mutual Aid Association, filed a 5-point demand with
the Department of Labor, including overtime pay, but the Department again filed to do anything
about the matter. On May 27, 1947, the petitioner instituted the system of strict eight-hour shifts. On
June 19, 1947, the Manila Port Terminal Police Association, not registered in accordance with the
provisions of Commonwealth Act No. 213, filed a petition with the Court of Industrial Relations. On
July 16, 1947, the Manila Terminal Relief and Mutual Aid Association was organized for the first
time, having been granted certificate No. 375 by the Department of Labor. On July 28, 1947, Manila
Terminal Relief and Mutual Aid Association filed an amended petition with the Court of Industrial
Relations praying, among others, that the petitioner be ordered to pay its watchmen or police force
overtime pay from the commencement of their employment. On May 9, 1949, by virtue of Customs
Administrative Order No. 81 and Executive Order No. 228 of the President of the Philippines, the
entire police force of the petitioner was consolidated with the Manila Harvor Police of the Customs
Patrol Service, a Government agency under the exclusive control of the Commissioner of Customs
and the Secretary of Finance The Manila Terminal Relief and Mutual Aid Association will hereafter
be referred to as the Association.

Judge V. Jimenez Yanson of the Court of Industrial Relations in his decision of April 1, 1950, as
amended on April 18, 1950, while dismissing other demands of the Association for lack of
jurisdiction, ordered the petitioner to pay to its police force
(a) Regular or base pay corresponding to four hours' overtime plus 25 per cent thereof as additional
overtime compensation for the period from September 1, 1945 to May 24, 1947;

(b) Additional compensation of 25 per cent to those who worked from 6:00 p.m. to 6:00 a.m. during
the same period:

(c) Additional compensation of 50 per cent for work performed on Sundays and legal holidays during
the same period;

(d) Additional compensation of 50 per cent for work performed on Sundays and legal holidays from
May 24, 1947 to May 9, 1949; and

(e) Additional compensation of 25 per cent for work performed at night from May 29, 1947 to May 9,
1949.

With reference to the pay for overtime service after the watchmen had been integrated into the
Manila Harbor Police, Judge Yanson ruled that the court has no jurisdiction because it affects the
Bureau of Customs, an instrumentality of the Government having no independent personality and
which cannot be sued without the consent of the State. (Metran vs. Paredes, 45. Off. Gaz., 2835.)

The petitioner find a motion for reconsideration. The Association also filed a motion for
reconsideration in so far its other demands were dismissed. Judge Yanson, concurred in by Judge
Jose S. Bautista, promulgated on July 13, 1950, a resolution denying both motions for
reconsideration. Presiding Judge Arsenio C. Roldan, in a separate opinion concurred in by Judge
Modesto Castillo, agreed with the decision of Judge Yanson of April 1, 1950, as to the dismissal of
other demands of the Association, but dissented therefrom as to the granting of overtime pay. In a
separate decisive opinion, Judge Juan S. Lanting concurred in the dismissal of other demands of the
Association. With respect to overtime compensation, Judge Lanting ruled:

1. The decision under review should be affirmed in so far it grants compensation for overtime on
regular days (not Sunday and legal holidays)during the period from the date of entrance to duty to
May 24, 1947, such compensation to consists of the amount corresponding to the four hours'
overtime at the regular rate and an additional amount of 25 per cent thereof.

2. As to the compensation for work on Sundays and legal holidays, the petitioner should pay to its
watchmen the compensation that corresponds to the overtime (in excess of 8 hours) at the regular
rate only, that is, without any additional amount, thus modifying the decision under review
accordingly.

3. The watchmen are not entitled to night differential pay for past services, and therefore the
decision should be reversed with the respect thereto.

The petitioner has filed a present petition for certiorari. Its various contentions may be briefly
summed up in the following propositions: (1) The Court of Industrial Relations has no jurisdiction to
render a money judgment involving obligation in arrears. (2) The agreement under which its police
force were paid certain specific wages for twelve-hour shifts, included overtime compensation. (3)
The Association is barred from recovery by estoppel and laches. (4) the nullity or invalidity of the
employment contract precludes any recovery by the Association. (5) Commonwealth Act No. 4444
does not authorize recovery of back overtime pay.
The contention that the Court of Industrial Relations has no jurisdiction to award a money judgment
was already overruled by this Court in G.R. No. L-4337, Detective & protective Bureau, Inc. vs. Court
of Industrial Relations and United Employees Welfare Association, 90 Phil., 665, in this wise: "It is
also argued that the respondent court has no jurisdiction to award overtime pay, which is money
judgment. We believe that under Commonwealth Act No. 103 the Court is empowered to make the
order for the purpose of settling disputes between the employer and employee1. As a matter of fact
this Court has confirmed an order of the Court of Industrial Relations requiring the Elks Club to pay
to its employees certain sum of money as overtime back wages from June 3, 1939 to March 13,
1941. This, in spite the allegation of lack or excess of jurisdiction on the part of said court. (45 Off.
Gaz., 3829; 80 Phil. 272)"

The important point stressed by the petitioner is that the contract between it and the Association
upon the commencement of the employment of its watchman was to the certain rates of pay,
including overtime compensation namely, P3 per day for the day shift and P6 per day for night shift
beginning September 1, 1945, and P4 per day shift and P6.25 per day for the night shift since
February, 1946. The record does not bear out these allegations. The petitioner has relied merely on
the facts that its watchmen had worked on twelve-hour shifts at specific wages per day and that no
complaint was made about the matter until, first on March 28, 1947 and, secondly, on April 29, 1947.

In times of acute unemployment, the people, urged by the instinct of self-preservation, go from place
to place and from office to office in search for any employment, regardless of its terms and
conditions, their main concern in the first place being admission to some work. Specially for positions
requiring no special qualifications, applicants would be good as rejected if they ever try to be
inquisitive about the hours of work or the amount of salary, ever attempt to dictate their terms. The
petitioner's watchmen must have railroaded themselves into their employment, so to speak, happy in
the thought that they would then have an income on which to subsist. But, at the same time, they
found themselves required to work for twelve hours a day. True, there was agreement to work, but
can it fairly be supposed that they had the freedom to bargain in any way, much less to insist in the
observance of the Eight Hour Labor Law?

As was aptly said in Floyd vs. Du Bois Soap Co., 1942, 317 U. S. 596, 63 Sup. Ct. 159; 6 CCH
Labor Cases, Par. 51, 147, "A contract of employment, which provides for a weekly wage for a
specified number of hours, sufficient to cover both the statutory minimum wage and overtime
compensation, if computed on the basis of the statutory minimum wage, and which makes no
provision for a fixed hourly rate or that the weekly wage includes overtime compensation, does not
meet the requirements of the Act."

Moreover, we note that after the petition had instituted the strict eight-hour shifts, no reduction was
made in the salaries which its watchmen received under the twelve hour arrangement. Indeed, as
admitted by the petitioner, "when the members or the respondent union were placed on strict eight-
hour shifts, the lowest salary of all the members of the respondent union was P165 a month, or
P5.50 daily, for both day and night shifts." Although it may be argued that the salary for the night
shift was somewhat lessened, the fact that the rate for the day shift was increased in a sense tends
to militate against the contention that the salaries given during the twelve-hour shifts included
overtime compensation.

Petitioner's allegation that the association had acquiesced in the twelve-hour shifts for more than 18
months, is not accurate, because the watchmen involved in this case did not enter the service of the
petitioner, at one time, on September 1, 1945. As Judge Lanting found, "only one of them entered
the service of the company on said date, very few during the rest of said month, some during the
rest of that year (1945) and in 1946, and very many in 1947, 1948 and 1949."
The case at bar is quite on all fours with the case of Detective & Protective Bureau, Inc. vs. Court of
Industrial Relations and United Employees Welfare Association, supra, in which the facts were as
follows: "The record discloses that upon petition properly submitted, said court made an investigation
and found that the members of the United Employees Welfare Association (hereafter called the
Association) were in the employ of the petitioner Detective and Protective Bureau, Inc. (herein called
the Bureau) which is engaged in the business of furnishing security guards to commercial and
industrial establishments, paying to said members monthly salaries out of what it received from the
establishments benefited by guard service. The employment called for daily tours of duty for more
than eight hours, in addition to work on Sundays and holidays. Nonetheless the members performed
their labors without receiving extra compensation." The only difference is that, while in said case the
employees concerned were paid monthly salaries, in the case now before us the wages were
computed daily. In the case cited, we held the following:

It appears that the Bureau had been granting the members of the Association, every month,
"two days off" days in which they rendered no service, although they received salary for the
whole month. Said Bureau contended below that the pay corresponding to said 2 day
vacation corresponded to the wages for extra work. The court rejected the contention, quite
properly we believe, because in the contract there was no agreement to that effect; and such
agreement, if any, would probably be contrary to the provisions of the Eight-Hour Law (Act
No. 444, sec. 6) and would be null and void ab initio.

It is argued here, in opposition to the payment, that until the commencement of this litigation
the members of the Association never claimed for overtime pay. That may be true.
Nevertheless the law gives them the right to extra compensation. And they could not be held
to have impliedly waived such extra compensation, for the obvious reason that could not
have expressly waived it.

The foregoing pronouncements are in point. The Association cannot be said to have impliedly
waived the right to overtime compensation, for the obvious reason that they could not have
expressly waived it."

The principle of estoppel and the laches cannot well be invoked against 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, so much so that it punishes the employer for its violation and
leaves the employee or laborer free and blameless. In the third place, 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 employer 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 the
employee 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 law by indirection.

While counsel for the petitioner has cited authorities in support of the doctrine invoked, there are
also authorities pointed out in the opinion of Judge Lanting to the contrary. Suffice it to say, in this
connection, that we are inclined to rule adversely against petitioner for the reasons already stated.

The argument that the nullity or invalidity of the employment contract precludes recovery by the
Association of any overtime pay is also untenable. The argument, based on the supposition that the
parties are in pari delicto, was in effect turned down in Gotamo Lumber Co. vs. Court of Industrial
Relations,* 47 Off. Gaz., 3421, wherein we ruled: "The petitioner maintains that as the overtime work
had been performed without a permit from the Department of Labor, no extra compensation should
be authorized. Several decisions of this court are involved. But those decisions were based on the
reasoning that as both the laborer and employer were duty bound to secure the permit from the
Department of Labor, both were in pari delicto. However the present law in effect imposed that duty
upon the employer (C.A. No. 444). Such employer may not therefore be heard to plead his own
neglect as exemption or defense.

The employee in rendering extra service at the request of his employer has a right to assume
that the latter has complied with the requirement of the law, and therefore has obtained the
required permission from the Department of Labor.

Moreover, the Eight-Hour Law, in providing that "any agreement or contract between the employer
and the laborer or employee contrary to the provisions of this Act shall be null avoid ab initio,"
(Commonwealth Act No. 444, sec. 6), obviously intended said provision for the benefit of the
laborers or employees. The employer cannot, therefore, invoke any violation of the act to exempt
him from liability for extra compensation. This conclusion is further supported by the fact that the law
makes only the employer criminally liable for any violation. It cannot be pretended that, for the
employer to commit any violation of the Eight-Hour Labor Law, the participation or acquiescence of
the employee or laborer is indispensable, because the latter in view of his need and desire to live,
cannot be considered as being on the same level with the employer when it comes to the question of
applying for and accepting an employment.

Petitioner also contends that Commonwealth Act No. 444 does not provide for recovery of back
overtime pay, and to support this contention it makes referrence to the Fair Labor Standards Act of
the United States which provides that "any employer who violates the provisions of section 206 and
section 207 of this title shall be liable to the employee or employees affected in the amount of their
unpaid minimum wages or their unpaid overtime compensation as the case may be," a provision
not incorporated in Commonwealth Act No. 444, our Eight-Hour Labor Law. We cannot agree to the
proposition, because sections 3 and 5 of Commonwealth Act 444 expressly provides for the
payment of extra compensation in cases where overtime services are required, with the result that
the employees or laborers are entitled to collect such extra compensation for past overtime work. To
hold otherwise would be to allow an employer to violate the law by simply, as in this case, failing to
provide for and pay overtime compensation.

The point is stressed that the payment of the claim of the Association for overtime pay covering a
period of almost two years may lead to the financial ruin of the petitioner, to the detriment of its
employees themselves. It is significant, however, that not all the petitioner's watchmen would receive
back overtime pay for the whole period specified in the appealed decision, since the record shows
that the great majority of the watchmen were admitted in 1946 and 1947, and even 1948 and 1949.
At any rate, we are constrained to sustain the claim of the Association as a matter of simple justice,
consistent with the spirit and purpose of the Eight-Hour Labor Law. The petitioner, in the first place,
was required to comply with the law and should therefore be made liable for the consequences of its
violation.

It is high time that all employers were warned that the public is interested in the strict enforcement of
the Eight-Hour Labor Law. This was designed not only to safeguard the health and welfare of the
laborer or employee, but in a way to minimize unemployment by forcing employers, in cases where
more than 8-hour operation is necessary, to utilize different shifts of laborers or employees working
only for eight hours each.
Wherefore, the appealed decision, in the form voted by Judge Lanting, is affirmed, it being
understood that the petitioner's watchmen will be entitled to extra compensation only from the dates
they respectively entered the service of the petitioner, hereafter to be duly determined by the Court
of Industrial Relations. So ordered, without costs.
 11. Sime Darby Philippines, Inc. v. NLRC, GR No. 119205, 15 April 1998

Republic of the Philippines

SUPREME COURT
Baguio City

FIRST DIVISION

G.R. No. 119205 April 15, 1998

SIME DARBY PILIPINAS, INC. petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (2ND DIVISION) and SIME DARBY SALARIED
EMPLOYEES ASSOCIATION (ALU-TUCP), respondents.

BELLOSILLO, J.:

Is the act of management in revising the work schedule of its employees and discarding their paid
lunch break constitutive of unfair labor practice?

Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires, tubes and
other rubber products. Sime Darby Salaried Employees Association (ALU-TUCP), private
respondent, is an association of monthly salaried employees of petitioner at its Marikina factory.
Prior to the present controversy, all company factory workers in Marikina including members of
private respondent union worked from 7:45 a.m. to 3:45 p.m. with a 30-minute paid "on call" lunch
break.

On 14 August 1992 petitioner issued a memorandum to all factory-based employees advising all its
monthly salaried employees in its Marikina Tire Plant, except those in the Warehouse and Quality
Assurance Department working on shifts, a change in work schedule effective 14 September 1992
thus

TO: ALL FACTORY-BASED EMPLOYEES

RE: NEW WORK SCHEDULE

Effective Monday, September 14, 1992, the new work schedule of the factory office will be as
follows:

7:45 A.M. 4:45 P.M. (Monday to Friday)

7:45 A.M. 11:45 A.M. (Saturday).

Coffee break time will be ten minutes only anytime between:

 9:30 A.M. 10:30 A.M. and

2:30 P.M. 3:30 P.M.

Lunch break will be between:

12:00 NN 1:00 P.M. (Monday to Friday).

Excluded from the above schedule are the Warehouse and QA employees who are on
shifting. Their work and break time schedules will be maintained as it is now.1

Since private respondent felt affected adversely by the change in the work schedule and
discontinuance of the 30-minute paid "on call" lunch break, it filed on behalf of its members a
complaint with the Labor Arbiter for unfair labor practice, discrimination and evasion of liability
pursuant to the resolution of this Court in Sime Darby International Tire Co., Inc. v. NLRC.2 However,
the Labor Arbiter dismissed the complaint on the ground that the change in the work schedule and
the elimination of the 30-minute paid lunch break of the factory workers constituted a valid exercise
of management prerogative and that the new work schedule, break time and one-hour lunch break
did not have the effect of diminishing the benefits granted to factory workers as the working time did
not exceed eight (8) hours.

The Labor Arbiter further held that the factory workers would be unjustly enriched if they continued to
be paid during their lunch break even if they were no longer "on call" or required to work during the
break. He also ruled that the decision in the earlier Sime Darby case3 was not applicable to the
instant case because the former involved discrimination of certain employees who were not paid for
their 30-minute lunch break while the rest of the factory workers were paid; hence, this Court
ordered that the discriminated employees be similarly paid the additional compensation for their
lunch break.

Private respondent appealed to respondent National Labor Relations Commission (NLRC) which
sustained the Labor Arbiter and dismissed the appeal.4 However, upon motion for reconsideration by
private respondent, the NLRC, this time with two (2) new commissioners replacing those who earlier
retired, reversed its earlier decision of 20 April 1994 as well as the decision of the Labor Arbiter.5 The
NLRC considered the decision of this Court in the Sime Darby case of 1990 as the law of the case
wherein petitioner was ordered to pay "the money value of these covered employees deprived of
lunch and/or working time breaks." The public respondent declared that the new work schedule
deprived the employees of the benefits of a time-honored company practice of providing its
employees a 30-minute paid lunch break resulting in an unjust diminution of company privileges
prohibited by Art. 100 of the Labor Code, as amended. Hence, this petition alleging that public
respondent committed grave abuse of discretion amounting to lack or excess of jurisdiction: (a) in
ruling that petitioner committed unfair labor practice in the implementation of the change in the work
schedule of its employees from 7:45 a.m. 3:45 p.m. to 7:45 a.m. 4:45 p.m. with one-hour lunch
break from 12:00 nn to 1:00 p.m.; (b) in holding that there was diminution of benefits when the 30-
minute paid lunch break was eliminated; (c) in failing to consider that in the earlier Sime Darby case
affirming the decision of the NLRC, petitioner was authorized to discontinue the practice of having a
30-minute paid lunch break should it decide to do so; and, (d) in ignoring petitioner's inherent
management prerogative of determining and fixing the work schedule of its employees which is
expressly recognized in the collective bargaining agreement between petitioner and private
respondent.

The Office of the Solicitor General filed in a lieu of comment a manifestation and motion
recommending that the petitioner be granted, alleging that the 14 August 1992 memorandum which
contained the new work schedule was not discriminatory of the union members nor did it constitute
unfair labor practice on the part of petitioner.

We agree, hence, we sustain petitioner. The right to fix the work schedules of the employees rests
principally on their employer. In the instant case petitioner, as the employer, cites as reason for the
adjustment the efficient conduct of its business operations and its improved production.6 It
rationalizes that while the old work schedule included a 30-minute paid lunch break, the employees
could be called upon to do jobs during that period as they were "on call." Even if denominated as
lunch break, this period could very well be considered as working time because the factory
employees were required to work if necessary and were paid accordingly for working. With the new
work schedule, the employees are now given a one-hour lunch break without any interruption from
their employer. For a full one-hour undisturbed lunch break, the employees can freely and effectively
use this hour not only for eating but also for their rest and comfort which are conducive to more
efficiency and better performance in their work. Since the employees are no longer required to work
during this one-hour lunch break, there is no more need for them to be compensated for this period.
We agree with the Labor Arbiter that the new work schedule fully complies with the daily work period
of eight (8) hours without violating the Labor Code.7 Besides, the new schedule applies to all
employees in the factory similarly situated whether they are union members or not.8

Consequently, it was grave abuse of discretion for public respondent to equate the earlier Sime
Darby case9 with the facts obtaining in this case. That ruling in the former case is not applicable
here. The issue in that case involved the matter of granting lunch breaks to certain employees while
depriving the other employees of such breaks. This Court affirmed in that case the NLRC's finding
that such act of management was discriminatory and constituted unfair labor practice.

The case before us does not pertain to any controversy involving discrimination of employees but
only the issue of whether the change of work schedule, which management deems necessary to
increase production, constitutes unfair labor practice. As shown by the records, the change effected
by management with regard to working time is made to apply to all factory employees engaged in
the same line of work whether or not they are members of private respondent union. Hence, it
cannot be said that the new scheme adopted by management prejudices the right of private
respondent to self-organization.

Every business enterprise endeavors to increase its profits. In the process, it may devise means to
attain that goal. Even as the law is solicitous of the welfare of the employees, it must also protect the
right of an employer to exercise what are clearly management prerogatives.10 Thus, management is
free to regulate, according to its own discretion and judgment, all aspects of employment, including
hiring, work assignments, working methods, time, place and manner of work, processes to be
followed, supervision of workers, working regulations, transfer of employees, work supervision, lay
off of workers and discipline, dismissal and recall of workers.11 Further, management retains the
prerogative, whenever exigencies of the service so require, to change the working hours of its
employees. So long as such prerogative is exercised in good faith for the advancement of the
employer's interest and not for the purpose of defeating or circumventing the rights of the employees
under special laws or under valid agreements, this Court will uphold such exercise.12

While the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every dispute will be automatically decided in favor of labor.
Management also has rights which, as such, are entitled to respect and enforcement in the interest
of simple fair play. Although this Court has inclined more often than not toward the worker and has
upheld his cause in his conflicts with the employer, such favoritism has not blinded the Court 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.13
WHEREFORE, the Petition is GRANTED. The Resolution of the National Labor Relations
Commission dated 29 November 1994 is SET ASIDE and the decision of the Labor Arbiter dated 26
November 1993 dismissing the complaint against petitioner for unfair labor practice is AFFIRMED.

SO ORDERED.
 12. Arica v NLRC, 170 SCRA 7

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 78210 February 28, 1989

TEOFILO ARICA, DANILO BERNABE, MELQUIADES DOHINO, ABONDIO OMERTA, GIL

TANGIHAN, SAMUEL LABAJO, NESTOR NORBE, RODOLFO CONCEPCION, RICARDO
RICHA, RODOLFO NENO, ALBERTO BALATRO, BENJAMIN JUMAMOY, FERMIN DAAROL,
JOVENAL ENRIQUEZ, OSCAR BASAL, RAMON ACENA, JAIME BUGTAY, and 561 OTHERS,
HEREIN REPRESENTED BY KORONADO B. APUZEN, petitioners
vs.
NATIONAL LABOR RELATIONS COMMISSION, HONORABLE FRANKLIN DRILON,
HONORABLE CONRADO B. MAGLAYA, HONORABLE ROSARIO B. ENCARNACION, and
STANDARD (PHILIPPINES) FRUIT CORPORATION, respondents.

Koronado B. Apuzen and Jose C. Espinas for petitioners.

The Solicitor General for public respondent.

Dominguez & Paderna Law Offices Co. for private respondent.

PARAS, J.:

This is a petition for review on certiorari of the decision of the National Labor Relations Commission
dated December 12, 1986 in NLRC Case No. 2327 MC-XI-84 entitled Teofilo Arica et al. vs.
Standard (Phil.) Fruits Corporation (STANFILCO) which affirmed the decision of Labor Arbiter Pedro
C. Ramos, NLRC, Special Task Force, Regional Arbitration Branch No. XI, Davao City dismissing
the claim of petitioners.

This case stemmed from a complaint filed on April 9, 1984 against private respondent Stanfilco for
assembly time, moral damages and attorney's fees, with the aforementioned Regional Arbitration
Branch No. XI, Davao City.

After the submission by the parties of their respective position papers (Annex "C", pp. 30-40; Annex
"D", Rollo, pp. 41-50), Labor Arbiter Pedro C. Ramos rendered a decision dated October 9, 1985
(Annex 'E', Rollo, pp. 51-58) in favor of private respondent STANFILCO, holding that:

Given these facts and circumstances, we cannot but agree with respondent that the
pronouncement in that earlier case, i.e. the thirty-minute assembly time long
practiced cannot be considered waiting time or work time and, therefore, not
compensable, has become the law of the case which can no longer be disturbed
without doing violence to the time- honored principle of res-judicata.
 WHEREFORE, in view of the foregoing considerations, the instant complaint should
therefore be, as it is hereby, DISMISSED.

SO ORDERED. (Rollo, p. 58)

On December 12, 1986, after considering the appeal memorandum of complainant and the
opposition of respondents, the First Division of public respondent NLRC composed of Acting
Presiding Commissioner Franklin Drilon, Commissioner Conrado Maglaya, Commissioner Rosario
D. Encarnacion as Members, promulgated its Resolution, upholding the Labor Arbiters' decision. The
Resolution's dispositive portion reads:

'Surely, the customary functions referred to in the above- quoted provision of the
agreement includes the long-standing practice and institutionalized non-
compensable assembly time. This, in effect, estopped complainants from pursuing
this case.

The Commission cannot ignore these hard facts, and we are constrained to uphold
the dismissal and closure of the case.

WHEREFORE, let the appeal be, as it is hereby dismissed, for lack of merit.

SO ORDERED. (Annex "H", Rollo, pp. 86-89).

On January 15, 1987, petitioners filed a Motion for Reconsideration which was opposed by private
respondent (Annex "I", Rollo, pp. 90-91; Annex J Rollo, pp. 92-96).

Public respondent NLRC, on January 30, 1987, issued a resolution denying for lack of merit
petitioners' motion for reconsideration (Annex "K", Rollo, p. 97).

Hence this petition for review on certiorari filed on May 7, 1987.

The Court in the resolution of May 4, 1988 gave due course to this petition.

Petitioners assign the following issues:

1) Whether or not the 30-minute activity of the petitioners before the scheduled
working time is compensable under the Labor Code.

2) Whether or not res judicata applies when the facts obtaining in the prior case and
in the case at bar are significantly different from each other in that there is merit in
the case at bar.

3) Whether or not there is finality in the decision of Secretary Ople in view of the
compromise agreement novating it and the withdrawal of the appeal.

4) Whether or not estoppel and laches lie in decisions for the enforcement of labor
standards (Rollo, p. 10).

Petitioners contend that the preliminary activities as workers of respondents STANFILCO in the
assembly area is compensable as working time (from 5:30 to 6:00 o'clock in the morning) since
these preliminary activities are necessarily and primarily for private respondent's benefit.
These preliminary activities of the workers are as follows:

(a) First there is the roll call. This is followed by getting their individual work
assignments from the foreman.

(b) Thereafter, they are individually required to accomplish the Laborer's Daily
Accomplishment Report during which they are often made to explain about their
reported accomplishment the following day.

(c) Then they go to the stockroom to get the working materials, tools and equipment.

(d) Lastly, they travel to the field bringing with them their tools, equipment and
materials.

All these activities take 30 minutes to accomplish (Rollo, Petition, p. 11).

Contrary to this contention, respondent avers that the instant complaint is not new, the very same
claim having been brought against herein respondent by the same group of rank and file employees
in the case of Associated Labor Union and Standard Fruit Corporation, NLRC Case No. 26-LS-XI-76
which was filed way back April 27, 1976 when ALU was the bargaining agent of respondent's rank
and file workers. The said case involved a claim for "waiting time", as the complainants purportedly
were required to assemble at a designated area at least 30 minutes prior to the start of their
scheduled working hours "to ascertain the work force available for the day by means of a roll call, for
the purpose of assignment or reassignment of employees to such areas in the plantation where they
are most needed." (Rollo, pp. 64- 65)

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

The Minister of Labor held:

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

Furthermore, the thirty (30)-minute assembly is a deeply- rooted, routinary practice of

the employees, and the proceedings attendant thereto are not infected with
complexities as to deprive the workers the time to attend to other personal pursuits.
They are not new employees as to require the company to deliver long briefings
regarding their respective work assignments. Their houses are situated right on the
area where the farm are located, such that after the roll call, which does not
necessarily require the personal presence, they can go back to their houses to attend
to some chores. In short, they are not subject to the absolute control of the company
during this period, otherwise, their failure to report in the assembly time would justify
the company to impose disciplinary measures. The CBA does not contain any
provision to this effect; the record is also bare of any proof on this point. This,
therefore, demonstrates the indubitable fact that the thirty (30)-minute assembly time
was not primarily intended for the interests of the employer, but ultimately for the
employees to indicate their availability or non-availability for work during every
working day. (Annex "E", Rollo, p. 57).
Accordingly, the issues are reduced to the sole question as to whether public respondent National
Labor Relations Commission committed a grave abuse of discretion in its resolution of December
17, 1986.

The facts on which this decision was predicated continue to be the facts of the case in this
questioned resolution of the National Labor Relations Commission.

It is clear that herein petitioners are merely reiterating the very same claim which they filed through
the ALU and which records show had already long been considered terminated and closed by this
Court in G.R. No. L-48510. Therefore, the NLRC can not be faulted for ruling that petitioners' claim is
already barred by res-judicata.

Be that as it may, petitioners' claim that there was a change in the factual scenario which are
"substantial changes in the facts" makes respondent firm now liable for the same claim they earlier
filed against respondent which was dismissed. It is thus axiomatic that the non-compensability of the
claim having been earlier established, constitute the controlling legal rule or decision between the
parties and remains to be the law of the case making this petition without merit.

As aptly observed by the Solicitor General that this petition is "clearly violative of the familiar
principle of res judicata.There will be no end to this controversy if the light of the Minister of Labor's
decision dated May 12, 1979 that had long acquired the character of finality and which already
resolved that petitioners' thirty (30)-minute assembly time is not compensable, the same issue can
be re-litigated again." (Rollo, p. 183)

This Court has held:

In this connection account should be taken of the cognate principle that res
judicata operates to bar not only the relitigation in a subsequent action of the issues
squarely raised, passed upon and adjudicated in the first suit, but also the ventilation
in said subsequent suit of any other issue which could have been raised in the first
but was not. The law provides that 'the judgment or order is, with respect to the
matter directly adjudged or as to any other matter that could have been raised in
relation thereto, conclusive between the parties and their successors in interest by
title subsequent to the commencement of the action .. litigating for the same thing
and in the same capacity.' So, even if new causes of action are asserted in the
second action (e.g. fraud, deceit, undue machinations in connection with their
execution of the convenio de transaccion), this would not preclude the operation of
the doctrine of res judicata. Those issues are also barred, even if not passed upon in
the first. They could have been, but were not, there raised. (Vda. de Buncio v. Estate
of the late Anita de Leon, 156 SCRA 352 [1987]).

Moreover, as a rule, the findings of facts of quasi-judicial agencies which have acquired expertise
because their jurisdiction is confined to specific matters are accorded not only respect but at times
even finality if such findings are supported by substantial evidence (Special Events & Central
Shipping Office Workers Union v. San Miguel Corporation, 122 SCRA 557 [1983]; Dangan v. NLRC,
127 SCRA 706 [1984]; Phil. Labor Alliance Council v. Bureau of Labor Relations, 75 SCRA 162
[1977]; Mamerto v. Inciong, 118 SCRA 265 (1982]; National Federation of Labor Union (NAFLU) v.
Ople, 143 SCRA 124 [1986]; Edi-Staff Builders International, Inc. v. Leogardo, Jr., 152 SCRA 453
[1987]; Asiaworld Publishing House, Inc. v. Ople, 152 SCRA 219 [1987]).

The records show that the Labor Arbiters' decision dated October 9, 1985 (Annex "E", Petition)
pointed out in detail the basis of his findings and conclusions, and no cogent reason can be found to
disturb these findings nor of those of the National Labor Relations Commission which affirmed the
same.

PREMISES CONSIDERED, the petition is DISMISSED for lack of merit and the decision of the
National Labor Relations Commission is AFFIRMED.

SO ORDERED.
 13. University of Pangasinan Faculty Union v University of Pangasinan, 127 SCRA 691, GR
No. L-63133, Feb 20, 1984

FIRST DIVISION

[G.R. No. L-63122. February 20, 1984.]

UNIVERSITY OF PANGASINAN FACULTY UNION, Petitioner, v. UNIVERSITY OF PANGASI

And NATIONAL LABOR RELATIONS COMMISSION, Respondents.

Tanopo, Serafico, Juanitez & Callanta Law Office and Hermogenes S. Decano for Petitio

The Solicitor General for Respondents.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATIONS; LABOR LAWS; PRESIDENTIAL DECREES ON EMERGENCY

OF LIVING ALLOWANCE; REQUISITES FOR ENTITLEMENT TO ALLOWANCES PROVIDED THEREUN
The various Presidential Decrees on ECOLAs to wit: PDs 1614, 1634, 1678 and 1713, provide
"Allowances of Fulltime Employees . . ." that "Employees shall be paid in full the required mont
allowance regardless of the number of their regular working days if they incur no absences durin
month. If they incur absences without pay, the amounts corresponding to the absences may b
deducted from the monthly allowance . . ." ; and on "Leave of Absence Without Pay", that "All co
employees shall be entitled to the allowance provided herein when they are on leave of absence
pay." c ralaw vi rtua1aw l ib rary

2. ID.; ID.; ID.; "NO WORK, NO PAY" PRINCIPLE NOT APPLICABLE CASE AT BAR. It is beyond
dispute that the petitioners members are full-time employees receiving their monthly salaries
irrespective of the number of working days or teaching hours in a month. However, they find
themselves in a most peculiar situation whereby they are forced to go on leave during semestral
breaks. These semestral breaks are in the nature of work interruptions beyond the employees co
The duration of the semestral break varies from year to year dependent on a variety of circumsta
affecting at times only the private respondent but at other times all educational institutions in the
country. As such, these breaks cannot be considered as absences within the meaning of the law f
which deductions may be made from monthly allowances. The "No work, no pay" principle does n
apply in the instant case. The petitioners members received their regular salaries during this peri
is clear from the aforequoted provision of law that it contemplates a "no work" situation where th
employees voluntarily absent themselves. Petitioners, in the case at bar, certainly do not, ad
voluntatem, absent themselves during semestral breaks. Rather, they are constrained to take
mandatory leave from work. For this they cannot be faulted nor can they be begrudged that whic
due them under the law.

3. ID.; ID.; ID.; EMPLOYEES WHETHER PAID ON MONTHLY OR DAILY BASIS ENTITLED TO DAILY
LIVING ALLOWANCE WHEN PAID THEIR BASIC WAGE. Respondents contention that the "factor
receiving a salary alone should not be the basis of receiving ECOLA", is likewise, without merit.
Particular attention is brought to the Implementing Rules and Regulations of Wage Order No. 1 to
"Sec. 5. Allowance for Unworked Days. a) All covered employees whether paid on a monthly or
basis shall be entitled to their daily living allowance when they are paid their basic.." . .

4. ID.; ID.; ID.; PURPOSE OF THE LAW. The legal principles of "No work, no pay; No pay, no
ECOLA" must necessarily give way to the purpose of the law to augment the income of employees
enable them to cope with the harsh living conditions brought about by inflation; and to protect
employees and their wages against the ravages brought by these conditions. Significantly, it is th
commitment of the State to protect labor and to provide means by which the difficulties faced by
working force may best be alleviated.

5. ID.; ID.; ID.; PRESIDENTIAL DECREE 451; CONSTRUED. Respondent overlooks the element
principle of statutory construction that the general statements in the whereas clauses cannot prev
over the specific or particular statements in the law itself which define or limit the purposes of the
legislation or proscribe certain acts. True, the whereas clauses of PD 451 provide for salary and o
wage increase and other benefits, however, the same do not delineate the source of such funds a
is only in Section 3 which provides for the limitations wherein the intention of the framers of the l
clearly outlined. The law is clear. 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 sa
The law cannot be construed to include allowances which are benefits over and above the basic
salaries of the employees.

6. REMEDIAL LAW; APPEALS; FINDINGS OF FACT OF NATIONAL LABOR RELATIONS COMMISSION

BINDING WHEN FULLY SUBSTANTIATED BY EVIDENCE. As evidenced by the payrolls submitted
them during the period September 16 to September 30, 1981, the faculty members have been pa
for the extra loads. We agree with the respondents that this issue involves a question of fact prop
within the competence of the respondent NLRC to pass upon. The findings of fact of the responde
Commission are binding on this Court there being no indication of their being unsubstantiated by
evidence.

DECISION

GUTIERREZ, JR

This is a petition for review on certiorari pursuant to Rule 65 of the Rules of Court to annul and
aside the decision of respondent National Labor Relations Commission (NLRC) dated October 25,
dismissing the appeal of petitioner in NLRC Case No. RBI-47-82, entitled "University of Panga
Faculty Union, complainant, versus University of Pangasinan, Responden

Petitioner is a labor union composed of faculty members of the respondent University of Pangasin
an educational institution duly organized and existing by virtue of the laws of the Philippines.

On December 18, 1981, the petitioner, through its President, Miss Consuelo Abad, filed a complai
against the private respondent with the Arbitration Branch of the NLRC, Dagupan District Office,
Dagupan City. The complaint seeks: (a) the payment of Emergency Cost of Living Allowances (EC
for November 7 to December 5, 1981, a semestral break; (b) salary increases from the sixty (60%
percent of the incremental proceeds of increased tuition fees; and (c) payment of salaries for
suspended extra loads.

The petitioners members are full-time professors, instructors, and teachers of respondent Univer
The teachers in the college level teach for a normal duration of ten (10) months a school year, div
into two (2) semesters of five (5) months each, excluding the two (2) months summer vacation. T
teachers are paid their salaries on a regular monthly basis.

In November and December, 1981, the petitioners members were fully paid their regular monthly
salaries. However, from November 7 to December 5, during the semestral break, they were not p
their ECOLA. The private respondent claims that the teachers are not entitled thereto because the
semestral break is not an integral part of the school year and there being no actual services rende
by the teachers during said period, the principle of "No work, no pay" applies.

During the same school year (1981-1982), the private respondent was authorized by the Ministry
Education and Culture to collect, as it did collect, from its students a fifteen (15%) percent increa
tuition fees. Petitioners members demanded a salary increase effective the first semester of said
schoolyear to be taken from the sixty (60%) percent incremental proceeds of the increased tuitio
fees. Private respondent refused, compelling the petitioner to include said demand in the complai
filed in the case at bar. While the complaint was pending in the arbitration branch, the private
respondent granted an across-the-board salary increase of 5.86%. Nonetheless, the petitioner is
pursuing full distribution of the 60% of the incremental proceeds as mandated by the Presidential
Decree No. 451.

Aside from their regular loads, some of petitioners members were given extra loads to handle du
the same 1981-1982 schoolyear. Some of them had extra loads to teach on September 21, 1981,
they were unable to teach as classes in all levels throughout the country were suspended, althoug
said days was proclaimed by the President of the Philippines as a working holiday. Those with ext
loads to teach on said day claimed they were not paid their salaries for those loads, but the privat
respondent claims otherwise.

The issue to be resolved in the case at bar are the following: cha nrob 1es vi rtua l 1aw lib rary

"WHETHER OR NOT PETITIONERS MEMBERS ARE ENTITLED TO ECOLA DURING THE SEMESTRAL
BREAK FROM NOVEMBER 7 TO DECEMBER 5, 1981 OF THE 1981-82 SCHOOL YEAR.

II
"WHETHER OR NOT 60% OF THE INCREMENTAL PROCEEDS OF INCREASED TUITION FEES SHALL
DEVOTED EXCLUSIVELY TO SALARY INCREASE,

III

"WHETHER OR NOT ALLEGED PAYMENT OF SALARIES FOR EXTRA LOADS ON SEPTEMBER 21, 198
WAS PROVEN BY SUBSTANTIAL EVIDENCE." cralaw vi rtua 1aw lib rary

Anent the first issue, the various Presidential Decrees on ECOLAs to wit: PDs 1614, 1634, 1678 a
1713, provide on "Allowances of Fulltime Employees . . ." that "Employees shall be paid in full the
required monthly allowance regardless of the number of their regular working days if they incur n
absences during the month. If they incur absences without pay, the amounts corresponding to th
absences may be deducted from the monthly allowance . . ." ; and on "Leave of Absence Without
Pay", that "All covered employees shall be entitled to the allowance provided herein when they ar
leave of absence with pay." c ralaw vi rtua 1aw lib rary

It is beyond dispute that the petitioners members are full-time employees receiving their monthly
salaries irrespective of the number of working days or teaching hours in a month. However, they
themselves in a most peculiar situation whereby they are forced to go on leave during semestral
breaks. These semestral breaks are in the nature of work interruptions beyond the employees co
The duration of the semestral break varies from year to year dependent on a variety of circumsta
affecting at times only the private respondent but at other times all educational institutions in the
country. As such, these breaks cannot be considered as absences within the meaning of the law f
which deductions may be made from monthly allowances. The "No work, no pay" principle does n
apply in the instant case. The petitioners members received their regular salaries during this peri
is clear from the aforequoted provision of law that it contemplates a "no work" situation where th
employees voluntarily absent themselves. Petitioners, in the case at bar, certainly do not, ad
voluntatem, absent themselves during semestral breaks. Rather, they are constrained to take
mandatory leave from work. For this they cannot be faulted nor can they be begrudged that whic
due them under the law. To a certain extent, the private respondent can specify dates when no cl
would be held. Surely, it was not the intention of the framers of the law to allow employers to wit
employee benefits by the simple expedient of unilaterally imposing "no work" days and consequen
avoiding compliance with the mandate of the law for those days. chanrobles. com.ph : vi rtua l law lib rary

Respondents contention that "the fact of receiving a salary alone should not be the basis of recei
ECOLA", is, likewise, without merit. Particular attention is brought to the Implementing Rules and
Regulations of Wage Order No. 1 to wit.

SECTION 5. Allowance for Unworked Days.

"a) All covered employees whether paid on a monthly or daily basis shall be entitled to their daily
living allowance when they are paid their basic wage." cralaw vi rtua 1aw lib rary

x x x

This provision, at once refutes the above contention. It is evident that the intention of the law is t
grant ECOLA upon the payment of basic wages. Hence, we have the principle of "No pay, no ECOL
the converse of which finds application in the case at bar. Petitioners cannot be considered to be
leave without pay so as not to be entitled to ECOLA, for, as earlier stated, the petitioners were pa
their wages in full for the months of November and December of 1981, notwithstanding the
intervening semestral break. This, in itself, is a tacit recognition of the rather unusual state of affa
in which teachers find themselves. Although said to be on forced leave, professors and teachers a
nevertheless, burdened with the task of working during a period of time supposedly available for
and private matters. There are papers to correct, students to evaluate, deadlines to meet, and pe
within which to submit grading reports. Although they may be considered by the respondent to be
leave, the semestral break could not be used effectively for the teachers own purposes for the na
of a teachers job imposes upon him further duties which must be done during the said period of t
Learning is a never ending process. Teachers and professors must keep abreast of developments
the time. Teachers cannot also wait for the opening of the next semester to begin their work. Ard
preparation is necessary for the delicate task of educating our children. Teaching involves not onl
application of skill and an imparting of knowledge, but a responsibility which entails self dedicatio
sacrifice. The task of teaching ends not with the perceptible efforts of the petitioners members bu
goes beyond the classroom: a continuum where only the visible labor is relieved by academic
intermissions. It would be most unfair for the private respondent to consider these teachers as
employees on leave without pay to suit its purposes and, yet, in the meantime, continue availing
their services as they prepare for the next semester or complete all of the last semesters
requirements. Furthermore, we may also by analogy apply the principle enunciated in the Omnibu
Rules Implementing the Labor Code to wit: chan rob1es v irt ual 1aw l ibra ry

Sec. 4. Principles in Determining Hours Worked. The following general principles shall govern in
determining whether the time spent by an employee is considered hours worked for purposes of t
Rule:chan rob1es v irt ual 1aw l ibra ry

x x x

"(d) The time during which an employee is inactive by reason of interruptions in his work beyond
control shall be considered time either if the imminence of the resumption of work requires the
employees presence at the place of work or if the interval is too brief to be utilized effectively and
gainfully in the employees own interest." (Emphasis supplied).

The petitioners members in the case at bar, are exactly in such a situation. The semestral break
scheduled is an interruption beyond petitioners control and it cannot be used "effectively nor gain
in the employees interest. Thus, the semestral break may also be considered as "hours worked."
this, the teachers are paid regular salaries and, for this, they should be entitled to ECOLA. Not on
the teachers continue to work during this short recess but much less do they cease to live for whi
the cost of living allowance is intended. The legal principles of "No work, no pay; No pay, no ECOL
must necessarily give way to the purpose of the law to augment the income of employees to enab
them to cope with the harsh living conditions brought about by inflation; and to protect employee
their wages against the ravages brought by these conditions. Significantly, it is the commitment o
State to protect labor and to provide means by which the difficulties faced by the working force m
best be alleviated. To submit to the respondents interpretation of the no work, no pay policy is to
defeat this noble purpose. The Constitution and the law mandate otherwise. chan roble s.com:c ralaw:re d
With regard to the second issue, we are called upon to interpret and apply Section 3 of Presidenti
Decree 451 to wit: chan rob 1es vi rtual 1aw lib rary

SEC. 3. Limitations. The increase in tuition or other school fees or other charges as well as the
fees or charges authorized under the next preceding section shall be subject to the following
conditions:jgc:chan robles .com.p h

"(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 fa
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 s
the return to investments exceed twelve (12%) per centum of the incremental proceeds; . . ." cra law virt ua1aw lib ra ry

x x x

This Court had the occasion to rule squarely on this point in the very recent case entitled, Univers
the East v. University of the East Faculty Association, 117 SCRA 554. We held that: jgc: chan robles. com.ph

"In effect, the problem posed before Us is whether or not the reference in Section 3(a) to increas
salaries or wages of the faculty and all other employees of the schools concerned as the first purp
to which the incremental proceeds from authorized increases to tuition fees may be devoted, may
construed to include allowances and benefits. In the negative, which is the position of respondent
would follow that such allowances must be taken in resources of the school not derived from tuitio
fees.

"Without delving into the factual issue of whether or not there could be any such other resources,
note that among the items of second purpose stated in provision in question is return in investme
And the law provides only for a maximum, not a minimum. In other words, the schools may get a
return to investment of not more than 12%, but if circumstances warrant, there is no minimum fi
by law which they should get.

"On this predicate, We are of the considered view that, if the school happen to have no other
resources to grant allowances and benefits, either mandated by law or secured by collective
bargaining, such allowances and benefits should be charged against the return to investments ref
to in the second purpose stated in Section 3(a) of P.D. 451." c ralaw vi rtua 1aw lib rary

Private respondent argues that the above interpretation "disregarded the intention and spirit of th
law" which intention is clear from the "whereas" clauses as follows: jgc:chanrob les.com. ph

"It is imperative that private educational institutions upgrade classroom instruction . . . provide sa
and or wage increases and other benefits . . ." c ralaw vi rtua 1aw lib rary

Respondent further contends that PD 451 was issued to alleviate the sad plight of private schools
their personnel and all those directly or indirectly on school income as the decree was aimed

". . . to upgrade classroom instruction by improving their facilities and bring competent teachers i
levels of education, provide salary and or wage increases and other benefits to their teaching,
administrative, and other personnel to keep up with the increasing cost of living." (Emphasis supp

Respondent overlooks the elemental principle of statutory construction that the general statemen
the whereas clauses cannot prevail over the specific or particular statements in the law itself whic
define or limit the purposes of the legislation or proscribe certain acts. True, the whereas clauses
451 provide for salary and or wage increase and other benefits, however, the same do not delinea
the source of such funds and it is only in Section 3 which provides for the limitations wherein the
intention of the framers of the law is clearly outlined. The law is clear. The sixty (60%) percent
incremental proceeds from the tuition increase are to be devoted entirely to wage or salary increa
which means increases in basic salary. The law cannot be construed to include allowances which a
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 thes
difficult economic times.
chanrob les vi rtua l lawlib rary

This Court is not guilty of usurpation of legislative functions as claimed by the respondents. We
expressed the opinion in the University of the East case that benefits mandated by law and collec
bargaining may be charged to the 12% return on investments within the 40% incremental procee
tuition increase. As admitted by respondent, we merely made this statement as a suggestion in
answer to the respondents query as to where then, under the law, can such benefits be charged.
were merely interpreting the meaning of the law within the confines of its provisions. The law pro
that 60% should go to wage increases and 40% to institutional developments, student assistance
extension services, and return on investments (ROI). Under the law, the last item ROI has flexibil
sufficient to accommodate other purposes of the law and the needs of the university. ROI is not s
aside for any one purpose of the university such as profits or returns on investments. The amoun
be used to comply with other duties and obligations imposed by law which the university exercisin
managerial prerogatives finds cannot under present circumstances, be funded by other revenue
sources. It may be applied to any other collateral purpose of the university or invested elsewhere
Hence, the framers of the law intended this portion of the increases in tuition fees to be a genera
to cover up for the universitys miscellaneous expenses and, precisely, for this reason, it was not
delimited. Besides, ROI is a return or profit over and above the operating expenditures of the
university, and still, over and above the profits it may have had prior to the tuition increase. The
earning capacities of private educational institutions are not dependent on the increases in tuition
allowed by P.D. 451. Accommodation of the allowances required by law require wise and prudent
management of all the university resources together with the incremental proceeds of tuition
increases. Cognizance should be taken of the fact that the private respondent had, before PD 451
managed to grant all allowances required by law. It cannot now claim that it could not afford the
same, considering that additional funds are even granted them by the law in question. We find no
compelling reason, therefore, to deviate from our previous ruling in the University of the East cas
even as we take the second hard look at the decision requested by the private Respondent. This c
was decided in 1982 when PDs 1614, 1634, 1678, and 1713 which are also the various Presidenti
Decrees on ECOLA were already in force. PD 451 was interpreted in the light of these subsequent
legislations which bear upon but do not modify nor amend, the same. We need not go beyond the
ruling in the University of the East case.

Coming now to the third issue, the respondents are of the considered view that as evidenced by t
payrolls submitted by them during the period September 16 to September 30, 1981, the faculty
members have been paid for the extra loads. We agree with the respondents that this issue involv
question of fact properly within the competence of the respondent NLRC to pass upon. The finding
fact of the respondent Commission are binding on this Court there being no indication of their bei
unsubstantiated by evidence. We find no grave abuse in the findings of respondent NLRC on this
matter to warrant reversal. Assuming arguendo, however, that the petitioners have not been paid
these extra loads, they are not entitled to payment following the principles of "No work, no pay."
time, the rule applies. Involved herein is a matter different from the payment of ECOLA under the
issue. We are now concerned with extra, not regular loads for which the petitioners are paid regu
salaries every month regardless of the number of working days or hours in such a month. Extra lo
should be paid for only when actually performed by the employee. Compensation is based, theref
on actual work done and on the number of hours and days spent over and beyond their regular h
of duty. Since there was no work on September 21, 1981, it would now be unfair to grant petition
demand for extra wages on that day. cha nro bles law l ibra ry : red

Finally, disposing of the respondents charge of petitioners lack of legal capacity to sue, suffice it
say that this question can no longer be raised initially on appeal or certiorari. It is quite belated fo
private respondent to question the personality of the petitioner after it had dealt with it as a party
the proceedings below. Furthermore, it was not disputed that the petitioner is a duly registered la
organization and as such has the legal capacity to sue and be sued. Registration grants it the righ
a legitimate labor organization and recognition by the respondent University is not necessary for i
institute this action in behalf of its members to protect their interests and obtain relief from
grievances. The issues raised by the petitioner do not involve pure money claims but are more
intricately intertwined with conditions of employment.

WHEREFORE the petition for certiorari is hereby GRANTED. The private respondent is ordered to p
its regular fulltime teachers/employees emergency cost of living allowances for the semestral brea
from November 7 to December 5, 1981 and the undistributed balance of the sixty (60%) percent
incremental proceeds from tuition increases for the same schoolyear as outlined above. The
respondent Commission is sustained insofar as it DENIED the payment of salaries for the suspend
extra loads on September 21, 1981.

SO ORDERED.
 14. Shell Co. v. NLU, 81 Phil 315

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-1309 July 26, 1948

THE SHELL COMPANY OF PHILIPPINE ISLANDS, LIMITED, recurrente,

vs.
NATIONAL LABOR UNION, recurrida.

Sres. Ross, Selph, Carrascoso y Janda en representacion de la recurrente.

Sres. Paguia y Villanueva en representacion de la recurrida.

BRIONES, J.:

Actuando sobre una peticion de la entidad obrera llamada "National Labor Union," la Corte de
Relaciones Industriales ha dictado una decision en la que, entre otras cosas, se obliga a la firma
petrolera "The Shell Company of Philippine Islands, Limited" a pagar a sus obreros que trabajan de
noche (desde que se pone el sol hasta que se levanta al dia siguiente) una compensacion adicional
de 50% sobre sus salarios regulares si trabajasen de dia. Parece que la comania tiene necesidad
del servicio nocturno de un determinado numero de obreros, pues los aviones procedentes del
extranjero suelen aterrizar y despegarse de noche, siendo por esto necesario el que se hagan
faenas de noche para el suministro de gasolina y lubricantes, y para otros menesteres. La compania
petrolera se ha excepcionado contra dicha decision de ahi el presente recurso de certiorari para que
la revoquemos.

La compania recurrente alega y arguye que no solo no existe ninguna disposicion legal que faculte
a la Corte de Relaciones Industriales para ordenar el pago de compensacion adicional a obreros
que trabajan de noche, sino que, por el contrario, la ley del Commonwealth No. 444 exime al
patrono de semejante obligacion toda vez que en dicha ley se proveen los casos en que es
compulsorio el pago de "overtime" (compensacion adicional), y entre tales casos no figura el trabajo
de noche.

Por su parte, la union obrera recurrida sostiene que la facultad que se discute forma parte de los
poderes amplios y efectivos que la ley del Commonwealth No. 103 la carta organica del Tribunal
de Relaciones Industriales otorga a dicho tribunal; y que la ley No. 444 del Commonwealth que
se invoca no tiene ninguna aplication al presente caso, pues la misma es de alcance forzosamente
limitado, refiriendose particular y exclusivamente a la jornada maxima de trabajo contidiano
permitida en los establecimientos industriales la jornada de 8 horas.

Nuestra conclusion es que la union obrera recurrida tiene la razon de su parte. Para una clara y
cabal elucidacion de los puntos discutidos, estmamos conveniente, aun a riesgo de alargar esta
ponencia, transcribir lasdisposiciones legales pertinentes que son los articulos 1, 4 y 13 de la ley del
Commonwealth No. 103. Helas aqui:

SECTION 1. The Judge: his appointment, qualifications, compensation, tenure. There is

hereby created a Court of Industrial Relations, which shall have jurisdiction over the entire
 Philippines, to consider, investigate, decide, and settle any question, matter, controversy or
dispute arising between, and/or affecting, employers and employees or laborers, and
landlords and tenants or farm-laborers, and regulate the relation between them, subject to,
and in accordance with, the provisions of this Act. The Court shall keep a record of all its
proceedings and shall be presided over by a Judge to be appointed by the President of the
Philippines with the consent of the Commission on Appointments of the National Assembly.
The Judge of the Court shall hold office during good behavior until he reaches the age of
seventy years, or becomes incapacitated to discharge the duties of his office. His
qualifications shall be the same as those provided in the Constitution for members of the
Supreme Court and he shall receive an annual compensation of ten thousand pesos and
shall be entitled to traveling expenses and per diems when performing official duties outside
of the City of Manila. The Department of Justice shall have executive supervision over the
Court.

SEC. 4. Strikes and lockouts. The Court shall take cognizance for purpose of prevention,
arbitration, decision and settlement, of any industrial or agricultural dispute causing or likely
to cause a strike or lockout, arising form differences as regards wages, shares or
compensation, hours of labor or conditions of tenancy or employment, between employers
and employees or laborers and between landlords and tenants or farm-laborers, provided
that the number of employees, laborers or tenants or farm-laborers involved exceeds thirty,
and such industrial or agricultural dispute is submitted to the Court by the Secretary of Labor,
or by any or both of the parties to the controversy and certified by the Secretary of Labor as
existing and proper to be dealt with by the Court for the sake of public interest. In all such
cases, the Secretary of Labor or the party or parties submitting the disputes, shall clearly and
specifically state in writing the questions to be decided. Upon the submission of such a
controversy or question by the Secretary of Labor, his intervention therein as authorized by
law, shall cease.

The Court shall, before hearing the dispute and in the course of such hearing, endeavor to
reconcile the parties and induce them to settle the dispute by amicable agreement. If any
agreement as to the whole or any part of the dispute is arrived at by the parties, a
memorandum of its terms shall be made in writing, signed and acknowledged by the parties
thereto before the Judge of the Court or any official acting in his behalf and authorized to
administer oaths or acknowledgments, or, before a notary public. The memorandum shall be
filed in the office of the Clerk of the Court, and, unless otherwise ordered by the Court, shall,
as between the parties to the agreement, have the same effect as, and be deemed to be, a
decision or award.

SEC. 13. Character of the award. In making an award, order or decision, under the
provisions of section four of this Act, the Court shall not be restricted to the specific relief
claimed or demands made by the parties to the industrial or agricultural dispute, but may
include in the award, order or decision any matter or determination which my be deemed
necessary or expedient for the purpose of setting the dispute or of preventing further
industrial or agricultural disputes.

Resulta evidente de las disposiciones transcritas lo siguiente: (a) que cuando surge una disputa
entre el principal y el empleado u obrero, vgr. sobre cuestion de salarios, la Corte de Relaciones
Industriales tiene jurisdiccion en todo el territorio de Filipinas para considerar, investigar y resolver
dicha disputa, fijando los salarios que estime justos y razonables; (b) que para los efectos de
prevencion, arbitraje, decision y arreglo, el mismo Tribunal de Relaciones Industriales tien
igualmente jurisdiccion para conocer de cualquier disputa industrial o agricola resultante de
cualesquier diferencias respecto de los salarios, participaciones o compensaciones, horas de
trabajo, condiciones del empleo o de la aparceria entre los patronos y los empleados u obreros y
entre los propietarios y los terratenientes u obreros agricolas previo el cumplimiento de ciertos
requisitos y condiciones, cuando se viere que dicha disputa ocasiona o puede ocasionar una
huelga; (c) que en el ejercicio de sus facultades arriba especificadas, el Tribunal de Relaciones
Industriales no queda limitado, al decidir la disputa, a conceder el remedio o remedios solicitados
por las partes en la controversia, sino que puede incluir en la orden or decision cualquier materia o
determinacion para el proposito de arreglar la disputa o de prevenir ulteriores controversias
industriales o agricolas.

En el caso nos ocupa existe indudablemente una dispunta industrial. Mientras la empresa, la
compania Shell, no esta dispuesta a pagar a sus obreros de noche mayores salarios que los
obreros de ida, la "NationalLabor Union", a la cual estan afiliados los trabajadoresde la Shell,
reclama otro tipo de salarios para el servicio nocturno un 50% mas. En esto consiste la disputa,
el litigio industrial. Ahora bien: que ha hecho la Corte de Relaciones Industriales, despues de
sometido el conflicto a su jurisdiccion? Pues precisamente lo que manda la citada ley No. 103 del
Commonwealth, carta organica de su creacion y funcionamiento, a saber: considerar, investigar y
enjuiciar la disputa, resolviedola despues en el sentido en que la ha resuelto, es decir, remunerando
el trabajo de noche con un 50% mas de los salarios de dia. Y esto es perfectamente legal tanto
dentro del alcance del articulo 1 de la referida ley No. 103 que faculta a la Corte de Relaciones
Industriales para decidir cualquier disputa sobre salarios y compensaciones en la forma que estime
razonable y conveniente, como dentro del marco del articulo 4 de la misma ley que autoriza a dicho
tribunal para enjuiciar y decidir cualquier pleito o controversia industrial o agricola determine el
estallido de una huelga o tienda a causarla. Mas todavia: lo hecho por el Trbunal de Relaciones
Industriales en el presente caso es asimismo legal dentro del marco del articulo 13 de la misma ley
No. 103, articulo que, como queda visto, no solo faculta a dicho tribunal a conceder el remedio que
recabanlas partes, sino inclusive a ir mas alla, esto es, a otorgar remedios no expresamente
solicitados, siempre que los mismos se encamienen a resolver de una vez la disputa o a prevenir el
estallido de ulteriores disputas o huelgas.

Es evidente que con estos amplios poderes el Estadose ha propuesto equipar al Tribunal de
Relaciones Industriales hasta el maximum posible de utilidad y eficacia, haciendo del mismo no una
simple agencia academica, sino verdaderamente activa, dinamica y eficiente en una palabra, la
maquinaria oficial por excelencia en la formidable y espinosa tarea de resolver los conflictos
industriales, yagricolas de cierta clase, previniendo y evitando de esta manera esos paros y huelgas
que tanto afligen y danan no solo a las empresas y a los obreros, sino, en general, a toda la
comunidad. En su opinion concurrente dictada en el caso autoritativo de Ang Tibay contra Tribunal
de Relaciones Industriales1 (R.G. No. 46496), el Magistado Laurel ha expresado muy
acertadamente la idea fundamental que subraya la creacion de dicho tribunal, con el siguiente
pronunciamiento:

In Commonwealth Act No. 103, and by it, our government no longer performs the role of
mere mediator or intervenor but that of supreme arbiter. (Las cursivas son nuestras.).

La recurrente arguye, sin embargo, que si bien es verdad que en caso de disputa el Tribunal de
relaciiones Industriales tiene, en virtud de su ley organica, el poder de fijar los salarios, tal poder no
es absoluto, sino que esta sujeto a ciertas restricciones y cortapizas, provistas en la ley
comunmente conocida por ley sobre la jornada de ocho horas, la ley del Commonwealth No. 444,
cuyos articulos pertinentes se transacriben integramente a continuacion:

SECTION 1. The legal working day for any person employed by another shall be of not more
than eight hours daily. When the work is not continuous, the time during which the laborer is
not working and can leave his working place and can rest completely shall not be counted.
 SEC. 3. Work may be performed beyond eight hours a day in case of actual or impending
emergencies caused by serious accidents, fire, flood, typhoon, earthquake, epidemic, or
other disaster or calamity in order to prevent loss to life and property or imminent danger to
public safety; or in case urgent work to be performed on the machines, equipment, or
installations in order to avoid a serious loss which the employer would otherwise suffer, or
some other just cause of a similar nature; but in all such cases the laborers and employees
shall be entitled to receive compensation for the overtime work performed at the same rate
as their regular wages or salary, plus at least twenty-five per centum additional.

In case of national emergency the government is empowered to establish rules and

regulations for the operation of the plants and factories and to determine the wages to be
paid the laborers.

SEC. 4. No person, firm, or corporation, business establishment or place or center of labor

shall compel an employee or laborer to work during Sundays and legal holidays, unless he is
paid an additional sum of at least twenty-five per centum of his regular
remuneration: Provided however, That this prohibition shall not apply to public utilities
performing some public service such as supplying gas, electricity, power, water, or providing
means of transportation or communication.

Como quiera argumentanlos abogados de la recurrente que en estos articulos se especifican

los casos en que se autoriza el pago de compensacion extra o adicional y son solo, a saber: (a) en
caso de "overtime" o trabajo en exceso de las horas regulares por razones imperiosasde urgencia
con motivo de algun desastre o accidente, o para evitar perdidas o repararlas; (b) en caso de
trabajo por los domingos y fiestas; (c) en caso de emergencia, y nada hay que se refiera al trabajo
de noche; luego la orden de que se trata es ilegal, pues no esta autorizada por la ley. "In the
absence recalcan los abogados de la recurrente legislation authorizing the payment of extra
compensation for work done at night, the Court of Industrial Relations ha no power or authority to
order the petitioner company to pay extra compensation for work done by its laborers at
night. Expressio unius est exclusio alterius. Where, as inthe case at bar, statute expressly specifies
the cases where payment of extra compensation may be demanded, extra compensation may be
allowed in those cases only, and in no others. The provisions of the Commonwealth Act No. 444
cannot be enlarged by implication or otherwise. Expressum facit cessare tacitum.

La argumentacion es erronea. La Ley No. 444 no es aplicable al presente caso, siendo evidente que
la misma tiene un objeto especifico, a saber: (a) fijar en 8 horas la jornada maxima de trabajo; (b)
senalar ciertos casos excepcionales en que se puede autorizar el trabajo fuera de dicha jornada; (c)
proveer un sobresueldo, que no debe ser menor de 25% del salario regular, para el "overtime" o
trabajo en exceso de las 8 horas.

En el caso de Manila Electric, solicitante-apelante, contra The Public Utities Employees'

Association,2 apelada, L-1206 (45 Off. Gaz., 1760), esta Corte ha declarado que la facultad
conferida por el articulo 1 de la ley del Commonwealth No. 103 al Tribunal de relaciones Industriales
para enjuciar y decidir pleitos y controversias industriales entre el capital y el trabajo, que incluye la
de fijar salarios y compnsaciones de empleados y obreros, ha quedado restringida por el articulo 4
de la ley Commonwealth No. 444, que al mismo tiempo que limita a un 25% del salario o
compensacion regular del obrero el minimum de la compensacion adicional que el tribunal puede
conceder por trabajos en los Domingos y fiestas oficiales, exime del pago de dicha compensacion
adicional a las entidades de utilidad publica que prestan algun servicio publico, como las que
suministran gas, electricidad, fuerza mortriz, agua, o proveen medios de transporte o
communicacion. Tal restriccion viene a ser una excepcion de la facultad general del tribunal para
fijar, en casos de disputa, los salarios y compensaciones que deben pagar los patronos a los
empleados y obreros; y como quiera que dicho articulo 4 se refiere solamente a salario o
compensacion por trabajos durante los dias de Domingo y fiestas oficiales, es obvio que no puede
referirse a salario o compensacion adicional por trabajos fuera de lajornada de ocho horas que
generalmente se realizan desde primeras horas de la manana a ultimas horas de la tarde, pues una
cosa es trabajar en dias de Domingo y fiestas oficiales, y otra cosa bien distinta es trabajar de
noche of fuera de la jornada de ocho horas en dias laborables. Aplicando la maxima legal "expressio
unius est exclusio alterius," se puede sostener, sin temor de equivocarse, que una ley que provee
una excepcion especifica a sus disposiciones generales, como la compensacion adicional por
trabajos en dias de Domingo y fiestas oficiales, excluye cualquiera otra, como la compensacion
adicional por trabajos de noche en dias laborables."Another case in which this maxim may almost
invariably by followed is that of statute which makes certain specific exceptions to its general
provisions. Here wemay safely assume that all other exceptions were intended to be excluded."
(Wabash R. Co.vs. United States, 178 Fed., 5, 101 C. C. A. 133; Cella Commision Co. vs. Bohlinger,
147 Fed., 419; 78 C. C. A. 467; Kunkalman vs. Gibson, 171 Ind., 503; 84 N.E. 985; Hering vs.
Clement, 133 App. Div., 293; 117 N.Y., Supp. 747.).

El trabajo denoche que la compania Shell exige de sus obreros no es talmente un "overtime", en el
sentido en que se emplea esta palabra en la Le No. 444, sino que es una jornada completa de
trabajo, tambien de 8 horas: solo que, en vez de realizarse de dia, se hace de noche. Dicho en otras
palabras, el trabajo de noche de que aqui se trata no es solamente unexceso, prolongacion u
"overtime" del trabajo regular de dia, sino que es otro tipo de trabajo, absolutamente independiente
de la jornada diurna. Por eso hay dos turnos: el turno de obreros que trabajan de dia; y el turno de
los que trabajan de noche. Asi que no es extrano que el legislador no haya incluido este tipo de
trabajo entre los casos de "overtime" senalados en la referida ley No. 444.

La cuestion que, a nuestro juicio, se debe determinar es si entre las facultades generales de la
Corte de Relaciones Industriales que estan admitidas sin dipusta, esta la de considerar la jornada
de noche como una jornada completade trabajo; la de estimarla como mas gravosa que la jornada
de dia; y consiguientemente, la de proveer y ordenar que se remunere con un 50% mas de los
salarios regulares diurnos. Nuestra contestacion es afirmativa: todo esto se halla comprendido entre
los poderes generales de la Corte de Relaciones Industriales. Si este tribunal tiene, en casos de
disputa, el poder de fijar los salarios que estime justos y razonables para el trabajo de dia, no hay
razon por que no ha de tener el mismo poder con respecto a los salarios de noche; es tan trabajo lo
uno como lo otro. Y con respecto ala apreciacion de que el trabajo de noche es mas pesado y
oneroso que el de dia y, por tanto, merece mayor remuneracion, tampoco hay motivospara
revocarla o alterarla. No hay argumento posible contra el hecho universal de que el trabajo regular,
normal y ordinario es el de dia, y que el trabajo de noche es muy exceptional y justificado solo por
ciertos motivos imperativamente inevitables. Por algo la humanidad ha trabajadosiempre de dia.

Razones de higiene, de medicina, de moral, de cultura, de sociologia, establecen de consuno que el

trabajo de nocho tiene muchos inconvenientes, y cuando no hay mas remedio que hacerlo es solo
justo que se remunero mejor que de ordinario para resarcir hasa cierto punto al obrero de tales
inconvenientes. Es indudable que el trabajo de noche no solo a la larga afecta a la salud del
trabajador, sino que le priva a este de ciertas cosas que hacen relativamente agradable la vida,
como, vgr., un reposo completo e ininterrumpido y ciertos ratos de solaz, ocio o expansion espiritual
y cultural que podria tener al terminar el trabajo por la tarde y durante las primeras horas de la
noche. Se dice que el obrero puede descansar de dia despues de haber trabajado toda la noche;
pero puede acaso el reposo de dia dar al cuerpo aquel tonico y aquel efecto reparador completo
que solo puede proporcionar el reposo natural de noche? Se dice tambien que algunos prefieren
trabajar de noche bajo nuestro clima abrasador, evitando asi el calor del dia. Mucho tememos, sin
embargo, que esto sea mejor hablado que praticado. Creemos que desde tiempo inmemorial la
regla universal es que el hombre trabja de noche mas por necesidad irremediable que por
placentera conveniencia.
A la opinion vulgar, universal, hay que sumar la opinionpericial, el criterio especialista. La opinion de
los tratadistas y expertos milita decididamente en favor de la tesis de que el trabajo de noche es
mas duro y oneroso que el trabajo de dia, considerandose por esto con marcada repugnancia y
compeliendo consiguientemente a las gerencias capitalisticas a establecer una escala mas alta de
salarios como incentivo a los obreros para aceptarlo. Se podrian citar virias autoridades, pero para
no extender demasiado esta ponencia optamos por transcriber solamente algunas, a saber:

. . . Then, it must be remembered that it is distinctly unphysiological to turn the night into day
and deprive the body of the beneficial effects of sunshine. The human organism revolts
against this procedure. Added to artificial lighting are reversed and unnatural times of eating,
resting, and sleeping. Much of the inferiority of nightwork can doubtless be traced to the
failure of the workers to secure proper rest and sleep, by day. Because of inability or the lack
of opportunity to sleep, nightworkers often spend their days in performing domestic duties,
joining the family in the midday meal, 'tinkering about the place', watching the baseball
game, attending the theater or taking a ride in the car. It is not strange that nightworkers tend
to be less efficient than dayworkers and lose more time. . . (The Management of Labor
Relations, by Watkins & Dodd, page 524.).

Nightwork. Nightwork has gained a measure of prominence in the modern industrial

system in connection with continuous industries, that is, industries in which the nature of the
processes makes it necessary to keep machinery and equipment in constant operation. Even
in continuous industries the tendency is definitely in the direction of FOUR shifts of 6 hours
each, with provision for an automatic change of shift for all workers at stated intervals. Some
discussion has taken place with regard to the lengths of the period any workers should be
allowed to remain on the night shift. A weekly change of shifts is common, specially where
three or four shifts are in operation; in other cases the change is made fortnightly or monthly;
in still other instances, no alternation is provided for, the workers remaining on day or
nightwork permanently, except where temporary changes are made for individual
convenience.

There is sharp difference of opinion concerning the relative merits of these systems.
Advocates of the weekly change of shifts contend that the strain of nightwork and the
difficulty of getting adequate sleep during the day make it unwise for workers to remain on
the"graveyard" shift for more than a week at a time. Opponents urge that repeated changes
make it more difficult to settle down to either kind of shift and that after the first week
nightwork becomes less trying while the ability to sleep by day increases. Workers
themselves react in various ways to the different systems. This much, however, is certain:
Few persons react favorably to nightwork, whether the shift be continuous or alternating.
Outside of continuous industries, nightwork can scarcely be justified, and, even in these, it
presents serious disadvantages which must be recognized in planing for industrial efficiency,
stabilization of the working force, the promotion of industrial good-will, and the conservation
of the health and vitality of the workers.

Nightwork cannot be regarded as desirable, either from the point of view of the employer or
of the wage earner. It is uneconomical unless overhead costs are unusually heavy.
Frequently the scale of wages is higher as an inducement to employees to accept
employment on the night shift, and the rate of production is generally lower. (Management of
Labor Relations, by Watkins & Dodd, pp. 522-524; emphasis ours.)

. . . The lack of sunlight tends to produce anemia and tuberculosis and to predispose to other
ills. Nightwork brings increased liability to eyestrain and accident. Serious moral dangers
also are likely to result from the necessity of traveling the streets alone at night, and from the
interference with normal home life. From an economic point of view, moreover, the
investigations showed that nightwork was unprofitable, being inferior to day work both in
quality and in quantity. Wherever it had been abolished, in the long run the efficiency both of
the management and of the workers was raised. Furthermore, it was found that nightwork
laws are a valuable aid in enforcing acts fixing the maximum period of employment.
(Principles of Labor Legislation, by Commons and Andrews, 4th Revised Edition, p. 142.)

Special regulation of nightwork for adult men is a comparatively recent development. Some
European countries have adopted laws placing special limitations on hours of nightwork for
men, and others prohibit such work except in continuous processes. (Principles of Labor
legislation, 4th Revised Edition by Common & Andrews, p. 147.)

Nightwork has almost invariably been looked upon with disfavor by students of the problem
because of the excessive strain involved, especially for women and young persons, the large
amount of lost time consequent upon exhaustion of the workers, the additional strain and
responsibility upon the executive staff, the tendency of excessively fatigued workers to "keep
going" on artificial stimulants, the general curtailment of time for rest, leisure, and cultural
improvement, and the fact that night workers, although precluded to an extent from the
activities of day life, do attempt to enter into these activities, with resultant impairment of
physical well-being. It is not contended, of course, that nightwork could be abolished in the
continuous-process industries, but it is possible to put such industries upon a three- or four-
shifts basis, and to prohibit nightwork for women and children. (Labor's Progress and
Problems, Vol. I, p. 464, by Professors Millis and Montgomery.)

Nightwork. Civilized peoples are beginning to recognize the fact that except in cases of
necessity or in periods of great emergency, nightwork is socially undesirable. Under our
modern industrial system, however, nightwork has greatly aided the production of
commodities, and has offered a significant method of cutting down the ever-increasing
overhead costs of industry. This result has led employers to believe that such work is
necessary and profitable. Here again one meets a conflict of economic and social interests.
Under these circumstances it is necessary to discover whether nightwork has deleterious
effects upon the health of laborers and tends to reduce the ultimate supply of efficient labor.
If it can proved that nightwork affects adversely both the quality and quantity of productive
labor, its discontinuance will undoubtedly be sanctioned by employers. From a social point of
view, even a relatively high degree of efficiency in night operations must be forfeited if it is
purchased with rapid exhaustion of the health and energy of the workers. From an economic
point of view, nightwork may be necessary if the employer is to meet the demand for his
product, or if he is to maintain his market in the face of increasing competition or mounting
variable production costs.

Industrial experience has shown that the possession of extra-ordinary physical strength and
self-control facilitates the reversal of the ordinary routine of day work and night rest, with the
little or no unfavorable effect on health and efficiency. Unusual vitality and self-control,
however, are not common possessions. It has been found that the most serious obstacle to a
reversal of the routine is the lack of self-discipline. Many night workers enter into the
numerous activities of day life that preclude sleep, and continue to attempt to do their work at
night. Evidence gathered by the British Health of Munition Workers' Committee places
permanent night workers, whether judged on the basis of output or loss of time, in a very
unfavorable positions as compared with day workers.

Systems of nightwork differ. There is the continuous system, in which employees labor by
night and do not attend the establishment at all by day, and the discontinuous system, in
 which the workers change to the day turn at regular intervals, usually every other week.
There are, of course, minor variations in these systems, depending upon the nature of the
industry and the wishes of management. Such bodies as the British Health Munition
Workers' Committee have given us valuable conclusions concerning the effect of nightwork.
Continuous nightwork is definitely less productive than the discontinuous system. The output
of the continuous day shift does not make up for this loss in production.

There is, moreover, a marked difference between the rates of output of night and day shifts
on the discontinuous plan. In each case investigated the inferiority of night labor was
definitely established. This inferiority is evidently the result of the night worker's failure to
secure proper amounts of sleep and rest during the day. The system of continuous shifts,
especially for women, is regarded by all investigators as undesirable. Women on continuous
nightwork are likely to perform domestic duties, and this added strain undoubtedly accounts
for the poorer results of their industrial activities. The tendency to devote to amusement and
other things the time that should be spent in rest and sleep is certainly as common among
men as among women workers and accounts largely for the loss of efficiency and time on
the part of both sexes in nightwork.

The case against nightwork, then, may be said to rest upon several grounds. In the first
place, there are the remotely injurious effects of permanent nightwork manifested in the later
years of the worker's life. Of more immediate importance to the average worker is the
disarrangement of his social life, including the recreational activities of his leisure hours and
the ordinary associations of normal family relations. From an economic point of view,
nightwork is to be discouraged because of its adverse effect upon efficiency and output. A
moral argument against nightwork in the case of women is that the night shift forces the
workers to go to and from the factory in darkness. Recent experiences of industrial nations
have added much to the evidence against the continuation of nightwork, except in
extraordinary circumstances and unavoidable emergencies. The immediate prohibition of
nightwork for all laborers is hardly practicable; its discontinuance in the case of women
employees is unquestionably desirable. 'The night was made for rest and sleep and not for
work' is a common saying among wage-earning people, and many of them dream of an
industrial order in which there will be no night shift. (Labor Problems, 3rd Edition, pp. 325-
328, by Watkins & Dodd.).

En meritos de lo expuesto, se deniega el recurso de certiorari interpuesto y se confirma la sentencia

del Tribunal De Reclaciones Industriales, con costas a cargo de a recurrente. Asi se ordena.

Paras, Pres. Interino, Feria, Pablo, Perfecto, Bengzon, Padilla and Tuason, MM., estan conformes.
 15. Damasco v. NLRC, GR No. 115755, 4 Dec 2000

G.R. No. 115755 December 4, 2000

IMELDA B. DAMASCO, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, MANILA GLASS SUPPLY and BONIFACIO K.
SIA, respondents.

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

G.R. No. 116101 December 4, 2000

BONIFACIO K. SIA and MANILA GLASS SUPPLY, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER DOMINADOR B.
SALUDARES, DEPUTY SHERIFF ANTONIO T. DATU and IMELDA B. DAMASCO, respondents.

DECISION

QUISUMBING, J.:

These two petitions for certiorari seek to annul the decision promulgated by public respondent
National Labor Relations Commission (NLRC) on March 21, 1994 in NLRC CA No. L-001159, and
its resolution dated May 11, 1994, which denied petitioners respective motions for reconsideration.

Ms. Imelda Damasco is the petitioner in G.R. No. 115755 and private respondent in G.R. No.
116101. She was a regular sales clerk in Manila Glass Supply in Olongapo City.

Manila Glass Supply is private respondent in G.R. No. 115755 and petitioner in G.R. No. 116101. It
is a sole proprietorship engaged in the sale of glass with main store in Olongapo City and branch in
Metro Manila. Bonifacio K. Sia is private respondent in G.R. No. 115755 and petitioner in G.R. No.
116101. He is the owner of Manila Glass Supply.

The factual background of this case as summarized by the labor arbiter is as follows:

"That she [Damasco] was employed by respondents [Manila Glass Supply and Bonifacio K. Sia] as
Sales Clerk on January 30, 1992, receiving lately a daily wage of P140.00; that as sales clerk, she
was ordered to do almost all the works related to the glass business of respondents including the
cutting, sales and delivery of glass as well as balancing, accounting and checking of capital and
profits every end of the month; that she was made to work from 8:30 in the morning up to 9:30 in the
evening continuously from Monday to Sunday without having been paid overtime pay, rest day pay
and holiday pay; that during the period of her employment, she was not paid any 13th month pay as
well as five (5) days service incentive leave pay; that on August 28, 1992 at around 7:00 oclock in
the evening, while she was working, respondent Bonifacio Sia called her up and told her to finish all
her works that night, but she told respondent that she would not be able to finish them all because it
was already late; that she then left respondents room but respondent called her again and asked
her why she could not finish what she was told to do, to which complainant [Damasco] answered
that it was already late and there were still a lot of things to do; that respondent asked her what she
was doing since he (respondent) left for Manila, to which complainant told him that she was
attending to the sales, to the field and to other things relative to the business of respondent, to which
respondent got mad at her; that respondent asked complainant why she was not teaching her two
(2) other co-workers on what to do, and she answered she would not do it anymore because if the
other co-workers should commit mistakes in accounting, she was the first one to be lambasted by
respondent and even required to share in paying the shortages; that when respondent heard this, he
picked up and swiped an ashtray in front of complainant and it broke, after which, he threw some
notebooks at complainant who began to tremble in fear and her whole body shook; respondent
ordered her to go out of the room, lambasted her again and told her that he (respondent)does not
want to see her face anymore ("ayaw ko nang makita ang pagmumukha mo rito"); that after
respondent had left, complainant again trembled and she could not prevent herself from crying, her
co-workers applied alcohol on her because her body was cold, given water to drink and after about
an hour, complainant decided not to finish her work anymore because she felt weak; that one of his
co-workers, Alma, brought her home and since then, she did not report for work anymore because
she developed a phobia of respondent

Disputing the claim of complainant, respondents maintain as follows: That sometime in the late part
of August 1992, complainant was instructed by respondent to report for work in their store in Metro
Manila as there is a necessity for her detail thereat for reasons that the employees there are new
and do not have the experience and know-how in running the store specifically with regards (sic) to
the sale of glass; that complainant manifested her objection to such detail for reasons that her
husband is working in Olongapo City and she does not want to work in Manila; that thereafter,
complainant did not report for work in the respondents store in Olongapo City, so respondent sent
some of his employees to the house of complainant but were told that she is sick and cannot report
for work; that sometime in the first week of January 1993, respondent received a copy of the instant
complaint filed by complainant; that immediately, respondent thru counsel sent a letter to
complainant directing her to report for work on January 13, 1993 at its store in Olongapo City; that
complainant ignored the letter despite receipt thereof, hence, on January 15, 1993, respondent
again sent complainant another letter directing her to report for work on January 22, 1993 but just
the same, complainant failed and refused to report for work; that it is not true as claimed by
complainant that respondent shouted at her and swiped an ashtray from the table and threw at her
some notebooks. "1

On December 7, 1992, Damasco filed before the NLRC Regional Arbitration Branch in San
Fernando, Pampanga, a complaint against Bonifacio Sia and Manila Glass Supply (jointly referred
hereafter as "Sia" for easy reference). In the one-page complaint form of the NLRC, Damasco
indicated that she is suing her employer for illegal dismissal and non-payment of overtime
pay.2 However, in her complaint affidavit and position paper filed later before the labor arbiter,
Damasco additionally charged her employer with non-payment of 13th month pay, service incentive
leave pay, holiday pay and night shift differential.3

On September 2, 1993, the labor arbiter rendered judgment in favor of Ms. Damasco. The labor
official declared that Sia has not shown any just or authorized cause in terminating the services of
Damasco, except for wild, generalized and self-serving statements that Damasco committed serious
misconduct or willful disobedience of the lawful orders in connection with her work. The labor arbiter
also ruled that Damasco is entitled to 13th month pay, service incentive leave pay, holiday pay,
overtime pay, and disposed of the case, thus:

"WHEREFORE, premises considered, judgment is hereby entered in favor of the complainant and
against respondents, ordering the latter, as follows:

1.To pay the total sum of P112,570.32 representing unpaid 13th month pay, holiday pay,
overtime and premiums pay, five (5) days service incentive leave pay, backwages and
separation pay of complainant;
 2.To pay attorneys fees in the sum of P11,257.00 which is ten (10%) percent of the award;
and

3.All other claims or issues, for want of substantial evidence, are hereby DISMISSED.

SO DECIDED."4

On appeal, the NLRC upheld the labor arbiters finding that Damasco was illegally dismissed but
modified the labor officials judgment, thus:

"PREMISES CONSIDERED, the Decision of September 2, 1993, is hereby MODIFIED.

Respondents are directed to pay complainant the following:

I. Backwages .. P43,680.00

II. Separation Pay 36,400.00

III. 13th month pay . 10,920.00

IV. Service Incentive Leave Pay 2,100.00

V. Holiday Pay .. 4,200.00

VI. Attorneys fees .. 1,722.00

--------------

T O T A L ----- P99,022.00

SO ORDERED."5

Both parties filed motions for reconsideration which were denied.

On July 4, 1994, the NLRC issued an entry of judgment stating that the aforesaid judgment of the
labor tribunal has become final and executory.

On July 7, 1994, the labor arbiter, upon motion of Damasco, issued a writ of execution. In
compliance therewith, public respondent deputy sheriff issued the next day a notice of garnishment
addressed to Far East Bank and Trust Company, Olongapo City, against all credits and deposits of
Bonifacio Sia and/or Manila Glass Supply maintained in said bank, sufficient to cover the monetary
award in favor of Damasco.6

In her petition, Damasco alleged that the NLRC committed grave abuse of discretion:

"IN DELETING THE AWARD FOR OVERTIME PAY AND REDUCING THE ATTORNEYS FEES
IN FAVOR OF PETITIONER."7

In his memorandum, Sia raised the following issues for resolution, thus:

A
 WHETHER OR NOT PUBLIC RESPONDENT LABOR ARBITER SALUDARES DEPRIVED
PETITIONERS OF THEIR RIGHT TO DUE PROCESS AND THUS COMMITTED GRAVE
ABUSE OF DISRCRETION, AMOUNTING TO LACK OR EXCESS OF JURISDICTION

WHETHER OR NOT PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF

DISCRETION, AMOUNTING TO LACK OR EXCESS OF JURISDICTION, IN AFFIRMING,
ALBEIT WITH MODIFICATIONS, THE LABOR ARBITERS PATENTLY NULL AND VOID
DECISION."8

In our view, the crucial issue for resolution is whether or not the NLRC committed grave abuse of
discretion in affirming the decision of the labor arbiter which held that Damasco was illegally
dismissed from her job.

On August 1, 1994, we decided to consolidate the two petitions inasmuch as they involve the same
parties and intertwined issues. Likewise, we issued a temporary restraining order, effective
immediately and continuing until further orders from this Court, enjoining the parties concerned from
implementing the subject writ of execution and notice of garnishment dated July 7 and 8, 1994,
which were respectively issued by the labor arbiter and deputy sheriff of NLRC Regional Arbitration
Branch III, San Fernando, Pampanga.9

We note that both petitioners did not comply with the rule on certification against forum shopping.
The certifications in their respective petitions were executed by their lawyers, which is not
correct.10 The certification of non-forum shopping must be by the petitioner or a principal party and
not the attorney. This procedural lapse on the part of petitioners could have warranted the outright
dismissal of their actions.11

But, the Court recognizes the need to resolve these two petitions on their merits as a matter of social
justice involving labor and capital. After all, technicality should not be allowed to stand in the way of
equitably and completely resolving herein the rights and obligations of these parties.12 Moreover, we
must stress that technical rules of procedure in labor cases are not to be strictly applied if the result
would be detrimental to the working woman.13

Sia contends that he was deprived of his right to due process as the labor arbiter failed to conduct a
hearing for the reception of evidence. He also claims that the labor arbiters finding that Damasco
was illegally dismissed is not supported by substantial evidence. On the contrary, Sia insists,
Damasco abandoned her work as she refused to be detailed at her employers store in Metro
Manila.

Sias contentions are bereft of merit. His words cannot hide the oppressive acts obviously directed to
deprive Ms. Damasco of her employment and erode her dignity as a worker.

It is now axiomatic that the essence of due process in administrative proceedings is simply an
opportunity to explain ones side or an opportunity to seek reconsideration of the action or ruling
complained of.14 A formal or trial-type hearing is not at all times and in all instances essential to due
process, the requirements of which is satisfied where parties are afforded fair and reasonable
opportunity to explain their side of the controversy at hand.15

As noted by the Solicitor General and petitioner Damasco, the labor arbiter set the case several
times for preliminary conference but the parties failed to reached an amicable settlement.16 The labor
arbiter then ordered the parties to submit their position papers. In compliance therewith, the parties
submitted position papers where they set out and argued the factual as well as the legal bases of
their position. Damasco filed her position paper, computation of money claims and affidavit. For his
part, Sia filed his position paper and affidavit. Damasco, in turn, filed her affidavit in reply to the
affidavit of Sia. After both parties had filed their replies, the case was deemed submitted for
resolution as the labor arbiter did not find it necessary to conduct a trial-type hearing. Note that the
filing of position papers and supporting documents fulfills the requirements of due process.17 Further,
it is within the discretion of the labor arbiter to determine if there is a need for a hearing.18 Thus, we
cannot subscribe to Sias posturing that the labor arbiter gravely abused its discretion when he
dispensed with the hearing to receive further evidence.19

Moreover, Sia was given additional opportunity to argue his case on appeal before the NLRC in a
memorandum and motion for reconsideration which pleadings were likewise considered by that labor
agency in the course of resolving the case. Sia cannot thereafter interpose lack of due process since
he was given sufficient time and ample chances to be heard in the present case. Consequently, the
alleged defect in the proceedings in the labor arbiter, if there be any, should be deemed cured.20 All
told, Sias due process argument must fail.

On Sias assertion that the labor arbiters finding is not supported by ample evidence, suffice it to
state that judicial review of labor cases does not go as far as to evaluate the sufficiency of evidence
upon which the labor arbiter and NLRC based their determinations.21 Moreover, this Court does not
review supposed errors in the decision of the NLRC which raise factual issues because findings of
agencies exercising quasi-judicial functions are accorded not only respect but even finality aside
from the consideration that this Court is not a trier of facts.22 In any case, in our view, the labor arbiter
used every reasonable means to ascertain the facts by giving the parties ample opportunity to
present evidence. It is worth stressing that in controversies between a worker and her employer
doubts reasonably arising from evidence or in the interpretation of agreements should be resolved in
the formers favor.23 Thus, the labor arbiter had reasonable ground to sustain the version of Ms.
Damasco on how she was unceremoniously dismissed from her job. Furthermore, Sia did not quite
succeed to convince the NLRC to rule otherwise. Finally, the mere fact that the worker seeks
reinstatement and backpay directly rebuts the employers bare claim of abandonment by the worker
of his employment.

Thus, going now to the specific issue of abandonment, we find no merit in Sias allegation that Ms.
Damasco abandoned her job. To constitute abandonment, two elements must concur: (1) the failure
to report for work or absence without valid or justifiable reason, and (2) a clear intention to sever the
employer-employee relationship, with the second element as the more determinative factor when
manifested by some overt acts.24 Abandoning ones job means the deliberate, unjustified refusal of
the employee to resume his employment and the burden of proof is on the employer to show a clear
and deliberate intent on the part of the employee to discontinue employment.

In this case, there are no overt acts established by Sia from which we can infer the clear intention of
Damasco to desist from employment. Sias letters dated January 7 and 15, 1993, for Damasco to
report for work deserve scant consideration. Note that those orders were made four months after
Damasco was told not to show herself again in the store, and after Sia had received a copy of
Damascos complaint for illegal dismissal. It is indeed highly incredible for an employer to require his
employee without an approved leave to report to work only after four months of absence. If at all, the
charge of abandonment is disingenuous to say the least. Moreover, as noted by the NLRC, it was
unlikely that Damasco had abandoned her job for no reason at all considering the hardship of the
times. In addition, if Damasco had truly forsaken her job, she would not have bothered to file a
complaint for illegal dismissal against her employer and prayed for reinstatement. An employee who
forthwith took steps to protect her layoff could not by any logic be said to have abandoned her
work.25
As to Sias allegation that Ms. Damasco committed serious misconduct or willful disobedience of
lawful order in connection with her work, we find no tenable support. Even if Sia directed her to be
assigned at his store in Metro Manila, her act of refusing to be detailed in Metro Manila could hardly
be characterized a willful or intentional disobedience of her employers order. It was Sias order that
appears to us whimsical if not vindictive. Reassignment to Metro Manila is prejudicial to Ms.
Damasco, as she and her family are residing in Olongapo City. This would entail separation from her
family and additional expenses on her part for transportation and food. Damascos reassignment
order was unreasonable, considering the attendant circumstances.26

In sum, we conclude there is no valid and just cause to terminate the employment of Ms.
Damasco. The NLRC did not gravely abuse its discretion in upholding the finding of the labor arbiter
1wphi 1

that Ms. Damascos dismissal was not for cause.

An employee who is unjustly dismissed from work is entitled to reinstatement without loss of
seniority rights and other privileges as well as to his full backwages, inclusive of allowances, and to
other benefits or their monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement.27

However, in our view, the circumstances obtaining in this case do not warrant the reinstatement of
Ms. Damasco. Antagonism caused a severe strain in the relationship between her and her employer.
A more equitable disposition would be an award of separation pay equivalent to one (1) months pay
for every year of service with the employer.28

Now, as regards Ms. Damascos contention that public respondent gravely abused its discretion in
deleting the award for overtime pay for lack of factual basis, we find the same impressed with merit.
We note that Sia has admitted in his pleadings that Damascos work starts at 8:30 in the morning
and ends up at 6:30 in the evening daily, except holidays and Sundays. However, Sia claims that
Damascos basic salary of P140.00 a day is more than enough to cover the "one hour excess work"
which is the compensation they allegedly agreed upon.29

Judicial admissions made by parties in the pleadings, or in the course of the trial or other
proceedings in the same case are conclusive, no further evidence being required to prove the same,
and cannot be contradicted unless previously shown to have been made through palpable mistake
or that no such admission was made.30 In view of Sias formal admission that Ms. Damasco worked
beyond eight hours daily, the latter is entitled to overtime compensation. No further proof is required.
Sia already admitted she worked an extra hour daily. Thus, public respondent gravely erred in
deleting the award of overtime pay to Ms. Damasco on the pretext that the claim has no factual
basis.

Still, even assuming that Damasco received a wage which is higher than the minimum provided by
law, it does not follow that any additional compensation due her can be offset by her pay in excess
of the minimum, in the absence of an express agreement to that effect. Moreover, such
arrangement, if there be any, must appear in the manner required by law on how overtime
compensation must be determined. For it is necessary to have a clear and definite delineation
between an employees regular and overtime compensation to thwart violation of the labor standards
provision of the Labor Code.31

With regard to the award of attorneys fees the ten percent (10%) attorneys fees is provided for in
Article 111 of the Labor Code. Considering the circumstances of this case, said award is in order.

WHEREFORE, in G.R. No. 115755, the petition is GRANTED. The judgment of the Labor Arbiter in
favor of petitioner Imelda B. Damasco dated September 2, 1993 is REINSTATED in full. In G.R. No.
116101, the petition of Bonifacio K. Sia and Manila Glass Supply is DISSMISSED for lack of merit.
Costs against petitioners Bonifacio K. Sia and Manila Glass Supply.

SO ORDERED.
 16. PNB v PNCEA, 115 SCRA 527

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-30279 July 30, 1982

PHILIPPINE NATIONAL BANK, petitioner,

vs.
PHILIPPINE NATIONAL BANK EMPLOYEES ASSOCIATION (PEMA) and COURT OF
INDUSTRIAL RELATIONS, respondents.

Conrado E. Medina, Edgardo M. Magtalas and Nestor Kalaw for petitioner.

Leon O. Ty, Gesmundo Fernandez & Zulueta, Oliver B. Gesmundo and Israel Bocobo for
respondents.

BARREDO, J.:

Appeal by the Philippine National Bank from the decision of the trial court of the Court of Industrial
Relations in Case No. IPA-53 dated August 5, 1967 and affirmed en banc by said court on January
15, 1968.

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

xxx xxx xxx

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

xxx xxx xxx

f. That in return for this concession, an injunction against future

strikes or lockouts shall be issued by the Court to last for a period of
six months but which shall terminate even before that period should
all disputes of the parties be already resolved; (Page 84, Record.)
According to the very decision now on appeal, "on May 22, 1965, petitioner (private respondent
herein) filed another pleading submitting to this Court for determination certain matters which it
claims cannot be resolved by the parties, which are as follows:

First Cause of Action

a. In a Resolution No. 1162 dated September 16, 1957, the Respondent's Board of
Directors approved a revision of the computation of overtime pay retroactive as of
July 1, 1954, and authorized a recomputation of the regular one- hour and extra
overtime already rendered by all officers and employees of the Respondent Bank.

The details of the benefits involved in said Resolution are contained in a

Memorandum of the Respondent Bank dated September 18, 1957.

b. Since the grant of the benefits in question, the employees of the Respondent,
represented by the petitioner, have always considered them to be a part of their
salaries and/or fringe benefits; nevertheless, the Respondent, in 1963, without just
cause, withdrew said benefits and in spite of repeated demands refused, and still
refuses to reinstate the same up to the present.

Second Cause of Action

c. After the promulgation of the Decision in National Waterworks and Sewerage

Authority vs. NAWASA Consolidated Unions, et al. G.R. No. L-18938, Aug. 31, 1964,
the Petitioner has repeatedly requested Respondent that the cost of living allowance
and longevity pay be taken into account in the computation of overtime pay, effective
as of the grant of said benefits on January 1, 1958, in accordance with the ruling in
said Decision of the Supreme Court.

d. Until now Respondent has not taken any concrete steps toward the payment of the
differential overtime and nighttime pays arising from the cost of living allowance and
longevity pay.

xxx xxx xxx

Respondent in its answer of June 7, 1965 took exception to this mentioned petition on several
grounds, namely, (1) the said alleged causes of action were not disputes existing between the
parties, (2) the same are mere money claims and therefore not within this Court's jurisdiction, and (3)
that the parties have not so stipulated under the collective bargaining agreement between them, or
the same is premature as the pertinent collective bargaining agreement has not yet expired." (Pp.
84-86, Record.) 1

Resolving the issues of jurisdiction and prematurity thus raised by PNB, the court held:

As to the first ground, it is well to note that this Court in its Order of January 28, 1965
has enjoined the parties not to strike or lockout for a period of six (6) months starting
from said date. In a very definite sense the labor disputes between the parties have
been given a specific period for the settlement of their differences. The fact that
thereafter the question of the manner of payment of overtime pay is being put in
issue, appears to indicate that this was a part of the labor dispute. If we are to
consider that this question, particularly the second cause of action, has in fact
existed as early as 1958, shows the necessity of resolving the same now. And the
same would indeed be an existing issue considering that the present certification
came only in 1965.

It is further to be noted that the presidential certification has not limited specific areas
of the labor dispute embraced within the said certification. It speaks of the existence
of a labor dispute between the parties and of a strike declared by the PEMA, for
which the Court has been requested to take immediate steps in the exercise of its
powers under the law.

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

xxx xxx xxx

4. Petitioner's claim that the issue of overtime compensation not having been raised
in the original case but merely dragged into it by intervenors, respondent Court
cannot take cognizance thereof under Section 1, Rule 13 of the Rules of Court.

xxx xxx xxx

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

xxx xxx xxx

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

With respect to ground three of the answer on which objection is based, on C.A. 444,
as amended, Section 6 thereof, provides as follows:

'Any agreement or contract between the employer and the laborer or

employee contrary to the provisions of this Act shall be null and void
ab initio'.
 The instant action is partially subject to the provisions of Commonwealth Act 444, as
amended. Even if, the parties have stipulated to the extent that overtime will not be
paid, the same will not be binding. More so under the present circumstances, where
the only question is the correctness of the computation of the overtime payments.

While the Court notes that the first cause of action has become moot and academic
in view of the compliance by respondent, hence there is no further need to resolve
the same (t.s.n., pp. 5-7, August 16, 1965), the settlement of said first cause of action
further strengthens the view that the second cause of action is indeed an existing
dispute between the parties. Both causes of fiction involve overtime questions. Both
stem from dates well beyond and before the presidential certification of the present
proceedings. If respondent has been fit to take steps to expedite and resolve, without
court intervention, the first cause of action, it cannot deny the existence of the
second cause of action as the first and second appear to be interrelated matters.
(Pp. 86-89, Record)

And We agree that the foregoing holding is well taken. It would be more worthwhile to proceed to the
basic issues immediately than to add anything more of Our own discourse to the sufficiently based
disposition of the court a quo of the above- mentioned preliminary questions.

After discussing the pros and cons on the issue involved in the second cause of action as to whether
or not the cost-of-living allowance otherwise denominated as equity pay and longevity pay granted
by the bank, the first beginning January 1, 1958 and the latter effective July 1, 1961, should be
included in the computation of overtime-pay, the court granted the demands of PE MA, except the
additional rate of work for night pay, and rendered the following judgment:

WHEREFORE, in view of the foregoing, this Court hereby promulgates the following:

1. The respondent Philippine National Bank is hereby required to pay overtime and
nighttime rates to its employees from January 28, 1962; and such overtime
compensation shall be based on the sum total of the employee's basic salary or
wage plus cost of living allowance and longevity pay under the following schedule:

'a. Overtime services rendered shall be paid at the rate of time and
one-third, but overtime work performed between 6:00 P.M. and 6- .00
A.M. shall be paid at the rate of 150% or 50% beyond the regular
rate;

'b. The rate for work performed in the night shift, or during the period
from 6:00 P.M. to 6:00 A.M. shall be compensated at the rate of
150% or 50% beyond the regular rate, provided the work performed
involved a definite night shift and not merely a continuation by way of
overtime of the regular and established hours of the respondent
Bank.

2. The Chief of the Examining Division of the Court or any of his duly designated
representatives is hereby ordered to compute the overtime rates due each employee
of the respondent Bank from January 28, 1962, in accordance with the above
determination; and to complete the same within a period of sixty (60) days from
receipt of this Order. However, considering that the Philippine National Bank is a
government depository, and renders and performs functions distinct and unique; and,
while it may be a banking institution, its relationship with other government agencies
 and the public is such that it has no basis for comparison with other banking
institutions organized under the corporation law or special charter. To require it to
pay immediately the liability after the exact amount shall have been determined by
the Court Examiner and duly approved by the Court, as in other cases, would work
undue hardship to the whole government machinery, not to mention the outstanding
foreign liabilities and outside commitments, if any. Moreover, the records show that
this case was initiated long before the taking over of the incumbent bank officials.

Accordingly, the Court feels that the payment shall be subject to the negotiations by
the parties as to time, amount, and duration.

The Court may intervene in said negotiations for the purpose of settling once and for
all this case to maintain industrial peace pursuant to Section 13 of Commonwealth
Act 103, as amended, if desired, however by the parties.

After all this is not an unfair labor practice case.

SO ORDERED. (Pp. 98-100, Record.)

In connection with the above decision, two interesting points appear at once to be of determinative
relevance:

The first is that in upholding its jurisdiction to take cognizance of the demand in question about cost-
of-living allowance and longevity pay, the Industrial Court carefully noted that it was not resolving a
petition for declaratory relief in the light of the decision of this Court in NAWASA vs. NAWASA
Consolidated Unions, G.R. No. L- 18938, August 31, 1964, 11 SCRA 766. Thus the decision under
review states:

Incidentally, the present action is not one for declaratory relief as to the applicability
of a judicial decision to the herein parties. A careful perusal of the pleadings indicates
that what is being sought is the payment of differential overtime and nighttime pay
based on existing law and jurisprudence. The cause of action is not anchored on any
decision of any court but on provisions of the law which have been in effect at the
time of the occurrence of the cause of the action in relation to a labor dispute. Hence,
this is not a petition for declaratory relief. (Pp. 94-95, Record.)

The second refers to a subsequent decision of the same Industrial Court in Shell Oil Workers Union
vs. Shell Co., et al., Case No. 2410-V and Shell & Affiliates Supervisors Union vs. Shell Company of
the Philippines, et al., Case No. 2411- V, in which the court made an explanatory discourse of its
understanding of the NAWASA ruling, supra, and on that basis rejected the claim of the workers. In
brief, it held that (1) NAWASA does not apply where the collective bargaining agreement does not
provide for the method of computation of overtime pay herein insisted upon by private respondent
PEMA and (2) the fact-situation in the Shell cases differed from that of NAWASA, since the sole and
definite ratio decidendi in NAWASA was merely that inasmuch as Republic Act 1880 merely fixed a
40-hour 5-day work for all workers, laborers and employees including government-owned
corporations like NAWASA, the weekly pay of NAWASA workers working more than five days a
week should remain intact; with overtime pay in excess of eight hours work and 25 % additional
compensation on Sundays. There was no pronouncement at all therein regarding the basis of the
computation of overtime pay in regard to bonuses and other fringe benefits.

For being commendably lucid and comprehensive, We deem it justified to quote from that Shell
decision:
The main issue:

The Unions appear to have read the NAWASA case very broadly. They would want it
held that in view of the said ruling of the Supreme Court, employers and employees
must, even in the face of existing bargaining contracts providing otherwise,
determine the daily and hourly rates of employees in this manner: Add to basic pay
all the money value of all fringe benefits agreed upon or already received by the
workers individually and overtime pay shall be computed thus

Basic yearly Rate plus Value of all Fringe Benefits divided by number of days worked
during the year equals daily wage; Daily wage divided by 8 equals hourly rate. Hourly
rate plus premium rate equals hourly overtime rate.

The NAWASA case must be viewed to determine whether it is that broad. NAWASA
case must be understood in its setting. The words used by the Supreme Court in its
reasoning should not be disengaged from the fact-situation with which it was
confronted and the specific question which it was there required to decide. Above all
care should be taken not to lose sight of the truth that the facts obtaining, the issue
settled, and the law applied in the said case, and these, though extractable from the
records thereof as material in the resolution herein, were, as they are, primarily
declarative of the rights and liabilities of the parties involved therein.

Recourse to the records of the NAWASA case shows that the fact- situation, as far
as can be materially connected with the instant case, is as follows:

In view of the enactment of Rep. Act 1880, providing that the legal
hours of work for government employees, (including those in
government-owned or controlled corporations) shall be eight (8)
hours a day for five (5) days a week or forty (40) hours a week, its
implementation by NAWASA was disputed by the Union. The workers
affected were those who, for a period of three (3) months prior to or
immediately preceding the implementation of Rep. Act 1880, were
working seven (7) days a week and were continuously receiving 25%
Sunday differential pay. The manner of computing or determining the
daily rate of monthly salaried employees.

And the Supreme Court, specifically laid out the issue to be decided, as it did decide,
in the NAWASA, as follows:

7. and 8. How is a daily wage of a weekly employee computed in the light of Republic
Act 1880?'(G.R. L-18938)

Resolving the above issue, it was held;

According to petitioner, the daily wage should be computed

exclusively on the basic wage without including the automatic
increase of 25% corresponding to the Sunday differential. To include
said Sunday differential would be to increase the basic pay which is
not contemplated by said Act. Respondent court disagrees with this
manner of computation. lt holds that Republic Act 1880 requires that
the basic weekly wage and the basic monthly salary should not be
diminished notwithstanding the reduction in the number of working
 days a week. If the automatic increase corresponding to the salary
differential should not be included there would be a diminution of the
weekly wage of the laborer concerned. Of course, this should only
benefit those who have been working seven days a week and had
been regularly receiving 25% additional compensation for Sunday
work before the effectivity of the Act.

It is thus necessary to analyze the Court's rationale in the said NAWASA case, 'in the
light of Rep. Act 1880', and the 'specific corollaries' discussed preparatory to arriving
at a final conclusion on the main issue. What was required to be done, by way of
implementing R. A. 1880? The statute directs that working hours and days of
government employees (including those of government owned and controlled
proprietary corporations) shall be reduced to five days-forty hours a week. But, the
same law carried the specific proviso, designed to guard against diminution of
salaries or earnings of affected employees. The Supreme Court itself clearly spelled
this out in the following language: 'It is evident that Republic Act 1880 does not
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. ...

If the object of the law was to keep intact, (not either to increase it or decrease it) it is
but natural that the Court should concern itself, as it did, with the corollary, what is
the weekly wage of worker who, prior to R.A. 1880, had been working seven (7) days
a week and regularly receiving differential payments for work on Sundays or at night?
It seems clear that the Court was only concerned in implementing correctly R.A.
1880 by ensuring that in diminishing the working days and hours of workers in one
week, no diminution should result in the worker's weekly or daily wage. And, the
conclusion reached by the Supreme Court was to affirm or recognize the correctness
of the action taken by the industrial court including such differential pay in computing
the weekly wages of these employees and laborers who worked seven days a week
and were continuously receiving 25% Sunday differential for a period of three months
immediately preceding the implementation of R.A. 1880.' Nothing was said about
adding the money value of some other bonuses or allowances or money value of
other fringe benefits, received outside the week or at some other periods. That was
not within the scope of the issue before the Court. in fact, the limited application of
the decision is expressed in the decision itself. The resolution of this particular issue
was for the benefit of only a segment of the NAWASA employees. Said the Court 'Of
course, this should only benefit those who have been working seven days a week
and had been regularly receiving 25% additional compensation for Sunday work
before the effectivity of the Act.'

Unions make capital of the following pronouncement of the Supreme Court in the
NAWASA case:

It has been held that for purposes of computing overtime

compensation a regular wage includes all payments which the parties
have agreed shall be received during the work week, including piece-
work wages, differential payments for working at undesirable times,
such as at night or on Sundays and holidays, and the cost of board
and lodging customarily furnished the employee (Walling v.
Yangerman-Reynolds Hardwook Co., 325 U.S. 419; Walling v.
Harischfeger Corp. 325 U.S. 427). The 'Regular rate of pay also
 ordinarily includes incentive bonus or profit- sharing payments made
in addition to the normal basic pay (56 C.J.S., pp. 704-705), and it
was also held that the higher rate for night, Sunday and holiday work
is just as much as regular rate as the lower rate for daytime work.
The higher rate is merely an inducement to accept employment at
times which are not at desirable form a workman's standpoint
(International L. Ass'n. Wise 50 F. Supp. 26, affirmed C.C.A.
Carbunao v. National Terminals Corp. 139 F. 853).

But this paragraph in the decision appears to have been used and cited by the Court
to sustain the action of the court a quo: that it was correct to include the 25% Sunday
premium for the purpose of setting the weekly wage of specified workers whose
weekly earnings before the passage of R.A. 1880 would be diminished, if said
premium pay regularly received for three months were not included. It is significant
that the citations therein used by the Supreme Court are excerpts from American
decisions whose legislation on overtime is at variance with the law in this jurisdiction
in this respect: the U.S. legislation considers work in excess of forty hours a week as
overtime; whereas, what is generally considered overtime in the Philippines is work
in excess 'of the regular 8-hours a day. It is understandably material to refer to
precedents in the U.S. for purposes of computing weekly wages under a 40- hour a
week rule, since the particular issue involved in NAWASA is the conversion of prior
weekly regular earnings into daily rates without allowing diminution or addition.

No rule of universal application to other cases may, therefore, be justifiably extracted

from the NAWASA case. Let it be enough that in arriving at just solution and correct
application of R.A. 1880, an inference was drawn from other decisions that a regular
wage includes payments 'agreed by the parties to be received during the week.' But
to use this analogy in another fact- situation would unmitigatingly stretch its value as
basis for legal reasoning, for analogies are not perfect and can bring a collapse if
stretched far beyond their logical and reasoned efficacy. Neither would it be far to
ascribe to the Supreme Court's citation of foreign jurisprudence, which was used for
purposes of analogy, the force of statute law, for this would be the consequence if it
were allowed to be used as authority for all fact-situations, even if different from the
NAWASA case. This, because courts do not legislate. All they do is apply the law.

The above discussions impel the objective analyst to reject the proposition that the
NAWASA decision is an embracing and can be used with the authority of a statute's
effects on existing contracts.

It appears that the answer to dispute lies, not in the text of the NAWASA case but in
the terms and conditions and practice in the implementation of, the agreement, an
area which makes resolution of the issue dependent on the relation of the terms and
conditions of the contract to the phraseology and purpose of the Eight-Hour Labor
Law (Act 444).

The more we read the NAWASA case, the more we are convinced that the overtime
computation set therein cannot apply to the cases at bar. For to do so would lead to
unjust results, inequities between and among the employees themselves and absurd
situations. To apply the NAWASA computation would require a different formula for
each and every employee, would require reference to and continued use of individual
earnings in the past, thus multiplying the administrative difficulties of the Company. It
would be cumbersome and tedious a process to compute overtime pay and this may
 again cause delays in payments, which in turn could lead to serious disputes. To
apply this mode of computation would retard and stifle the growth of unions
themselves as Companies would be irresistibly drawn into denying, new and
additional fringe benefits, if not those already existing, for fear of bloating their
overhead expenses through overtime which, by reason of being unfixed, becomes
instead a veritable source of irritant in labor relations.

One other reason why application of the NAWASA case should be rejected is that
this Court is not prepared to accept that it can lay down a less cumbersome formula
for a company-wide overtime pay other than that which is already provided in the
collective bargaining agreement. Courts cannot make contracts for the parties
themselves.

Commonwealth Act 444 prescribes that overtime work shall be paid 'at the same rate
as their regular wages or salary, plus at least twenty-five per centum additional'
(Secs. 4 & 5). The law did not define what is a 'regular wage or salary'. What the law
emphasized by way of repeated expression is that in addition to 'regular wage', there
must be paid an additional 25% of that 'regular wage' to constitute overtime rate of
pay. The parties were thus allowed to agree on what shag be mutually considered
regular pay from or upon which a 25% premium shall be based and added to make
up overtime compensation. This the parties did by agreeing and accepting for a very
long period to a basic hourly rate to which a premium shall be added for purposes of
overtime.

Also significant is the fact that Commonwealth Act 444 merely sets a minimum, a
least premium rate for purposes of overtime. In this case, the parties agreed to
premium rates four (4) or even six (6) times than that fixed by the Act. Far from being
against the law, therefore, the agreement provided for rates 'commensurate with the
Company's reputation of being among the leading employers in the Philippines' (Art.
1, Sec. 2, Coll. Barg. Agreement) at the same time that the Company is maintained
in a competitive position in the market Coll. Barg. Agreement, lbid).

Since the agreed rates are way above prevailing statutory wages and premiums,
fixed by themselves bona fide through negotiations favored by law, there appears no
compelling reason nor basis for declaring the same illegal. A basic principle forming
an important foundation of R.A. 875 is the encouragement given to parties to resort
to peaceful settlement of industrial problems through collective bargaining. It
behooves this Court, therefore, to help develop respect for those agreements which
do not exhibit features of illegality This is the only way to build confidence in the
democratic process of collective bargaining. Parties cannot be permitted to avoid the
implications and ramifications of the agreement.

Although this Court has gone very far in resolving an doubts and in giving great
weight to evidence and presumptions in favor of labor, it may not go as far as
reconstruct the law to fit particular cases." (Pp. 174-181, Record)

Proof of the correctness of the aforequoted considerations, the appeal of the workers from the
Industrial Court's decision did not prosper. Affirming the appealed decision, We held:

The theory, therefore, of the petitioners is to the effect that, notwithstanding the terms
and conditions of their existing collective bargaining agreement with respondent Shell
Company, particularly Exhibit 'A-l' for the Petitioners and Exhibit 'l-A' for the
Respondent (which is Appendix 'B' of the Collective Bargaining Agreement of the
parties), considering the ruling in the NAWASA case, a recomputation should be
made of their basic wage by adding the money value of the fringe benefits enjoyed
by them from whence the premium rates agreed upon shall be computed in order to
arrive at the correct computation of their overtime compensation from the Company.
On the other hand, respondent Shell Company maintains that the NAWASA case
should not be utilized as the basis for the alteration of their mode of computing
overtime rate of pay as set forth in their collective Bargaining Agreement. It insists
that their collective bargaining agreement should be the law between them.

After a careful and thorough re-examination of the NAWASA case, supra, and a
minute examination of the facts and the evidence of the case now before Us, We rule
that the NAWASA case is not in point and, therefore, is inapplicable to the case at
bar.

The ruling of this Court in the NAWASA case contemplates the regularity and
continuity of the benefits enjoyed by the employees or workers (for at least three (3)
months) as the condition precedent before such additional payments or benefits are
taken into account. This is evident in the aforequoted ruling of this Court in the
NAWASA case as well as in the hereinbelow cited authorities, to wit:

The 'regular rate' of pay on the basis of which overtime must be

computed must reflect an payments which parties have agreed shall
be received regularly during the work week, exclusive of overtime
payments.' Walling v. Garlock Packing Co. C.C.A.N.Y., 159 F. 2d 44,
45. (Page 289, WORDS And PHRASES, Permanent Edition, Vol.
36A; Italics supplied); and

As a general rule the words 'regular rate' mean the hourly rate
actually paid for the normal, non-overtime work week, and an
employee's regular compensation is the compensation which
regularly and actually reaches him, ... .' (56 C.J.S. 704; Emphasis
supplied).

Even in the definition of wage under the Minimum Wage Law, the words 'customarily
furnished' are used in referring to the additional payments or benefits, thus, -

'Wage' paid to any employee shag mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, commission basis, or other method of calculating
the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done or for services
rendered or to be rendered, and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging or other facilities customarily
furnished by the employer to the employee.' (Sec. 2 (g), R.A. No. 602).

Having been stipulated by the parties that ... the Tin Factory Incentive Pay has
ceased in view of the closure of the factory in May 1966 the fringe benefits as
described show that they are occasionally not regularly enjoyed and that not all
employees are entitled to them', herein petitioners failed to meet the test laid down
by this Court in the NAWASA case. Further, the collective bargaining agreement
resorted to by the parties being in accordance with R.A. 875, with its provision on
 overtime pay far way beyond the premium rate provided for in Sections 4 and 5 of
Commonwealth Act 444, the same should govern their relationship. Since this is their
contract entered into by them pursuant to bargaining negotiations under existing
laws, they are bound to respect it. It is the duty of this Court to see to it that contracts
between parties, not tainted with infirmity or irregularity or illegality, be strictly
complied with by the parties themselves. This is the only way by which unity and
order can be properly attained in our society.

It should be noted in passing that Commonwealth Act 444 prescribes only a

minimum of at least 25% in addition to the regular wage or salary of an employee to
constitute his overtime rate of pay, whereas, under Appendix 'B', (Exhs. 'A-l',
Petitioners and 'l-A', Respondent) of the Collective Bargaining Agreement of the
parties, the premium rate of overtime pay is as high as l50% on regular working days
up to 250 % on Sundays and recognized national holidays. (Shell Oil Workers Union
vs. Shell Company of the Philippines, G.R. No. L-30658-59, March 31, 1976, 70
SCRA 242-243.)

In the instant case, on May 22, 1965 PEMA alleged in the court below the following cause of action
as amended on June 7, 1965:

Since the start of the giving of cost of living allowance and longevity pay and
reiterated, after the promulgation of the Decision in National Waterworks and
Sewerage Authority vs. NAWASA Consolidated Unions et al., G.R. No. L-18938,
August 31, 1964, the petitioner has repeatedly requested respondent that the cost of
living allowance and longevity pay be taken into account in the computation of
overtime pay, effective as of the grant of said benefits on January 1, 1958, in
accordance with the ruling in said Decision of the Supreme Court. (Page 14, PNB's
Brief.)

To be sure, there could be some plausibility in PNB's pose regarding the jurisdiction of the Industrial
Court over the above cause of action. But, as We have already stated, We agree with the broader
view adopted by the court a quo on said point, and We find that it is in the best interests of an
concerned that this almost 25-year dispute be settled once and for all without the need of going
through other forums only for the matter to ultimately come back to this Court probably years later,
taking particular note as We do, in this regard, of the cases cited on pages 9-10 of PEMA's original
memo, as follows:

Realizing its error before in not considering the present case a certified labor dispute,
the Bank now concedes that the case at bar 'belongs to compulsory arbitration'.
Hence, the lawful powers of the CIR over the same. However, the Bank says
'overtime differential is but a money claim, (and) respondent court does not have
jurisdiction to take cognizance of the same'.

But this is not a pure money claim (pp. 10-11, Opposition) because other factors are
involved - certification by the President, the matter may likely cause a strike, the
dispute concerns national interest and comes within the CIR's injunction against
striking, and the employer-employee relationship between the Bank and the
employees has not been severed. Besides, 'money claim' is embraced within the
term 'compensation' and therefore falls squarely under the jurisdiction of the CIR in
the exercise of its arbitration power (Sec. 4, CA 103; Please see also Republic vs.
CIR, L- 21303, Sept. 23/68; Makalintal J., NWSA Case, L-26894-96, Feb. 28/69;
Fernando, J.).
 What confers jurisdiction on the Industrial Court, says Justice J.B.L. Reyes, is not the
form or manner of certification by the President, but the referral to said court of the
industrial dispute between the employer and the employees. (Liberation Steamship
vs. CIR, etc., L-25389 & 25390, June 27/68).

In Phil. Postal Savings Bank, et al. vs. CIR, et al., L-24572, Dec. 20/67, this
Honorable Court, speaking through Chief Justice Concepcion, held that the
certification of the issue 'as a dispute affecting an industry indispensable to the
national interest' leaves 'no room for doubt on the jurisdiction of the CIR to settle
such dispute.'

Relatedly, however, it is to be noted that it is clear from the holding of the Industrial Court's decision
We have earlier quoted, "the cause of action (here) is not on any decision of any court but on the
provisions of the law which have been in effect at the time of the occurrence of the cause of action in
relation to a labor dispute". Viewed from such perspective laid by the lower court itself, it can hardly
be said that it indeed exercised purely its power of arbitration, which means laying down the terms
and conditions that should govern the relationship between the employer and employees of an
enterprise following its own appreciation of the relevant circumstances rather empirically. More
accurately understood, the court in fact indulged in an interpretation of the applicable law, namely,
CA 444, in the light of its own impression of the opinion of this Court in NAWASA and based its
decision thereon.

Accordingly, upon the fact-situation of this case hereunder to be set forth, the fundamental question
for Us to decide is whether or not the decision under appeal is in accordance with that law and the
cited jurisprudence. In brief, as PEMA posits, is NAWASA four-square with this case? And even
assuming, for a while, that in a sense what is before Us is an arbitration decision, private respondent
itself admits in its above-mentioned memorandum that this Court is not without power and authority
to determine whether or not such arbitration decision is against the law or jurisprudence or
constitutes a grave abuse of discretion. Thus, in PEMA's memorandum, it makes the observation
that "(F)urthermore, in the Shell cases, the unions are using the NAWASA decision as a source of
right for recomputation, while in the PNB, the Union merely cites the NAWASA doctrine, not as a
source of right, but as a legal authority or reference by both parties so the Union demand may be
granted. " (Motion to Dismiss, p. 3.)

Obviously, therefore, the polestar to which Our mental vision must be focused in order that We may
arrive at a correct legal and equitable determination of this controversy and, in the process make
NAWASA better understood as We believe it should be, is none other than Sections 3 and 4 of Com.
Act No. 444, the Eight Hour Labor Law, which pertinently provide thus:

SEC. 3. Work may be performed beyond eight hours a day in case of actual or
impending emergencies caused by serious accidents, fire, flood, typhoon,
earthquake, epidemic, or other disaster or calamity in order to prevent loss to life and
property or imminent danger to public safety; or in case of urgent work to be
performed on the machines, equipment, or installations in order to avoid a serious
loss which the employer would otherwise suffer, or some other just cause of a similar
nature; but in all such cases the laborers and employees shall be entitled to receive
compensation for the overtime work performed at the same rate as their regular
wages or salary, plus at least twenty-five per centum additional.

In case of national emergency the Government is empowered to establish rules and

regulations for the operation of the plants and factories and to determine the wages
to be paid the laborers.
 xxx xxx xxx

SEC. 4. No person, firm, or corporation, business establishment or place or center of

labor shall compel an employee or laborer to work during Sundays and legal
holidays, unless he is paid an additional sum of at least twenty-five per centum of his
regular remuneration: Provided, however, that this prohibition shall not apply to
public utilities performing some public service such as supplying gas, electricity,
power, water, or providing means of transportation or communication.

The vital question is, what does "regular wage or salary" mean or connote in the light of the demand
of PEMA?

In Our considered opinion, the answer to such question lies in the basic rationale of overtime pay.
Why is a laborer or employee who works beyond the regular hours of work entitled to extra
compensation called in this enlightened time, overtime pay? Verily, there can be no other reason
than that he is made to work longer than what is commensurate with his agreed compensation for
the statutorily fixed or voluntarily agreed hours of labor he is supposed to do. When he thus spends
additional time to his work, the effect upon him is multi-faceted: he puts in more effort, physical
and/or mental; he is delayed in going home to his family to enjoy the comforts thereof; he might have
no time for relaxation, amusement or sports; he might miss important pre-arranged engagements;
etc., etc. It is thus the additional work, labor or service employed and the adverse effects just
mentioned of his longer stay in his place of work that justify and is the real reason for the extra
compensation that he called overtime pay.

Overtime work is actually the lengthening of hours developed to the interests of the employer and
the requirements of his enterprise. It follows that the wage or salary to be received must likewise be
increased, and more than that, a special additional amount must be added to serve either as
encouragement or inducement or to make up fop the things he loses which We have already
referred to. And on this score, it must always be borne in mind that wage is indisputably intended as
payment for work done or services rendered. Thus, in the definition of wage for purposes of the
Minimum Wage Law, Republic Act No. 602, it is stated:

'Wage' paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time task, piece, commission basis or other method of calculating
the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done or for services
rendered or to be rendered and includes the fair and reasonable value as determined
by the Secretary of Labor, of board, lodging or other facilities customarily furnished
by the employer to the employee. 'Fair and reasonable value' shall not include a
profit to the employer which reduces the wage received by the employee below the
minimum wage applicable to the employee under this Act, nor shall any transaction
between an employer or any person affiliated with the employer and the employee of
the employer include any profit to the employer or affiliated person which reduces the
employee's wage below the wage applicable to the employee under this
Act.' 2 (Emphasis supplied).

As can be seen, wage under said law, in whatever means or form it is given to the worker, is "for
work done or to be done or for services rendered or to be rendered" and logically "includes (only) the
fair and reasonable value as determined by the Secretary of Labor, of board, lodging or other
facilities customarily furnished by the employer to the employee".
Indeed, for the purpose of avoiding any misunderstanding or misinterpretation of the word "wage"
used in the law and to differentiate it from "supplement", the Wage Administration Service to
implement the Minimum Wage Law, defined the latter as:

extra remuneration or benefits received by wage earners from their employers and
include but are not restricted to pay for vacation and holidays not worked; paid sick
leave or maternity leave; overtime rate in excess of what is required by law; pension,
retirement, and death benefits; profit-sharing, family allowances; Christmas, war risk
and cost-of-living bonuses; or other bonuses other than those paid as a reward for
extra output or time spent on the job. (Emphasis ours).

In these times when humane and dignified treatment of labor is steadily becoming universally an
obsession of society, we, in our country, have reached a point in employer- employee relationship
wherein employers themselves realize the indispensability of at least making the compensation of
workers equal to the worth of their efforts as much as this case can be statistically determined. Thus,
in order to meet the effects of uncertain economic conditions affecting adversely the living conditions
of wage earners, employers, whenever the financial conditions of the enterprise permit, grant them
what has been called as cost-of-living allowance. In other words, instead of leaving the workers to
assume the risks of or drift by themselves amidst the cross -currents of country-wide economic
dislocation, employers try their best to help them tide over the hardships and difficulties of the
situation. Sometimes, such allowances are voluntarily agreed upon in collective bargaining
agreements. At other times, it is imposed by the government as in the instances of Presidential
Decrees Nos. 525, 928, 1123, 1389, 1614, 1678, 1751 and 1790; Letters of Instructions No. 1056
and Wage Order No. 1. Notably, Presidential Decree No. 1751 increased the statutory wage at all
levels by P400 in addition to integrating the mandatory emergency living allowances under
Presidential Decree No. 525 and Presidential Decree No. 1123 into the basic pay of all covered
workers.

Going over these laws, one readily notices two distinctive features: First, it is evidently gratifying that
the government, in keeping with the humanitarian trend of the times, always makes every effort to
keep wages abreast with increased cost of living conditions, doing it as soon as the necessity for it
arises. However, obviously, in order not to overdo things, except when otherwise provided, it spares
from such obligation employers who by mutual agreement with their workers are already paying
what the corresponding law provides (See Sec. 4 of P.D. No. 525; Section 2 of P.D. No. 851 until
P.D. 1684 abolished all exemptions under P.D. No. 525, P.D. No. 1123, P.D. No. 851 and P.D. No.
928 among distressed employers who even though given sufficient lapse of time to make the
necessary adjustment have not done so.)3

In the case at bar, as already related earlier, the cost-of-living allowance began to be granted in
1958 and the longevity pay in 1981. In other words, they were granted by PNB upon realizing the
difficult plight of its labor force in the face of the unusual inflationary situation in the economy of the
country, which, however acute, was nevertheless expected to improve. There was thus evident an
inherently contingent character in said allowances. They were not intended to be regular, much less
permanent additional part of the compensation of the employees and workers. To such effect were
the testimonies of the witnesses at the trial. For instance, Mr. Ladislao Yuzon declared:

ATTORNEY GESMUNDO

Questioning ....

Q. Calling your attention to paragraph No. 1, entitled monthly living

allowance, which has been marked as Exhibit 'A-l', will you kindly tell
 us the history of this benefit- monthly living allowance, why the same
has been granted?

A. Well, in view of the increasing standard of living, we decided to

demand from management in our set of demands ... included in our
set of demands in 1957-1958 a monthly living allowance in addition to
our basic salary. This benefit was agreed upon and granted to take
effect as of January 1, 1958. That was the first time it was enjoyed by
the employees of the Philippine National Bank. It started on a lesser
amount but year after year we have been demanding for increases on
this living allowance until we have attained the present amount of P 1
50.00 a month, starting with P40.00 when it was first granted. The
same is still being enjoyed by the employees on a much higher
amount. There were a few variations to that. (t. t.s.n., pp. 18-19,
Hearing of August 16, 1965)

which testimony was affirmed by Mr. Panfilo Domingo, on cross- examination by counsel for the
respondent, reading as follows:

ATTORNEY GESMUNDO:

Q. Do you recall Mr. Domingo, that in denying the cost of living

allowance and longevity pay for incorporation with the basic salary,
the reason given by the management was that as according to you, it
will mean an added cost and ' furthermore it will increase the
contribution of the Philippine National Bank to the GSIS, is that
correct?

A. This is one of the reasons, of the objections for the inclusion of the
living allowance and longevity pay to form part of the basic pay, I
mean among others, because the basic reason why management
would object is the cost of living allowance is temporary in nature, the
philosophy behind the grant of this benefit, Nonetheless, it was the
understanding if I recall right that in the event that cost of living
should go down then there should be a corresponding decrease in
the cost of living allowance being granted I have to mention this
because this is the fundamental philosophy in the grant of cost of
living allowance. (Pp. 19-20, Record.)

Much less were they dependent on extra or special work done or service rendered by the
corresponding recipient. Rather, they were based on the needs of their families as the conditions of
the economy warranted. Such is the inexorable import of the pertinent provisions of the collective
bargaining agreement:

MONTHLY LIVING ALLOWANCE

All employees of the Bank shall be granted a monthly living allowance of P140, plus
P10 for each minor dependent child below 21 years of age, but in no case shall the
total allowance exceed P200 or 25% of the monthly salary, whichever is higher,
subject to the following conditions:
 a) That this new basic allowance shall be applicable to all employees,
irrespective of their civil status;

b) That a widow or widower shall also enjoy the basic allowance of

P140 a month, plus the additional benefit of P10 for each minor
dependent child but not to exceed P200 or 25% of basic salary
whichever is higher.

c) That in case the husband and wife are both employees in the Bank
both shall enjoy this new basic monthly living allowance of P140 but
only one of spouses shall be entitled to claim the additional benefit of
P10 for each minor legitimate or acknowledged child. (Pp. 30-31,
PNB's memo.)

So also with the longevity pay; manifestly, this was not based on the daily or monthly amount of work
done or service rendered it was more of a gratuity for their loyalty, or their having been in the bank's
employment for consideration periods of time. Indeed, with particular reference to the longevity pay,
the then existing collective bargaining contract expressly provided: "... That this benefit shall not form
part of the basic salaries of the officers so affected."

PEMA may contend that the express exclusion of the longevity pay, means that the cost-of-living
allowance was not intended to be excluded. Considering, however, the contingent nature of the
allowances and their lack of relation to work done or service rendered, which in a sense may be
otherwise in respect to longevity pay PEMA's contention is untenable. The rule of exclusio
unius, exclusio alterius would not apply here, if only because in the very nature of the two benefits in
question, considerations and conclusions as to one of them could be non-sequitur as to the other.

Withal, there is the indisputable significant fact that after 1958, everytime a collective bargaining
agreement was being entered into, the union always demanded the integration of the cost-of-living
allowances and longevity pay, and as many times, upon opposition of the bank, no stipulation to
such effect has ever been included in any of said agreements. And the express exclusion of
longevity pay was continued to be maintained.

On this point, the respondent court held that under its broad jurisdiction, it was within the ambit of its
authority to provide for what the parties could not agree upon. We are not persuaded to view the
matter that way. We are not convinced that the government, thru the Industrial Court, then, could
impose upon the parties in an employer-employee conflict, terms and conditions which are
inconsistent with the existing law and jurisprudence, particularly where the remedy is sought by the
actors more on such legal basis and not purely on the court's arbitration powers.

As pointed out earlier in this opinion, Our task here is two-fold: First, reviewing the decision under
scrutiny as based on law and jurisprudence, the question is whether or not the rulings therein are
correct. And second, reading such judgment as an arbitration decision, did the court a quo gravely
abuse its discretion in holding, as it did, that cost-of-living allowance and longevity pay should be
included in the computation of overtime pay?

In regard to the first question, We have already pointed out to start with, that as far as longevity pay
is concerned, it is beyond question that the same cannot be included in the computation of overtime
pay for the very simple reason that the contrary is expressly stipulated in the collective bargaining
agreement and, as should be the case, it is settled that the terms and conditions of a collective
bargaining agreement constitute the law between the parties. (Mactan Workers Union vs. Aboitiz, 45
SCRA 577. See also Shell Oil Workers Union et al. vs. Shell Company of the Philippines, supra) The
contention of PEMA that the express provision in the collective bargaining agreement that "this
benefit (longevity pay) shall not form part of the basic salaries of the officers so affected" cannot
imply the same Idea insofar as the computation of the overtime pay is concerned defies the rules of
logic and mathematics. If the basic pay cannot be deemed increased, how could the overtime pay be
based on any increased amount at all?

However, the matter of the cost-of-living allowance has to be examined from another perspective,
namely, that while PEMA had been always demanding for its integration into the basic pay, it never
succeeded in getting the conformity of PNB thereto, and so, all collective bargaining agreements
entered -4 into periodically by the said parties did not provide therefor. And it would appear that
PEMA took the non-agreement of the bank in good grace, for the record does not show that any
remedial measure was ever taken by it in connection therewith. In other words, the parties seemed
to be mutually satisfied that the matter could be better left for settlement on the bargaining table
sooner or later, pursuant to the spirit of free bargaining underlying Republic Act 875, the Industrial
Peace Act then in force. Or, as observed by PEMA in its memorandum, (page 23), the parties
"agreed to let the question remain open-pending decision of authorities that would justify the demand
of the Union." Indeed, on pages 23-24 of said memorandum, the following position of PEMA is
stated thus:

Thus the following proceeding took place at the Court a quo:

ATTY. GESMUNDO:

That is our position, Your Honor, because apparently there was an understanding
reached between the parties as to their having to wait for authorities and considering
that the issue or one of the issues then involved in the NAWASA case pending in the
CIR supports the stand of the union, that the principle enunciated in connection with
that issue is applicable to this case.

xxx xxx xxx

Q. Do we understand from you, Mister Yuson, that it was because of

the management asking you for authorities in allowing the integration
of the cost of living allowance with your basic salary and your failure
to produce at the time such authorities that the union then did not
bring any case to the Court?

A. Well, in the first place, it is not really my Idea to be bringing

matters to the Court during my time but I would much prefer that we
agree on the issue. Well, insofar as you said that the management
was asking me, welt I would say that they were invoking (on)
authorities that we can show in order to become as a basis for
granting or for agreeing with us although we were aware of the
existence of a pending case which is very closely similar to our
demand, yet we decided to wait until this case should be decided by
the Court so that we can avail of the decision to present to
management as what they are asking for. (t.s.n., pp. 31-32, 35-36,
Aug. 28,1965.)

Now, to complete proper understanding of the character of the controversy before Us, and lest it be
felt by those concerned that We have overlooked a point precisely related to the matter touched in
the above immediately preceding paragraph, it should be relevant to quote a portion of the
"Stipulation of Facts" of the parties hereto:

1. This particular demand was among those submitted by Petitioner-Union in the

current collective bargaining negotiations to the Respondent Bank. However, since
this case was already filed in court on May 22, 1965, the parties agreed not to
include this particular demand in the discussion, leaving the matter to the discretion
and final judicial determination of the courts of justice." (Page 81, Rec.)

In fine, what the parties commonly desire is for this Court to construe CA 444 in the light of
NAWASA, considering the fact- situation of the instant case.

In this respect, it is Our considered opinion, after mature deliberation, that notwithstanding the
portions of the NAWASA's opinion relied upon by PEMA, there is nothing in CA 444 that could justify
its posture that cost-of-living allowance should be added to the regular wage in computing overtime
pay.

After all, what was said in NAWASA that could be controlling here? True, it is there stated that "for
purposes of computing overtime compensation, regular wage includes all payments which the
parties have agreed shall be received during the work week, including - differential payments for
working at undesirable times, such as at night and the board and lodging customarily furnished the
employee. ... The 'regular rate' of pay also ordinarily includes incentive bonus or profit-sharing
payments made in addition to the normal basic pay (56 C.J.S., pp. 704-705), and it was also held
that the higher rate for night, Sunday and holiday work is just as much a regular rate as the lower
rate for daytime work. The higher rate is merely an inducement to accept employment at times which
are not as desirable from a workmen's standpoint (International L. Ass'n vs. National Terminals
Corp. C.C. Wise, 50 F. Supp. 26, affirmed C.C.A. Carbunoa v. National Terminals Corp. 139 F. 2d
853)." (11 SCRA, p. 783)

But nowhere did NAWASA refer to extra, temporary and contingent compensation unrelated to work
done or service rendered, which as explained earlier is the very nature of cost-of- living allowance.
Withal, in strict sense, what We have just quoted from NAWASA was obiter dictum, since the only
issue before the Court there was whether or not "in computing the daily wage, (whether) the addition
compensation for Sunday should be included. " (See No. 7 of Record)

In any event, as stressed by Us in the Shell cases, the basis of computation of overtime pay beyond
that required by CA 444 must be the collective bargaining agreement, 4 for, to reiterate Our postulation
therein and in Bisig ng Manggagawa, supra, it is not for the court to impose upon the parties anything
beyond what they have agreed upon which is not tainted with illegality. On the other hand, where the
parties fail to come to an agreement, on a matter not legally required, the court abuses its discretion when
it obliges any 6f them to do more than what is legally obliged.

Doctrinally, We hold that, in the absence of any specific provision on the matter in a collective
bargaining agreement, what are decisive in determining the basis for the computation of overtime
pay are two very germane considerations, namely, (1) whether or not the additional pay is for extra
work done or service rendered and (2) whether or not the same is intended to be permanent and
regular, not contingent nor temporary and given only to remedy a situation which can change any
time. We reiterate, overtime pay is for extra effort beyond that contemplated in the employment
contract, hence when additional pay is given for any other purpose, it is illogical to include the same
in the basis for the computation of overtime pay. This holding supersedes NAWASA.
Having arrived at the foregoing conclusions, We deem it unnecessary to discuss any of the other
issues raised by the parties.

WHEREFORE, judgment is hereby rendered reversing the decision appealed from, without costs.
 17. Insular Bank of Asia and America Employees Union (IBAAEU) v. Inciong, G.R. No. L-
52415, Oct. 23, 1984)

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-52415 October 23, 1984

INSULAR BANK OF ASIA AND AMERICA EMPLOYEES' UNION (IBAAEU), petitioner,

vs.
HON. AMADO G. INCIONG, Deputy Minister, Ministry of Labor and INSULAR BANK OF ASIA
AND AMERICA, respondents.

Sisenando R. Villaluz, Jr. for petitioner.

Abdulmaid Kiram Muin colloborating counsel for petitioner.

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

MAKASIAR, J.: +.wp h!1

This is a petition for certiorari to set aside the order dated November 10, 1979, of respondent Deputy
Minister of Labor, Amado G. Inciong, in NLRC case No. RB-IV-1561-76 entitled "Insular Bank of Asia
and America Employees' Union (complainant-appellee), vs. Insular Bank of Asia and America"
(respondent-appellant), the dispositive portion of which reads as follows: t.hqw

xxx xxx xxx

ALL THE FOREGOING CONSIDERED, let the appealed Resolution en banc of the
National Labor Relations Commission dated 20 June 1978 be, as it is hereby, set
aside and a new judgment. promulgated dismissing the instant case for lack of merit
(p. 109 rec.).

The antecedent facts culled from the records are as follows:

On June 20, 1975, petitioner filed a complaint against the respondent bank for the payment of
holiday pay before the then Department of Labor, National Labor Relations Commission, Regional
Office No. IV in Manila. Conciliation having failed, and upon the request of both parties, the case
was certified for arbitration on July 7, 1975 (p. 18, NLRC rec.

On August 25, 1975, Labor Arbiter Ricarte T. Soriano rendered a decision in the above-entitled
case, granting petitioner's complaint for payment of holiday pay. Pertinent portions of the decision
read: t.hqw
 xxx xxx xxx

The records disclosed that employees of respondent bank were not paid their wages
on unworked regular holidays as mandated by the Code, particularly Article 208, to
wit:t.hqw

Art. 208. Right to holiday pay.

(a) Every worker shall be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly
employing less than 10 workers.

(b) The term "holiday" as used in this chapter, shall include: New
Year's Day, Maundy Thursday, Good Friday, the ninth of April the first
of May, the twelfth of June, the fourth of July, the thirtieth of
November, the twenty-fifth and the thirtieth of December and the day
designated by law for holding a general election.

xxx xxx xxx

This conclusion is deduced from the fact that the daily rate of pay of the bank
employees was computed in the past with the unworked regular holidays as
excluded for purposes of determining the deductible amount for absences
incurred Thus, if the employer uses the factor 303 days as a divisor in determining
the daily rate of monthly paid employee, this gives rise to a presumption that the
monthly rate does not include payments for unworked regular holidays. The use of
the factor 303 indicates the number of ordinary working days in a year (which
normally has 365 calendar days), excluding the 52 Sundays and the 10 regular
holidays. The use of 251 as a factor (365 calendar days less 52 Saturdays, 52
Sundays, and 10 regular holidays) gives rise likewise to the same presumption that
the unworked Saturdays, Sundays and regular holidays are unpaid. This being the
case, it is not amiss to state with certainty that the instant claim for wages on regular
unworked holidays is found to be tenable and meritorious.

WHEREFORE, judgment is hereby rendered:

(a) xxx xxxx xxx

(b) Ordering respondent to pay wages to all its employees for all regular h(olidays
since November 1, 1974 (pp. 97-99, rec., underscoring supplied).

Respondent bank did not appeal from the said decision. Instead, it complied with the order of Arbiter
Ricarte T. Soriano by paying their holiday pay up to and including January, 1976.

On December 16, 1975, Presidential Decree No. 850 was promulgated amending, among others,
the provisions of the Labor Code on the right to holiday pay to read as follows: t.hqw

Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily
wages during regular holidays, except in retail and service establishments regularly
employing less than ten (10) workers;
 (b) The employer may require an employee to work on any holiday but such
employee shall be paid a compensation equivalent to twice his regular rate and

(c) As used in this Article, "holiday" includes New Year's Day, Maundy Thursday,
Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of July,
the thirtieth of November, the twenty-fifth and the thirtieth of December, and the day
designated by law for holding a general election.

Accordingly, on February 16, 1976, by authority of Article 5 of the same Code, the Department of
Labor (now Ministry of Labor) promulgated the rules and regulations for the implementation of
holidays with pay. The controversial section thereof reads: t.hqw

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.

For this purpose, the monthly minimum wage shall not be less than the statutory
minimum wage multiplied by 365 days divided by twelve" (italics supplied).

On April 23, 1976, Policy Instruction No. 9 was issued by the then Secretary of Labor (now Minister)
interpreting the above-quoted rule, pertinent portions of which read: t.hqw

xxx xxx xxx

The ten (10) paid legal holidays law, to start with, is intended to benefit principally
daily employees. In the case of monthly, only those whose monthly salary did not yet
include payment for the ten (10) paid legal holidays are entitled to the benefit.

Under the rules implementing P.D. 850, this policy has been fully clarified to
eliminate controversies on the entitlement of monthly paid employees, The new
determining rule is this: If the monthly paid employee is receiving not less than P240,
the maximum monthly minimum wage, and his monthly pay is uniform from January
to December, he is presumed to be already paid the ten (10) paid legal holidays.
However, if deductions are made from his monthly salary on account of holidays in
months where they occur, then he is still entitled to the ten (10) paid legal holidays.
..." (emphasis supplied).

Respondent bank, by reason of the ruling laid down by the aforecited rule implementing Article 94 of
the Labor Code and by Policy Instruction No. 9, stopped the payment of holiday pay to an its
employees.

On August 30, 1976, petitioner filed a motion for a writ of execution to enforce the arbiter's decision
of August 25, 1975, whereby the respondent bank was ordered to pay its employees their daily wage
for the unworked regular holidays.

On September 10, 1975, respondent bank filed an opposition to the motion for a writ of execution
alleging, among others, that: (a) its refusal to pay the corresponding unworked holiday pay in
accordance with the award of Labor Arbiter Ricarte T. Soriano dated August 25, 1975, is based on
and justified by Policy Instruction No. 9 which interpreted the rules implementing P. D. 850; and (b)
that the said award is already repealed by P.D. 850 which took effect on December 16, 1975, and by
said Policy Instruction No. 9 of the Department of Labor, considering that its monthly paid employees
are not receiving less than P240.00 and their monthly pay is uniform from January to December, and
that no deductions are made from the monthly salaries of its employees on account of holidays in
months where they occur (pp. 64-65, NLRC rec.).

On October 18, 1976, Labor Arbiter Ricarte T. Soriano, instead of issuing a writ of execution, issued
an order enjoining the respondent bank to continue paying its employees their regular holiday pay on
the following grounds: (a) that the judgment is already final and the findings which is found in the
body of the decision as well as the dispositive portion thereof is res judicata or is the law of the case
between the parties; and (b) that since the decision had been partially implemented by the
respondent bank, appeal from the said decision is no longer available (pp. 100-103, rec.).

On November 17, 1976, respondent bank appealed from the above-cited order of Labor Arbiter
Soriano to the National Labor Relations Commission, reiterating therein its contentions averred in its
opposition to the motion for writ of execution. Respondent bank further alleged for the first time that
the questioned order is not supported by evidence insofar as it finds that respondent bank
discontinued payment of holiday pay beginning January, 1976 (p. 84, NLRC rec.).

On June 20, 1978, the National Labor Relations Commission promulgated its resolution en
banc dismissing respondent bank's appeal, the dispositive portion of which reads as follows: t.hqw

In view of the foregoing, we hereby resolve to dismiss, as we hereby dismiss,

respondent's appeal; to set aside Labor Arbiter Ricarte T. Soriano's order of 18
October 1976 and, as prayed for by complainant, to order the issuance of the proper
writ of execution (p. 244, NLRC rec.).

Copies of the above resolution were served on the petitioner only on February 9, 1979 or almost
eight. (8) months after it was promulgated, while copies were served on the respondent bank on
February 13, 1979.

On February 21, 1979, respondent bank filed with the Office of the Minister of Labor a motion for
reconsideration/appeal with urgent prayer to stay execution, alleging therein the following: (a) that
there is prima facie evidence of grave abuse of discretion, amounting to lack of jurisdiction on the
part of the National Labor Relations Commission, in dismissing the respondent's appeal on pure
technicalities without passing upon the merits of the appeal and (b) that the resolution appealed from
is contrary to the law and jurisprudence (pp. 260-274, NLRC rec.).

On March 19, 1979, petitioner filed its opposition to the respondent bank's appeal and alleged the
following grounds: (a) that the office of the Minister of Labor has no jurisdiction to entertain the
instant appeal pursuant to the provisions of P. D. 1391; (b) that the labor arbiter's decision being
final, executory and unappealable, execution is a matter of right for the petitioner; and (c) that the
decision of the labor arbiter dated August 25, 1975 is supported by the law and the evidence in the
case (p. 364, NLRC rec.).

On July 30, 1979, petitioner filed a second motion for execution pending appeal, praying that a writ
of execution be issued by the National Labor Relations Commission pending appeal of the case with
the Office of the Minister of Labor. Respondent bank filed its opposition thereto on August 8, 1979.

On August 13, 1979, the National Labor Relations Commission issued an order which states: t.hqw

The Chief, Research and Information Division of this Commission is hereby directed
to designate a Socio-Economic Analyst to compute the holiday pay of the employees
 of the Insular Bank of Asia and America from April 1976 to the present, in
accordance with the Decision of the Labor Arbiter dated August 25, 1975" (p. 80,
rec.).

On November 10, 1979, the Office of the Minister of Labor, through Deputy Minister Amado G.
Inciong, issued an order, the dispositive portion of which states:
t.hqw

ALL THE FOREGOING CONSIDERED, let the appealed Resolution en banc of the
National Labor Relations Commission dated 20 June 1978 be, as it is hereby, set
aside and a new judgment promulgated dismissing the instant case for lack of merit
(p. 436, NLRC rec.).

Hence, this petition for certiorari charging public respondent Amado G. Inciong with abuse of
discretion amounting to lack or excess of jurisdiction.

The issue in this case is: whether or not the decision of a Labor Arbiter awarding payment of regular
holiday pay can still be set aside on appeal by the Deputy Minister of Labor even though it has
already become final and had been partially executed, the finality of which was affirmed by the
National Labor Relations Commission sitting en banc, on the basis of an Implementing Rule and
Policy Instruction promulgated by the Ministry of Labor long after the said decision had become final
and executory.

WE find for the petitioner.

WE agree with the petitioner's contention that Section 2, Rule IV, Book III of the implementing rules
and Policy Instruction No. 9 issued by the then Secretary of Labor are null and void since in the
guise of clarifying the Labor Code's provisions on holiday pay, they in effect amended them by
enlarging the scope of their exclusion (p. 1 1, rec.).

Article 94 of the Labor Code, as amended by P.D. 850, provides: t.hqw

Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage
during regular holidays, except in retail and service establishments regularly
employing less than ten (10) workers. ...

The coverage and scope of exclusion of the Labor Code's holiday pay provisions is spelled out
under Article 82 thereof which reads: t.hqw

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).

From the above-cited provisions, it is clear that monthly paid employees are not excluded from the
benefits of holiday pay. However, the implementing rules on holiday pay promulgated by the then
Secretary of Labor excludes monthly paid employees from the said benefits by inserting, under Rule
IV, Book Ill of the implementing rules, Section 2, which provides that: "employees who are uniformly
paid by the month, irrespective of the number of working days therein, with a salary of not less than
the statutory or established minimum wage shall be presumed to be paid for all days in the month
whether worked or not. "

Public respondent maintains that "(T)he rules implementing P. D. 850 and Policy Instruction No. 9
were issued to clarify the policy in the implementation of the ten (10) paid legal holidays. As
interpreted, 'unworked' legal holidays are deemed paid insofar as monthly paid employees are
concerned if (a) they are receiving not less than the statutory minimum wage, (b) their monthly pay is
uniform from January to December, and (c) no deduction is made from their monthly salary on
account of holidays in months where they occur. As explained in Policy Instruction No, 9, 'The ten
(10) paid legal holidays law, to start with, is intended to benefit principally daily paid employees. In
case of monthly, only those whose monthly salary did not yet include payment for the ten (10) paid
legal holidays are entitled to the benefit' " (pp. 340-341, rec.). This contention is untenable.

It is elementary in the rules of statutory construction that when the language of the law is clear and
unequivocal the law must be taken to mean exactly what it says. In the case at bar, the provisions of
the Labor Code on the entitlement to the benefits of holiday pay are clear and explicit - it provides for
both the coverage of and exclusion from the benefits. In Policy Instruction No. 9, the then Secretary
of Labor went as far as to categorically state that the benefit is principally intended for daily paid
employees, when the law clearly states that every worker shall be paid their regular holiday pay.
This is a flagrant violation of the mandatory directive of Article 4 of the Labor Code, which states that
"All doubts in the implementation and interpretation of the provisions of this Code, including its
implementing rules and regulations, shall be resolved in favor of labor." Moreover, it shall always be
presumed that the legislature intended to enact a valid and permanent statute which would have the
most beneficial effect that its language permits (Orlosky vs. Haskell, 155 A. 112.)

Obviously, the Secretary (Minister) of Labor had exceeded his statutory authority granted by Article 5
of the Labor Code authorizing him to promulgate the necessary implementing rules and regulations.

Public respondent vehemently argues that the intent and spirit of the holiday pay law, as expressed
by the Secretary of Labor in the case of Chartered Bank Employees Association v. The Chartered
Bank (NLRC Case No. RB-1789-75, March 24, 1976), is to correct the disadvantages inherent in the
daily compensation system of employment holiday pay is primarily intended to benefit the daily
paid workers whose employment and income are circumscribed by the principle of "no work, no
pay." This argument may sound meritorious; but, until the provisions of the Labor Code on holiday
pay is amended by another law, monthly paid employees are definitely included in the benefits of
regular holiday pay. As earlier stated, the presumption is always in favor of law, negatively put, the
Labor Code is always strictly construed against management.

While it is true that the contemporaneous construction placed upon a statute by executive officers
whose duty is to enforce it should be given great weight by the courts, still if such construction is so
erroneous, as in the instant case, the same must be declared as null and void. It is the role of the
Judiciary to refine and, when necessary, correct constitutional (and/or statutory) interpretation, in the
context of the interactions of the three branches of the government, almost always in situations
where some agency of the State has engaged in action that stems ultimately from some legitimate
area of governmental power (The Supreme Court in Modern Role, C. B. Swisher 1958, p. 36).

Thus. in the case of Philippine Apparel Workers Union vs. National Labor Relations
Commission (106 SCRA 444, July 31, 1981) where the Secretary of Labor enlarged the scope of
exemption from the coverage of a Presidential Decree granting increase in emergency allowance,
this Court ruled that:
t.hqw

... the Secretary of Labor has exceeded his authority when he included paragraph (k)
in Section 1 of the Rules implementing P. D. 1 1 23.

xxx xxx xxx

Clearly, the inclusion of paragraph k contravenes the statutory authority granted to

the Secretary of Labor, and the same is therefore void, as ruled by this Court in a
long line of cases . . . .. t.hqw

The recognition of the power of administrative officials to promulgate

rules in the administration of the statute, necessarily limited to what is
provided for in the legislative enactment, may be found in the early
case of United States vs. Barrios decided in 1908. Then came in a
1914 decision, United States vs. Tupasi Molina (29 Phil. 119)
delineation of the scope of such competence. Thus: "Of course the
regulations adopted under legislative authority by a particular
department must be in harmony with the provisions of the law, and for
the sole purpose of carrying into effect its general provisions. By such
regulations, of course, the law itself cannot be extended. So long,
however, as the regulations relate solely to carrying into effect the
provisions of the law, they are valid." In 1936, in People vs.
Santos, this Court expressed its disapproval of an administrative
order that would amount to an excess of the regulatory power vested
in an administrative official We reaffirmed such a doctrine in a 1951
decision, where we again made clear that where an administrative
order betrays inconsistency or repugnancy to the provisions of the
Act, 'the mandate of the Act must prevail and must be followed.
Justice Barrera, speaking for the Court in Victorias Milling inc. vs.
Social Security Commission, citing Parker as well as Davis did tersely
sum up the matter thus: "A rule is binding on the Courts so long as
the procedure fixed for its promulgation is followed and its scope is
within the statutory authority granted by the legislature, even if the
courts are not in agreement with the policy stated therein or its innate
wisdom. ... On the other hand, administrative interpretation of the law
is at best merely advisory, for it is the courts that finally determine
chat the law means."

"It cannot be otherwise as the Constitution limits the authority of the

President, in whom all executive power resides, to take care that the
laws be faithfully executed. No lesser administrative executive office
or agency then can, contrary to the express language of the
Constitution assert for itself a more extensive prerogative.
Necessarily, it is bound to observe the constitutional mandate. There
must be strict compliance with the legislative enactment. Its terms
must be followed the statute requires adherence to, not departure
from its provisions. No deviation is allowable. In the terse language of
the present Chief Justice, an administrative agency "cannot amend
an act of Congress." Respondents can be sustained, therefore, only if
it could be shown that the rules and regulations promulgated by them
 were in accordance with what the Veterans Bill of Rights provides"
(Phil. Apparel Workers Union vs. National Labor Relations
Commission, supra, 463, 464, citing Teozon vs. Members of the
Board of Administrators, PVA 33 SCRA 585; see also Santos vs.
Hon. Estenzo, et al, 109 Phil. 419; Hilado vs. Collector of Internal
Revenue, 100 Phil. 295; Sy Man vs. Jacinto & Fabros, 93 Phil. 1093;
Olsen & Co., Inc. vs. Aldanese and Trinidad, 43 Phil. 259).

This ruling of the Court was recently reiterated in the case of American Wire & Cable Workers Union
(TUPAS) vs. The National Labor Relations Commission and American Wire & Cable Co., Inc., G.R.
No. 53337, promulgated on June 29, 1984.

In view of the foregoing, Section 2, Rule IV, Book III of the Rules to implement the Labor Code and
Policy instruction No. 9 issued by the then Secretary of Labor must be declared null and void.
Accordingly, public respondent Deputy Minister of Labor Amado G. Inciong had no basis at all to
deny the members of petitioner union their regular holiday pay as directed by the Labor Code.

II

It is not disputed that the decision of Labor Arbiter Ricarte T. Soriano dated August 25, 1975, had
already become final, and was, in fact, partially executed by the respondent bank.

However, public respondent maintains that on the authority of De Luna vs. Kayanan, 61 SCRA 49,
November 13, 1974, he can annul the final decision of Labor Arbiter Soriano since the ensuing
promulgation of the integrated implementing rules of the Labor Code pursuant to P.D. 850 on
February 16, 1976, and the issuance of Policy Instruction No. 9 on April 23, 1976 by the then
Secretary of Labor are facts and circumstances that transpired subsequent to the promulgation of
the decision of the labor arbiter, which renders the execution of the said decision impossible and
unjust on the part of herein respondent bank (pp. 342-343, rec.).

This contention is untenable.

To start with, unlike the instant case, the case of De Luna relied upon by the public respondent is not
a labor case wherein the express mandate of the Constitution on the protection to labor is applied.
Thus Article 4 of the Labor Code provides that, "All doubts in the implementation and interpretation
of the provisions of this Code, including its implementing rules and regulations, shall be resolved in
favor of labor and Article 1702 of the Civil Code provides that, " In case of doubt, all labor legislation
and all labor contracts shall be construed in favor of the safety and decent living for the laborer.

Consequently, contrary to public respondent's allegations, it is patently unjust to deprive the

members of petitioner union of their vested right acquired by virtue of a final judgment on the basis
of a labor statute promulgated following the acquisition of the "right".

On the question of whether or not a law or statute can annul or modify a judicial order issued prior to
its promulgation, this Court, through Associate Justice Claro M. Recto, said: t.hqw

xxx xxx xxx

We are decidedly of the opinion that they did not. Said order, being unappealable,
became final on the date of its issuance and the parties who acquired rights
thereunder cannot be deprived thereof by a constitutional provision enacted or
 promulgated subsequent thereto. Neither the Constitution nor the statutes, except
penal laws favorable to the accused, have retroactive effect in the sense of annulling
or modifying vested rights, or altering contractual obligations" (China Ins. & Surety
Co. vs. Judge of First Instance of Manila, 63 Phil. 324, emphasis supplied).

In the case of In re: Cunanan, et al., 19 Phil. 585, March 18, 1954, this Court said: "... when a court
renders a decision or promulgates a resolution or order on the basis of and in accordance with a
certain law or rule then in force, the subsequent amendment or even repeal of said law or rule may
not affect the final decision, order, or resolution already promulgated, in the sense of revoking or
rendering it void and of no effect." Thus, the amendatory rule (Rule IV, Book III of the Rules to
Implement the Labor Code) cannot be given retroactive effect as to modify final judgments. Not even
a law can validly annul final decisions (In re: Cunanan, et al., Ibid).

Furthermore, the facts of the case relied upon by the public respondent are not analogous to that of
the case at bar. The case of De Luna speaks of final and executory judgment, while iii the instant
case, the final judgment is partially executed. just as the court is ousted of its jurisdiction to annul or
modify a judgment the moment it becomes final, the court also loses its jurisdiction to annul or
modify a writ of execution upon its service or execution; for, otherwise, we will have a situation
wherein a final and executed judgment can still be annulled or modified by the court upon mere
motion of a panty This would certainly result in endless litigations thereby rendering inutile the rule of
law.

Respondent bank counters with the argument that its partial compliance was involuntary because it
did so under pain of levy and execution of its assets (p. 138, rec.). WE find no merit in this argument.
Respondent bank clearly manifested its voluntariness in complying with the decision of the labor
arbiter by not appealing to the National Labor Relations Commission as provided for under the Labor
Code under Article 223. A party who waives his right to appeal is deemed to have accepted the
judgment, adverse or not, as correct, especially if such party readily acquiesced in the judgment by
starting to execute said judgment even before a writ of execution was issued, as in this case. Under
these circumstances, to permit a party to appeal from the said partially executed final judgment
would make a mockery of the doctrine of finality of judgments long enshrined in this jurisdiction.

Section I of Rule 39 of the Revised Rules of Court provides that "... execution shall issue as a matter
of right upon the expiration of the period to appeal ... or if no appeal has been duly perfected." This
rule applies to decisions or orders of labor arbiters who are exercising quasi-judicial functions since
"... the rule of execution of judgments under the rules should govern all kinds of execution of
judgment, unless it is otherwise provided in other laws" Sagucio vs. Bulos 5 SCRA 803) and Article
223 of the Labor Code provides that "... decisions, awards, or orders of the Labor Arbiter or
compulsory arbitrators are final and executory unless appealed to the Commission by any or both of
the parties within ten (10) days from receipt of such awards, orders, or decisions. ..."

Thus, under the aforecited rule, the lapse of the appeal period deprives the courts of jurisdiction to
alter the final judgment and the judgment becomes final ipso jure (Vega vs. WCC, 89 SCRA 143,
citing Cruz vs. WCC, 2 PHILAJUR 436, 440, January 31, 1978; see also Soliven vs. WCC, 77 SCRA
621; Carrero vs. WCC and Regala vs. WCC, decided jointly, 77 SCRA 297; Vitug vs. Republic, 75
SCRA 436; Ramos vs. Republic, 69 SCRA 576).

In Galvez vs. Philippine Long Distance Telephone Co., 3 SCRA 422, 423, October 31, 1961, where
the lower court modified a final order, this Court ruled thus: t.hqw

xxx xxx xxx

 The lower court was thus aware of the fact that it was thereby altering or modifying
its order of January 8, 1959. Regardless of the excellence of the motive for acting as
it did, we are constrained to hold however, that the lower court had no authorities to
make said alteration or modification. ...

xxx xxx xxx

The equitable considerations that led the lower court to take the action complained of
cannot offset the dem ands of public policy and public interest which are also
responsive to the tenets of equity requiring that an issues passed upon in
decisions or final orders that have become executory, be deemed conclusively
disposed of and definitely closed for, otherwise, there would be no end to litigations,
thus setting at naught the main role of courts of justice, which is to assist in the
enforcement of the rule of law and the maintenance of peace and order, by settling
justiciable controversies with finality.

xxx xxx xxx

In the recent case of Gabaya vs. Mendoza, 113 SCRA 405, 406, March 30, 1982, this Court said: t.hqw

xxx xxx xxx

In Marasigan vs. Ronquillo (94 Phil. 237), it was categorically stated that the rule is
absolute that after a judgment becomes final by the expiration of the period provided
by the rules within which it so becomes, no further amendment or correction can be
made by the court except for clerical errors or mistakes. And such final judgment is
conclusive not only as to every matter which was offered and received to sustain or
defeat the claim or demand but as to any other admissible matter which must have
been offered for that purpose (L-7044, 96 Phil. 526). In the earlier case of Contreras
and Ginco vs. Felix and China Banking Corp., Inc. (44 O.G. 4306), it was stated
that the rule must be adhered to regardless of any possible injustice in a particular
case for (W)e have to subordinate the equity of a particular situation to the over-
mastering need of certainty and immutability of judicial pronouncements

xxx xxx xxx

III

The despotic manner by which public respondent Amado G. Inciong divested the members of the
petitioner union of their rights acquired by virtue of a final judgment is tantamount to a deprivation of
property without due process of law Public respondent completely ignored the rights of the petitioner
union's members in dismissing their complaint since he knew for a fact that the judgment of the labor
arbiter had long become final and was even partially executed by the respondent bank.

A final judgment vests in the prevailing party a right recognized and protected by law under the due
process clause of the Constitution (China Ins. & Surety Co. vs. Judge of First Instance of Manila, 63
Phil. 324). A final judgment is "a vested interest which it is right and equitable that the government
should recognize and protect, and of which the individual could no. be deprived arbitrarily without
injustice" (Rookledge v. Garwood, 65 N.W. 2d 785, 791).
lt is by this guiding principle that the due process clause is interpreted. Thus, in the pithy language of
then Justice, later Chief Justice, Concepcion "... acts of Congress, as well as those of the Executive,
can deny due process only under pain of nullity, and judicial proceedings suffering from the same
flaw are subject to the same sanction, any statutory provision to the contrary notwithstanding (Vda.
de Cuaycong vs. Vda. de Sengbengco 110 Phil. 118, emphasis supplied), And "(I)t has been
likewise established that a violation of a constitutional right divested the court of jurisdiction; and as a
consequence its judgment is null and void and confers no rights" (Phil. Blooming Mills Employees
Organization vs. Phil. Blooming Mills Co., Inc., 51 SCRA 211, June 5, 1973).

Tested by and pitted against this broad concept of the constitutional guarantee of due process, the
action of public respondent Amado G. Inciong is a clear example of deprivation of property without
due process of law and constituted grave abuse of discretion, amounting to lack or excess of
jurisdiction in issuing the order dated November 10, 1979.

WHEREFORE, THE PETITION IS HEREBY GRANTED, THE ORDER OF PUBLIC RESPONDENT

IS SET ASIDE, AND THE DECISION OF LABOR ARBITER RICARTE T. SORIANO DATED
AUGUST 25, 1975, IS HEREBY REINSTATED.

COSTS AGAINST PRIVATE RESPONDENT INSULAR BANK OF ASIA AND AMERICA

SO ORDERED. 1w ph1.t
 18. Associated Labor Unions (ALU-TUCP) v. Letrondo-Montejo, G.R. No. 111988, October
14, 1994

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 111988 October 14, 1994

ASSOCIATED LABOR UNIONS (ALU)-TUCP in behalf of its members at AMS FARMING

CORPORATION, petitioner,
vs.
VOLUNTARY ARBITRATOR ROSALINA LETRONDO-MONTEJO and AMS FARMING
CORPORATION, respondent.

Seno, Mendoza and Associates for petitioner.

Castro, Enriquez, Carpio, Guillen and Associates for private respondents.

MENDOZA, J.:

This is a petition for certiorari to set aside the decision dated July 19, 1993 of public respondent
Voluntary Arbitrator Rosalina Letrondo-Montejo insofar as it dismissed the claim of petitioner's
members for holiday pay for December 4, 1992, which had been declared a special day for the
holding of Sangguniang Kabataan election.

The facts are as follows:

On December 27, 1990, petitioner Associated Labor Unions (ALU-TUCP and private respondent
AMS Farming Corporation entered into a five-year Collective Bargaining Agreement beginning
November 1, 1990 and
ending midnight of October 31, 1995. The CBA covers the regular daily-paid rank-and-file
employees of private respondent AMS Farming Corp. at Sampao, Kapalong, Davao del Norte and
Magatos, Asuncion, Davao del Norte.

Art. VII, sec 3. of the CBA provides:

New Year, Maundy Thursday, Good Friday, Araw ng Kagitingan, 1st of May, 12th of
June, Araw ng Dabaw, 4th of July, Last Sunday of August, 1st November, 30th of
November, 25th of December, 30th of December and the days designated by law for
holding referendum and local/national election shall be considered paid regular
holidays. Consequently, they shall receive their basic pay even if they do not work on
those days. Any employee required to work on these holidays shall be paid at last
TWO HUNDRED PERCENT (200%) of his daily wage. Covered employees
performing overtime work on these days shall be entitled to another THIRTY
 PERCENT (30%) overtime pay. It is understood however, that any covered
employee who shall be absent for more than one day immediately preceding the paid
holiday shall not be entitled to the holiday pay.

The President of the Philippines declared December 4, 1992 a "special day" for the holding of
election for Sangguniang Kabataan (SK) throughout the nation. Employees covered by the CBA
subsequently filed claims for the payment to them of holiday pay for that day. Private respondent,
however, refused their claims on the ground that December 4, 1992 was not a regular holiday within
the contemplation of the CBA.

The matter was eventually submitted to voluntary arbitration. At the conference held on February 19,
1993, the parties agreed, among others things, to submit the following issue:

Is the Sangguniang Kabataan Election Day considered a regular holiday for purpose
of said Section 3, Article VII of the CBA?

In connection with this issue, they agreed that the Sangguniang Kabataan Election Day was a
holiday as decreed by the President of the Philippines.

The parties presented position papers and thereafter submitted the case for resolution.

On July 19, 1993, public respondent rendered an "Award"1 in which, while holding employees who
had become regular employees on November 1, 1990 entitled to salary increases under the CBA,
nonetheless dismissed their claim for holiday pay for December 4, 1992 on the ground that the
Sangguniang Kabataan election "by any stretch of the imagination cannot be considered as a local
election within the meaning of CBA because not all people can vote in the said election but only
qualified youths." According to the Voluntary Arbitrator, "A 'local election' is generally understood to
mean the election by the people of their local leaders like the governors, mayors, members of the
provincial and municipal councils, and barangay officials. And when a local election is held, the day
is declared a non-working holiday. This is our experience in local and national elections. In the case
of the Sangguniang Kabataan (SK) elections, it was a working holiday. Except for the qualified
youthful voters, not everybody noticed said election as not everyone voted in the said election."

Hence, this petition, the only issue in which is whether the election for the Sangguniang Kabataan on
December 4, 1992 was a "local/national election" within the contemplation of Art. VII, sec. 3 of the
CBA so as to entitle petitioner's members, who are employed at the AMS Farming Corp. to the
payment of holiday pay for that day.

We hold that it is and that, in denying petitioner's claim, respondent Voluntary Arbitrator denied
members of petitioner union substantial justice as a result of her erroneous interpretation of the
CBA, thereby justifying judicial review.2

First. The Sangguniang Kabataan (SK) is part of the local government structure. The Local
Government Code (Rep. Act. No. 7160) creates in every barangay a Sangguniang Kabataan
composed of a chairman, seven (7) members, a secretary and a treasurer.3 The chairman and the
seven members are elected by the Katipunan ng Kabataan, which is composed of citizens of the
Philippines residing in the barangay for at least six (6) months, who are between the ages of 15 and
21 and who are registered as members.4 The chairman of the SK is an ex officio member of the
Sangguniang Baranggay with the same powers duties, functions and privileges as the regular
members of the Sangguniang Barangay.5 The President of the Pederasyon ng mga Sangguniang
Kabataan, which is imposed of the SK chairmen of the sangguniang kabataan of the barangays in
the province, city, or municipality, is an ex officio member of the Sangguniang Panlalawigan,
Sangguniang Panlungsod, and Sangguniang Bayan.6

Hence, as the Solicitor General points out, the election for members of the SK may properly be
considered a "local election" within the meaning of
Art. VII, sec 3 of the CBA and the day on which it is held to be a holiday, thereby entitling petitioners
members at the AMS Farming Corp. to the payment of holiday on such day.

Second. The Voluntary Arbitrator held, however, that the election for members of the SK cannot be
considered a local election as the election for Governors , Vice Governors, Mayors and Vice Mayors
and the various local legislative assemblies (sanggunians) because the SK election is participated in
only by the youth who are between the ages of 15 and 21 and for this reason the day is not a
nonworking holiday.

To begin with, it is not true that December 4, 1992 was not a nonworking holiday. It was a
nonworking holiday and this was announced in the media.7 In Proclamation No. 118 dated December
2, 1992 President Ramos declared the day as "a special day through the country on the occasion of
the Sangguniang Kabataan Elections" and enjoined all "local government units through their
respective Chief Local Executives [to] extend all possible assistance and support to ensure the
smooth conduct of the general elections."

A "special day" is a "special day", as provided by the Administrative Code of 1987.8 On the other
hand, the term "general elections" means, in the context of SK elections, the regular elections for
members of the SK, as distinguished from the special elections for such officers.9

Moreover, the fact that only those between 15 and 21 take part in the election for members of the SK
does not make such election any less a regular local election. The Constitution provides, for
example, for the sectoral representatives in the House of Representatives of, among others, women
and youth. 10 Only voters belonging to the relevant sectors can take part in the election of their
representatives. Yet it cannot be denied that such election is a regular national election and the day
set for its holding, a holiday.

Third. Indeed, the CBA provision in question merely reiterates the provision on paid holidays. Thus,
the Labor Code 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; 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 the thirtieth of December, and the day
designated by law for holding a general election.

As already explained, the phrase "general election" means regular local and national elections.

Consequently, whether in the context of the CBA or the Labor Code, December 4, 1992 was a
holiday for which holiday pay should be paid by respondent employer.
WHEREFORE, the decision dated July 19, 1993 of public respondent Rosalina Letrondo-Montejo,
insofar as it dismissed petitioner's claim for holiday pay, is SET ASIDE and private respondent is
ORDERED to pay petitioner's members their regular holiday pay for December 4, 1992 in
accordance with Art. VII, sec. 3 of the Collective Bargaining Agreement.

SO ORDERED.
 19. San Miguel Corporation v. CA, G.R. No. 146775, January 30, 2002

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 non-Muslim 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
1wphi1

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
1wphi1
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.
 20. Imbuido v. NLRC, G.R. No. 114734, March 31, 2001

G.R. No. 114734 March 31, 2000

VIVIAN Y. IMBUIDO, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, INTERNATIONAL INFORMATION SERVICES,
INC. and GABRIEL LIBRANDO, respondents.

BUENA, J.:

This special civil action for certiorari seeks to set aside the Decision1 of the National Labor Relations
Commission (NLRC) promulgated on September 27, 1993 and its Order dated January 11, 1994,
which denied petitioner's motion for reconsideration.

Petitioner was employed as a data encoder by private respondent International Information Services,
Inc., a domestic corporation engaged in the business of data encoding and keypunching, from
August 26, 1988 until October 18, 1991 when her services were terminated. From August 26, 1988
until October 18, 1991, petitioner entered into thirteen (13) separate employment contracts with
private respondent, each contract lasting only far a period of three (3) months. Aside from the basic
hourly rate, specific job contract number and period of employment, each contract contains the
following terms and conditions:

a. This Contract is for a specific project/job contract only and shall be effective for the period
covered as above-mentioned unless sooner terminated when the job contract is completed
earlier or withdrawn by client, or when employee is dismissed for just and lawful causes
provided by law. The happening of any of these events will automatically terminate this
contract of employment.

b. Subject shall abide with the Company's rules and regulations for its employees attached
herein to form an integral part hereof.

c. The nature of your job may require you to render overtime work with pay so as not to
disrupt the Company's commitment of scheduled delivery dates made on said job contract.2

In September 1991, petitioner and twelve (12) other, employees of private respondent allegedly
agreed to the filing of a petition for certification election involving the rank-and-file employees of
private respondent.3 Thus, on October 8, 1991, Lakas Manggagawa sa Pilipinas (LAKAS) filed a
petition for certification election with the Bureau of Labor Relations (BLR), docketed as NCR-OD-M-
9110-128.4

Subsequently, on October 18, 1991, petitioner received a termination letter from Edna Kasilag,
Administrative Officer of private respondent, allegedly "due to low volume of work."5

Thus, on May 25, 1992, petitioner filed a complaint for illegal dismissal with prayer for service
incentive leave pay and 13th month differential pay, with the National Labor Relations Commission,
National Capital Region, Arbitration Branch, docketed as NLRC-NCR Case No. 05-02912-92.6

In her position paper dated August 3, 1992 and filed before labor arbiter Raul T. Aquino, petitioner
alleged that her employment was terminated not due to the alleged low volume of work but because
she "signed a petition for certification election among the rank and file employees of respondents,"
thus charging private respondent with committing unfair labor practices. Petitioner further
complained of non-payment of service incentive leave benefits and underpayment of 13th month
pay.7

On the other hand, private respondent, in its position paper filed on July 16, 1992, maintained that it
had valid reasons to terminate petitioner's employment and disclaimed any knowledge of the
existence or formation of a union among its rank-and-file employees at the time petitioner's services
were terminated.8 Private respondent stressed that its business ". . . relies heavily on companies
availing of its services. Its retention by client companies with particular emphasis on data encoding is
on a project to project basis,"9 usually lasting for a period of "two (2) to five (5) months." Private
respondent further argued that petitioner's employment was for a "specific project with a specified
period of engagement." According to private respondent, ". . . the certainty of the expiration of
complainant's engagement has been determined at the time of their (sic) engagement (until 27
November 1991) or when the project is earlier completed or when the client withdraws," as provided
in the contract. 10 "The happening of the second event [completion of the project] has materialized,
thus, her contract of employment is deemed terminated per the Brent School ruling." 11 Finally, private
respondent averred that petitioner's "claims for non-payment of overtime time (sic) and service
incentive leave [pay] are without factual and legal basis." 12

In a decision dated August 25, 1992, labor arbiter Raul T. Aquino, ruled in favor of petitioner, and
accordingly ordered her reinstatement without loss of seniority rights and privileges, and the
payment of backwages and service incentive leave pay. The dispositive part of the said decision
reads:

WHEREFORE, responsive to the foregoing, judgment is hereby rendered ordering

respondents to immediately reinstate complainant [petitioner herein] as a regular employee
to her former position without loss of seniority rights and privileges and to pay backwages
from the time of dismissal up to the date of this decision, the same to continue until
complainant ['s] [petitioner herein] actual reinstatement from (sic) the service. Respondents
are likewise ordered to pay complainant [petitioner herein] service incentive leave pay
computed as follows:

Backwages:

10/18/91 - 8/25/92 = 10.23 mos.

P118.00 x 26 x 10.23 mos. = P31, 385.64

Service Incentive Leave Pay

1989 = P89.00 x 5 days = P445.00

1990 = 106 x 5 days = P530.00

1991 = 118 x 5 days = P590.00

P 1,565.00

Total
 P 32,950.64
==========

SO ORDERED. 13

In his decision, the labor arbiter found petitioner to be a regular employee, ruling that "[e]ven if herein
complainant [petitioner herein] had been obstensively (sic) hired for a fixed period or for a specific
undertaking, she should be considered as [a] regular employee of the respondents in conformity with
the provisions (sic) laid down under Article 280 of the Labor Code," 14 after finding that ". . . [i]t is
crystal clear that herein complainant [petitioner herein] performed a job which are (sic) usually
necessary or desirable in the usual business of respondent [s]." 15 The labor arbiter further
denounced ". . . the purpose behind the series of contracts which respondents required complainant
to execute as a condition of employment was to evade the true intent and spirit of the labor laws for
the workingmen . . . ." 16 Furthermore, the labor arbiter concluded that petitioner was illegally
dismissed because the alleged reason for her termination, that is, low volume of work, is "not among
the just causes for termination recognized by law," 17 hence, he ordered her immediate reinstatement
without loss of seniority rights and with full backwages. With regard to the service incentive leave
pay, the labor arbiter decided ". . . to grant the same for failure of the respondents to fully controvert
said claims." 18 Lastly, the labor arbiter rejected petitioner's claim for 13th month pay ". . . since
complainant [petitioner herein] failed to fully substantiate and argued (sic) the same." 19

On appeal, the NLRC reversed the decision of the labor arbiter in a decision 20 promulgated on
September 27, 1993, the dispositive part of which reads:

WHEREFORE, the appealed decision is hereby set aside. The complaint for illegal dismissal
is hereby dismissed for being without merit. Complainant's [petitioner herein] claim for
service incentive leave pay is hereby remanded for further arbitration.

SO ORDERED. 21

The NLRC ruled that "[t]here is no question that the complainant [petitioner herein], viewed in
relation to said Article 280 of the [Labor] Code, is a regular employee judging from the function
and/or work for which she was hired. . . . But this does not necessarily mean that the complainant
[petitioner herein] has to be guaranteed a tenurial security beyond the period for which she was
hired." 22 The NLRC held that ". . . the complainant [petitioner herein], while hired as a regular worker,
is statutorily guaranteed, in her tenurial security, only up to the time the specific project for which she
was hired is completed." 23 Hence, the NLRC concluded that "[w]ith the specific project "at RCBC
014" admittedly completed, the complainant [petitioner herein] has therefore no valid basis in
charging illegal dismissal for her concomittant (sic) dislocation." 24

In an Order dated January 11, 1994, the NLRC denied petitioner's motion for reconsideration. 25

In this petition for certiorari, petitioner, for and in her behalf, argues that (1) the public respondent
"committed grave abuse of discretion when it ignored the findings of Labor Arbiter Raul Aquino
based on the evidence presented directly before him, and when it made findings of fact that are
contrary to or not supported by evidence," 26 (2) "[p]etitioner was a "regular employee," NOT a
"project employee" as found by public respondent NLRC," 27 (3) "[t]he termination of petition (sic) was
tainted with unfair labor practice," 28 and (4) the public respondent "committed grave abuse of
discretion in remanding the awarded service incentive leave pay for further arbitration." 29

The petition is impressed with merit.

We agree with the findings of the NLRC that petitioner is a project employee. The principal test for
determining whether an employee is a project employee or a regular employee is whether the
project employee was assigned to carry out a specific project or undertaking, the duration and scope
of which were specified at the time the employee was engaged for that project. 30 A project employee
is one whose 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 or where
the work or service to be performed is seasonal in nature and the employment is for the duration of
the season. 31 In the instant case, petitioner was engaged to perform activities which were usually
necessary or desirable in the usual business or trade of the employer, as admittedly, petitioner
worked as a data encoder for private respondent, a corporation engaged in the business of data
encoding and keypunching, and her employment was fixed for a specific project or undertaking the
completion or termination of which had been determined at the time of her engagement, as may be
observed from the series of employment contracts 32 between petitioner and private respondent, all of
which contained a designation of the specific job contract and a specific period of employment. 1wphi1.nt

However, even as we concur with the NLRC's findings that petitioner is a project employee, we have
reached a different conclusion. In the recent case of Maraguinot, Jr. vs. NLRC, 33 we held that "[a]
project employee or a member of a work pool may acquire the status of a regular employee when
the following concur:

1) There is a continuous rehiring of project employees even after [the] cessation of a

project; 34 and

2) The tasks performed by the alleged "project employee" are vital, necessary and
indispensable to the usual business or trade of the employer. 35

The evidence on record reveals that petitioner was employed by private respondent as a data
encoder, performing activities which are usually necessary or desirable in the usual business or
trade of her employer, continuously for a period of more than three (3) years, from August 26, 1988
to October 18, 1991 36 and contracted for a total of thirteen (13) successive projects. We have
previously ruled that "[h]owever, the length of time during which the employee was continuously re-
hired is not controlling, but merely serves as a badge of regular employment." 37 Based on the
foregoing, we conclude that petitioner has attained the status of a regular employee of private
respondent.

At this point, we reiterate with emphasis that:

xxx xxx xxx

At this time, we wish to allay any fears that this decision unduly burdens an employer by
imposing a duty to re-hire a project employee even after completion of the project for which
he was hired. The import of this decision is not to impose a positive and sweeping obligation
upon the employer to re-hire project employees. What this decision merely accomplishes is a
judicial recognition of the employment status of a project or work pool employee in
accordance with what is fait accompli, i.e., the continuous re-hiring by the employer of project
or work pool employees who perform tasks necessary or desirable to the employer's usual
business or trade. Let it not be said that this decision "coddles" labor, for as Lao 38 has
ruled, project or work pool employees who have gained the status of regular employees are
subject to the "no work-no pay" principle, to repeat:

A work pool may exist although the workers in the pool do not receive salaries and are free
to seek other employment during temporary breaks in the business, provided that the worker
 shall be available when called to report for a project. Although primarily applicable to regular
seasonal workers, this set-up can likewise be applied to project workers insofar as the effect
of temporary cessation of work is concerned. This is beneficial to both the employer and
employee for it prevents the unjust situation of "coddling labor at the expense of capital" and
at the same time enables the workers to attain the status of regular employees.

The Court's ruling here is meant precisely to give life to the constitutional policy of
strengthening the labor sector, but, we stress, not at the expense of management. Lest it be
misunderstood, this ruling does not mean that simply because an employee is a project or
work pool employee even outside the construction industry, he is deemed, ipso jure, a
regular employee. All that we hold today is that once a project or work pool employee has
been: (1) continuously, as opposed to intermittently, re-hired by the same employer for the
same tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to
the usual business or trade of the employer, then the employee must be deemed a regular
employee, pursuant to Article 280 of the Labor Code and jurisprudence. To rule otherwise
would allow circumvention of labor laws in industries not falling within the ambit of Policy
Instruction No. Policy Department Order No. 19, hence allowing the prevention of acquisition
of tenurial security by project or work pool employees who have already gained the status of
regular employees by the employer's conduct. 39 (emphasis supplied)

Being a regular employee, petitioner is entitled to security of tenure and could only be dismissed for
a just or authorized cause, as provided in Article 279 of the Labor Code, as amended:

Art. 279. Security of Tenure - In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the time
his compensation was withheld from him up to the time of his actual reinstatement.

The alleged causes of petitioner's dismissal (low volume of work and belatedly, completion of
project) are not valid causes for dismissal under Articles 282 and 283 of the Labor Code. Thus,
petitioner is entitled to reinstatement without loss of seniority rights and other privileges, and to her
full backwages, inclusive of allowances, and to her other benefits or their monetary equivalent
computed from the time her compensation was withheld from her up to the time of her actual
reinstatement. However, complying with the principles of "suspension of work" and "no work, no pay"
between the end of one project and the start of a new one, in computing petitioner's backwages, the
amounts corresponding to what could have been earned during the periods from the date petitioner
was dismissed until her reinstatement when private respondent was not undertaking any project,
should be deducted. 1wphi1

With regard to petitioner's claim for service incentive leave pay, we agree with the labor arbiter that
petitioner is entitled to service incentive leave pay, as provided in Article 95 of the Labor Code,
which reads:

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.

xxx xxx xxx

 Having already worked for more than three (3) years at the time of her unwarranted
dismissal, petitioner is undoubtedly entitled to service incentive leave benefits, computed
from 1989 until the date of her actual reinstatement. As we ruled in the recent case
of Fernandez vs. NLRC, 40 "[s]ince a service incentive leave is clearly demandable after one
year of service - whether continuous or broken - or its equivalent period, and it is one of the
"benefits" which would have accrued if an employee was not otherwise illegally dismissed, it
is fair and legal that its computation should be up to the date of reinstatement as provided
under Section [Article] 279 of the Labor Code, as amended, which reads:

Art. 279. Security of Tenure. - An employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation is withheld from him up to the time of
his actual reinstatement." (emphasis supplied).

WHEREFORE, the instant petition is GRANTED. The assailed decision of the National Labor
Relations Commission in NLRC NCR CA No. 003845-92 dated September 27, 1993, as well as its
Order dated January 11, 1994, are hereby ANNULLED and SET ASIDE for having been rendered
with grave abuse of discretion, and the decision of the Labor Arbiter in NLRC NCR Case No. 05-
02912-92 is REINSTATED with MODIFICATION as above-stated, with regard to computation of
back wages and service incentive leave pay. 1w phi1.nt

SO ORDERED.
 21. Fernandez v. NLRC, 285 SCRA 149

[G.R. No. 105892. January 28, 1998]

LEIDEN FERNANDEZ, BRENDA GADIANO, GLORIA ADRIANO, EMELIA

NEGAPATAN, JESUS TOMONGHA, ELEONOR QUIANOLA,
ASTERIA CAMPO, FLORIDA VILLACERAN, FLORIDA TALLEDO,
MARILYN LIM and JOSEPH CANONIGO, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION, FOURTH
DIVISION, MARGUERITE LHUILLIER AND/OR
[1]
AGENCIA
CEBUANA-H. LHUILLIER, respondents.

DECISION
PANGANIBAN, J.:

Is failure to attend hearings before the labor arbiter a waiver of the right to present
evidence? Are moral damages included in the computation of monetary award for
purposes of determining the amount of the appeal bond? Is there a limit to the amount of
service incentive leave pay and backwages that may be awarded to an illegally dismissed
employee?

The Case

These are the main questions raised in this petition for certiorari under Rule 65 of the
Rules of Court assailing the March 11, 1992 Decision[2] of Respondent National Labor
Relations Commission (NLRC),[3]the dispositive portion of which reads:[4]

WHEREFORE, premises considered, the appealed decision is hereby declared

VACATED and the entire records of these cases are hereby ordered remanded to the
Regional Arbitration Branch VII for further proceedings.

This petition also challenges the NLRCs May 29, 1992 Resolution denying the motion
for reconsideration.
The decision[5] vacated by the NLRC and penned by Labor Arbiter Gabino A.
Velasquez, Jr. disposed as follows:[6]

WHEREFORE, judgment is hereby rendered in favor of the complainants and against

the respondent. The respondent is hereby ordered:
1. To reinstate the complainants to their respective position [sic] at the Agencia
Cebuana with full backwages without qualification; if reinstatement is not feasible, for
one reason or another, to pay to the complainants their respective separation pay,
service incentive leave pay with full backwages without qualification computed
hereunder as follows:

1. LEIDEN FERNANDEZ:

a) Separation Pay for 6 years = P 8,640.00

b) Service Incentive Leave (6 yrs.)= 3,322.50

c) Backwages for one year only = 34,560.00

TOTAL = P 46,522.50

2. GLORIA ADRIANO:

a) Separation pay for 17 years = P 28,560.00

b) Service incentive leave (17 yrs.)= 10,986.25

c) Backwages for one year = 40,320.00

TOTAL = P 79,866.25

3. EMELIA NEGAPATAN:

a) Separation pay for 24 yrs. =P 35,760.00

b) Service incentive leave (24 yrs.)= 13,752.00

c) Backwages for one year = 35,760.00

TOTAL = P 85,272.00

4. JESUS P. TOMONGHA:

a) Separation pay for 33 years = P 50,655.00

b) Service Incentive leave = 19,478.25

c) Backwages for one year = 36,840.00

TOTAL = P 106,973.25
5. ELEONOR QUIANOLA:

a) Separation pay for 14 years = P20,860.00

b) Service Incentive Leave = 8,022.00

c) Backwages for one year = 35,760.00

TOTAL = P 64,642.00

6. ASTERIA CAMPO:

a) Separation pay for 13 years = P19,240.00

b) Service Incentive Leave (13 yrs.) = 7,400.00

c) Backwages for one year = 35,520.00

TOTAL = P62,160.25

7. FLORIDA VILLACERAN:

a) Separation pay for 17 yrs. = P25,160.00

b) Service Incentive leave (17 yrs.) = 9,677.25

c) Backwages for one year = 35,520.00

TOTAL = P 70,357.25

8. FLORIDA TALLEDO:

a) Separation pay for 18 yrs. = P 27,450.00

b) Service Incentive leave (18 yrs.) = 10,557.00

c) Backwages for one year = 36,600.00

TOTAL = P 74,607.00

9. BRENDA GADIANO:

a) Separation pay for 13 yrs. = P19,597.50

b) Service Incentive leave (13 yrs.) 7,536.75

c) Backwages for one year 36,180.00

TOTAL = P 63,313.25

10. MARILYN LIM:

a) Separation pay for 7 yrs. = P12,950.00

b) Service Incentive for 7 yrs. = 4,980.50

c) Backwages for one year = 44,400.00

TOTAL P 62,330.00

11. JOSEPH CANONIGO:

a) Separation Pay for 2 years = P 2,700.00

b) Service Incentive Leave (2 yrs.) = 1,038.50

c) Backwages for 1 year = 32,400.00

TOTAL = P 36,138.50

2) To pay to all complainants the amount of P100,000.00 for moral damages and the
amount of another P100,000.00 for exemplary damages, plus the amount of P98,018.25
as attorneys fees representing 10% of the total award and the amount of P30,000.00 for
litigation expenses.

The totality of the award amounting to P1,078,200.55 must be deposited with this Office
ten (10) days from receipt of this decision for further disposition. However, the payment
of backwages will be computed as of the actual date of payment provided it will not
exceed a period of three years.

The Facts

The factual milieu of this case is recited by the solicitor general in his Comment dated
December 21, 1992 as follows:[7]

1. The instant case stemmed from a consolidated complaint against private respondents
Agencia Cebuana-H. Lhuillier and/or Margueritte Lhuillier (Lhuillier) for illegal dismissal
(Rec., pp. 56-58). The Agencia Cebuana is a sole proprietorship operated by
Margueritte Lhuillier.
2. Two (2) Position Papers were filed by petitioners, one by Leiden E. Fernandez, Gloria
B. Adriano, Emilia A. Negapatan, Jesus P. Tomongha, Eleonor A. Quianola, Asteria C.
Ocampo [sic], Florida Villaceran, Florida B. Tallado [sic] and Brenda A. Gadiano (Rec.,
pp. 79-88) and the other by Marilyn E. Lim and Joseph Canonigo (Exhibit C-4).

3. In their Position Papers, petitioners alleged that they were employed by Lhuillier, as
follows:

Name Position
Date of Employment Latest Date of Dismissal

Salary/Month
P2,880.00
1. Leiden E. Cashier Dec. 3, 1984 July 19, 1990
Fernandez

3,360.00
2. Gloria B. Appraiser July 10, 1973 July 19, 1990
Adriano

2,980.00
3. Emilia A. Sales Girl March 9, 1966 July 19, 1990
Negapatan

Office Clerk July 1957 3,070.00

4. Jesus P. July 19, 1990
Tomongha

2,980.00
5. Eleonor A. Office Dec. 8, 1976 July 21, 1990
Quianola Clerk

2,960.00
6. Asteria C. Clerk May 27, 1977 July 19, 1990
Campo

2,960.00
7. Florida Sales March 8, 1973 July 19, 1990
Villaceran Clerk

3,050.00
8. Florida B. Pawnshop June 19, 1972 July 19, 1990
Talledo Writer

3,015.00
9. Brenda A. Pawnshop March 7, 1977 July 19, 1990
Gadiano Teller

3,700.00
10. Marilyn Branch June 1984 Feb. 16, 1990
E. Lim Manager

2,700.00
11. Joseph Record June 1988 July 14, 1990
M. Canonigo Keeper

Petitioners Fernandez, Adriano, Negapatan, Tomongha, Quianola, Campo, Villaceran,

Talledo, and Gadiano further alleged that prior to and during early July 1990, they
demanded from Margueritte Lhuillier an increase in their salaries since her business
was making good and that she was evading payment of taxes by making false entries in
her records of account; that Lhuillier became angry and threatened them that something
would happen to their employment if they would report her to the BIR; that shortly
thereafter, Lhuillier suspected them of stealing jewelry from the pawnshop; that on July
19, 1990, Lhuillier verbally informed them not to report for work as their employment
had been terminated; that from July 20, 1990 they did not report for work; and on July
23, 1990, they filed the instant complaint (Rec., pp. 79-88).

On their part, petitioners Lim and Canonigo alleged that in early January 1990 and in
June 1990, respectively, they demanded increases in their salaries since they noted
that Lhuillier had a very lucrative business besides evading tax payments by making
false entries in her records of account; that they also informed her that they intended to
join the Associated Labor Union (ALU), which made Lhuillier angry, causing her to
threaten them that should they report her to the BIR and join the ALU something would
happen to their employment; that Lhuillier advised them to tender their resignations as
they were reportedly responsible for some anomalies at the Agencia Cebuana-H
Lhuillier; that Lhuillier assured them that they will be given separation pay; that they
asked Lhuillier that they be allowed to confront the persons who reported to her about
their supposed involvement in the alleged anomalies but she ignored it and told them to
tender their respective resignations effective February 16, 1990 (for Lim) and July 14,
1990 (for Canonigo); and that they were not given separation pay (Decision, pp. 6-8;
Rec., pp. 256-258).

5. In her Position Paper, Lhuillier, represented initially by Atty. Malcolm V. Seno, alleged
that:

a) In the case of Marilyn Lim, on January 13, 1990, she was informed that an
investigation will be conducted by Lhuillier because of the report received by Flora Go,
also an employee of Lhuillier, that Lim sold to a company consumer her own jewelry, in
violation of the company house rules; on January 22, 1990, a Notice of Intended
Termination was served upon her requiring her to submit a written explanation within 48
hours from receipt; Lim did not submit a written explanation but actively participated in
the investigation where she admitted having committed the violation complained of; in
view of her admission of guilt, the company lawyer recommended to the management
her demotion and transfer without reduction of salary; after Lims receipt of a copy of the
investigation report, she sent through her lawyer a letter signifying her intention to
resign and her willingness to execute a promissory note for her indebtedness; the
company gave Lim a draft of the promissory note which was never returned by her; on
February 24, 1990 she tendered an irrevocable letter of resignation, hence, she was not
terminated; and because of the malicious and false complaint filed by Lim, the company
was compelled to file a counter-complaint for Perjury against her before the Office of the
City Prosecutor of Cebu City (Rec., pp. 92-93; 97).

b) In the case of Jesus Tomongha, he was found to have stolen rematado jewelries
worth P70,670.00 sometime in March 1990; instead of attending the investigation
scheduled for this offense, he abandoned his job although his application for leave of
absence was not approved; Lhuillier asked the company lawyer to talk with Tomongha
for him to return to work so that he could pay his pecuniary liability out of his salary;
Lhuillier made it a pre-condition for his return to work that he executes a promissory
note for his indebtedness; on April 10, 1990, he executed a promissory note and was
allowed to return to work; on July 20, 1990, he and the other petitioners, abandoned
their employment; he was not dismissed but he was allowed to return to work and was
only made to execute a promissory note when the company found out sometime in
March 1990 that he had stolen rematado jewelries worth P70,670.00 (Rec., pp. 97-101).

c) In the case of the other petitioners, on July 19, 1990, Gloria Adriano was found by
Flora Go to have over-declared the weights and values of certain items of jewelry
pawned to the company, as a result of which, upon investigation, the pawnshop was
found to have lost the amount of P174,850.00; a letter dated July 19, 1990 was served
upon Adriano to explain within 72 hours why she should not be terminated; on July 20,
1990, Gloria Adriano, Florida Villaceran, Emilia Negapatan, Brenda Gadiano, Leiden
Fernandez, Jesus Tomongha, Asteria Campo and Florida Talledo did not report for
work although no requests for leave of absence were filed by them, which absence
violated company rules; on July 21, 1990, the said employees did not report for work;
another employee, Eleonor Quianola, also did not report for work although she did not
file a request for leave of absence; on July 23, 1990 the said nine (9) employees did not
report for work; because of this unusual incident, the management decided to make an
inventory of the transactions in Agencia Cebuana and the rematado diamond-studded
jewelry; the inventory showed that the pawnshop incurred a considerable loss as a
result of the anomalous overpricing of pawned items and the employees immediately
responsible were Gloria Adriano, Florida Talledo and Leiden Fernandez, being the
appraiser, writer and payer, respectively; the inventory also showed that of the
rematado diamond-studded jewelries, items worth P1,592,200.00 were lost for which
Florida Villaceran and Emilia Negapatan were directly responsible, being the employees
entrusted with their safekeeping; a case of Estafa was filed on July 24, 1990 before the
Office of the City Prosecutor of Cebu City against Gloria Adriano, Florida Talledo,
Leiden Fernandez, Asteria Campo, Brenda Gadiano, Florida Villaceran, Emilia
Negapatan, and Jesus Tomongha and three (3) other unknown persons; a case of Theft
was filed on August 16, 1990 with the Office of the City Prosecutor of Cebu City against
Florida Villaceran and Emilia Negapatan; when Lhuillier left for Hongkong on July 19,
1990, she did not terminate the employment of Gloria Adriano nor was she advised not
to report for work, although a letter was served upon her requiring her to explain within
72 hours why she should not be terminated from her employment; when Lhuillier arrived
from Hongkong, she caused to be served upon the eight (8) petitioners who joined
Adriano, letters dated July 25, 1990 requiring them to explain the sudden abandonment
of their posts; petitioners, except Lim, instead of giving an explanation, claimed that
their employment[s] were terminated on July 19, 1990; Lhuillier was prevented from
pursuing any action in respect of the illegal abandonment of their work by the nine (9)
petitioners because she was served with summons in the instant case; petitioners did
not report for work and voluntarily abandoned their work on July 19, 1990 in order to
dramatize their sympathy for Gloria Adriano, and they were not dismissed from their
employment; their demand for an award of damages and attorneys fees was
unwarranted; petitioners had no cause of action against Lhuillier because they were not
terminated from employment; and Quianola could not have been terminated from
employment on July 21, 1990 because Lhuillier was in Hongkong at that time (Rec., pp.
96-108).
6. Trial on the merits ensued and hearings were scheduled on July 5, 8, and 12, 1991.

7. The hearing scheduled on July 5, 1991 was, however, postponed by agreement of

the parties as shown in the minutes of the proceedings on July 8, 1991:

xxxxxxxxx

REMARKS

This case was scheduled for the cross-examination of the last witnesses (sic), Marilyn
Lim, who is one of the complainants of this (sic) consolidated cases.

The scheduled dates was (sic) July 5, 8, and 12, 1991 which dates were for the
crossexamination (sic) of Marilyn Lim and for the respondents to present their evidence.

The July 5, 1991 (sic) was postponed upon aggreement [sic] of the parties and counsels
and that it was aggreed (sic) the repondents (sic) counsel will cross examine Marilyn
Lim on July 8, 1991 and for the respondents to present their evidence on July 12,
1991. In as much (sic) as the respondents and their counsel failed to appear today to
cross-examine Marilyn Lim, we moved that the respondent be declared having waived
their rights (sic) to cross-examine Marilyn Lim. (Rec., p. 176).

8. On July 8, 1991, counsel for petitioners filed Complainants Formal Offer of Evidence
(Rec., pp. 182-187).

9. At the hearing scheduled on July 12, 1991, Atty. Seno and Lhuillier failed to
appear. Thus, counsel for petitioners submitted the instant case for resolution (Rec., p.
181).

10. On July 18, 1991, a Ruling was issued by Labor Arbiter Velasquez, admitting
complainants exhibits (Rec., pp. 189-190).

11. On July 30, 1991, counsel for petitioners filed an Urgent Motion For Early Decision
(Rec., pp. 191-193).

12. On August 6, 1991, Atty. Seno filed a Comment to the Offer of Exhibits With
Counter-Manifestation stating that:

[T]he failure of undersigned to appear on the date of hearing was for the reason that his
car bogged down, as in fact he called up the Office of the Hearing Officer. While his
absence may be considered a waiver to cross-examine the witness, it cannot be taken
to mean forfeiture of the right to present admissible evidence against the complainant
witness. (Rec., pp. 195-197)
13. On August 9, 1991, Atty. Seno filed his Comment on Complainants Urgent Motion
For Early Decision praying that Lhuillier be given a period of ten (10) days from August
9, 1991 within which to submit additional affidavits and thereafter to consider the cases
submitted for resolution (Rec., pp. 199-200).

14. On August 15, 1991, petitioners filed a Counter-Comment On Respondents

Comment of [sic] Motion For Early Decision alleging that under Rule VII, Section 10 (c)
of the Revised Rules of Court of the NLRC which reads:

xxxxxxxxx

c) In case of unjustified non-appearance by the respondent during her/his turn to

present evidence, despite due notice, the case shall be considered submitted for
decision on the basis of the evidence so far presented.

the non-appearance of Lhuillier or its counsel on the scheduled dates of hearing on July
8 and 12, 1991, was clearly unjustified (Rec., pp. 202-205).

15. On October 14, 1991, Atty. Seno filed a Motion Reiterating The Request For
Submission Of Additional Affidavits therein alleging that Lhuilliers previous motion to
present additional affidavits had not been acted upon; and that he had not received an
order considering the instant case submitted for resolution. With the motion, Lhuillier
submitted the affidavits of additional witnesses, praying that said supplemental affidavits
be admitted and presentation of additional evidence be allowed (Rec., pp. 207-209).

16. On October 16, 1991, petitioners filed an Opposition On [sic] Respondents Request
For Submission Of Additional Affidavits And Urgent Motion To Release Decision,
alleging that counsel for Lhuillier was given ample opportunity to present his evidence;
that by his failure to appear at the scheduled hearings without any reason or prior
motion for postponement, he was deemed to have waived his right to present evidence;
and that about the later part of August 1991, upon learning that Labor Arbiter Velasquez
would be transferred to NLRC, Tacloban, they (petitioners) inquired about the status of
the instant case and they were informed by Labor Arbiter Velasquez that a Decision
was already rendered (Rec., pp. 203-205).

On August 30, 1991, the labor arbiter rendered a decision in favor of petitioners. On
appeal,Respondent NLRC vacated the labor arbiters order and remanded the case for
further proceedings. It subsequently denied the motion for reconsideration.

Respondent NLRCs Ruling

Ruled the NLRC:[8]

In resolving this issue [of due process], it is necessary to go over the pertinent
provisions of the 1990 NLRC Rules of Procedure, more particularly Sec. 11, Rule V.
Rule V - Proceedings Before the Labor Arbiters:

Section 11. Non-appearance of Parties at Conference/Hearings. - (a) Two (2)

successive absences at a conference/hearing by the complainant or petitioner, who was
duly notified thereof may be sufficient cause to dismiss the case without
prejudice. Where proper justification, however, is shown by proper motion to warrant the
re-opening of the case, the Labor Arbiter shall call a second hearing and continue the
proceedings until the case is finally decided. Dismissal of the case for the second time
due to the unjustified non-appearance of the complainant or petitioner who was duly
notified thereof shall be with prejudice.

b) In case of two (2) successive non-appearances by the respondent, despite due

notice, during the complainants presentation of evidence, the complainant shall be
allowed to present evidence ex-parte, subject to cross-examination by the respondent,
where proper, at the next hearing. Upon completion of such presentation of evidence for
the complainant, another notice of hearing for the reception of the respondents
evidence shall be issued, with a warning that failure of the respondent to appear shall
be construed as submission by him of the case for resolution without presenting his
evidence.

c) In case of two (2) successive unjustified non-appearances by the respondent during

his turn to present evidence, despite due notice, the case shall be considered submitted
for decision on the basis of the evidence so far presented.

The established fact is that July 8 and 12, 1991 were the scheduled dates for the cross-
examination of Marilyn Lim, last witness for the complainants and the start of
respondents presentation of evidence. It is also not disputed that respondent and
counsel failed to appear at the July 8 hearing. A scrutiny of the minutes of the July 8,
1991 hearing would however reveal that that date was alloted [sic] purposely for the
cross-examination of Marilyn Lim and that respondents presentation of evidence would
start on July 12, 1991. (page 176, records) Technically, the Labor Arbiter was correct in
ruling that respondent had waived her right to cross-examine complainant Marilyn Lim
when she failed to appear on July 8, 1991. But definitely, it was error for him to consider
the case submitted for decision when respondent failed to appear on July 12, 1991. The
above-cited rules are clear and explicit. It takes two successive and unjustified non-
appearance on the part of respondent before he or she can be considered to have
waived his/her right to present evidence and thereafter to consider the case submitted
for decision on the basis of the evidence thus far presented. Respondents absence on
July 12, 1991 was but her first since, as pointed out, it was on that day that she was
supposed to start presenting her evidence. What the Labor Arbiter should have done
was to set another date for the reception of respondents evidence. If she still failed to
appear, his reliance on Sec. 11 (c), Rule V of the New Rules of Procedure of the NLRC
would have been justified and this Commission would not hesitate to uphold him on that
respect. As it is, the questioned ruling was, indeed, premature to say the least. While
concern for the less privileged workers and speediin [sic] the disposition of labor cases
are highly commendable, those considerations should not run roughshod over well-
established principles of due process.

It may be argued that the evidence sought to be introduced by respondent are

contained in the additional affidavits which now form part of the records, hence this
Commission can now decide this appeal on the merits. It is with more reason that this
case should be remanded not only to allow respondent to formally present her
evidence, but also to allow complainants to cross-examine and confront their accusers.
(Underscoring supplied.)

Not satisfied, petitioners filed the present petition before us under Rule 65 of the
Rules of Court.[9]

The Issues

Petitioners submit to this Court the following issues:[10]

A

The Honorable Commission has committed serious reversible error amounting to a

grave abuse of discretion and in excess of jurisdiction in finding that the private
respondent was not afforded due process by the hearing labor arbiter, particularly the
reception of private respondents evidence.

The Honorable Commission has committed serious reversible error amounting to a

grave abuse of discretion and in excess of jurisdiction in finding that the declaration by
the hearing labor arbiter submitting these cases for decision on July 12, 1991 was not in
accordance with Rule V Section II of the 1990 New Rules of Procedure of the NLRC
(attached hereto as annex C).

The Honorable Commission has committed serious reversible error amounting to a

grave abuse of discretion and in excess of jurisdiction in giving importance to private
respondents additional alleged affidavits which were filed only on October 14, 1991
(attached hereto as annex G-1), by way of attaching the same in private respondents
motion reiterating request for submission of additional affidavits (attached hereto as
annex G), long after the hearing labor arbiter rendered a decision on August 30, 1992
(attached hereto as annex E), contrary to the private respondents prayer and
commitment (attached hereto as annex F-1).

D
The Honorable Commission has committed serious reversible error amounting to a
grave abuse of discretion, in substance and in law, in not modifying the appealed
decision of the hearing labor arbiter (attached hereto as annex E) with respect to the
accuracy of the monetary awards pursuant to the pertinent provisions of the Labor
Code, its implementing rules and regulations and pursuant particularly to the celebrated
case of Roche (Philippines), et als. [sic] vs. NLRC, et als., [sic] G.R. No. 83335, October
12, 1989.

The Honorable Commission has no jurisdiction to entertain private respondents two

appeals.

Put differently but more plainly, the issues in this case are as follows:
1. Did the NLRC acquire jurisdiction over the appeal notwithstanding the alleged
insufficiency of the appeal bond?
2. Were private respondents deprived of due process of law by the labor arbiter?
3. Were petitioners illegally dismissed?
4. Assuming petitioners were illegally dismissed, was the computation of the backwages,
service incentive leave pay and damages valid and correct?

The Courts Ruling

The petition is meritorious. We hold that the private respondents were not denied due
process of law by the labor arbiter; and that nine of the petitioners were illegally dismissed,
but that Petitioners Lim and Canonigo were not.

First Issue: Insufficiency of Appeal Bond

Petitioners contend that Respondent NLRC did not acquire jurisdiction over the
appeal of private respondents because the appeal bond was insufficient. Although the
total monetary award in their favor was P1,078,200.55, private respondents posted a
cash bond in the amount of P752,183.00 only. In computing the monetary award for the
purpose of posting an appeal bond, private respondents relied on Rule VI, Section 6, of
the 1990 New Rules of Procedure of the NLRC and excluded the award for damages,
litigation expenses and attorneys fees. Petitioners argue however that the said rule
cannot prevail over Article 223 of the Labor Code, which does not provide for such
exclusion.
We agree with private respondents. Article 223 of the Labor Code provides:

xxxxxxxxx
In case of a judgment 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.

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall immediately be
executory, even pending appeal. The employee shall either be admitted back to work
under the same terms and conditions prevailing prior to his dismissal or separation or,
at the option of the employer, merely reinstated in the payroll. The posting of a bond by
the employer shall not stay the execution for reinstatement provided therein. x x
x. (Underscoring supplied.)

On the other hand, Rule VI, Section 6 of the 1990 NLRC New Rules of
Procedure,[11] invoked by private respondent, provides:

Section 6. Bond. In case of the decision of a Labor Arbiter involves a monetary award,
an appeal by the employer shall be perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly accredited by the Commission or the
Supreme Court in an amount equivalent to the monetary award.

The Commission may, in meritorious cases and upon Motion of the Appellant, reduce
the amount of the bond. However, an appeal is deemed perfected upon the posting of
the bond equivalent to the monetary award exclusive of moral and exemplary damages
as well as attorneys fees.

Nothing herein however, shall be construed as extending the period of

appeal. (Underscoring supplied.)

There is no conflict between the two provisions. Article 223 lays down the requirement
that an appeal bond should be filed. The implementing rule, on the other hand, explains
how the appeal bond shall be computed. The rule explicitly excludes moral and exemplary
damages and attorneys fees from the computation of the appeal bond. This exclusion has
been recognized by the Court in a number of cases.Hence, in Erectors vs. NLRC, [12] the
Court nullified an NLRC order requiring the posting of an appeal bond which, among
others, even included in the computation the award of P400,000.00 for moral and
exemplary damages. Indeed, the said implementing rule is a contemporaneous
construction of Article 223 by the NLRC pursuant to the mandate of the Labor Code;
hence, it is accorded great respect by this Court.[13]
In line with the desired objective of our labor laws to resolve controversies on their
merits, the Court has held that the filing of a bond in appeals involving monetary awards
should be given liberal construction.[14] The rule requiring the employer to post a cash or
surety bond to perfect his appeal assures the workers that they will receive the money
judgment awarded to them upon the dismissal of the employers appeal. It also
discourages employers from using an appeal to delay or even evade their obligation to
satisfy the just and lawful claims of their employees.[15]
 Hence, deducting from the total monetary award of P1,078,200.55 the amount
of P200,000.00 for moral and exemplary damages, P98,018.25 for attorneys fees
and P30,000.00 for litigation expenses, the amount of the bond should
be P750,182.55. Thus, the appeal bond actually posted in the amount of P752,183 is
even more than the amount of appeal bond that may be required from private respondents
under Respondent NLRCs rules.

Second Issue: No Denial of Due Process

The NLRC ruled that private respondents were denied due process because the labor
arbiter deemed the case submitted for resolution when they failed to attend the hearings
on July 8 and 12, 1991. Under the NLRC Rules of Procedure, a case may be deemed
submitted for decision on the basis of the evidence thus far adduced in the event
respondent incurs two successive absences during his turn to present evidence.While the
hearing on July 12, 1991 was for the presentation of herein private respondents evidence,
the NLRC found that the hearing on July 8, 1991 was scheduled for the cross-examination
of petitioners witness. Since the absences were not made during respondents turn to
present evidence, public respondent remanded the case to the labor arbiter for further
proceedings.
Petitioners dispute the NLRC ruling, contending that the parties in this case were able
to submit their respective position papers together with supporting affidavits and other
documents. They stress that private respondents failure to attend the hearings on July 8
and 12, 1991, without any justification or a motion for postponement, warranted the
submission of the case for decision pursuant to Section 11, Rule V of the 1990 New Rules
of Procedure of the NLRC. They insist that the hearing on July 8, 1991 was scheduled to
afford private respondents not only an opportunity to cross-examine petitioners last
witness, Marilyn Lim, [but also] to start the presentation of [their] evidence xxx. [16]
On the other hand, private respondents argue that the labor arbiter erred in
considering the absence of their counsel during the hearings scheduled on July 8 and
July 12, 1991 as waiver not only of the right to cross-examine but of the right to present
evidence. They further contend that the labor arbiter released his decision
notwithstanding the pendency of three unresolved motions.[17] These circumstances
clearly show that they were not afforded due process of law.[18]
To make a clear ruling, we again cite Rule V, Section 11 of the 1990 Rules of
Procedure of Respondent NLRC, which provides:

Section 11. Non-appearance of Parties at Conference/Hearings. -- (a) Two (2)

successive absences at a conference/hearing by the complainant or petitioner, who was
duly notified thereof, may be sufficient cause to dismiss the case without
prejudice. Where proper justification, however, is shown by proper motion to warrant the
re-opening of the case, the Labor Arbiter shall call a second hearing and continue the
proceedings until the case is finally decided. Dismissal of the case of the second time
due to the unjustified non-appearance of the complainant or petitioner who was duly
notified thereof shall be with prejudice.

(b) In case of two (2) successive non-appearances by the respondent, despite due
notice, during the complainants presentation of evidence, the complainant shall be
allowed to present evidence ex parte, subject to cross-examination by the respondent,
where proper, at the next hearing. Upon completion of such presentation of evidence for
the complainant, another notice of hearing for the reception of the respondents
evidence shall be issued, with a warning that failure of the respondent to appear shall
be construed as submission by him of the case for resolution without presenting his
evidence.

(c) In case of two (2) successive unjustified non-appearances by the respondent during
his turn to present evidence, despite due notice, the case shall be considered submitted
for decision on the basis of the evidence so far presented. (Underscoring supplied).

It is undisputed that private respondents counsel failed to attend the hearings on the
two aforementioned dates. Moreover, the labor arbiter[19] and the NLRC held that the
hearing on July 8, 1991 was only for the cross-examination of herein petitioners witness,
while that on July 12, 1991 was for the reception of private respondents evidence. This
notwithstanding, we hold that the NLRC committed grave abuse of discretion in
remanding the case to the labor arbiter.
Private respondents were able to file their respective position papers and the
documents in support thereof, and all these were duly considered by the labor
arbiter.[20] Indeed, the requirements of due process are satisfied where the parties are
given the opportunity to submit position papers.[21] In any event, Respondent NLRC and
the labor arbiter are authorized under the Labor Code to decide a case on the basis of
the position papers and documents submitted.[22] The holding of an adversarial trial
depends on the discretion of the labor arbiter, and the parties cannot demand it as a
matter of right. In other words, the filing of position papers and supporting documents
fulfilled the requirements of due process.[23] Therefore, there was no denial of this right
because private respondents were given the opportunity to present their side.[24]
Moreover, it should be noted that private respondents did not dispute the order of the
labor arbiter submitting the case for decision immediately after its issuance. Likewise,
they failed to present additional evidence on the date they themselves specified. It was
only on August 6, 1991 that private respondents counsel, in his Comments to the Offer of
Exhibits[25] with counter-manifestation, explained his failure to appear at the hearing on
July 8, 1991. His explanation, quoted below, is not compelling.[26]

The failure of the undersigned to appear on the date of hearing was for the reason that
his car bogged down, as in fact he called up the Office of the Hearing Officer. While his
absence may be considered a waiver to cross-examine the witness, it cannot be taken
to mean forfeiture of the right to present admissible evidence against the complainant-
witness.
 Three days later on August 9, 1991, private respondents moved that they be given a
period of ten days from August 9, 1991 -- or until August 19, 1991 -- within which to submit
additional affidavits, after which, the cases will be deemed submitted for resolution on the
basis of complainants evidence and respondents position paper and the additional
affidavits.[27] Counsel, however, failed to submit the supposed evidence on said date. On
October 14, 1991, private respondents filed a Motion Reiterating the Request for
Submission of Additional Affidavits.[28] Again, private respondents did not submit the said
documents.
As earlier noted, the essence of due process is simply an opportunity to be heard, to
explain ones side, or to seek a reconsideration of the action or ruling complained of. In
the case at bar, private respondents were given ample opportunity to do just that but they
failed, for unknown reasons, to avail themselves of such opportunity. They themselves
moved that they be allowed to present additional affidavits on August 19, 1991, but they
never did; no valid reason was given for their failure to do so. Their contention that the
labor arbiter failed to rule on their motion deserves scant consideration. It is axiomatic in
fact, it is plainly commonsensical that when a counsel asks for an extension of time within
which to file a pleading, he must be ready with that pleading on the date specified in his
motion, even absent a resolution or order disposing of his motion.
We cannot remand the instant case to the labor arbiter for further
proceedings. Respondent NLRC, on the basis of the evidence on record, could have
resolved the dispute. To remand it to the labor arbiter is to delay needlessly the disposition
of this case, which has been pending since July 23, 1990. It becomes our duty under the
circumstances to determine the validity of the allegations of the parties. Remanding the
case to the labor arbiter will just frustrate speedy justice and, in any event, would be a
futile exercise, as in all probability the case would end up with this Court. We shall thus
rule on the substantial claims of the parties.

Third Issue: Petitioners Were Illegally Dismissed

Private respondents controvert the claim of illegal dismissal by maintaining that

petitioners abandoned their employment. They aver that on July 19, 1990, Petitioner
Gloria Adriano, pawnshop appraiser, over-declared the weights and values of pawned
pieces of jewelry, which allegedly caused a loss of at least P174,850. In a letter dated
July 19, 1990, they required Petitioner Adriano to explain within 72 hours why her
employment should not be terminated. On July 20, 1990, however, Petitioner Adriano
together with Petitioners Asteria Campo, Leiden Fernandez, Brenda Gadiano, Emilia
Negapatan, Eleonor Quianola, Jesus Tomongha, Florida Talledo and Florida Villaceran
allegedly did not report for work without any excuse. Thus, private respondents concluded
that petitioners abandoned their employment. They also state that they intended to
pursue legal action against the said petitioners for illegal abandonment. But before they
could do so, they received summons requiring them to respond to the complaints of illegal
dismissal filed by the said nine petitioners.[29]
 On the other hand, petitioners maintain that on July 19, 1990, Private Respondent
Marguerite Lhuillier, the pawnshop owner, told them not to report for work because their
employment had been terminated.Thus, they did not report for work the following day,
July 20, 1990. On July 23, 1990, they filed their respective complaints before the Regional
Arbitration Board of Respondent NLRC.
In view of the conflicting claims of the parties, we examined the records of this case
and found that private respondents did not abandon their employment; rather, they were
illegally dismissed.
To succeed in pleading abandonment as a valid ground for dismissal, the employer
must prove (1) the intention of an employee to abandon his or her employment and (2)
an overt act from which such intention may be inferred; i.e., the employee showed no
desire to resume his work.[30] Mere absence is not sufficient.The employer must prove a
deliberate and unjustified refusal of the employee to resume his employment without any
intention of returning.[31] Private respondents failed to discharge this burden. The claim of
abandonment was inconsistent with the immediate filing of petitioners complaint for illegal
dismissal and prayer for reinstatement. For how can an inference be made that an
employee had no intention of returning to work, when he filed a complaint for illegal
dismissal praying for reinstatement three days after the alleged
abandonment?[32] Moreover, considering that petitioners had been with Pawnshop Lhuillier
for several years -- ranging from six (6) years to thirty three (33) years -- it is unlikely that
they would simply leave their employment. Clearly, there is no cogent basis for private
respondents theory that said petitioners abandoned their work. In this light, we sustain
the finding of the labor arbiter that said petitioners were illegally dismissed, with neither
just cause nor due process.

Petitioners Lim and Canonigo Resigned

The foregoing holding cannot apply to Petitioners Marilyn Lim and Joseph Canonigo,
however.
Lim claims that Private Respondent Lhuillier forced her to resign, but at the same
time assured her of separation pay.[33] On February 5, 1990, prior to Lims letter of
resignation dated February 24, 1990,[34] her lawyer proposed the following to Private
Respondent Lhuillier:[35]

1. That our client Ms. Marilyn Lim be given immediately a clearance upon resignation
from your good company and payment of separation pay at the rate of one month per
year of service; and

2. That our client is willing to execute a promissory note on her indebtedness, and will
pay upon the same terms prevailing before her resignation. Our clients ability to settle
her indebtedness should be given kind consideration by your company considering that
her eventual resignation will render her jobless for a while.Besides, per Investigation
Report No. 2, Series of 1990, conducted by your Resident Counsel, Atty. Malcolm V.
Seno, our client has impressed your Resident Counsel as a person of much valor and
great determination when she immediately admitted her guilt.

3. That the various checks she endorsed to your company be returned to our client, so
that she could file a case against the issuers or drawers of the same, be it criminal or
civil in nature. (Emphasis supplied).

Petitioner Lims testimony[36] that she has never been informed of any wrongdoing until
her termination is belied by her assertions in the aforequoted letter. Her admission of the
offense charged shows that shewas not coerced to resign. Besides, the fact that her
complaint for illegal dismissal was filed long after her resignation on February 24, 1990
suggests that it was a mere afterthought.
On the other hand, Petitioner Canonigo contends that he was forced to sign his letter
of resignation dated July 14, 1990, because Private Respondent Lhuillier received reports
from other employees that he was responsible for some anomalies in the pawnshop. He
also stated that he resigned because he was assured of separation pay.[37] Like Petitioner
Lim, he did not immediately file a complaint for illegal dismissal, doing so only on July 23,
1990. From the foregoing facts, we see no cogent basis for holding that he was forced to
resign. On the contrary, we find that he voluntarily tendered his resignation on the
assurance of separation pay. Clearly, Petitioner Canonigo, like Lim, was not dismissed;
rather, he resigned voluntarily.

Fourth Issue: Service Incentive Leave Pay and Damages

In his decision, the labor arbiter granted varying amounts of service incentive leave
pay to the petitioners based on the length of their tenure; i.e, the shortest was six years
and the longest was thirty-three years. While recommending that the labor arbiters
decision be reinstated substantially, the solicitor general recommended that the award of
service incentive leave be limited to three years. This is based on 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.

x x x x x x x x x.
Petitioners counter that Article 291 speaks clearly on the prescription of filing [an]
action upon monetary claims within three (3) years from the time the cause of action
accrued, but it is not a prescription of a period of time for the computation of monetary
claims.[38]
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[39] 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.[40] It is also commutable to its money equivalent if not
used or exhausted at the end of the year.[41] 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. The law indeed does not prohibit its commutation. Moreover, the
solicitor generals recommendation is contrary to the ruling of the Court in Bustamante et
al. vs. NLRC et al.[42] lifting the three-year restriction on the amount of backwages and
other allowances that may be awarded an illegally dismissed employee, thus:

Therefore, in accordance with R.A. No. 6715, petitioners are entitled to their full
backwages, inclusive of allowances and other benefits or their monetary equivalent,
from the time their actual compensation was withheld from them up to the time of their
actual reinstatement. (Underscoring supplied.)

Since a service incentive leave is clearly demandable after one year of service --
whether continuous or broken -- or its equivalent period, and it is one of the benefits which
would have accrued if an employee was not otherwise illegally dismissed, it is fair and
legal that its computation should be up to the date of reinstatement as provided under
Section 279 of the Labor Code, as amended, which reads:

ART. 279. Security of Tenure. -- An employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and other privileges and to
his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation is withheld from him up to the time
of his actual reinstatement. (underscoring supplied).

However, the Implementing Rules clearly state that entitlement to benefit provided
under this Rule shall start December 16, 1975, the date the amendatory provision of the
[Labor] Code took effect.[43] Hence, petitioners, except Lim and Canonigo, should be
entitled to service incentive leave pay from December 16, 1975 up to their actual
reinstatement.
Petitioners, citing Roche Philippines et al. vs. NLRC et al.,[44] further contend that the
award of damages in the case at bar should be increased, for there are eleven (11)
complainants/petitioners whose long years of employment was illegally, oppressively and
wantonly terminated by the private respondent.[45]
We disagree. Determination of the amount of moral damages and attorneys fees is
best left to the discretion of the labor arbiter.[46] Moral damages are recoverable where the
dismissal of the employee was attended by bad faith or fraud, or it constituted an act
oppressive to labor, or it was done in a manner contrary to morals, good customs or public
policy.[47] In the case before us, records show that petitioners dismissals were done
oppressively and in bad faith, for they were just summarily dismissed without even the
benefit of notice and hearing. The well-settled rule is that the employer shall be
sanctioned for noncompliance with the requirements of, or for failure to observe, due
process in dismissing its employees.[48] Petitioners were likewise subjected to
unnecessary embarrassment or humiliation because of the filing of the criminal charge of
qualified theft, which was later dismissed[49] by the investigating prosecutor.[50] It follows
then that the award of attorneys fees is likewise proper, for the defendants act or omission
has compelled the plaintiff to litigate with third persons or to incur expenses to protect his
interest.[51]

Full Backwages for Dismissals Effected After March 21, 1989

Having determined that petitioners, except Lim and Canonigo, were illegally
dismissed, we next resolve the question of whether Respondent NLRC gravely abused
its discretion in ordering the reinstatement of dismissed employees and the payment to
them of full backwages; or, if reinstatement was no longer feasible, whether the grant to
them of separation pay plus backwages was correct. In several cases,[52] this Court has
held that illegally dismissed employees are entitled to reinstatement and full
backwages. If reinstatement is not possible, the employees are entitled to separation pay
and full backwages.Accordingly, the award to petitioners of backwages for three years
should be modified in accordance with Article 279 [53] of the Labor Code, as amended by
R.A. 6715, by giving them full backwages without conditions and limitations, the
dismissals having occurred after the effectivity of the amendatory law on March 21,
1989.[54] Thus, the Court held in Bustamante:[55]

The clear legislative intent of the amendment in Rep. Act No. 6715 is to give more
benefits to workers than was previously given them under the Mercury Drug rule or the
deduction of earnings elsewhere rule. Thus, a closer adherence to the legislative policy
behind Rep. Act No. 6715 points to full backwages as meaning exactly that, i.e., without
deducting from backwages the earnings derived elsewhere by the concerned employee
during the period of his illegal dismissal.

WHEREFORE, the petition is hereby GRANTED and the assailed Decision and
Resolution are REVERSED and SET ASIDE. The labor arbiters decision
is REINSTATED with MODIFICATIONS, such that the award of separation pay is deleted
and the service incentive leave pay is computed from December 16, 1975 up to petitioners
actual reinstatement. Full backwages, including the accrued thirteenth month pay, are
also awarded to the nine petitioners -- Leiden Fernandez, Brenda Gadiano, Gloria
Adriano, Emelia Negapatan, Jesus Tomongha, Eleonor Quianola, Asteria Campo, Florida
Villaceran and Florida Talledo -- from the date of their illegal dismissal to the time of their
actual reinstatement. Petitioners Lim and Canonigo, whom we find to have voluntarily
resigned, are not entitled to any benefit.
SO ORDERED.
 22. Integrated Contractor and Plumbing Works, Inc. v. NLRC, G.R. No. 152427, August 9,
2005

G.R. No. 152427. August 9, 2005

INTEGRATED CONTRACTOR AND PLUMBING WORKS, INC., Petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and GLEN SOLON, Respondent.

DECISION

QUISUMBING, J.:

This petition for review assails the Decision1 dated October 30, 2001 of the Court of Appeals and
its Resolution2 dated February 28, 2002 in CA-G.R. SP No. 60136, denying the petitioners motion
for reconsideration for lack of merit. The decision affirmed the National Labor Relations Commission
(NLRC) which declared private respondent Glen Solon a regular employee of the petitioner and
awarded him 13th month pay, service incentive leave pay, reinstatement to his former position with
full backwages from the time his salary was withheld until his reinstatement.

Petitioner is a plumbing contractor. Its business depends on the number and frequency of the
projects it is able to contract with its clients.3

Private respondent Solon worked for petitioner. His employment records is as follows:

December 14, 1994 up to January 14, 1995 St. Charbel Warehouse

February 1, 1995 up to April 30, 1995 St. Charbel Warehouse

May 23, 1995 up to June 23, 1995 St. Charbel Warehouse

August 15, 1995 up to October 31, 1995 St. Charbel Warehouse

November 2, 1995 up to January 31, 1996 St. Charbel Warehouse

May 13, 1996 up to June 15, 1996 Ayala Triangle

August 27, 1996 up to November 30, 1996 St. Charbel Warehouse4

July 14, 1997 up to November 1997 ICPWI Warehouse

November 1997 up to January 5, 1998 Cathedral Heights

January 6, 1998 Rockwell Center5

On February 23, 1998, while private respondent was about to log out from work, he was informed by
the warehouseman that the main office had instructed them to tell him it was his last day of work as
he had been terminated. When private respondent went to the petitioners office on February 24,
1998 to verify his status, he found out that indeed, he had been terminated. He went back to
petitioners office on February 27, 1998 to sign a clearance so he could claim his 13th month pay
and tax refunds. However, he had second thoughts and refused to sign the clearance when he read
the clearance indicating he had resigned. On March 6, 1998, he filed a complaint alleging that he
was illegally dismissed without just cause and without due process.6

In a Decision dated February 26, 1999, the Labor Arbiter ruled that private respondent was a
regular employee and could only be removed for cause. Petitioner was ordered to reinstate private
respondent to his former position with full backwages from the time his salary was withheld until his
actual reinstatement, and pay him service incentive leave pay, and 13th month pay for three years in
the amount of 2,880 and 14,976, respectively.

Petitioner appealed to the National Labor Relations Commission (NLRC), which ruled:

WHEREFORE, prescinding from the foregoing and in the interest of justice, the decision of the Labor
Arbiter is hereby AFFIRMED with a MODIFICATION that the 13th month pay should be given only
for the year 1997 and portion of 1998. Backwages shall be computed from the time he was illegally
dismissed up to the time of his actual reinstatement. Likewise, service incentive leave pay for three
(3) years is also awarded to appellee in the amount of P2,880.00.

SO ORDERED.7

Petitioners Motion for Reconsideration was denied.8

Petitioner appealed to the Court of Appeals, alleging that the NLRC committed grave abuse of
discretion in finding that the private respondent was a regular employee and in awarding 13th month
pay, service incentive leave pay, and holiday pay to the private respondent despite evidence of
payment. The said petition was dismissed for lack of merit.9

Before us now, petitioner raises the following issues: (1) Whether the respondent is a project
employee of the petitioner or a regular employee; and (2) Whether the Court of Appeals erred
seriously in awarding 13th month pay for the entire year of 1997 and service incentive leave pay to
the respondent and without taking cognizance of the evidence presented by petitioner.10

The petitioner asserts that the private respondent was a project employee. Thus, when the project
was completed and private respondent was not re-assigned to another project, petitioner did not
violate any law since it was petitioners discretion to re-assign the private respondent to other
projects.11

Article 280 of the Labor Code states:

The provisions of written agreement of the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the usual business or
trade of the employer, except 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 or where the work or services to be performed is seasonal in nature
and the employment is for the duration of the season (Italics supplied.)

We held in Tomas Lao Construction v. NLRC12 that the principal test in determining whether an
employee is a "project employee" or "regular employee," is, whether he is assigned to carry out a
"specific project or undertaking," the duration (and scope) of which are specified at the time the
employee is engaged in the project.13 "Project" refers to a particular job or undertaking that is within
the regular or usual business of the employer, but which is distinct and separate and identifiable
from the undertakings of the company. Such job or undertaking begins and ends at determined or
determinable times.14

In our review of the employment contracts of private respondent, we are convinced he was initially a
project employee. The services he rendered, the duration and scope of each project are clear
indications that he was hired as a project employee.

We concur with the NLRC that while there were several employment contracts between private
respondent and petitioner, in all of them, private respondent performed tasks which were usually
necessary or desirable in the usual business or trade of petitioner. A review of private respondents
work assignments patently showed he belonged to a work pool tapped from where workers are and
assigned whenever their services were needed. In a work pool, the workers do not receive salaries
and are free to seek other employment during temporary breaks in the business. They are like
regular seasonal workers insofar as the effect of temporary cessation of work is concerned. This
arrangement is beneficial to both the employer and employee for it prevents the unjust situation of
"coddling labor at the expense of capital" and at the same time enables the workers to attain the
status of regular employees.15 Nonetheless, the pattern of re-hiring and the recurring need for his
services are sufficient evidence of the necessity and indispensability of such services to petitioners
business or trade.16

In Maraguinot, Jr. v. NLRC17 we ruled that once a project or work pool employee has been: (1)
continuously, as opposed to intermittently, re-hired by the same employer for the same tasks or
nature of tasks; and (2) these tasks are vital, necessary and indispensable to the usual business or
trade of the employer, then the employee must be deemed a regular employee.

In this case, did the private respondent become a regular employee then?

The test to determine whether employment is regular or not is the reasonable connection between
the particular activity performed by the employee in relation to the usual business or trade of the
employer. Also, if the employee has been performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law deems the repeated and continuing
need for its performance as sufficient evidence of the necessity, if not indispensability of that activity
to the business.18 Thus, we held that where the employment of project employees is extended long
after the supposed project has been finished, the employees are removed from the scope of project
employees and are considered regular employees.19

While length of time may not be the controlling test for project employment, it is vital in determining if
the employee was hired for a specific undertaking or tasked to perform functions vital, necessary
and indispensable to the usual business or trade of the employer. Here, private respondent had
been a project employee several times over. His employment ceased to be coterminous with specific
projects when he was repeatedly re-hired due to the demands of petitioners business.20 Where from
the circumstances it is apparent that periods have been imposed to preclude the acquisition of
tenurial security by the employee, they should be struck down as contrary to public policy, morals,
good customs or public order.21

Further, Policy Instructions No. 20 requires employers to submit a report of an employees

termination to the nearest public employment office every time his employment was terminated due
to a completion of a project. The failure of the employer to file termination reports is an indication
that the employee is not a project employee.22 Department Order No. 19 superseding Policy
Instructions No. 20 also expressly provides that the report of termination is one of the indications of
project employment.23 In the case at bar, there was only one list of terminated workers submitted to
the Department of Labor and Employment.24 If private respondent was a project employee, petitioner
should have submitted a termination report for every completion of a project to which the former was
assigned.

Juxtaposing private respondents employment history, vis the requirements in the test to determine if
he is a regular worker, we are constrained to say he is.

As a regular worker, private respondent is entitled to security of tenure under Article 279 of the Labor
Code25 and can only be removed for cause. We found no valid cause attending to private
respondents dismissal and found also that his dismissal was without due process.

Additionally, Article 277(b) of the Labor Code provides that

... Subject to the constitutional right of workers to security of tenure and their right to be protected
against dismissal except for a just and authorized cause and without prejudice to the requirement of
notice under Article 283 of this Code, the employer shall furnish the worker whose employment is
sought to be terminated a written notice containing a statement of the causes for termination and
shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his
representative if he so desires in accordance with company rules and regulations promulgated
pursuant to guidelines set by the Department of Labor and Employment

The failure of the petitioner to comply with these procedural guidelines renders its dismissal of
private respondent, illegal. An illegally dismissed employee is entitled to reinstatement with full
backwages, inclusive of allowances, and to his other benefits computed from the time his
compensation was withheld from him up to the time of his actual reinstatement, pursuant to Article
279 of the Labor Code.

However, we note that the private respondent had been paid his 13th month pay for the year 1997.
The Court of Appeals erred in granting the same to him.

Article 95(a) of the Labor Code governs the award of service incentive leave. It provides that 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, and Section 3, Rule V, Book III of the Implementing Rules and
Regulations, defines the term "at least one year of service" to mean service 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 contract is less
than 12 months, in which case said period shall be considered as one year. Accordingly, private
respondents service incentive leave credits of five days for every year of service, based on the
actual service rendered to the petitioner, in accordance with each contract of employment should be
computed up to the date of reinstatement pursuant to Article 279 of the Labor Code.26

WHEREFORE, the assailed Decision dated October 30, 2001 and the Resolution dated February
28, 2002 of the Court of Appeals in CA-G.R. SP No. 60136, are AFFIRMED with MODIFICATION.
The petitioner is hereby ORDERED to (1) reinstate the respondent with no loss of seniority rights
and other privileges; and (2) pay respondent his backwages, 13th month pay for the year 1998 and
Service Incentive Leave Pay computed from the date of his illegal dismissal up to the date of his
actual reinstatement. Costs against petitioner.

SO ORDERED.
 23. JPL Marketing Promotions v. CA, G.R. No. 151966, July 8, 2005

G.R. No. 151966 July 8, 2005

JPL MARKETING PROMOTIONS, Petitioner,

vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, NOEL GONZALES,
RAMON ABESA III and FAUSTINO ANINIPOT, Respondents.

DECISION

Tinga, J.:

This is a petition for review of the Decision1 of the Court of Appeals in CA-G.R. SP No. 62631 dated
03 October 2001 and its Resolution2 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 13th 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 cases36 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 Serrano37 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 self-destruction
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.
 24. Republic Planters Bank v. NLRC, G.R. No. 117460, Jan 6, 1997

G.R. No. 117460 January 6, 1997

REPUBLIC PLANTERS BANK now known as PNB-REPUBLIC BANK, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and ANTONIO G. SANTOS, respondents.

BELLOSILLO, J.:

ANTONIO G. SANTOS was employed by Republic Planters Bank, now known as PNB-Republic
Bank (PNB-RB), for thirty-one (31) years and fifteen (15) days occupying various positions. At the
time of his retirement on 31 May 1990 he was a Department Manager with a monthly salary of
P8,965.00 and accumulated leave credits of two hundred and seventy-two (272) days. He received a
gratuity pay of P434,468.52 out of which P20,615.62 was deducted for taxes due.

Santos filed the instant suit for underpayment of gratuity pay, non-payment of accumulated sick and
vacation leaves, mid-year and year-end bonuses, financial assistance, at the same time claiming
damages and attorney's fees.

The Labor Arbiter found for complainant Santos and this finding was affirmed by the National Labor
Relations Commission (NLRC) on appeal.

PNB-RB alleges in this petition that the resolution of NLRC is contrary to the evidence and existing
jurisprudence; that NLRC gravely abused its discretion when it upheld the order of the Labor Arbiter
awarding P661,210.63 to Santos; and, that the award to Santos of mid-year and year-end bonuses,
moral and exemplary damages and attorney's fees has no legal basis. Petitioner argues that Santos
is not entitled to the award as he signed a Release, Waiver and Quitclaim therefor when he received
his gratuity pay of P434,468.52.

We are not unaware that a quitclaim by an employee in favor of his employer amounts to a valid and
binding compromise agreement between them. 1 An agreement voluntarily entered into which
represents a reasonable settlement is binding on the parties and may not later be disowned simply
because of a change of mind. 2

On the other hand, we are not also unmindful of the principle that quitclaims are ineffective to bar
recovery for the full measure of the worker's rights 3 and that acceptance thereof does not amount to
estoppel. 4 Generally, quitclaims by laborers are frowned upon as contrary to public policy. 5 And the
fact that the consideration given in exchange thereof was very much less than the amount claimed
renders the quitclaim null and void. 6 In the instant case, the total amount claimed by Santos is
P908,022.65 of which only P434,468.52 was received by him. Considering that the Release, Waiver
and Quitclaim was signed by Santos under protest as found by the Labor Arbiter and the NLRC, and
the difference between the amount claimed and that paid cannot in any way be considered
negligible, we deem it proper to recompute and determine the exact amount of the retirement
benefits due private respondent. We perceive the waiver under the facts of the case to dangerously
encroach on the entrenched domain of public policy.

Petitioner invokes Periquet v. National Labor Relations Commission 7 to thwart private respondent's
claim. Unfortunately, the case does not provide the desired relief. In Periquet, the consideration for
the quitclaim was found to be credible and reasonable. In the case before us, we are unable to make
such finding for the difference involved is considerably big and substantial. The total of the claim is
P908,022.65. Deducting therefrom the amount of P434,468.52 already received by respondent
Santos leaves a difference of P473,554.13 which is even more than what he had been given.

PNB-RB avers that the NLRC gravely abused its discretion when it computed the gratuity pay of
Santos at P661,210.63 based on the salary rate of the next higher rank on the theory that he
acquired a vested right over it pursuant to the 1971-1973 Collective Bargaining Agreement (CBA).
Petitioner posits that as the CBA had long expired it could no longer be used as basis in computing
the gratuity pay of its retiring officers; instead, the computation should be based on the practice and
policy of the bank effective at the time of the employee's retirement.

We cannot agree. Not so long ago we resolved exactly the same issues in Republic Planters Bank
v. National Labor Relations Commissions 8 which, coincidentally, emanated from a similar set of
facts. In that case, Macario de Guzman resigned from PNB-RB on 3 June 1985. The following day
he filed a complaint with the Department of Labor and Employment for underpayment of gratuity pay,
underpayment of unused leaves and non-payment of accrued leave credits. De Guzman bewailed
the erroneous computation of his gratuity pay and the cash value of his accumulated leave credits,
and maintained that it should have been based on the provisions of the 1971-1973 CBA instead of
the 1982-1985 CBA entered into between PNB-RB and its rank-and-file employees. In finding for de
Guzman we ruled

Prior to private respondent's resignation, there were other managerial employees

who resigned and/or retired from petitioner's employ who received their
corresponding gratuity benefits and the cash value of their accumulated leave credits
pursuant to the provisions of the old CBA of 1971-73 despite its expiration in 1976.
Among them were Simplicio Manalo and Miguel Calimbas who resigned on 15 March
1977 and 15 July 1978, respectively. With such a practice and policy, petitioner
cannot refuse to pay private respondent his gratuity benefits under the old CBA.
Under Section 14(a), Rule 1 of the Rules and Regulations Implementing Book VI of
the Labor Code, it is provided:

Sec. 14. Retirement Benefits. (a) An employee who is retired

pursuant to a bonafide retirement plan or in accordance with the
applicable individual or collective agreement or established employer
policy shall be entitled to all the retirement benefits provided therein. .
. (Emphasis supplied).

The foregoing provision explicitly states that a company practice or policy is a labor
standard in determining the retirement benefits of its employees.

The petitioner's theory that the computation of the benefits of private respondent
should be based on the 1982-85 CBA which was the one enforced at the time of his
resignation is untenable. Said CBA was entered into by petitioner with its rank-and-
file employees. Private respondent is a managerial employee who, by express
provision of law, is excepted from the coverage of the aforesaid contract. Private
respondent was not a party thereto and could not be bound thereby.

Since no new CBA had been entered into between the managerial employees and
petitioner upon the expiration of the said 1971-73 CBA, private respondent has
acquired a vested right to the said established policy of petitioner in applying the
 1971-73 CBA to retiring or resigning executives of managerial employees. Such right
cannot be curtailed or diminished. 9

We maintain the same dictum in the case before us. PNB-RB insists on disowning any practice or
policy of granting gratuity pay to its retiring officers based on the salary rate of the next higher rank.
It admitted however that it granted gratuity pay on the basis of the salary rate of the next higher rank
but only in the case of Simplicio Manalo. As to other instances when it granted gratuity pay based on
the salary rate of the next higher rank, PNB-RB explains that those were not voluntarily done but
were in lawful compliance with court orders.

PNB-RB asserts that our findings in the Republic Planters Bank v. National Labor Relations
Commission 10 were definitely erroneous as they
were contrary to law and the facts of the case. Thus, the error should not be perpetuated. 11

A punctilious perusal of the records leads us to the same conclusion, i.e., that PNB-RB has adopted
the policy of granting gratuity benefits to its retiring officers based on the salary rate of the next
higher rank. It continued to adopt this practice even after the expiration of the 1971-1973 CBA. The
grant was consistent and deliberate although petitioner knew fully well that it was not required to give
the benefits after the expiration of the 1971-1973 CBA. Under these circumstances, the granting of
the gratuity pay on the basis of the salary rate of the rank next higher may be deemed to have
ripened into company practice or policy which can no longer be peremptorily withdrawn. 12Any benefit
and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or
eliminated by the employer by virtue of Sec. 10 of the Rules and Regulations Implementing P.D. No.
851 and Art. 100 of the Labor Code which prohibit the diminution or elimination by the employer of
the employees' existing benefits. 13 Leave credits should likewise be computed based on the
upgraded salary rate, i.e., the salary rate of the next higher rank in conformity with the provisions of
the 1971-1973 CBA which in part read

Sec. 14. The Bank agrees to grant to each regular supervisor employee upon his
retirement, resignation or separation without cause after July 1, 1969, the following
benefits:

a) Gratuity pay equivalent to one (1) month salary plus the corresponding living
allowance of the rank next higher than the rank of such supervisor at the time of his
retirement, resignation or separation without cause, for every year of service in the
Bank, provided that the said supervisor has at least five (5) years of continuous
service with the Bank.

b) The cash equivalent of the accumulated sick and vacation leaves since the time of
his initial employment with the Bank. 14

Under this section, only the gratuity pay is expressly entitled to be computed based on the salary
rate of the rank next higher. This however should not be interpreted in isolation. In this instance, it
may be worth to look into the reasons which motivated the parties to enter into the above
agreement. The conversion of leave credits into their cash equivalent is aimed primarily to
encourage workers to work continuously and with dedication for the company. Companies offer
incentives, such as the conversion of the accumulated leave credits into their cash equivalent, to lure
employees to stay with the company. Leave credits are normally converted into their cash equivalent
based on the last prevailing salary received by the employee. Considering all these, the
accumulated leave credits should be converted based on the upgraded salary of the retiree, which is
the salary rate of the rank next higher.
PNB-RB avers that it has sufficiently established that the salary of an officer is pegged to a minimum
or maximum depending on his performance appraisal in accordance with the Executive
Compensation Salary Structure 15(ECSS) effective 1 May 1987. Since Santos' latest performance
rating was only satisfactory, his gratuity pay should be based on the minimum and not on the
maximum amount of the rate of the salary of the rank next higher. In this regard, we quote with
approval the Comment of the Solicitor General that

Nothing in the provisions of the 1971 CBA from which emanated the one rank higher
policy indicates a minimum or maximum range of the next higher rank. Instead, what
is provided is an unqualified one rank higher concept. Petitioner is, therefore,
precluded from drawing a distinction where none has been stated in the contract.
Besides, assuming that an ambiguity does exist, the same must be resolved in the
light of Article 1702 of the Civil Code that: In case of doubt, the labor legislation and
all labor contracts shall be construed in favor of the safety and decent living for the
laborer. Such should be liberally construed in favor of the persons intended to be
benefited thereby.

Moreover, petitioner, by invoking the salary structure and criteria for promotion as
basis for determining the amount of gratuity has confused the two distinct concepts
of gratuity and salary. Gratuity pay, unlike salary, is paid to the beneficiary for the
past services or favor rendered purely out of the generosity of the giver or grantor.
Gratuity, therefore, is not intended to pay a worker for actual services rendered or for
actual performance. It is a money benefit or bounty given to the worker, the purpose
of which is to reward employees who have rendered satisfactory service to the
company. Salary, on the other hand, is a part of labor standard law based on the
actual amount of work rendered or the number of days worked over the period of
years. Hence, petitioner's attempt to apply the salary structure to determine gratuity
would eradicate the very essence of a gratuity award, and make it partake of the
character of a wage or salary given on the basis of actual work or performance. Such
was never the intendment of the law and would run counter to essential social
justice. 16

Additionally, computing the gratuity pay based on the performance rating of the retiring officer is a
practice that is very likely susceptible to abuse as he will be placed at the mercy of the members of
the performance appraisal committee.

Petitioner argues that the claim of Santos for bonuses corresponding to the years 1985, 1986 and
mid-year of 1987 has already prescribed. This is correct. Article 291 of the Labor Code states in part

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.

Since Santos filed his complaint only on 12 July 1990, his claim for 1985 (mid-year and year-end),
1986 (mid-year and year-end), and 1987 (mid-year) bonuses already prescribed. As regards
bonuses for 1987 (year-end), 1988 (mid-year and year-end), 1989 (mid-year and year-end), and
1990 (mid-year), we agree with petitioner that these should be based on the existing salary rate at
the time of their accrual. The record shows however that in 1988 Santos was found guilty of an
administrative charge. Hence, in consonance with existing company policy, the 1988 (mid-year and
year-end) bonus should be forfeited in favor of the Bank. 17
As regards the award of moral and exemplary damages, as well as attorney's fees, we quote with
approval the Comment of private respondent thus

On the matter of moral and exemplary damages, the same is a must considering that
petitioner is guilty of bad faith by its continued refusal to pay his claims despite the
final rulings of the Supreme Court in similar other cases earlier cited. By refusing to
abide by the doctrinal pronouncements of the Highest Tribunal, petitioner has shown
to be anti-labor. This stubborn attitude is not only contemptible but also contrary to
morals, good customs and public policy. Regardless of its own thinking on the issues
presented vis-a-vis the judicial pronouncements already made, petitioner is duty-
bound to respect the Supreme Court decisions which have become part of the law of
the land.

Consequently, private respondent had suffered mental anguish and sleepless nights
and therefore, should be entitled to moral damages. And to serve as example for the
public good so that others similarly inclined could be dissuaded from adopting the
same detestable practice, petitioner should also be sanctioned in the form of
exemplary damages.

In addition, petitioner had continuously and openly declared that it will continuously
deny the existence of said policy as it was based on erroneous assumption of facts,
and private respondent is not at all surprised that petitioner has been throwing all
kinds of blockade or obstacle, so as to stop a snowball application of the Supreme
Court decision. Such act of the petitioner of arrogantly defying a well-laid down
jurisprudence on the issue at hand (resulted) to the great prejudice of private
respondent's interest. The delay on the part of the petitioner to rectify its error and
grant private respondent what is really due him must have certainly caused undue
damages on the part of the latter. Such defiant attitude does not really set good
example on how one should abide by the decision of the highest tribunal of the land.

xxx xxx xxx

Private respondent has been dragged into this case because petitioner refuses and
arrogantly defies the doctrine of stare decisis that had long set in, compelling private
respondent to litigate. In this regard, private respondent's award for attorney's fees is
proper. 18

ACCORDINGLY, the 30 June 1993 Decision of the Labor Arbiter and the 30 August 1994 Resolution
of the National Labor Relations Commission are AFFIRMED with the modification that petitioner
PNB-REPUBLIC BANK is ordered to pay private respondent Antonio G. Santos the amount of
P423,661.00, less the applicable taxes, computed as follows:

Basic gratuity Day:

Applicable monthly rate (P15,840.00)

x length of service (31 years and
15 days) =

P15,840.00 x 31 years P491,040.00

P15,840.00 x 15/251 days 946.00

 P491,986.00

Leave credits:

P15,840 x 272 x 12/251 205,983.00

Accrued Bonuses:

1987-year-end only P1,300.00 19

1988-forfeited (due adm. case)
1989-mid year/year-end 11,380.00 20
1990-mid-year only 8,965.00 21

21,645.00

P719,614.00

Less: Gratuity already received 434,468.00

Balance P285,146.00
Add: Moral damages 50,000.00
Exemplary damages 50,000.00
Attorney's fees 38,515.00

Total P423,661.00
=========

SO ORDERED.
 25. Mayon Hotel and Restaurant v Adana, G.R. No. 157634, May 16, 2005

G.R. No. 157634 May 16, 2005

MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO LAM, petitioners,

vs.
ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE, EDUARDO ALAMARES, AMADO
ALAMARES, EDGARDO TORREFRANCA, LOURDES CAMIGLA, TEODORO LAURENARIA,
WENEFREDO LOVERES, LUIS GUADES, AMADO MACANDOG, PATERNO LLARENA,
GREGORIO NICERIO, JOSE ATRACTIVO, MIGUEL TORREFRANCA, and SANTOS
BROOLA, respondents.

DECISION

PUNO, J.:

This is a petition for certiorari to reverse and set aside the Decision issued by the Court of Appeals
(CA)1 in CA-G.R. SP No. 68642, entitled "Rolando Adana, Wenefredo Loveres, et. al. vs. National
Labor Relations Commission (NLRC), Mayon Hotel & Restaurant/Pacita O. Po, et al.," and the
Resolution2 denying petitioners' motion for reconsideration. The assailed CA decision reversed the
NLRC Decision which had dismissed all of respondents' complaints,3 and reinstated the Joint
Decision of the Labor Arbiter4 which ruled that respondents were illegally dismissed and entitled to
their money claims.

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

Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the name of
petitioner Pacita O. Po,6 whose mother, petitioner Josefa Po Lam, manages the establishment.7 The
hotel and restaurant employed about sixteen (16) employees.

Records show that on various dates starting in 1981, petitioner hotel and restaurant hired the
following people, all respondents in this case, with the following jobs:8

1. Wenefredo Loveres Accountant and Officer-in-charge

2. Paterno Llarena Front Desk Clerk
3. Gregorio Nicerio Supervisory Waiter
4. Amado Macandog Roomboy
5. Luis Guades Utility/Maintenance Worker
6. Santos Broola Roomboy
7. Teodoro Laurenaria Waiter
8. Eduardo Alamares Roomboy/Waiter
9. Lourdes Camigla Cashier
10. Chona Bumalay Cashier
11. Jose Atractivo Technician
12. Amado Alamares Dishwasher and Kitchen Helper
13. Roger Burce Cook
14. Rolando Adana Waiter
15. Miguel Torrefranca Cook
 16. Edgardo Torrefranca Cook

Due to the expiration and non-renewal of the lease contract for the rented space occupied by the
said hotel and restaurant at Rizal Street, the hotel operations of the business were suspended on
March 31, 1997.9 The operation of the restaurant was continued in its new location at Elizondo
Street, Legazpi City, while waiting for the construction of a new Mayon Hotel & Restaurant at
Pearanda Street, Legazpi City.10 Only nine (9) of the sixteen (16) employees continued working in
the Mayon Restaurant at its new site.11

On various dates of April and May 1997, the 16 employees filed complaints for underpayment of
wages and other money claims against petitioners, as follows:12

Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for illegal dismissal,
underpayment of wages, nonpayment of holiday and rest day pay; service incentive leave
pay (SILP) and claims for separation pay plus damages;

Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for underpayment of
wages; nonpayment of cost of living allowance (COLA) and overtime pay; premium pay for
holiday and rest day; SILP; nightshift differential pay and separation pay plus damages;

Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment of wages;
nonpayment of holiday and rest day pay and SILP;

Rolando Adana, Roger Burce and Amado Alamares for underpayment of wages;
nonpayment of COLA, overtime, holiday, rest day, SILP and nightshift differential pay;

Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest day and SILP
and night shift differential pay;

Santos Broola for illegal dismissal, underpayment of wages, overtime pay, rest day pay,
holiday pay, SILP, and damages;13 and

Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and overtime pay;
premium pay for holiday and rest day, and SILP.

On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a Joint Decision in favor of
the employees. The Labor Arbiter awarded substantially all of respondents' money claims, and held
that respondents Loveres, Macandog and Llarena were entitled to separation pay, while
respondents Guades, Nicerio and Alamares were entitled to their retirement pay. The Labor Arbiter
also held that based on the evidence presented, Josefa Po Lam is the owner/proprietor of Mayon
Hotel & Restaurant and the proper respondent in these cases.

On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and all the complaints were
dismissed.

Respondents filed a motion for reconsideration with the NLRC and when this was denied, they filed
a petition for certiorari with the CA which rendered the now assailed decision.

After their motion for reconsideration was denied, petitioners now come to this Court, seeking the
reversal of the CA decision on the following grounds:
 I. The Honorable Court of Appeals erred in reversing the decision of the National Labor
Relations Commission (Second Division) by holding that the findings of fact of the NLRC
were not supported by substantial evidence despite ample and sufficient evidence showing
that the NLRC decision is indeed supported by substantial evidence;

II. The Honorable Court of Appeals erred in upholding the joint decision of the labor arbiter
which ruled that private respondents were illegally dismissed from their employment, despite
the fact that the reason why private respondents were out of work was not due to the fault of
petitioners but to causes beyond the control of petitioners.

III. The Honorable Court of Appeals erred in upholding the award of monetary benefits by the
labor arbiter in his joint decision in favor of the private respondentS, including the award of
damages to six (6) of the private respondents, despite the fact that the private respondents
have not proven by substantial evidence their entitlement thereto and especially the fact that
they were not illegally dismissed by the petitioners.

IV. The Honorable Court of Appeals erred in holding that Pacita Ong Po is the owner of the
business establishment, petitioner Mayon Hotel and Restaurant, thus disregarding the
certificate of registration of the business establishment ISSUED by the local government,
which is a public document, and the unqualified admissions of complainants-private
respondents.14

In essence, the petition calls for a review of the following issues:

1. Was it correct for petitioner Josefa Po Lam to be held liable as the owner of petitioner
Mayon Hotel & Restaurant, and the proper respondent in this case?

2. Were respondents Loveres, Guades, Macandog, Atractivo, Llarena and Nicerio illegally
dismissed?

3. Are respondents entitled to their money claims due to underpayment of wages, and
nonpayment of holiday pay, rest day premium, SILP, COLA, overtime pay, and night shift
differential pay?

It is petitioners' contention that the above issues have already been threshed out sufficiently and
definitively by the NLRC. They therefore assail the CA's reversal of the NLRC decision, claiming that
based on the ruling in Castillo v. NLRC,15 it is non sequitur that the CA should re-examine the
factual findings of both the NLRC and the Labor Arbiter, especially as in this case the NLRC's
findings are allegedly supported by substantial evidence.

We do not agree.

There is no denying that it is within the NLRC's competence, as an appellate agency reviewing
decisions of Labor Arbiters, to disagree with and set aside the latter's findings.16 But it stands to
reason that the NLRC should state an acceptable cause therefore, otherwise it would be a
whimsical, capricious, oppressive, illogical, unreasonable exercise of quasi-judicial prerogative,
subject to invalidation by the extraordinary writ of certiorari.17 And when the factual findings of the
Labor Arbiter and the NLRC are diametrically opposed and this disparity of findings is called into
question, there is, necessarily, a re-examination of the factual findings to ascertain which opinion
should be sustained.18 As ruled in Asuncion v. NLRC,19
 Although, it is a legal tenet that factual findings of administrative bodies are entitled to great
weight and respect, we are constrained to take a second look at the facts before us because
of the diversity in the opinions of the Labor Arbiter and the NLRC. A disharmony between the
factual findings of the Labor Arbiter and those of the NLRC opens the door to a review
thereof by this Court.20

The CA, therefore, did not err in reviewing the records to determine which opinion was supported by
substantial evidence.

Moreover, it is explicit in Castillo v. NLRC21 that factual findings of administrative bodies like the
NLRC are affirmed only if they are supported by substantial evidence that is manifest in the
decision and on the records. As stated in Castillo:

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

After careful review, we find that the reversal of the NLRC's decision was in order precisely because
it was not supported by substantial evidence.

1. Ownership by Josefa Po Lam

The Labor Arbiter ruled that as regards the claims of the employees, petitioner Josefa Po Lam is, in
fact, the owner of Mayon Hotel & Restaurant. Although the NLRC reversed this decision, the CA, on
review, agreed with the Labor Arbiter that notwithstanding the certificate of registration in the name
of Pacita Po, it is Josefa Po Lam who is the owner/proprietor of Mayon Hotel & Restaurant, and the
proper respondent in the complaints filed by the employees. The CA decision states in part:

[Despite] the existence of the Certificate of Registration in the name of Pacita Po, we cannot
fault the labor arbiter in ruling that Josefa Po Lam is the owner of the subject hotel and
restaurant. There were conflicting documents submitted by Josefa herself. She was ordered
to submit additional documents to clearly establish ownership of the hotel and restaurant,
considering the testimonies given by the [respondents] and the non-appearance and failure
to submit her own position paper by Pacita Po. But Josefa did not comply with the directive
of the Labor Arbiter. The ruling of the Supreme Court in Metropolitan Bank and Trust
Company v. Court of Appeals applies to Josefa Po Lam which is stated in this wise:

When the evidence tends to prove a material fact which imposes a liability on a party,
and he has it in his power to produce evidence which from its very nature must
overthrow the case made against him if it is not founded on fact, and he refuses to
produce such evidence, the presumption arises that the evidence[,] if produced,
would operate to his prejudice, and support the case of his adversary.
 Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and restaurant, the
labor arbiter relied also on the testimonies of the witnesses, during the hearing of the instant
case. When the conclusions of the labor arbiter are sufficiently corroborated by evidence on
record, the same should be respected by appellate tribunals, since he is in a better position
to assess and evaluate the credibility of the contending parties.23(citations omitted)

Petitioners insist that it was error for the Labor Arbiter and the CA to have ruled that petitioner Josefa
Po Lam is the owner of Mayon Hotel & Restaurant. They allege that the documents they submitted
to the Labor Arbiter sufficiently and clearly establish the fact of ownership by petitioner Pacita Po,
and not her mother, petitioner Josefa Po Lam. They contend that petitioner Josefa Po Lam's
participation was limited to merely (a) being the overseer; (b) receiving the month-to-month and/or
year-to-year financial reports prepared and submitted by respondent Loveres; and (c) visitation of
the premises.24 They also put emphasis on the admission of the respondents in their position paper
submitted to the Labor Arbiter, identifying petitioner Josefa Po Lam as the manager, and Pacita Po
as the owner.25 This, they claim, is a judicial admission and is binding on respondents. They protest
the reliance the Labor Arbiter and the CA placed on their failure to submit additional documents to
clearly establish ownership of the hotel and restaurant, claiming that there was no need for petitioner
Josefa Po Lam to submit additional documents considering that the Certificate of Registration is the
best and primary evidence of ownership.

We disagree with petitioners. We have scrutinized the records and find the claim that petitioner
Josefa Po Lam is merely the overseer is not borne out by the evidence.

First. It is significant that only Josefa Po Lam appeared in the proceedings with the Labor Arbiter.
Despite receipt of the Labor Arbiter's notice and summons, other notices and Orders, petitioner
Pacita Po failed to appear in any of the proceedings with the Labor Arbiter in these cases, nor file
her position paper.26 It was only on appeal with the NLRC that Pacita Po signed the pleadings.27 The
apathy shown by petitioner Pacita Po is contrary to human experience as one would think that the
owner of an establishment would naturally be concerned when all her employees file complaints
against her.

Second. The records of the case belie petitioner Josefa Po Lam's claim that she is merely an
overseer. The findings of the Labor Arbiter on this question were based on credible, competent and
substantial evidence. We again quote the Joint Decision on this matter:

Mayon Hotel and Restaurant is a [business name] of an enterprise. While [petitioner] Josefa
Po Lam claims that it is her daughter, Pacita Po, who owns the hotel and restaurant when
the latter purchased the same from one Palanos in 1981, Josefa failed to submit the
document of sale from said Palanos to Pacita as allegedly the sale was only verbal although
the license to operate said hotel and restaurant is in the name of Pacita which, despite our
Order to Josefa to present the same, she failed to comply (p. 38, tsn. August 13, 1998).
While several documentary evidences were submitted by Josefa wherein Pacita was named
therein as owner of the hotel and restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,] there were
documentary evidences also that were submitted by Josefa showing her ownership of said
enterprise (pp. 468 to 469; vol. II, rollo). While Josefa explained her participation and interest
in the business as merely to help and assist her daughter as the hotel and restaurant was
near the former's store, the testimonies of [respondents] and Josefa as well as her demeanor
during the trial in these cases proves (sic) that Josefa Po Lam owns Mayon Hotel and
Restaurant. [Respondents] testified that it was Josefa who exercises all the acts and
manifestation of ownership of the hotel and restaurant like transferring employees from the
Greatwall Palace Restaurant which she and her husband Roy Po Lam previously owned; it is
Josefa to whom the employees submits (sic) reports, draws money for payment of payables
 and for marketing, attending (sic) to Labor Inspectors during ocular inspections. Except for
documents whereby Pacita Po appears as the owner of Mayon Hotel and Restaurant,
nothing in the record shows any circumstance or manifestation that Pacita Po is the owner of
Mayon Hotel and Restaurant. The least that can be said is that it is absurd for a person to
purchase a hotel and restaurant in the very heart of the City of Legazpi verbally. Assuming
this to be true, when [petitioners], particularly Josefa, was directed to submit evidence as to
the ownership of Pacita of the hotel and restaurant, considering the testimonies of
[respondents], the former should [have] submitted the lease contract between the owner of
the building where Mayon Hotel and Restaurant was located at Rizal St., Legazpi City and
Pacita Po to clearly establish ownership by the latter of said enterprise. Josefa failed. We are
not surprised why some employers employ schemes to mislead Us in order to evade
liabilities. We therefore consider and hold Josefa Po Lam as the owner/proprietor of Mayon
Hotel and Restaurant and the proper respondent in these cases.28

Petitioners' reliance on the rules of evidence, i.e., the certificate of registration being the best proof of
ownership, is misplaced. Notwithstanding the certificate of registration, doubts were cast as to the
true nature of petitioner Josefa Po Lam's involvement in the enterprise, and the Labor Arbiter had
the authority to resolve this issue. It was therefore within his jurisdiction to require the additional
documents to ascertain who was the real owner of petitioner Mayon Hotel & Restaurant.

Article 221 of the Labor Code is clear: technical rules are not binding, and the application of
technical rules of procedure may be relaxed in labor cases to serve the demand of substantial
justice.29 The rule of evidence prevailing in court of law or equity shall not be controlling in labor
cases and it is the spirit and intention of the Labor Code that the Labor Arbiter shall use every and all
reasonable means to ascertain the facts in each case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due process.30 Labor laws mandate the
speedy administration of justice, with least attention to technicalities but without sacrificing the
fundamental requisites of due process.31

Similarly, the fact that the respondents' complaints contained no allegation that petitioner Josefa Po
Lam is the owner is of no moment. To apply the concept of judicial admissions to respondents
who are but lowly employees - would be to exact compliance with technicalities of law that is
contrary to the demands of substantial justice. Moreover, the issue of ownership was an issue that
arose only during the course of the proceedings with the Labor Arbiter, as an incident of determining
respondents' claims, and was well within his jurisdiction.32

Petitioners were also not denied due process, as they were given sufficient opportunity to be heard
on the issue of ownership.33 The essence of due process in administrative proceedings is simply an
opportunity to explain one's side or an opportunity to seek reconsideration of the action or ruling
complained of.34 And there is nothing in the records which would suggest that petitioners had
absolute lack of opportunity to be heard.35 Obviously, the choice not to present evidence was made
by petitioners themselves.36

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

2. Illegal Dismissal: claim for separation pay

Of the sixteen employees, only the following filed a case for illegal dismissal: respondents Loveres,
Llarena, Nicerio, Macandog, Guades, Atractivo and Broola.38

The Labor Arbiter found that there was illegal dismissal, and granted separation pay to respondents
Loveres, Macandog and Llarena. As respondents Guades, Nicerio and Alamares were already 79,
66 and 65 years old respectively at the time of the dismissal, the Labor Arbiter granted retirement
benefits pursuant to Article 287 of the Labor Code as amended.39 The Labor Arbiter ruled that
respondent Atractivo was not entitled to separation pay because he had been transferred to work in
the restaurant operations in Elizondo Street, but awarded him damages. Respondents Loveres,
Llarena, Nicerio, Macandog and Guades were also awarded damages.40

The NLRC reversed the Labor Arbiter, finding that "no clear act of termination is attendant in the
case at bar" and that respondents "did not submit any evidence to that effect, but the finding and
conclusion of the Labor Arbiter [are] merely based on his own surmises and conjectures."41 In turn,
the NLRC was reversed by the CA.

It is petitioners contention that the CA should have sustained the NLRC finding that none of the
above-named respondents were illegally dismissed, or entitled to separation or retirement pay.
According to petitioners, even the Labor Arbiter and the CA admit that when the illegal dismissal
case was filed by respondents on April 1997, they had as yet no cause of action. Petitioners
therefore conclude that the filing by respondents of the illegal dismissal case was premature and
should have been dismissed outright by the Labor Arbiter.42 Petitioners also claim that since the
validity of respondents' dismissal is a factual question, it is not for the reviewing court to weigh the
conflicting evidence.43

We do not agree. Whether respondents are still working for petitioners is a factual question. And
the records are unequivocal that since April 1997, when petitioner Mayon Hotel & Restaurant
suspended its hotel operations and transferred its restaurant operations in Elizondo Street,
respondents Loveres, Macandog, Llarena, Guades and Nicerio have not been permitted to work for
petitioners. Respondent Alamares, on the other hand, was also laid-off when the Elizondo Street
operations closed, as were all the other respondents. Since then, respondents have not been
permitted to work nor recalled, even after the construction of the new premises at Pearanda Street
and the reopening of the hotel operations with the restaurant in this new site. As stated by the Joint
Decision of the Labor Arbiter on July 2000, or more than three (3) years after the complaint was
filed:44

[F]rom the records, more than six months had lapsed without [petitioner] having resumed
operation of the hotel. After more than one year from the temporary closure of Mayon Hotel
and the temporary transfer to another site of Mayon Restaurant, the building which
[petitioner] Josefa allege[d] w[h]ere the hotel and restaurant will be transferred has been
finally constructed and the same is operated as a hotel with bar and restaurant nevertheless,
none of [respondents] herein who were employed at Mayon Hotel and Restaurant which was
also closed on April 30, 1998 was/were recalled by [petitioner] to continue their services...

Parenthetically, the Labor Arbiter did not grant separation pay to the other respondents as they had
not filed an amended complaint to question the cessation of their employment after the closure of
Mayon Hotel & Restaurant on March 31, 1997.45
The above factual finding of the Labor Arbiter was never refuted by petitioners in their appeal with
the NLRC. It confounds us, therefore, how the NLRC could have so cavalierly treated this
uncontroverted factual finding by ruling that respondents have not introduced any evidence to show
that they were illegally dismissed, and that the Labor Arbiter's finding was based on conjecture.46 It
was a serious error that the NLRC did not inquire as to the legality of the cessation of employment.
Article 286 of the Labor Code is clear there is termination of employment when an otherwise bona
fide suspension of work exceeds six (6) months.47 The cessation of employment for more than six
months was patent and the employer has the burden of proving that the termination was for a just or
authorized cause.48

Moreover, we are not impressed by any of petitioners' attempts to exculpate themselves from the
charges. First, in the proceedings with the Labor Arbiter, they claimed that it could not be illegal
dismissal because the lay-off was merely temporary (and due to the expiration of the lease contract
over the old premises of the hotel). They specifically invoked Article 286 of the Labor Code to argue
that the claim for separation pay was premature and without legal and factual basis.49 Then, because
the Labor Arbiter had ruled that there was already illegal dismissal when the lay-off had exceeded
the six-month period provided for in Article 286, petitioners raise this novel argument, to wit:

It is the firm but respectful submission of petitioners that reliance on Article 286 of the Labor
Code is misplaced, considering that the reason why private respondents were out of work
was not due to the fault of petitioners. The failure of petitioners to reinstate the private
respondents to their former positions should not likewise be attributable to said petitioners as
the private respondents did not submit any evidence to prove their alleged illegal dismissal.
The petitioners cannot discern why they should be made liable to the private respondents for
their failure to be reinstated considering that the fact that they were out of work was not due
to the fault of petitioners but due to circumstances beyond the control of petitioners, which
are the termination and non-renewal of the lease contract over the subject premises. Private
respondents, however, argue in their Comment that petitioners themselves sought the
application of Article 286 of the Labor Code in their case in their Position Paper filed before
the Labor Arbiter. In refutation, petitioners humbly submit that even if they invoke Article 286
of the Labor Code, still the fact remains, and this bears stress and emphasis, that the
temporary suspension of the operations of the establishment arising from the non-renewal of
the lease contract did not result in the termination of employment of private respondents and,
therefore, the petitioners cannot be faulted if said private respondents were out of work, and
consequently, they are not entitled to their money claims against the petitioners.50

It is confounding how petitioners have fashioned their arguments. After having admitted, in effect,
that respondents have been laid-off since April 1997, they would have this Court excuse their refusal
to reinstate respondents or grant them separation pay because these same respondents purportedly
have not proven the illegality of their dismissal.

Petitioners' arguments reflect their lack of candor and the blatant attempt to use technicalities to
muddle the issues and defeat the lawful claims of their employees. First, petitioners admit that since
April 1997, when hotel operations were suspended due to the termination of the lease of the old
premises, respondents Loveres, Macandog, Llarena, Nicerio and Guades have not been permitted
to work. Second, even after six months of what should have been just a temporary lay-off, the
same respondents were still not recalled to work. As a matter of fact, the Labor Arbiter even found
that as of the time when he rendered his Joint Decision on July 2000 or more than three (3) years
after the supposed "temporary lay-off," the employment of all of the respondents with petitioners
had ceased, notwithstanding that the new premises had been completed and the same operated as
a hotel with bar and restaurant. This is clearly dismissal or the permanent severance or complete
separation of the worker from the service on the initiative of the employer regardless of the reasons
therefor.51
On this point, we note that the Labor Arbiter and the CA are in accord that at the time of the filing of
the complaint, respondents had no cause of action to file the case for illegal dismissal. According to
the CA and the Labor Arbiter, the lay-off of the respondents was merely temporary, pending
construction of the new building at Pearanda Street.52

While the closure of the hotel operations in April of 1997 may have been temporary, we hold that
the evidence on record belie any claim of petitioners that the lay-off of respondents on that same
date was merely temporary. On the contrary, we find substantial evidence that petitioners intended
the termination to be permanent. First, respondents Loveres, Macandog, Llarena, Guades, Nicerio
and Alamares filed the complaint for illegal dismissal immediately after the closure of the hotel
operations in Rizal Street, notwithstanding the alleged temporary nature of the closure of the hotel
operations, and petitioners' allegations that the employees assigned to the hotel operations knew
about this beforehand. Second, in their position paper submitted to the Labor Arbiter, petitioners
invoked Article 286 of the Labor Code to assert that the employer-employee relationship was merely
suspended, and therefore the claim for separation pay was premature and without legal or factual
basis.53 But they made no mention of any intent to recall these respondents to work upon
completion of the new premises. Third, the various pleadings on record show that petitioners held
respondents, particularly Loveres, as responsible for mismanagement of the establishment and for
abuse of trust and confidence. Petitioner Josefa Po Lam's affidavit on July 21, 1998, for example,
squarely blamed respondents, specifically Loveres, Bumalay and Camigla, for abusing her leniency
and causing petitioner Mayon Hotel & Restaurant to sustain "continuous losses until it is closed."
She then asserts that respondents "are not entitled to separation pay for they were not terminated
and if ever the business ceased to operate it was because of losses."54 Again, petitioners make the
same allegation in their memorandum on appeal with the NLRC, where they alleged that three (3)
years prior to the expiration of the lease in 1997, the operation of the Hotel had been sustaining
consistent losses, and these were solely attributed to respondents, but most especially due to
Loveres's mismanagement and abuse of petitioners' trust and confidence.55 Even the petition filed in
this court made reference to the separation of the respondents due to "severe financial losses and
reverses," again imputing it to respondents' mismanagement.56 The vehemence of petitioners'
accusation of mismanagement against respondents, especially against Loveres, is inconsistent with
the desire to recall them to work. Fourth, petitioners' memorandum on appeal also averred that the
case was filed "not because of the business being operated by them or that they were supposedly
not receiving benefits from the Labor Code which is true, but because of the fact that the source of
their livelihood, whether legal or immoral, was stopped on March 31, 1997, when the owner of
the building terminated the Lease Contract."57 Fifth, petitioners had inconsistencies in their pleadings
(with the NLRC, CA and with this Court) in referring to the closure,58 i.e., in the petition filed with this
court, they assert that there is no illegal dismissal because there was "only a temporary cessation or
suspension of operations of the hotel and restaurant due to circumstances beyond the control of
petitioners, and that is, the non-renewal of the lease contract..."59 And yet, in the same petition, they
also assert that: (a) the separation of respondents was due to severe financial losses and reverses
leading to the closure of the business; and (b) petitioner Pacita Po had to close shop and was
bankrupt and has no liquidity to put up her own building to house Mayon Hotel & Restaurant.60 Sixth,
and finally, the uncontroverted finding of the Labor Arbiter that petitioners terminated all the other
respondents, by not employing them when the Hotel and Restaurant transferred to its new site on
Pearanda Street.61 Indeed, in this same memorandum, petitioners referred to all respondents as
"former employees of Mayon Hotel & Restaurant."62

These factors may be inconclusive individually, but when taken together, they lead us to conclude
that petitioners really intended to dismiss all respondents and merely used the termination of the
lease (on Rizal Street premises) as a means by which they could terminate their employees.
Moreover, even assuming arguendo that the cessation of employment on April 1997 was merely
temporary, it became dismissal by operation of law when petitioners failed to reinstate respondents
after the lapse of six (6) months, pursuant to Article 286 of the Labor Code.

We are not impressed by petitioners' claim that severe business losses justified their failure to
reinstate respondents. The evidence to prove this fact is inconclusive. But more important, serious
business losses do not excuse the employer from complying with the clearance or report required
under Article 283 of the Labor Code and its implementing rules before terminating the employment
of its workers.63 In the absence of justifying circumstances, the failure of petitioners to observe the
procedural requirements set out under Article 284, taints their actuations with bad faith, especially
since they claimed that they have been experiencing losses in the three years before 1997. To say
the least, if it were true that the lay-off was temporary but then serious business losses prevented
the reinstatement of respondents, then petitioners should have complied with the requirements of
written notice. The requirement of law mandating the giving of notices was intended not only to
enable the employees to look for another employment and therefore ease the impact of the loss of
their jobs and the corresponding income, but more importantly, to give the Department of Labor and
Employment (DOLE) the opportunity to ascertain the verity of the alleged authorized cause of
termination.64

And even assuming that the closure was due to a reason beyond the control of the employer, it still
has to accord its employees some relief in the form of severance pay.65

While we recognize the right of the employer to terminate the services of an employee for a just or
authorized cause, the dismissal of employees must be made within the parameters of law and
pursuant to the tenets of fair play.66 And in termination disputes, the burden of proof is always on the
employer to prove that the dismissal was for a just or authorized cause.67 Where there is no showing
of a clear, valid and legal cause for termination of employment, the law considers the case a matter
of illegal dismissal.68

Under these circumstances, the award of damages was proper. As a rule, moral damages are
recoverable where the dismissal of the employee was attended by bad faith or fraud or constituted
an act oppressive to labor, or was done in a manner contrary to morals, good customs or public
policy.69 We believe that the dismissal of the respondents was attended with bad faith and meant to
evade the lawful obligations imposed upon an employer.

To rule otherwise would lead to the anomaly of respondents being terminated from employment in
1997 as a matter of fact, but without legal redress. This runs counter to notions of fair play,
substantial justice and the constitutional mandate that labor rights should be respected. If doubts
exist between the evidence presented by the employer and the employee, the scales of justice must
be tilted in favor of the latter the employer must affirmatively show rationally adequate evidence
that the dismissal was for a justifiable cause.70 It is a time-honored rule that in controversies between
a laborer and his master, doubts reasonably arising from the evidence, or in the interpretation of
agreements and writing should be resolved in the former's favor.71 The policy is to extend the
doctrine to a greater number of employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid and protection of labor.72

We therefore reinstate the Labor Arbiter's decision with the following modifications:

(a) Separation pay for the illegal dismissal of respondents Loveres, Macandog and Llarena;
(Santos Broola cannot be granted separation pay as he made no such claim);
 (b) Retirement pay for respondents Guades, Nicerio, and Alamares, who at the time of
dismissal were entitled to their retirement benefits pursuant to Article 287 of the Labor Code
as amended;73 and

(c) Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and
Broola.

3. Money claims

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

Petitioners assail this ruling by repeating their long and convoluted argument that as there was no
illegal dismissal, then respondents are not entitled to their monetary claims or separation pay and
damages. Petitioners' arguments are not only tiring, repetitive and unconvincing, but confusing and
confused entitlement to labor standard benefits is a separate and distinct concept from payment
of separation pay arising from illegal dismissal, and are governed by different provisions of the Labor
Code.

We agree with the CA and the Labor Arbiter. Respondents have set out with particularity in their
complaint, position paper, affidavits and other documents the labor standard benefits they are
entitled to, and which they alleged that petitioners have failed to pay them. It was therefore
petitioners' burden to prove that they have paid these money claims. One who pleads payment has
the burden of proving it, and even where the employees must allege nonpayment, the general rule is
that the burden rests on the defendant to prove nonpayment, rather than on the plaintiff to prove non
payment.75 This petitioners failed to do.

We also agree with the Labor Arbiter and the CA that the documents petitioners submitted, i.e.,
affidavits executed by some of respondents during an ocular inspection conducted by an inspector of
the DOLE; notices of inspection result and Facility Evaluation Orders issued by DOLE, are not
sufficient to prove payment.76 Despite repeated orders from the Labor Arbiter,77 petitioners failed to
submit the pertinent employee files, payrolls, records, remittances and other similar documents
which would show that respondents rendered work entitling them to payment for overtime work,
night shift differential, premium pay for work on holidays and rest day, and payment of these as well
as the COLA and the SILP documents which are not in respondents' possession but in the custody
and absolute control of petitioners.78 By choosing not to fully and completely disclose information and
present the necessary documents to prove payment of labor standard benefits due to respondents,
petitioners failed to discharge the burden of proof.79 Indeed, petitioners' failure to submit the
necessary documents which as employers are in their possession, inspite of orders to do so, gives
rise to the presumption that their presentation is prejudicial to its cause.80 As aptly quoted by the CA:

[W]hen the evidence tends to prove a material fact which imposes a liability on a party, and
he has it in his power to produce evidence which from its very nature must overthrow the
case made against him if it is not founded on fact, and he refuses to produce such evidence,
the presumption arises that the evidence, if produced, would operate to his prejudice, and
support the case of his adversary.81

Petitioners next claim that the cost of the food and snacks provided to respondents as facilities
should have been included in reckoning the payment of respondents' wages. They state that
although on the surface respondents appeared to receive minimal wages, petitioners had granted
respondents other benefits which are considered part and parcel of their wages and are allowed
under existing laws.82 They claim that these benefits make up for whatever inadequacies there may
be in compensation.83 Specifically, they invoked Sections 5 and 6, Rule VII-A, which allow the
deduction of facilities provided by the employer through an appropriate Facility Evaluation Order
issued by the Regional Director of the DOLE.84 Petitioners also aver that they give five (5) percent of
the gross income each month as incentives. As proof of compliance of payment of minimum wages,
petitioners submitted the Notice of Inspection Results issued in 1995 and 1997 by the DOLE
Regional Office.85

The cost of meals and snacks purportedly provided to respondents cannot be deducted as part of
respondents' minimum wage. As stated in the Labor Arbiter's decision:86

While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol. II, rollo) issued by
the DOLE Regional Office whereby the cost of meals given by [petitioners] to [respondents]
were specified for purposes of considering the same as part of their wages, We cannot
consider the cost of meals in the Orders as applicable to [respondents]. [Respondents] were
not interviewed by the DOLE as to the quality and quantity of food appearing in the
applications of [petitioners] for facility evaluation prior to its approval to determine whether or
not [respondents] were indeed given such kind and quantity of food. Also, there was no
evidence that the quality and quantity of food in the Orders were voluntarily accepted by
[respondents]. On the contrary; while some [of the respondents] admitted that they were
given meals and merienda, the quality of food serve[d] to them were not what were provided
for in the Orders and that it was only when they filed these cases that they came to know
about said Facility Evaluation Orders (pp. 100; 379[,] vol. II, rollo; p. 40, tsn[,] June 19, 1998).
[Petitioner] Josefa herself, who applied for evaluation of the facility (food) given to
[respondents], testified that she did not inform [respondents] concerning said Facility
Evaluation Orders (p. 34, tsn[,] August 13, 1998).

Even granting that meals and snacks were provided and indeed constituted facilities, such facilities
could not be deducted without compliance with certain legal requirements. As stated in Mabeza v.
NLRC,87 the employer simply cannot deduct the value from the employee's wages without satisfying
the following: (a) proof that such facilities are customarily furnished by the trade; (b) the provision of
deductible facilities is voluntarily accepted in writing by the employee; and (c) the facilities are
charged at fair and reasonable value. The records are clear that petitioners failed to comply with
these requirements. There was no proof of respondents' written authorization. Indeed, the Labor
Arbiter found that while the respondents admitted that they were given meals and merienda, the
quality of food served to them was not what was provided for in the Facility Evaluation Orders and it
was only when they filed the cases that they came to know of this supposed Facility Evaluation
Orders.88 Petitioner Josefa Po Lam herself admitted that she did not inform the respondents of the
facilities she had applied for.89

Considering the failure to comply with the above-mentioned legal requirements, the Labor Arbiter
therefore erred when he ruled that the cost of the meals actually provided to respondents should be
deducted as part of their salaries, on the ground that respondents have availed themselves of the
food given by petitioners.90 The law is clear that mere availment is not sufficient to allow deductions
from employees' wages.

More important, we note the uncontroverted testimony of respondents on record that they were
required to eat in the hotel and restaurant so that they will not go home and there is no interruption in
the services of Mayon Hotel & Restaurant. As ruled in Mabeza, food or snacks or other convenience
provided by the employers are deemed as supplements if they are granted for the convenience of
the employer. The criterion in making a distinction between a supplement and a facility does not so
much lie in the kind (food, lodging) but the purpose.91 Considering, therefore, that hotel workers are
required to work different shifts and are expected to be available at various odd hours, their ready
availability is a necessary matter in the operations of a small hotel, such as petitioners'
business.92 The deduction of the cost of meals from respondents' wages, therefore, should be
removed.

We also do not agree with petitioners that the five (5) percent of the gross income of the
establishment can be considered as part of the respondents' wages. We quote with approval the
Labor Arbiter on this matter, to wit:

While complainants, who were employed in the hotel, receive[d] various amounts as profit
share, the same cannot be considered as part of their wages in determining their claims for
violation of labor standard benefits. Although called profit share[,] such is in the nature of
share from service charges charged by the hotel. This is more explained by [respondents]
when they testified that what they received are not fixed amounts and the same are paid not
on a monthly basis (pp. 55, 93, 94, 103, 104; vol. II, rollo). Also, [petitioners] failed to submit
evidence that the amounts received by [respondents] as profit share are to be considered
part of their wages and had been agreed by them prior to their employment. Further, how
can the amounts receive[d] by [respondents] be considered as profit share when the same
[are] based on the gross receipt of the hotel[?] No profit can as yet be determined out of the
gross receipt of an enterprise. Profits are realized after expenses are deducted from the
gross income.

On the issue of the proper minimum wage applicable to respondents, we sustain the Labor Arbiter.
We note that petitioners themselves have admitted that the establishment employs "more or less
sixteen (16) employees,"93therefore they are estopped from claiming that the applicable minimum
wage should be for service establishments employing 15 employees or less.

As for petitioners repeated invocation of serious business losses, suffice to say that this is not a
defense to payment of labor standard benefits. The employer cannot exempt himself from liability to
pay minimum wages because of poor financial condition of the company. The payment of minimum
wages is not dependent on the employer's ability to pay.94

Thus, we reinstate the award of monetary claims granted by the Labor Arbiter.

4. Conclusion

There is no denying that the actuations of petitioners in this case have been reprehensible. They
have terminated the respondents' employment in an underhanded manner, and have used and
abused the quasi-judicial and judicial processes to resist payment of their employees' rightful claims,
thereby protracting this case and causing the unnecessary clogging of dockets of the Court. They
have also forced respondents to unnecessary hardship and financial expense. Indeed, the
circumstances of this case would have called for exemplary damages, as the dismissal was effected
in a wanton, oppressive or malevolent manner,95 and public policy requires that these acts must be
suppressed and discouraged.96

Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary damages of P10,000.00
each to all respondents. While it is true that other forms of damages under the Civil Code may be
awarded to illegally dismissed employees,97 any award of moral damages by the Labor Arbiter
cannot be based on the Labor Code but should be grounded on the Civil Code.98 And the law is clear
that exemplary damages can only be awarded if plaintiff shows proof that he is entitled to moral,
temperate or compensatory damages.99
As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo and Broola
specifically claimed damages from petitioners, then only they are entitled to exemplary damages.sjgs1

Finally, we rule that attorney's fees in the amount to P10,000.00 should be granted to each
respondent. It is settled that in actions for recovery of wages or where an employee was forced to
litigate and incur expenses to protect his rights and interest, he is entitled to an award of attorney's
fees.100 This case undoubtedly falls within this rule.

IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January 17, 2003 of the Court
of Appeals in CA-G.R. SP No. 68642 upholding the Joint Decision of July 14, 2000 of the Labor
Arbiter in RAB V Case Nos. 04-00079-97 and 04-00080-97 is AFFIRMED, with the following
MODIFICATIONS:

(1) Granting separation pay of one-half (1/2) month for every year of service to respondents
Loveres, Macandog and Llarena;

(2) Granting retirement pay for respondents Guades, Nicerio, and Alamares;

(3) Removing the deductions for food facility from the amounts due to all respondents;

(4) Awarding moral damages of P20,000.00 each for respondents Loveres, Macandog,
Llarena, Guades, Nicerio, Atractivo, and Broola;

(5) Deleting the award of exemplary damages of P10,000.00 from all respondents except
Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broola; and

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

The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total monetary
benefits awarded and due to the employees concerned in accordance with the decision. The Labor
Arbiter is ORDERED to submit his compliance thereon within thirty (30) days from notice of this
decision, with copies furnished to the parties.

SO ORDERED.
 26. Mabeza v. NLRC, G.R. No. 118506, April 18, 1997

G.R. No. 118506 April 18, 1997

NORMA MABEZA, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, PETER NG/HOTEL SUPREME, respondents.

KAPUNAN, J.:

This petition seeking the nullification of a resolution of public respondent National Labor Relations
Commission dated April 28, 1994 vividly illustrates why courts should be ever vigilant in the
preservation of the constitutionally enshrined rights of the working class. Without the protection
accorded by our laws and the tempering of courts, the natural and historical inclination of capital to
ride roughshod over the rights of labor would run unabated.

The facts of the case at bar, culled from the conflicting versions of petitioner and private respondent,
are illustrative.

Petitioner Norma Mabeza contends that around the first week of May, 1991, she and her co-
employees at the Hotel Supreme in Baguio City were asked by the hotel's management to sign an
instrument attesting to the latter's compliance with minimum wage and other labor standard
provisions of law. 1 The instrument provides: 2

JOINT AFFIDAVIT

We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY, MACARIA

JUGUETA, ADELAIDA NONOG, NORMA MABEZA, JONATHAN PICART and JOSE
DIZON, all of legal ages (sic), Filipinos and residents of Baguio City, under oath,
depose and say:

1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme situated at No.
416 Magsaysay Ave., Baguio City.

2. That the said Hotel is separately operated from the Ivy's Grill and Restaurant;

3. That we are all (8) employees in the hotel and assigned in each respective shifts;

4. That we have no complaints against the management of the Hotel Supreme as we

are paid accordingly and that we are treated well.

5. That we are executing this affidavit voluntarily without any force or intimidation and
for the purpose of informing the authorities concerned and to dispute the alleged
report of the Labor Inspector of the Department of Labor and Employment conducted
on the said establishment on February 2, 1991.

IN WITNESS WHEREOF, we have hereunto set our hands this 7th day of May, 1991
at Baguio City, Philippines.
 (Sgd.) (Sgd.) (Sgd.)
SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY

(Sgd.) (Sgd.) (Sgd.)

MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA.

(Sgd.) (Sgd.)
JONATHAN PICART JOSE DIZON

SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at Baguio City, Philippines.

Asst. City Prosecutor

Petitioner signed the affidavit but refused to go to the City Prosecutor's Office to swear to the
veracity and contents of the affidavit as instructed by management. The affidavit was nevertheless
submitted on the same day to the Regional Office of the Department of Labor and Employment in
Baguio City.

As gleaned from the affidavit, the same was drawn by management for the sole purpose of refuting
findings of the Labor Inspector of DOLE (in an inspection of respondent's establishment on February
2, 1991) apparently adverse to the private respondent. 3

After she refused to proceed to the City Prosecutor's Office on the same day the affidavit was
submitted to the Cordillera Regional Office of DOLE petitioner avers that she was ordered by the
hotel management to turn over the keys to her living quarters and to remove her belongings from the
hotel
premises. 4 According to her, respondent strongly chided her for refusing to proceed to the City
Prosecutor's Office to attest to the affidavit. 5 She thereafter reluctantly filed a leave of absence from
her job which was denied by management. When she attempted to return to work on May 10, 1991,
the hotel's cashier, Margarita Choy, informed her that she should not report to work and, instead,
continue with her unofficial leave of absence. Consequently, on May 13, 1991, three days after her
attempt to return to work, petitioner filed a complaint for illegal dismissal before the Arbitration
Branch of the National Labor Relations Commission CAR Baguio City. In addition to her
complaint for illegal dismissal, she alleged underpayment of wages, non-payment of holiday pay,
service incentive leave pay, 13th month pay, night differential and other benefits. The complaint was
docketed as NLRC Case No. RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe P. Pati.

Responding to the allegations made in support of petitioner's complaint for illegal dismissal, private
respondent Peter Ng alleged before Labor Arbiter Pati that petitioner "surreptitiously left (her job)
without notice to the management" 6 and that she actually abandoned her work. He maintained that
there was no basis for the money claims for underpayment and other benefits as these were paid in
the form of facilities to petitioner and the hotel's other employee. 7 Pointing to the Affidavit of May 7,
1991, the private respondent asserted that his employees actually have no problems with
management. In a supplemental answer submitted eleven (11) months after the original complaint
for illegal dismissal was filed, private respondent raised a new ground, loss of confidence, which was
supported by a criminal complaint for Qualified Theft he filed before the prosecutor's office of the City
of Baguio against petitioner on July 4, 1991. 8

On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing petitioner's complaint on the
ground of loss of confidence. His disquisitions in support of his conclusion read as follows:
 It appears from the evidence of respondent that complainant carted away or stole
one (1) blanket, 1 piece bedsheet, 1 piece thermos, 2 pieces towel (Exhibits "9", "9-
A," "9-B," "9-C" and "10" pages 12-14 TSN, December 1, 1992).

In fact, this was the reason why respondent Peter Ng lodged a criminal complaint
against complainant for qualified theft and perjury. The fiscal's office finding a prima
facie evidence that complainant committed the crime of qualified theft issued a
resolution for its filing in court but dismissing the charge of perjury (Exhibit "4" for
respondent and Exhibit "B-7" for complainant). As a consequence, complainant was
charged in court for the said crime (Exhibit "5" for respondent and Exhibit "B-6" for
the complainant).

With these pieces of evidence, complainant committed serious misconduct against

her employer which is one of the just and valid grounds for an employer to terminate
an employee (Article 282 of the Labor Code as amended). 9

On April 28, 1994, respondent NLRC promulgated its assailed

Resolution 10 affirming the Labor Arbiter's decision. The resolution substantially incorporated the
findings of the Labor Arbiter. 11 Unsatisfied, petitioner instituted the instant special civil action
for certiorari under Rule 65 of the Rules of Court on the following grounds: 12

1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS

COMMISSION COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING
TO GRAVE ABUSE OF DISCRETION IN ITS FAILURE TO CONSIDER THAT THE
ALLEGED LOSS OF CONFIDENCE IS A FALSE CAUSE AND AN
AFTERTHOUGHT ON THE PART OF THE RESPONDENT-EMPLOYER TO
JUSTIFY, ALBEIT ILLEGALLY, THE DISMISSAL OF THE COMPLAINANT FROM
HER EMPLOYMENT;

2. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS

COMMISSION COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING
TO GRAVE ABUSE OF DISCRETION IN ADOPTING THE RULING OF THE LABOR
ARBITER THAT THERE WAS NO UNDERPAYMENT OF WAGES AND BENEFITS
ON THE BASIS OF EXHIBIT "8" (AN UNDATED SUMMARY OF COMPUTATION
PREPARED BY ALLEGEDLY BY RESPONDENT'S EXTERNAL ACCOUNTANT)
WHICH IS TOTALLY INADMISSIBLE AS AN EVIDENCE TO PROVE PAYMENT OF
WAGES AND BENEFITS;

3. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS

COMMISSION COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING
TO GRAVE ABUSE OF DISCRETION IN FAILING TO CONSIDER THE EVIDENCE
ADDUCED BEFORE THE LABOR ARBITER AS CONSTITUTING UNFAIR LABOR
PRACTICE COMMITTED BY THE RESPONDENT.

The Solicitor General, in a Manifestation in lieu of Comment dated August 8, 1995 rejects private
respondent's principal claims and defenses and urges this Court to set aside the public respondent's
assailed resolution. 13

We agree.
It is settled that in termination cases the employer bears the burden of proof to show that the
dismissal is for just cause, the failure of which would mean that the dismissal is not justified and the
employee is entitled to reinstatement. 14

In the case at bar, the private respondent initially claimed that petitioner abandoned her job when
she failed to return to work on May 8, 1991. Additionally, in order to strengthen his contention that
there existed sufficient cause for the termination of petitioner, he belatedly included a complaint for
loss of confidence, supporting this with charges that petitioner had stolen a blanket, a bedsheet and
two towels from the hotel. 15 Appended to his last complaint was a suit for qualified theft filed with the
Baguio City prosecutor's office.

From the evidence on record, it is crystal clear that the circumstances upon which private
respondent anchored his claim that petitioner "abandoned" her job were not enough to constitute just
cause to sanction the termination of her services under Article 283 of the Labor Code. For
abandonment to arise, there must be concurrence of two things: 1) lack of intention to work; 16 and 2)
the presence of overt acts signifying the employee's intention not to work. 17

In the instant case, respondent does not dispute the fact that petitioner tried to file a leave of
absence when she learned that the hotel management was displeased with her refusal to attest to
the affidavit. The fact that she made this attempt clearly indicates not an intention to abandon but an
intention to return to work after the period of her leave of absence, had it been granted, shall have
expired.

Furthermore, while absence from work for a prolonged period may suggest abandonment in certain
instances, mere absence of one or two days would not be enough to sustain such a claim. The overt
act (absence) ought
to unerringly point to the fact that the employee has no intention to return to work, 18 which is patently
not the case here. In fact, several days after she had been advised to take an informal leave,
petitioner tried to resume working with the hotel, to no avail. It was only after she had been
repeatedly rebuffed that she filed a case for illegal dismissal. These acts militate against the private
respondent's claim that petitioner abandoned her job. As the Solicitor General in his manifestation
observed:

Petitioner's absence on that day should not be construed as abandonment of her job.
She did not report because the cashier told her not to report anymore, and that
private respondent Ng did not want to see her in the hotel premises. But two days
later or on the 10th of May, after realizing that she had to clarify her employment
status, she again reported for work. However, she was prevented from working by
private respondents. 19

We now come to the second cause raised by private respondent to support his contention that
petitioner was validly dismissed from her job.

Loss of confidence as a just cause for dismissal was never intended to provide employers with a
blank check for terminating their employees. Such a vague, all-encompassing pretext as loss of
confidence, if unqualifiedly given the seal of approval by this Court, could readily reduce to barren
form the words of the constitutional guarantee of security of tenure. Having this in mind, loss of
confidence should ideally apply only to cases involving employees occupying positions of trust and
confidence or to those situations where the employee is routinely charged with the care and custody
of the employer's money or property. To the first class belong managerial employees, i.e., those
vested with the powers or prerogatives to lay down management policies and/or to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline employees or effectively recommend such
managerial actions; and to the second class belong cashiers, auditors, property custodians, etc., or
those who, in the normal and routine exercise of their functions, regularly handle significant amounts
of money or property. Evidently, an ordinary chambermaid who has to sign out for linen and other
hotel property from the property custodian each day and who has to account for each and every
towel or bedsheet utilized by the hotel's guests at the end of her shift would not fall under any of
these two classes of employees for which loss of confidence, if ably supported by evidence, would
normally apply. Illustrating this distinction, this Court in Marina Port Services, Inc. vs. NLRC, 20 has
stated that:

To be sure, every employee must enjoy some degree of trust and confidence from
the employer as that is one reason why he was employed in the first place. One
certainly does not employ a person he distrusts. Indeed, even the lowly janitor must
enjoy that trust and confidence in some measure if only because he is the one who
opens the office in the morning and closes it at night and in this sense is entrusted
with the care or protection of the employer's property. The keys he holds are the
symbol of that trust and confidence.

By the same token, the security guard must also be considered as enjoying the trust
and confidence of his employer, whose property he is safeguarding. Like the janitor,
he has access to this property. He too, is charged with its care and protection.

Notably, however, and like the janitor again, he is entrusted only with
the physical task of protecting that property. The employer's trust and confidence in
him is limited to that ministerial function. He is not entrusted, in the Labor Arbiter's
words, with the duties of safekeeping and safeguarding company policies,
management instructions, and company secrets such as operation devices. He is not
privy to these confidential matters, which are shared only in the higher echelons of
management. It is the persons on such levels who, because they discharge these
sensitive duties, may be considered holding positions of trust and confidence. The
security guard does not belong in such category. 21

More importantly, we have repeatedly held that loss of confidence should not be simulated in order
to justify what would otherwise be, under the provisions of law, an illegal dismissal. "It should not be
used as a subterfuge for causes which are illegal, improper and unjustified. It must be genuine, not a
mere afterthought to justify an earlier action taken in bad faith." 22

In the case at bar, the suspicious delay in private respondent's filing of qualified theft charges
against petitioner long after the latter exposed the hotel's scheme (to avoid its obligations as
employer under the Labor Code) by her act of filing illegal dismissal charges against the private
respondent would hardly warrant serious consideration of loss of confidence as a valid ground for
dismissal. Notably, the Solicitor General has himself taken a position opposite the public respondent
and has observed that:

If petitioner had really committed the acts charged against her by private
respondents (stealing supplies of respondent hotel), private respondents should have
confronted her before dismissing her on that ground. Private respondents did not do
so. In fact, private respondent Ng did not raise the matter when petitioner went to see
him on May 9, 1991, and handed him her application for leave. It took private
respondents 52 days or up to July 4, 1991 before finally deciding to file a criminal
complaint against petitioner, in an obvious attempt to build a case against her.

The manipulations of private respondents should not be countenanced. 23

Clearly, the efforts to justify petitioner's dismissal on top of the private respondent's scheme of
inducing his employees to sign an affidavit absolving him from possible violations of the Labor Code
taints with evident bad faith and deliberate malice petitioner's summary termination from
employment.

Having said this, we turn to the important question of whether or not the dismissal by the private
respondent of petitioner constitutes an unfair labor practice.

The answer in this case must inevitably be in the affirmative.

The pivotal question in any case where unfair labor practice on the part of the employer is alleged is
whether or not the employer has exerted pressure, in the form of restraint, interference or coercion,
against his employee's right to institute concerted action for better terms and conditions of
employment. Without doubt, the act of compelling employees to sign an instrument indicating that
the employer observed labor standards provisions of law when he might have not, together with the
act of terminating or coercing those who refuse to cooperate with the employer's scheme constitutes
unfair labor practice. The first act clearly preempts the right of the hotel's workers to seek better
terms and conditions of employment through concerted action.

We agree with the Solicitor General's observation in his manifestation that "[t]his actuation . . . is
analogous to the situation envisaged in paragraph (f) of Article 248 of the Labor Code" 24 which
distinctly makes it an unfair labor practice "to dismiss, discharge or otherwise prejudice or
discriminate against an employee for having given or being about to give testimony" 25 under the
Labor Code. For in not giving positive testimony in favor of her employer, petitioner had reserved not
only her right to dispute the claim and proffer evidence in support thereof but also to work for better
terms and conditions of employment.

For refusing to cooperate with the private respondent's scheme, petitioner was obviously held up as
an example to all of the hotel's employees, that they could only cause trouble to management at
great personal inconvenience. Implicit in the act of petitioner's termination and the subsequent filing
of charges against her was the warning that they would not only be deprived of their means of
livelihood, but also possibly, their personal liberty.

This Court does not normally overturn findings and conclusions of quasi-judicial agencies when the
same are ably supported by the evidence on record. However, where such conclusions are based
on a misperception of facts or where they patently fly in the face of reason and logic, we will not
hesitate to set aside those conclusions. Going into the issue of petitioner's money claims, we find
one more salient reason in this case to set things right: the labor arbiter's evaluation of the money
claims in this case incredibly ignores existing law and jurisprudence on the matter. Its blatant one-
sidedness simply raises the suspicion that something more than the facts, the law and jurisprudence
may have influenced the decision at the level of the Arbiter.

Labor Arbiter Pati accepted hook, line and sinker the private respondent's bare claim that the reason
the monetary benefits received by petitioner between 1981 to 1987 were less than minimum wage
was because petitioner did not factor in the meals, lodging, electric consumption and water she
received during the period in her computations. 26Granting that meals and lodging were provided and
indeed constituted facilities, such facilities could not be deducted without the employer complying
first with certain legal requirements. Without satisfying these requirements, the employer simply
cannot deduct the value from the employee's ages. First, proof must be shown that such facilities are
customarily furnished by the trade. Second, the provision of deductible facilities must be voluntarily
accepted in writing by the employee. Finally, facilities must be charged at fair and reasonable
value. 27
These requirements were not met in the instant case. Private respondent "failed to present any
company policy or guideline to show that the meal and lodging . . . (are) part of the salary;" 28 he
failed to provide proof of the employee's written authorization; and, he failed to show how he arrived
at the valuations. 29

Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision
were figures furnished by the private respondent's own accountant, without corroborative evidence.
On the pretext that records prior to the July 16, 1990 earthquake were lost or destroyed, respondent
failed to produce payroll records, receipts and other relevant documents, where he could have, as
has been pointed out in the Solicitor General's manifestation, "secured certified copies thereof from
the nearest regional office of the Department of Labor, the SSS or the BIR." 30

More significantly, the food and lodging, or the electricity and water consumed by the petitioner were
not facilities but supplements. A benefit or privilege granted to an employee for the convenience of
the employer is not a facility. The criterion in making a distinction between the two not so much lies
in the kind (food, lodging) but the purpose. 31Considering, therefore, that hotel workers are required
to work different shifts and are expected to be available at various odd hours, their ready availability
is a necessary matter in the operations of a small hotel, such as the private respondent's hotel.

It is therefore evident that petitioner is entitled to the payment of the deficiency in her wages
equivalent to the fullwage applicable from May 13, 1988 up to the date of her illegal dismissal.

Additionally, petitioner is entitled to payment of service incentive leave pay, emergency cost of living
allowance, night differential pay, and 13th month pay for the periods alleged by the petitioner as the
private respondent has never been able to adduce proof that petitioner was paid the aforestated
benefits.

However, the claims covering the period of October 1987 up to the time of filing the case on May 13,
1988 are barred by prescription as P.D. 442 (as amended) and its implementing rules limit all money
claims arising out of employer-employee relationship to three (3) years from the time the cause of
action accrues. 32

We depart from the settled rule that an employee who is unjustly dismissed from work normally
should be reinstated without loss of seniority rights and other privileges. Owing to the strained
relations between petitioner and private respondent, allowing the former to return to her job would
only subject her to possible harassment and future embarrassment. In the instant case, separation
pay equivalent to one month's salary for every year of continuous service with the private respondent
would be proper, starting with her job at the Belfront Hotel.

In addition to separation pay, backwages are in order. Pursuant to R.A. 6715 and our decision
in Osmalik Bustamante, et al. vs. National Labor Relations Commission, 33 petitioner is entitled to full
backwages from the time of her illegal dismissal up to the date of promulgation of this decision
without qualification or deduction.

Finally, in dismissal cases, the law requires that the employer must furnish the employee sought to
be terminated from employment with two written notices before the same may be legally effected.
The first is a written notice containing a statement of the cause(s) for dismissal; the second is a
notice informing the employee of the employer's decision to terminate him stating the basis of the
dismissal. During the process leading to the second notice, the employer must give the employee
ample opportunity to be heard and defend himself, with the assistance of counsel if he so desires.
Given the seriousness of the second cause (qualified theft) of the petitioner's dismissal, it is
noteworthy that the private respondent never even bothered to inform petitioner of the charges
against her. Neither was petitioner given the opportunity to explain the loss of the articles. It was only
almost two months after petitioner had filed a complaint for illegal dismissal, as an afterthought, that
the loss was reported to the police and added as a supplemental answer to petitioner's complaint.
Clearly, the dismissal of petitioner without the benefit of notice and hearing prior to her termination
violated her constitutional right to due process. Under the circumstance an award of One Thousand
Pesos (P1,000.00) on top of payment of the deficiency in wages and benefits for the period
aforestated would be proper.

WHEREFORE, premises considered, the RESOLUTION of the National Labor Relations

Commission dated April 24, 1994 is REVERSED and SET ASIDE, with costs. For clarity, the
economic benefits due the petitioner are hereby summarized as follows:

1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the date of petitioner's
illegal dismissal;

2) Service incentive leave pay; night differential pay and 13th month pay for the same period;

3) Separation pay equal to one month's salary for every year of petitioner's continuous service with
the private respondent starting with her job at the Belfront Hotel;

4) Full backwages, without qualification or deduction, from the date of petitioner's illegal dismissal up
to the date of promulgation of this decision pursuant to our ruling in Bustamante vs. NLRC. 34

5) P1,000.00.

ORDERED.
 27. States Marine Corporation and Royal Line, Inc. v. Cebu Seamens Association, Inc., G.R.
No. L-12444, February 28, 1963

G.R. No. L-12444 February 28, 1963

STATES MARINE CORPORATION and ROYAL LINE, INC., petitioners,

vs.
CEBU SEAMEN'S ASSOCIATION, INC., respondent.

Pedro B. Uy Calderon for petitioners.

Gaudioso C. Villagonzalo for respondent.

PAREDES, J.:

Petitioners States Marine Corporation and Royal Line, Inc. were engaged in the business of marine
coastwise transportation, employing therein several steamships of Philippine registry. They had a
collective bargaining contract with the respondent Cebu Seamen's Association, Inc. On September
12, 1952, the respondent union filed with the Court of Industrial Relations (CIR), a petition (Case No.
740-V) against the States Marine Corporation, later amended on May 4, 1953, by including as party
respondent, the petitioner Royal Line, Inc. The Union alleged that the officers and men working on
board the petitioners' vessels have not been paid their sick leave, vacation leave and overtime pay;
that the petitioners threatened or coerced them to accept a reduction of salaries, observed by other
shipowners; that after the Minimum Wage Law had taken effect, the petitioners required their
employees on board their vessels, to pay the sum of P.40 for every meal, while the masters and
officers were not required to pay their meals and that because Captain Carlos Asensi had refused to
yield to the general reduction of salaries, the petitioners dismissed said captain who now claims for
reinstatement and the payment of back wages from December 25, 1952, at the rate of P540.00,
monthly.

The petitioners' shipping companies, answering, averred that very much below 30 of the men and
officers in their employ were members of the respondent union; that the work on board a vessel is
one of comparative ease; that petitioners have suffered financial losses in the operation of their
vessels and that there is no law which provides for the payment of sick leave or vacation leave to
employees or workers of private firms; that as regards the claim for overtime pay, the petitioners
have always observed the provisions of Comm. Act No. 444, (Eight-Hour Labor Law),
notwithstanding the fact that it does not apply to those who provide means of transportation; that the
shipowners and operators in Cebu were paying the salaries of their officers and men, depending
upon the margin of profits they could realize and other factors or circumstances of the business; that
in enacting Rep. Act No. 602 (Minimum Wage Law), the Congress had in mind that the amount of
P.40 per meal, furnished the employees should be deducted from the daily wages; that Captain
Asensi was not dismissed for alleged union activities, but with the expiration of the terms of the
contract between said officer and the petitioners, his services were terminated.

A decision was rendered on February 21, 1957 in favor of the respondent union. The motion for
reconsideration thereof, having been denied, the companies filed the present writ of certiorari, to
resolve legal question involved. Always bearing in mind the deep-rooted principle that the factual
findings of the Court of Industrial Relations should not be disturbed, if supported by substantial
evidence, the different issues are taken up, in the order they are raised in the brief for the petitioners.

1. First assignment of error. The respondent court erred in holding that it had jurisdiction
over case No. 740-V, notwithstanding the fact that those who had dispute with the
petitioners, were less than thirty (30) in number.
 The CIR made a finding that at the time of the filing of the petition in case No. 740-V,
respondent Union had more than thirty members actually working with the
companies, and the court declared itself with jurisdiction to take cognizance of the
case. Against this order, the herein petitioners did not file a motion for
reconsideration or a petition for certiorari. The finding of fact made by the CIR
became final and conclusive, which We are not now authorized to alter or modify. It
is axiomatic that once the CIR had acquired jurisdiction over a case, it continues to
have that jurisdiction, until the case is terminated (Manila Hotel Emp. Association v.
Manila Hotel Company, et al., 40 O.G. No. 6, p. 3027). It was abundantly shown that
there were 56 members who signed Exhibits A, A-I to A-8, and that 103 members of
the Union are listed in Exhibits B, B-1 to B-35, F, F-1 and K-2 to K-3. So that at the
time of the filing of the petition, the respondent union had a total membership of 159,
working with the herein petitioners, who were presumed interested in or would be
benefited by the outcome of the case (NAMARCO v. CIR, L-17804, Jan. 1963).
Annex D, (Order of the CIR, dated March 8, 1954), likewise belies the contention of
herein petitioner in this regard. The fact that only 7 claimed for overtime pay and only
7 witnesses testified, does not warrant the conclusion that the employees who had
some dispute with the present petitioners were less than 30. The ruling of the CIR,
with respect to the question of jurisdiction is, therefore, correct.

2. Second assignment of error. The CIR erred in holding, that inasmuch as in the shipping
articles, the herein petitioners have bound themselves to supply the crew with provisions and
with such "daily subsistence as shall be mutually agreed upon" between the master and the
crew, no deductions for meals could be made by the aforesaid petitioners from their wages
or salaries.

3. Third assignment of error. The CIR erred in holding that inasmuch as with regard to
meals furnished to crew members of a vessel, section 3(f) of Act No. 602 is the general rule,
which section 19 thereof is the exception, the cost of said meals may not be legally deducted
from the wages or salaries of the aforesaid crew members by the herein petitioners.

4. Fourth assignment of error. The CIR erred in declaring that the deduction for costs of
meals from the wages or salaries after August 4, 1951, is illegal and same should be
reimbursed to the employee concerned, in spite of said section 3, par. (f) of Act No. 602.

It was shown by substantial evidence, that since the beginning of the operation of the petitioner's
business, all the crew of their vessels have been signing "shipping articles" in which are stated
opposite their names, the salaries or wages they would receive. All seamen, whether members of
the crew or deck officers or engineers, have been furnished free meals by the ship owners or
operators. All the shipping articles signed by the master and the crew members, contained, among
others, a stipulation, that "in consideration of which services to be duly performed, the said master
hereby agrees to pay to the said crew, as wages, the sums against their names respectively
expressed in the contract; and to supply them with provisions as provided herein ..." (Sec. 8, par. [b],
shipping articles), and during the duration of the contract "the master of the vessel will provide each
member of the crew such daily subsistence as shall be mutually agreed daily upon between said
master and crew; or, in lieu of such subsistence the crew may reserve the right to demand at the
time of execution of these articles that adequate daily rations be furnished each member of the
crew." (Sec. 8, par. [e], shipping articles). It is, therefore, apparent that, aside from the payment of
the respective salaries or wages, set opposite the names of the crew members, the petitioners
bound themselves to supply the crew with ship's provisions, daily subsistence or daily rations, which
include food.
This was the situation before August 4, 1951, when the Minimum Wage Law became effective. After
this date, however, the companies began deducting the cost of meals from the wages or salaries of
crew members; but no such deductions were made from the salaries of the deck officers and
engineers in all the boats of the petitioners. Under the existing laws, therefore, the query converges
on the legality of such deductions. While the petitioners herein contend that the deductions are legal
and should not be reimbursed to the respondent union, the latter, however, claims that same are
illegal and reimbursement should be made.

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

We hold that such deductions are not authorized. In the coastwise business of transportation of
passengers and freight, the men who compose the complement of a vessel are provided with free
meals by the shipowners, operators or agents, because they hold on to their work and duties,
regardless of "the stress and strain concomitant of a bad weather, unmindful of the dangers that lurk
ahead in the midst of the high seas."

Section 3, par. f, of the Minimum Wage Law, (R.A. No. 602), provides as follows

(f) Until and unless investigations by the Secretary of Labor on his initiative or on petition of
any interested party result in a different determination of the fair and reasonable value,
the furnishing of meals shall be valued at not more than thirty centavos per meal for
agricultural employees and not more than forty centavos for any other employees covered by
this Act, and the furnishing of housing shall be valued at not more than twenty centavos daily
for agricultural workers and not more than forty centavos daily for other employees covered
by this Act.

Petitioners maintain, in view of the above provisions, that in fixing the minimum wage of employees,
Congress took into account the meals furnished by employers and that in fixing the rate of forty
centavos per meal, the lawmakers had in mind that the latter amount should be deducted from the
daily wage, otherwise, no rate for meals should have been provided.

However, section 19, same law, states

SEC. 19. Relations to other labor laws and practices. Nothing in this Act shall deprive an
employee of the right to seek fair wages, shorter working hours and better working conditions
nor justify an employer in violating any other labor law applicable to his employees, in
reducing the wage now paid to any of his employees in excess of the minimum wage
established under this Act, or in reducing supplements furnished on the date of enactment.

At first blush, it would appear that there exists a contradiction between the provisions of section 3(f)
and section 19 of Rep. Act No. 602; but from a careful examination of the same, it is evident that
Section 3(f) constitutes the general rule, while section 19 is the exception. In other words, if there are
no supplements given, within the meaning and contemplation of section 19, but merely facilities,
section 3(f) governs. There is no conflict; the two provisions could, as they should be harmonized.
And even if there is such a conflict, the respondent CIR should resolve the same in favor of the
safety and decent living laborers (Art. 1702, new Civil Code)..

It is argued that the food or meals given to the deck officers, marine engineers and unlicensed crew
members in question, were mere "facilities" which should be deducted from wages, and not
"supplements" which, according to said section 19, should not be deducted from such wages,
because it is provided therein: "Nothing in this Act shall deprive an employee of the right to such fair
wage ... or in reducing supplements furnished on the date of enactment." In the case of Atok-Big
Wedge Assn. v. Atok-Big Wedge Co., L-7349, July 19, 1955; 51 O.G. 3432, the two terms are
defined as follows

"Supplements", therefore, constitute extra remuneration or special privileges or benefits

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

In short, the benefit or privilege given to the employee which constitutes an extra remuneration
above and over his basic or ordinary earning or wage, is supplement; and when said benefit or
privilege is part of the laborers' basic wages, it is a facility. The criterion is not so much with the kind
of the benefit or item (food, lodging, bonus or sick leave) given, but its purpose. Considering,
therefore, as definitely found by the respondent court that the meals were freely given to crew
members prior to August 4, 1951, while they were on the high seas "not as part of their wages but as
a necessary matter in the maintenance of the health and efficiency of the crew personnel during the
voyage", the deductions therein made for the meals given after August 4, 1951, should be returned
to them, and the operator of the coastwise vessels affected should continue giving the same benefit..

In the case of Cebu Autobus Company v. United Cebu Autobus Employees Assn., L-9742, Oct. 27,
1955, the company used to pay to its drivers and conductors, who were assigned outside of the City
limits, aside from their regular salary, a certain percentage of their daily wage, as allowance for food.
Upon the effectivity of the Minimum Wage Law, however, that privilege was stopped by the
company. The order CIR to the company to continue granting this privilege, was upheld by this
Court.

The shipping companies argue that the furnishing of meals to the crew before the effectivity of Rep.
Act No. 602, is of no moment, because such circumstance was already taken into consideration by
Congress, when it stated that "wage" includes the fair and reasonable value of boards customarily
furnished by the employer to the employees. If We are to follow the theory of the herein petitioners,
then a crew member, who used to receive a monthly wage of P100.00, before August 4, 1951, with
no deduction for meals, after said date, would receive only P86.00 monthly (after deducting the cost
of his meals at P.40 per meal), which would be very much less than the P122.00 monthly minimum
wage, fixed in accordance with the Minimum Wage Law. Instead of benefiting him, the law will
adversely affect said crew member. Such interpretation does not conform with the avowed intention
of Congress in enacting the said law.

One should not overlook a fact fully established, that only unlicensed crew members were made to
pay for their meals or food, while the deck officers and marine engineers receiving higher pay and
provided with better victuals, were not. This pictures in no uncertain terms, a great and unjust
discrimination obtaining in the present case (Pambujan Sur United Mine Workers v. CIR, et al., L-
7177, May 31, 1955).

Fifth, Sixth and Seventh assignments of error. The CIR erred in holding that Severino Pepito, a
boatsman, had rendered overtime work, notwithstanding the provisions of section 1, of C.A. No. 444;
in basing its finding ofthe alleged overtime, on the uncorroborated testimony of said Severino Pepito;
and in ordering the herein petitioners to pay him. Severino Pepito was found by the CIR to have
worked overtime and had not been paid for such services. Severino Pepito categorically stated that
he worked during the late hours of the evening and during the early hours of the day when the boat
docks and unloads. Aside from the above, he did other jobs such as removing rusts and cleaning the
vessel, which overtime work totalled to 6 hours a day, and of which he has not been paid as yet.
This statement was not rebutted by the petitioners. Nobody working with him on the same boat "M/V
Adriana" contrawise. The testimonies of boatswains of other vessels(M/V Iruna and M/V Princesa),
are incompetent and unreliable. And considering the established fact that the work of Severino
Pepito was continuous, and during the time he was not working, he could not leave and could not
completely rest, because of the place and nature of his work, the provisions of sec. 1, of Comm. Act
No. 444, which states "When the work is not continuous, the time during which the laborer is not
working and can leave his working place and can rest completely shall not be counted", find no
application in his case.

8. Eighth assignment of error. The CIR erred in ordering petitioners to reinstate Capt. Carlos
Asensi to his former position, considering the fact that said officer had been employed since January
9, 1953, as captain of a vessel belonging to another shipping firm in the City of Cebu.

The CIR held

Finding that the claims of Captain Carlos Asensi for back salaries from the time of his alleged
lay-off on March 20, 1952, is not supported by the evidence on record, the same is hereby
dismissed. Considering, however, that Captain Asensi had been laid-off for a long time and
that his failure to report for work is not sufficient cause for his absolute dismissal,
respondents are hereby ordered to reinstate him to his former job without back salary but
under the same terms and conditions of employment existing prior to his lay-off, without loss
of seniority and other benefits already acquired by him prior to March 20, 1952. This Court is
empowered to reduce the punishment meted out to an erring employee (Standard Vacuum
Oil Co., Inc. v. Katipunan Labor Union, G.R. No. L-9666, Jan. 30, 1957). This step taken is in
consonance with section 12 of Comm. Act 103, as amended." (p. 16, Decision, Annex 'G').

The ruling is in conformity with the evidence, law and equity.

Ninth and Tenth assignments of error. The CIR erred in denying a duly verified motion for new
trial, and in overruling petitioner's motion for reconsideration.

The motion for new trial, supported by an affidavit, states that the movants have a good and valid
defense and the same is based on three orders of the WAS (Wage Administration Service), dated
November 6, 1956. It is alleged that they would inevitably affect the defense of the petitioners. The
motion for new trial is without merit. Having the said wage Orders in their possession, while the case
was pending decision, it was not explained why the proper move was not taken to introduce them
before the decision was promulgated. The said wage orders, dealing as they do, with the evaluation
of meals and facilities, are irrelevant to the present issue, it having been found and held that the
meals or food in question are not facilities but supplements. The original petition in the CIR having
been filed on Sept. 12, 1952, the WAS could have intervened in the manner provided by law to
express its views on the matter. At any rate, the admission of the three wage orders have not altered
the decision reached in this case.

IN VIEW HEREOF, the petition is dismissed, with costs against the petitioners.
28. Cebu Autobus Co. v. Cebu Autobus Employees Association, G.R. No. L-9742, Oct. 27,
1955
 29. Arco Metal Products Inc. v. Samahan ng Mga Manggagawa sa Arco Metal - NAFLU,,
G.R. No. 170734, May 14, 2008
G.R. No. 170734 May 14, 2008

ARCO METAL PRODUCTS, CO., INC., and MRS. SALVADOR UY, petitioners,
vs.
SAMAHAN NG MGA MANGGAGAWA SA ARCO METAL-NAFLU (SAMARM-
NAFLU),respondent.

DECISION

TINGA, J.:

This treats of the Petition for Review1 of the Resolution2 and Decision3 of the Court of Appeals
dated 9 December 2005 and 29 September 2005, respectively in CA-G.R. SP No. 85089
entitled

Samahan ng mga Manggagawa sa Arco Metal-NAFLU (SAMARM-NAFLU) v. Arco Metal

Products Co., Inc. and/or Mr. Salvador Uy/Accredited Voluntary Arbitrator Apron M.
Mangabat,4 which ruled that the 13th month pay, vacation leave and sick leave conversion to
cash shall be paid in full to the employees of petitioner regardless of the actual service they
rendered within a year.

Petitioner is a company engaged in the manufacture of metal products, whereas respondent is

the labor union of petitioners rank and file employees. Sometime in December 2003, petitioner
paid the 13thmonth pay, bonus, and leave encashment of three union members in amounts
proportional to the service they actually rendered in a year, which is less than a full twelve (12)
months. The employees were:

1. Rante Lamadrid Sickness 27 August 2003 to 27 February 2004

2. Alberto Gamban Suspension 10 June 2003 to 1 July 2003
3. Rodelio Collantes Sickness August 2003 to February 2004

Respondent protested the prorated scheme, claiming that on several occasions petitioner did not
prorate the payment of the same benefits to seven (7) employees who had not served for the full
12 months. The payments were made in 1992, 1993, 1994, 1996, 1999, 2003, and 2004.
According to respondent, the prorated payment violates the rule against diminution of benefits
under Article 100 of the Labor Code. Thus, they filed a complaint before the National
Conciliation and Mediation Board (NCMB). The parties submitted the case for voluntary
arbitration.

The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and found that the
giving of the contested benefits in full, irrespective of the actual service rendered within one
year has not ripened into a practice. He noted the affidavit of Joselito Baingan, manufacturing
group head of petitioner, which states that the giving in full of the benefit was a mere error. He
also interpreted the phrase "for each year of service" found in the pertinent CBA provisions to
mean that an employee must have rendered one year of service in order to be entitled to the full
benefits provided in the CBA.5

Unsatisfied, respondent filed a Petition for Review6 under Rule 43 before the Court of Appeals,
imputing serious error to Mangabats conclusion. The Court of Appeals ruled that the CBA did
not intend to foreclose the application of prorated payments of leave benefits to covered
employees. The appellate court found that petitioner, however, had an existing voluntary
practice of paying the aforesaid benefits in full to its employees, thereby rejecting the claim that
petitioner erred in paying full benefits to its seven employees. The appellate court noted that
aside from the affidavit of petitioners officer, it has not presented any evidence in support of its
position that it has no voluntary practice of granting the contested benefits in full and without
regard to the service actually rendered within the year. It also questioned why it took petitioner
eleven (11) years before it was able to discover the alleged error. The dispositive portion of the
courts decision reads:

WHEREFORE, premises considered, the instant petition is hereby GRANTED and the
Decision of Accredited Voluntary Arbiter Apron M. Mangabat in NCMB-NCR Case
No. PM-12-345-03, dated June 18, 2004 is hereby AFFIRMED WITH
MODIFICATION in that the 13th month pay, bonus, vacation leave and sick leave
conversions to cash shall be paid to the employees in full, irrespective of the actual
service rendered within a year.7

Petitioner moved for the reconsideration of the decision but its motion was denied, hence this
petition.

Petitioner submits that the Court of Appeals erred when it ruled that the grant of 13th month pay,
bonus, and leave encashment in full regardless of actual service rendered constitutes voluntary
employer practice and, consequently, the prorated payment of the said benefits does not
constitute diminution of benefits under Article 100 of the Labor Code.8

The petition ultimately fails.

First, we determine whether the intent of the CBA provisions is to grant full benefits regardless
of service actually rendered by an employee to the company. According to petitioner, there is a
one-year cutoff in the entitlement to the benefits provided in the CBA which is evident from the
wording of its pertinent provisions as well as of the existing law.

We agree with petitioner on the first issue. The applicable CBA provisions read:

ARTICLE XIV-VACATION LEAVE

Section 1. Employees/workers covered by this agreement who have rendered at least one
(1) year of service shall be entitled to sixteen (16) days vacation leave with pay for each
year of service. Unused leaves shall not be cumulative but shall be converted into its
cash equivalent and shall become due and payable every 1st Saturday of December of
each year.

However, if the 1st Saturday of December falls in December 1, November 30 (Friday)

being a holiday, the management will give the cash conversion of leaves in November
29.

Section 2. In case of resignation or retirement of an employee, his vacation leave shall

be paid proportionately to his days of service rendered during the year.

ARTICLE XV-SICK LEAVE

Section 1. Employees/workers covered by this agreement who have rendered at least one
(1) year of service shall be entitled to sixteen (16) days of sick leave with pay for each
year of service. Unused sick leave shall not be cumulative but shall be converted into its
cash equivalent and shall become due and payable every 1st Saturday of December of
each year.

Section 2. Sick Leave will only be granted to actual sickness duly certified by the
Company physician or by a licensed physician.

Section 3. All commutable earned leaves will be paid proportionately upon retirement or
separation.

ARTICLE XVI EMERGENCY LEAVE, ETC.

Section 1. The Company shall grant six (6) days emergency leave to employees covered
by this agreement and if unused shall be converted into cash and become due and
payable on the 1stSaturday of December each year.

Section 2. Employees/workers covered by this agreement who have rendered at least one
(1) year of service shall be entitled to seven (7) days of Paternity Leave with pay in case
the married employees legitimate spouse gave birth. Said benefit shall be non-
cumulative and non-commutative and shall be deemed in compliance with the law on
the same.

Section 3. Maternity leaves for married female employees shall be in accordance with
the SSS Law plus a cash grant of P1,500.00 per month.

xxx

ARTICLE XVIII- 13TH MONTH PAY & BONUS

Section 1. The Company shall grant 13th Month Pay to all employees covered by this
agreement. The basis of computing such pay shall be the basic salary per day of the
 employee multiplied by 30 and shall become due and payable every 1st Saturday of
December.

Section 2. The Company shall grant a bonus to all employees as practiced which shall be
distributed on the 2nd Saturday of December.

Section 3. That the Company further grants the amount of Two Thousand Five Hundred
Pesos (P2,500.00) as signing bonus plus a free CBA Booklet.9 (Underscoring ours)

There is no doubt that in order to be entitled to the full monetization of sixteen (16) days of
vacation and sick leave, one must have rendered at least one year of service. The clear wording
of the provisions does not allow any other interpretation. Anent the 13th month pay and bonus,
we agree with the findings of Mangabat that the CBA provisions did not give any meaning
different from that given by the law, thus it should be computed at 1/12 of the total
compensation which an employee receives for the whole calendar year. The bonus is also
equivalent to the amount of the 13th month pay given, or in proportion to the actual service
rendered by an employee within the year.

On the second issue, however, petitioner founders.

As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts,
does not normally embark on a re-examination of the evidence presented by the contending
parties during the trial of the case considering that the findings of facts of the Court of Appeals
are conclusive and binding on the Court.10 The rule, however, admits of several exceptions, one
of which is when the findings of the Court of Appeals are contrary to that of the lower tribunals.
Such is the case here, as the factual conclusions of the Court of Appeals differ from that of the
voluntary arbitrator.

Petitioner granted, in several instances, full benefits to employees who have not served a full
year, thus:

Name Reason Duration

1. Percival Bernas Sickness July 1992 to November 1992
2. Cezar Montero Sickness 21 Dec. 1992 to February 1993
3. Wilson Sayod Sickness May 1994 to July 1994
4. Nomer Becina Suspension 1 Sept. 1996 to 5 Oct. 1996
5. Ronnie Licuan Sickness 8 Nov. 1999 to 9 Dec. 1999
6. Guilbert Villaruel Sickness 23 Aug. 2002 to 4 Feb. 2003
7. Melandro Moque Sickness 29 Aug. 2003 to 30 Sept. 200311
Petitioner claims that its full payment of benefits regardless of the length of service to the
company does not constitute voluntary employer practice. It points out that the payments had
been erroneously made and they occurred in isolated cases in the years 1992, 1993, 1994, 1999,
2002 and 2003. According to petitioner, it was only in 2003 that the accounting department
discovered the error "when there were already three (3) employees involved with prolonged
absences and the error was corrected by implementing the pro-rata payment of benefits pursuant
to law and their existing CBA."12 It adds that the seven earlier cases of full payment of benefits
went unnoticed considering the proportion of one employee concerned (per year) vis vis the
170 employees of the company. Petitioner describes the situation as a "clear oversight" which
should not be taken against it.13 To further bolster its case, petitioner argues that for a grant of a
benefit to be considered a practice, it should have been practiced over a long period of time and
must be shown to be consistent, deliberate and intentional, which is not what happened in this
case. Petitioner tries to make a case out of the fact that the CBA has not been modified to
incorporate the giving of full benefits regardless of the length of service, proof that the grant has
not ripened into company practice.

We disagree.

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

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

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

6. It was never the intention much less the policy of the management to grant the
aforesaid benefits to the employees in full regardless of whether or not the employee has
rendered services to the company for the entire year, otherwise, it would be unjust and
inequitable not only to the company but to other employees as well.24

In cases involving money claims of employees, the employer has the burden of proving that the
employees did receive the wages and benefits and that the same were paid in accordance with
law.25

Indeed, if petitioner wants to prove that it merely erred in giving full benefits, it could have
easily presented other proofs, such as the names of other employees who did not fully serve for
one year and thus were given prorated benefits. Experientially, a perfect attendance in the
workplace is always the goal but it is seldom achieved. There must have been other employees
who had reported for work less than a full year and who, as a consequence received only
prorated benefits. This could have easily bolstered petitioners theory of mistake/error, but
sadly, no evidence to that effect was presented.

IN VIEW HEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-
G.R. SP No. 85089 dated 29 September 2005 is and its Resolution dated 9 December 2005 are
hereby AFFIRMED.

SO ORDERED.
 30. Philippine Wireless Inc. v. NLRC, G.R. No. 112963, July 20, 1999

G.R. No. 112963 July 20, 1999

PHILIPPINE WIRELESS INC. (Pocketbell) and/or JOSE LUIS SANTIAGO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and GOLDWIN LUCILA, respondents.

PARDO, J.:

This petition for certiorari is to set aside the decision of the National Labor Relations
Commission 1 on the ground that it was rendered with grave abuse of its discretion. The dispositive
portion of the decision reads as follows:

WHEREFORE, finding the appeal to be meritorious the decision appealed from is

hereby REVERSED AND SET ASIDE and a new one ENTERED, declaring that the
complainant has been constructively dismissed and ordering the respondent to pay
him backn wages from his dismissal on December 28, 1990 up to the date of the
promulgation of this Resolution. And in lieu of reinstatement, respondent is likewise
hereby ordered to pay complainant his separation pay at the rate of one (1) month
pay for every year of service.
1w phi 1.nt

No Cost.

SO ORDERED.

(s/t) EDNA BONITO-PEREZ

Presiding Commissioner2

The facts are as follows:

On January 8, 1976, petitioner Philippine Wireless Inc. hired respondent Doldwin Lucila as
operator/encoder. On January 7, 1979, he was promoted as Head Technical and Maintenance
Department of the Engineering Department. On September 11, 1987, he was promoted as
Supervisor, Technical Services of the same department. On October 1, 1990, he was again
promoted as Superintendent, Project Management.

On December 28, 1990, he tendered his resignation.

On December 3, 1991, he filed with the Arbitration Branch, National Labor Relations Commission, a
complaint for illegal/constructive dismissal. He alleged that he was constructively dismissed
inasmuch as his promotion from Supervisor, Technical Services to Superintendent, Project
Management is demeaning, illusory and humiliating. The basis of his allegation was the fact that he
was not give any secretary, assistant and/or subordinates.

On June 29, 1992, Labor Arbiter Benigno Villarente Jr, rendered a decision declaring that
respondent actually resigned and dismissed the complaint for lack of merit. 3
On June 15, 1993, public respondent NLRC reversed the findings of the labor arbiter, and ordered
respondent's reinstatement with back wages or separation pay.

On August 27, 1993 petitioners filed a motion for reconsideration which the National Labor Relations
Commission denied for lack of merit in a resolution dated November 16, 1993.

Hence, this petition.

At issue is whether or not petitioner was constructively dismissed from the petitioner's employment.

We find the petition meritorious.

The Court has held that constructive dismissal is "an involuntary resignation resorted to when
continued employment is rendered impossible, unreasonable or unlikely; when there is a demotion in
rank and/or a diminution in pay; or when a clear discrimination, insensibility or disdain by an
employer becomes unbearable to the employee. 4 In this particular case, respondent voluntarily
resigned from his employment. He was not pressured into resigning.

Voluntary resignation is defined as the act of an employee who "finds himself in a situation where he
believes that personal reasons cannot be sacrificed in favor of the exigency of the service and he
has no other choice but to disassociate himself from his employment." 5

Respondent considered his transfer/promotion as a demotion due to the fact that he had no support
staff to assist him in his work and whom he could supervise. There is no demotion where there is no
reduction in position, rank or salary as a result of such transfer. 6 In fact, respondent Goldwin Lucila
was promoted three (3) times from the time he was hired until his resignation from work. 1wphi1.nt

WHEREFORE, the petition is hereby GRANTED. The questioned decision of the National Labor
Relations Commission, dated June 15, 1993, is SET ASIDE. The decision of the Labor Arbiter dated
June 29, 1992, is REINSTATED and AFFIRMED.

No costs.

SO ORDERED.
 31. Unicorn Safety Glass Inc. v Basarte, G.R. No. 154689, Nov 25, 2004

G.R. No. 154689 November 25, 2004

UNICORN SAFETY GLASS, INC., LILY YULO and HILARIO YULO, petitioners,
vs.
RODRIGO BASARTE, JAIMELITO FLORES, TEODOLFO LOR, RONNIE DECIO, ELMER
SULTORA and JOSELITO DECIO, respondents.

DECISION

YNARES-SANTIAGO, J.:

This is a Petition for Review on Certiorari seeking to set aside the Decision1 of the Court of Appeals
dated October 18, 2001 and its subsequent Resolution dated August 7, 2002, which reversed the
decisions of the Labor Arbiter and the National Labor Relations Commission (NLRC).

Respondents were regular employees of petitioner Unicorn Safety Glass Incorporated, a company
engaged in the business of glass manufacturing. Respondents normally worked six (6) times a
week, from Monday to Saturday, and were paid on a weekly basis. They were likewise officers of the
organized union in petitioner company, owned and managed by the Spouses Lily and Hilario Yulo.

On March 2, 1998, Hilario Yulo, as general manager of Unicorn, issued a Memorandum2 informing
respondents that effective April 13, 1998, their workdays shall be reduced due to economic
considerations. Yulo cited several factors such as decrease in sales, increase in the cost of
production, devaluation of the peso and increase in minimum wage, which contributed to the current
economic state of the company. In a letter dated March 12, 1998, respondents registered their
protest to the proposed reduction of working days and expressed doubts on the reasons offered by
the company.3 Respondents also surmised that the management was merely getting back at them for
forming a union especially since only the union officers were affected by the work reduction.

On April 6, 1998, Hilario Yulo issued another Memorandum4 announcing the implementation of a
work rotation schedule to take effect from April 13, 1998 to April 30, 1998, which will effectively
reduce respondents' workdays to merely three days a week. A copy of the planned rotation scheme
was sent to the Department of Labor and Employment. Respondents wrote another letter of protest
dated April 7, 19985 expressing their frustrations at the apparent lack of willingness on the part of
petitioner company's management to address their concerns and objections. On the same day,
respondents met with the Spouses Yulo and inquired as to the reasons for the imposition of the
reduced workweek. They were told that it was management's prerogative to do so.6

On April 13, 1998, instead of reporting for work, respondents filed a complaint against petitioner
company with the National Labor Relations Commission, docketed as NLRC Case No. NCR-00-04-
03277-98, for constructive dismissal and unfair labor practice, i.e., union busting, non-payment of
five days service incentive leave pay and payment of moral and exemplary damages as well as
attorney's fees. Respondents prayed for reinstatement and payment of full backwages.
Meanwhile, since respondents failed to report for work, petitioners sent each of them a telegram
directing them to do so. On April 18, 1998, respondents sent Yulo a letter informing him that, in view
of the management's apparent indifference to their plight and blatant violation of their rights, a
complaint was lodged against petitioner company for constructive dismissal. Moreover, given the
working environment they were subjected to, they decided not to report for work at all.7 Petitioner
company replied by asking them to explain why they have not been reporting for work. However,
respondents neither reported for work nor replied to petitioner company's telegrams.

On January 26, 1999, Labor Arbiter Felipe Pati rendered judgment finding that respondents were not
constructively terminated by petitioner company. Thus:

Complainants claim that they were constructively terminated. However, evidence extant do
not support this contention. What we see on records are the telegrams, letters and
memoranda sent by respondents to complainants ordering the latter to report for work.
Despite due receipt by the complainants of these communications, they simply ignored
respondents' plea. Complainants deliberate refusal to report for work is very much evident
from the number of letters they received from respondents which were all ignored.

It is true that complainants have sent to respondent a joint letter-reply dated April 18, 1998
(Annexes 35, Respondents Position Paper). However, said joint letter reinforces the fact that
complainants were not terminated by respondents. In fact complainants admitted in this joint
letter-reply that they have decided not to report for work because they did not agree with the
report rotation adopted by respondents. From this admission and statement of complainant,
we feel that the charge of illegal dismissal they filed against respondents is misplaced. If
complainants strongly opposed the rotation adopted by respondents, they could have
initiated an illegal rotation and not illegal dismissal case against respondents. As "good
soldiers" complainants could initiate this case while they are reporting for work based on the
adopted work rotation and let the Court decides whether or not this rotation is valid and legal.
Certainly refusal to report for work is not a proper remedy.8

The Labor Arbiter likewise dismissed the charge of unfair labor practice for lack of legal and factual
basis. Nonetheless, the Labor Arbiter ordered petitioner company to pay the respondents' claim for
unpaid service incentive leave pay. The Labor Arbiter disposed of the case, thus:

WHEREFORE, the instant case is hereby dismissed for lack of merit. Respondents however,
are ordered to pay complainants the total amount of P5,110.00 for unpaid service incentive
leave pay as alluded in the above computation.

On the grounds of amicable settlement and subsequent withdrawals of their complaints, the
cases of PAQUITO MANONGSONG and ELMER SULTORA are hereby dismissed with
prejudice.

SO ORDERED.9

The case was appealed to the NLRC. During the pendency of the appeal, however, petitioner
company filed a Motion to Dismiss alleging that respondents Basarte, Flores, Decio and Lor entered
into amicable settlements and executed a "Waiver, Release & Quitclaim."10 Respondents'
representative filed an Opposition thereto alleging that the "Waiver, Release & Quitclaim" executed
by respondents were entered into without his knowledge and not in the presence of the Labor
Arbiter; and that the amounts received by respondents were unconscionably inadequate.
In a decision dated October 31, 2000, the NLRC sustained the findings of the Labor Arbiter. On the
issue of the amicable settlements, the NLRC stated:

We are not convinced that the amicable settlement entered into by complainants were
involuntary and that the consideration thereof are unconscionable.

It is to be stressed that the complainants were the ones who went to the office of respondent
for settlement. They acknowledged having signed the "Waiver, Release and Quitclaim" and
brought the same before a Notary Public. Given these factual circumstances, it is hard to
believe that there was involuntariness on the part of the complainant when they settled their
claims with respondent. In fact, almost a year have already lapsed since then. It is only now
that complainants are claiming that their settlement was involuntary.

Anent complainants' claim that the consideration of settlement is unconscionable suffice it to

state that the amount granted by way of settlement to complainants Rodrigo Basarte,
Jaimelito Flores, Joselito Decio including that of complainant Teodolfo Lor (Records, p. 179)
are more than the judgment award.11

The dispositive portion of the NLRC's decision states:

PREMISES CONSIDERED, the appeal from the Decision dated January 26, 1999 is hereby
DISMISSED for lack of merit and the Decision is AFFIRMED.

Further, the motions to dismiss filed by respondents with respect to complainants Rodrigo
Basarte, Jaimelito Flores, Joselito Decio and Teodolfo Lor are hereby GRANTED. Thus,
insofar as said complainants are concerned their cases are dismissed with prejudice, as
prayed for by respondents.

SO ORDERED.12

Unrelenting, the respondents filed a petition for certiorari with the Court of Appeals, which found
respondents' case partly meritorious.

However, it declined to make a contrary finding on the charge of unfair labor practice for lack of
clear-cut and convincing evidence. The dispositive portion of the Court of Appeals' decision is as
follows:

UPON THE VIEW WE TAKE OF THIS CASE, THUS, the petition is substantially GRANTED.
Private respondents are hereby ordered to reinstate to their former positions Rodrigo
Basarte, Jaimelito Flores and Ronnie Decio, without loss of seniority rights and privileges,
and to pay these three their full backwages from April 13, 1998 until their reinstatement. Or,
to award them separation pay, in case reinstatement is no longer feasible or possible.
Private respondents are further sentenced to pay the aforenamed petitioners ten per cent
(10%) of the total awards by way of attorney's fees. Costs shall also be taxed against private
respondents.

SO ORDERED.13

Its Motion for Reconsideration having been denied, petitioners are before us on Petition for Review
on Certiorari, raising the following assignment of errors:
 I.

THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE RULING OF THE

LABOR ARBITER A QUO WHICH WAS AFFIRMED BY THE NLRC HOLDING THAT
PRIVATE RESPONDENTS WERE NOT ILLEGALLY DISMISSED FROM THEIR
EMPLOYMENT.

II.

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE RELEASE,

WAIVER AND QUITCLAIMS EXECUTED BY PRIVATE RESPONDENTS RODRIGO
BASARTE AND JAIMELITO FLORES NULL AND VOID.14

The petition lacks merit.

Constructive dismissal or a constructive discharge has been defined as quitting because continued
employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in
rank and a diminution in pay.15 Constructive dismissal, however, does not always take the form of a
diminution. In several cases, we have ruled that an act of clear discrimination, insensibility, or
disdain by an employer may become so unbearable on the part of the employee so as to foreclose
any choice on his part except to resign from such employment. This constitutes constructive
dismissal.16

In the case at bar, we agree with the Court of Appeals that petitioners' bare assertions on the alleged
reason for the rotation plan as well as its failure to refute respondents' contention that they were
targeted due to their union activities, merit the reversal of the Labor Arbiter's decision. It was
incumbent upon petitioners to prove that the rotation scheme was a genuine business necessity and
not meant to subdue the organized union. The reasons enumerated by petitioners in their
Memoranda dated March 2, 1998 were factors too general to actually substantiate the need for the
scheme. Petitioners cite the reduction in their electric consumption as proof of an economic slump.
This may be true to an extent. But it does not, by itself, prove that the rotation scheme was the most
reasonable alternative to remedy the company's problems.

The petitioners' unbending stance on the implementation of the rotation scheme was an indication
that the rotation plan was being implemented for reasons other than business necessity. It appears
that respondents attempted on more than one occasion to have a dialogue with petitioner Hilario
Yulo to discuss the work reduction. Good faith should have prompted Yulo to hear the side of the
respondents, to come up with a scheme amenable to both parties or attempt to convince the
employees concerned that there was no other viable option. However, petitioners ignored the letters
sent by respondents, which compelled the latter to seek redress with the Labor Arbiter.

We are mindful that every business strives to keep afloat during these times when prevailing
economic situations turns such endeavor into a near struggle. With as much latitude as our laws
would allow, the Court has always respected a company's exercise of its prerogative to devise
means to improve its operations. Thus, we have held that management is free to regulate, according
to its own discretion and judgment, all aspects of employment, including hiring, work assignments,
working methods, time, place and manner of work, processes to be followed, supervision of workers,
working regulations, transfer of employees, work supervision, lay off of workers and discipline,
dismissal and recall of workers.17 Further, management retains the prerogative, whenever exigencies
of the service so require, to change the working hours of its employees.18
However, the exercise of management prerogative is not absolute. By its very nature, encompassing
as it could be, management prerogative must be exercised in good faith and with due regard to the
rights of laborverily, with the principles of fair play at heart and justice in mind. While we concede
that management would best know its operational needs, the exercise of management prerogative
cannot be utilized as an implement to circumvent our laws and oppress employees. The prerogative
accorded management cannot defeat the very purpose for which our labor laws exist: to balance the
conflicting interests of labor and management, not to tilt the scale in favor of one over the other, but
to guaranty that labor and management stand on equal footing when bargaining in good faith with
each other.19

In the case at bar, the manner by which petitioners exercised their management prerogative appears
to be an underhanded circumvention of the law. Petitioners were keen on summarily implementing
the rotation plan, obviously singling out respondents who were all union officers. The management's
apparent lack of interest to hear what the respondents had to say, created an uncertain situation
where reporting for work was tantamount to an acquiescence in an unjust situation.

Petitioners argued that they "exerted diligent and massive efforts" to make respondents return to
work, highlighting the telegrams and memoranda sent to respondents.20 It is well established that to
constitute abandonment, two elements must concur: (1) the failure to report for work or absence
without valid or justifiable reason, and (2) a clear intention to sever the employer-employee
relationship, with the second element as the more determinative factor and being manifested by
some overt acts. Abandoning one's job means the deliberate, unjustified refusal of the employee to
resume his employment and the burden of proof is on the employer to show a clear and deliberate
intent on the part of the employee to discontinue employment.21

However, petitioners' charge of abandonment of work by respondents does not hold water when
taken in light of the complaint for constructive dismissal. We have held that a charge of
abandonment is totally inconsistent with the filing of a complaint for constructive dismissal and
with reason.22 Respondents cannot be said to have abandoned their jobs when precisely, the root
cause of their protest is their demand to maintain their regular work hours. What is more,
respondents even prayed for reinstatement and backwages. Clearly, these are incompatible with the
proposition that respondents sought to abandon their work.

Anent the issue of the validity of the waivers and quitclaims executed by some of the respondents,
petitioners argue that while admittedly, the amounts indicated therein were not substantial, it does
not necessarily follow that these were executed under duress. Moreover, the waivers and quitclaims
were executed when the complaint for illegal dismissal was already dismissed by the Labor Arbiter.
Thus, the waivers and quitclaims were executed under valid circumstances.

We do not agree. To be sure, the law looks with disfavor upon quitclaims and releases by
employees who are inveigled or pressured into signing them by unscrupulous employers seeking to
evade their legal responsibilities. We have clarified the standards for determining the validity of
quitclaim or waiver in the case of Periquet v. National Labor Relations Commission,23 to wit:

If the agreement was voluntarily entered into and represents a reasonable settlement, it is
binding on the parties and may not later be disowned simply because of a change of mind. It
is only where there is clear proof that the waiver was wangled from an unsuspecting or
gullible person, or the terms of settlement are unconscionable on its face, that the law will
step in to annul the questionable transaction. But 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.
In the instant case, while it is true that the complaint for illegal dismissal filed by respondents with the
Labor Arbiter has been dismissed, their appeal before the NLRC was still pending. In fact, petitioners
even filed a Motion to Dismiss with the NLRC on the very ground that the respondents, or at least
most of them, have executed said "Waivers, Releases and Quitclaims." Petitioners cannot therefore
deny that it was in their interest to have respondents execute the quitclaims.

Furthermore, the considerations received by respondents Basarte and Flores were grossly
inadequate considering the length of time that they were employed in petitioner company. As
correctly pointed out by the Court of Appeals, Basarte worked for petitioner company for 21 years,
that is, from 1976 to 1998, while Flores worked from 1991 to 1998. Basarte and Flores only received
P10,000.00 and P3,000.00, respectively. In contrast, Manongsong and Soltura, two workers who
opted to settle their respective cases earlier on, both started in 1993 only, but were able to take
home P16,434.00 each after executing their waivers.

Article 279 of the Labor Code provides that an employee who is unjustly dismissed from work is
entitled to reinstatement without loss of seniority rights and other privileges, and to his full
backwages, inclusive of allowances, and to the other benefits or their monetary equivalent computed
from the time of his actual reinstatement. However, if reinstatement is no longer possible, the
employer has the alternative of paying the employee his separation pay in lieu of reinstatement.

WHEREFORE, the instant petition is DENIED, and the decision of the Court of Appeals of October
18, 2001 in CA-G.R. SP No. 63577 is AFFIRMED in toto. Costs against petitioners.

SO ORDERED.
 32. Uniwide Sales Warehouse Club v. NLRC, G.R. No. 154503, Feb 29, 2008

G.R. No. 154503 February 29, 2008

UNIWIDE SALES WAREHOUSE CLUB and VIVIAN M. APDUHAN, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and AMALIA P. KAWADA, respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by
Uniwide Sales Warehouse Club (Uniwide) and Vivian M. Apduhan (Apduhan) seeking to annul the
Decision1 dated November 23, 2001 and the Resolution2 dated July 23, 2002 of the Court of Appeals
(CA) in CA-G.R. SP No. 64581.

The facts of the case:

Amalia P. Kawada (private respondent) started her employment with Uniwide sometime in 1981 as a
saleslady. Over the years, private respondent worked herself within Uniwide's corporate ladder until
she attained the rank of Full Assistant Store Manager with a monthly compensation of P13,000.00 in
1995.

As a Full Assistant Store Manager, private respondent's primary function was to manage and
oversee the operation of the Fashion and Personal Care, GSR Toys, and Home Furnishing
Departments of Uniwide, to ensure its continuous profitability as well as to see to it that the
established company policies and procedures were properly complied with and implemented in her
departments.3

Sometime in 1998, Uniwide received reports from the other employees regarding some problems in
the departments managed by the private respondent.4 Thus, on March 15, 1998, Uniwide, through
Store Manager Apduhan, issued a Memorandum addressed to the private respondent summarizing
the various reported incidents signifying unsatisfactory performance on the latter's part which include
the commingling of good and damaged items, sale of a voluminous quantity of damaged toys and
ready-to-wear items at unreasonable prices, and failure to submit inventory reports. Uniwide asked
private respondent for concrete plans on how she can effectively perform her job.5In a letter6 dated
March 23, 1998, private respondent answered all the allegations contained in the March 15, 1998
Memorandum.

Unsatisfied, Apduhan sent another Memorandum7 dated March 30, 1998 to private respondent
where Apduhan claimed that the answers given by the private respondent in her March 23, 1998
letter were all hypothetical and did not answer directly the allegations attributed to her.8 Apduhan
elaborated the incidents contained in the March 15, 1998 Memorandum.

On June 30, 1998, Apduhan sent another Memorandum9 seeking from the private respondent an
explanation regarding the incidents reported by Uniwide employees and security personnel for
alleged irregularities committed by the private respondent such as allowing the entry of unauthorized
persons inside a restricted area during non-office hours, falsification of or inducing another employee
to falsify personnel or company records, sleeping and allowing a non-employee to sleep inside the
private office, unauthorized search and bringing out of company records, purchase of damaged
home furnishing items without the approval from superior, taking advantage of buying damaged
items in large quantity, alteration of approval slips for the purchase of damaged items and
abandonment of work.10 In a letter11 dated July 9, 1998, private respondent answered the allegations
made against her.

On July 27, 1998, private respondent sought medical help from the company physician, Dr. Marivelle
C. Zambrano (Dr. Zambrano), due to complaints of dizziness.12 Finding private respondent to be
suffering from hypertension, Dr. Zambrano advised her to take five days sick leave.13

On July 30, 1998, private respondent was able to obtain from Dr. Zambrano a certificate of fitness to
work,14 which she presented to Apduhan the following day.15 It turned out that Dr. Zambrano
inadvertently wrote "Menia," the surname of the company nurse, in the medical certificate instead of
private respondent's surname.16 Thereafter, private respondent claims that Apduhan shouted at her
and prevented her from resuming work because she was not the person referred to in the medical
certificate.17 After private respondent left Apduhan's office, a certain Evelyn Maigue, Apduhan's
assistant, approached the private respondent to get the certification so that it may be photocopied.
When she refused to give the certification, private respondent claims that Apduhan once again
shouted at her which caused her hypertension to recur and eventually caused her to collapse.
Private respondent's head hit the edge of the table before she fell down on the ground for which she
suffered contusions at the back of her head, as evidenced by the medical certificate18 issued by Dr.
George K. C. Cheu of the Chinese General Hospital & Medical Center.19

On August 1, 1998, private respondent reported the confrontation between her and Apduhan to the
Central Police District.20 Likewise, private respondent was able to obtain from Dr. Zambrano the
corrected certification21 together with the clarification that the name "Amalia Menia" written on the
July 30, 1998 certification referred to Amalia Kawada.22

Thereafter, counsel for private respondent sent a letter23 dated August 1, 1998 to Apduhan stating
that the latter's alleged continued harassment and vexation against private respondent created a
hostile work environment which had become life threatening, and that they had no alternative but to
bring the matter to the proper forum.24

On August 2, 1998, Apduhan issued a Memorandum,25 received on the same day by Edgardo
Kawada, the husband of private respondent, advising the latter of a hearing scheduled on August
12, 1998 to be held at the Uniwide Office in Quirino Highway, and warning her that failure to appear
shall constitute as waiver and the case shall be submitted for decision based on available papers
and evidence.26

On August 3, 1998, private respondent filed a case for illegal dismissal before the Labor Arbiter
(LA).27

Counsel for private respondent sent a letter28 dated August 8, 1998 to Apduhan claiming that the
August 2, 1998 Memorandum was a mere afterthought, in an attempt to justify private respondent's
dismissal; and that on August 3, 1998, private respondent had already filed charges against Uniwide
and Apduhan (petitioners).

On August 8, 1998, Apduhan sent a letter addressed to private respondent, which the latter received
on even date, advising private respondent to report for work, as she had been absent since August
1, 1998; and warning her that upon her failure to do so, she shall be considered to have abandoned
her job.29
On September 1, 1998, Apduhan issued a Memorandum30 stating that since private respondent was
unable to attend the scheduled August 12, 1998 hearing, the case was evaluated on the basis of the
evidence on record; and enumerating the pieces of evidence of the irregularities and violations of
company rules committed by private respondent, the latter's defenses and the corresponding
findings by Uniwide. Portions of the Memorandum read:

VIOLATIONS:

1. Allowing entry of Unauthorized person inside a Restricted Area during non-office hours
(night-time)

xxxx

FINDINGS:

Towards these evidence, Ms. A. Kawada only raised questions as to the propriety of the
entries on the logbook, but the offense itself was not even denied categorically by the
employee concerned. Hence, the fact remains that the employee concerned indeed allowed
the entries of Mr. Ed Kawada on different occasions. The Security personnel when asked
why they did not report those incidents immediately, answered: They hesitated to report
them because they were afraid as the employee concerned is a manager, whom they
thought knows better then them.

*Violation - No. 9 Type C, Code of Discipline*

2. Falsification of or Inducing another employee to falsify personnel or company records.

xxxx

FINDINGS:

In her answer, Ms. A. Kawada again only questioned the propriety of the entries on the
logbook, but there were clear indications that the violation was indeed committed as shown
by the abovestated pieces of evidence.

The testimonies by the witnesses' are very explicit of what really transpired, specifically
security guard Dennis Venancio, who just performs his duty of reporting any unusual incident
that occurred within his jurisdiction. The fact that they failed to report it at an earlier time, in
understandable, since they were hesitant, that the manager might get back at them, or
simply because of their respect for Ms. A. Kawada, as a Manager.

*Violation - No. 8 Type F, Code of Discipline*

3. Sleeping during overnight work last August 17, 1997.

xxxx

FINDINGS:
Based on the records and reports submitted, there is no doubt that the concerned employee
committed such an offense. The witnesses stated their testimonies only in accordance with
what they have seen and witnessed during those stated periods.

*Violation - No. 7 Type D, Code of Discipline*

4. Unauthorized Search, Bringing Out and taking of Company Records, March 18, 1998 and
March 20, 1998.

xxxx

FINDINGS:

It is established that 15 approval slips were taken by the employee concerned, however, only
11 approval slips were surrendered or returned.

*Violation - No. 1 Type F, Code of Discipline*

5. Purchases of Dented or Sub-standard items of Home Furnishing without approval from

authorized Supervisor, February 3, 1998.

xxxx

FINDINGS:

Towards this accusation subject employee countered that she only asked Ms. Melanie Laag
why she was not able to sign said approval slip but not for the purpose of letting her sign it.
By this, it only means that indeed the said approval slip does not contain the necessary
approval prior to the purchase. This could be related to the other charge against the subject
employee on unauthorized search and bringing out of company records, for based on the
circumstances there was such a search conducted to look for and retrieve approval slips of
subject employee, as there are really approval slips of subject employee which does not bear
the necessary approval. The search must have been probably made to cover up and/or
suppress such evidence against her.

6. Altering Approval slips dated January 17, 1998.

a) #1 original quantity - 7 pieces changed to 2 pieces - amount was altered from Php14.00 to
Php10.00.

b) #2 erasures on the number of quantity whether 15, 5 or 7 pieces.

xxxx

FINDINGS:

Towards this accusation Ms. A. Kawada submitted no plausible explanation, indicating that
said employee concerned might have really committed the acts complained of.

Violation of Company Rules on the proper procedure in selling of dented merchandise.

 7. Making Reservations of Dented Items - January to February 1998.

xxxx

FINDINGS:

There was no direct explanation submitted by Ms. A. Kawada on this. Thus, it becomes clear
that Ms. Kawada had violated the company rule on No Reservation.

8. Conduct unbecoming of a manager in cornering and/or bringing large quantity of damaged

items (toys, furniture, RTW, appliances and Home Furnishing items), causing demoralization
among the store crew and tainting management's image to its personnel.

xxxx

FINDINGS:

The report that were submitted by the witnesses proved that Ms. Kawada made those
purchases of dented or sub-standard items that were under her assigned area, without
regard for the rest of the employees who wanted to buy also, thus, using and taking
advantage of her position, to the detriment of the other employees and painting a bad image
of the company's managers.

9. Abandonment of work or absence for five (5) consecutive days without prior notice from
any authorized company officer or higher authority.

FINDINGS:

Despite notice for subject employee to report to work or else be considered as having
abandoned her job, it appears that subject employee continuously failed to report for work
without any explanation.

*Violation - No. 2, Sec. A*

Based on all the foregoing it seems clear and convincing, that you have indeed committed
the violations imputed on you. The aforementioned violations per se deserves termination as
a penalty, not to mention that they also constitute willful breach of the trust reposed on you
as a manager. Thus, we have no other alternative but to terminate your service with the
Company, effective September 1, 1998, on the grounds of violations of Company
Rules, Abandonment of Work and loss of trust and confidence.

You are hereby directed to surrender all other documents and papers pertaining to your job,
which you may have acquired and have come into your possession as a result of your
employment with the company.

Please be guided. thank you.31 (Emphasis supplied)

On March 9, 1999 the LA32 dismissed the complaint for lack of merit.33 Private respondent appealed
the LA's decision to the National Labor Relations Commission (NLRC).
In its Decision34 dated December 27, 2000, the NLRC ruled in favor of private respondent, reversing
the LA, to wit:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE.
Complainant is declared constructively dismissed by respondents. Respondents Uniwide
Sales Warehouse Club and Vivian Apduhan are jointly and severally ordered to pay
complainant the following sums:

Separation Pay:

November 1981 -July 3, 1998

P13,000.00 x 16.8 yrs. = P218,400.00

Backwages:

July 31, 1998-up to the present

Moral Damages = P100,000.00

Exemplary Damages P100,000.00

Attorney's fees computed at ten percent (10%) of the total award.

SO ORDERED. 35

According to the NLRC, private respondent was subjected to inhuman and anti-social treatment
oppressive to labor. Private respondent received successive memoranda from Apduhan accusing
the former of different infractions, some of which offenses complainant was informed of only a year
after the alleged commission. Further, Apduhan's ill will and motive to edge private respondent out of
her employ was displayed by Apduhan's stubborn refusal to allow private respondent to continue her
work on the flimsy excuse that the medical certificate did not bear her correct surname, while
Apduhan knew for a fact that the same could not have referred to another person but to private
respondent.36

Also, the NLRC observed that private respondent was not afforded due process by petitioners
because the former was not given an opportunity to a fair hearing in that the investigation was
conducted after private respondent had been constructively dismissed; and that there was no point
for private respondent to still attend the investigation set on August 12, 1998 after her constructive
dismissal on July 31, 1998 and after she had already filed her complaint.

Feeling aggrieved, petitioners appealed the NLRC Decision to the CA. In the assailed
Decision37 dated November 23, 2001, the CA affirmed in toto the NLRC Decision.

Hence, the present petition.38

The sole issue raised before the Court is:

WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN SUSTAINING

THE NLRC'S FINDING THAT PRIVATE RESPONDENT WAS CONSTRUCTIVELY
DISMISSED.39
It is a well-settled rule that the jurisdiction of the Supreme Court in petitions for review
on certiorari under Rule 45 of the Rules of Court is limited to reviewing errors of law, not of
fact.40 The Court is not a trier of facts. In the exercise of its power of review, the findings of fact of the
CA are conclusive and binding and consequently, it is not the Court's function to analyze or weigh
evidence all over again.41

The foregoing rule, however, is not absolute. The Court, in Dusit Hotel Nikko v. National Union of
Workers in Hotel, Restaurant and Allied Industries (NUWHRAIN),42 held that the factual findings of
the NLRC as affirmed by the CA, are accorded high respect and finality unless the factual findings
and conclusions of the LA clash with those of the NLRC and the CA in which case the Court will
have to review the records and the arguments of the parties to resolve the factual issues and render
substantial justice to the parties.43

The present case is clouded by conflict of factual perceptions. Consequently, the Court is
constrained to review the factual findings of the CA which contravene the findings of facts of the LA.

The Court's Ruling

The petition is meritorious. After a thorough examination of the conflicting positions of the parties,
the Court finds the records bereft of evidence to substantiate the conclusions of the NLRC and the
CA that private respondent was constructively dismissed from employment.

Case law defines constructive dismissal as a cessation of work because continued employment is
rendered impossible, unreasonable or unlikely; when there is a demotion in rank or diminution in pay
or both; or when a clear discrimination, insensibility, or disdain by an employer becomes unbearable
to the employee.44

The test of constructive dismissal is whether a reasonable person in the employee's position would
have felt compelled to give up his position under the circumstances.45 It is an act amounting to
dismissal but made to appear as if it were not. In fact, the employee who is constructively dismissed
may be allowed to keep on coming to work. Constructive dismissal is therefore a dismissal in
disguise. The law recognizes and resolves this situation in favor of employees in order to protect
their rights and interests from the coercive acts of the employer.46

In the present case, private respondent claims that from the months of February to June 1998, she
had been subjected to constant harassment, ridicule and inhumane treatment by Apduhan, with the
hope that the latter can get the private respondent to resign.47 The harassment allegedly came in the
form of successive memoranda which private respondent would receive almost every week,
enumerating a litany of offenses and maligning her reputation and spreading rumors among the
employees that private respondent shall be dismissed soon.48 The last straw of the imputed
harassment was the July 31, 1998 incident wherein private respondent's life was put in danger when
she lost consciousness due to hypertension as a result of Apduhan's alleged hostility and shouting.49

The Court finds that private respondent's allegation of harassment is a specious statement which
contains nothing but empty imputation of a fact that could hardly be given any evidentiary weight by
this Court.50 Private respondent's bare allegations of constructive dismissal, when uncorroborated by
the evidence on record, cannot be given credence.51

The sending of several memoranda addressed to a managerial or supervisory employee concerning

various violations of company rules and regulations, committed on different occasions, are not
unusual. The alleged February to June 1998 series of memoranda given by petitioners to private
respondent asking the latter to explain the alleged irregular acts should not be construed as a form
of harassment but merely an exercise of management's prerogative to discipline its employees.

The right to impose disciplinary sanctions upon an employee for just and valid cause, as well as the
authority to determine the existence of said cause in accordance with the norms of due process,
pertains in the first place to the employer.52 Precisely, petitioners gave private respondent
successive memoranda so as to give the latter an opportunity to controvert the charges against her.
Clearly, the memoranda are not forms of harassment, but petitioners' compliance with the
requirements of due process.

The July 31, 1998 confrontation where Apduhan allegedly shouted at private respondent which
caused the latter's hypertension to recur and eventually caused her to collapse cannot by itself
support a finding of constructive dismissal by the NLRC and the CA. Even if true, the act of Apduhan
in shouting at private respondent was an isolated outburst on the part of Apduhan that did not show
a clear discrimination or insensibility that would render the working condition of private respondent
unbearable.

Moreover, the finding of the NLRC that Apduhan knew for a fact that the certification presented by
private respondent referred to the latter and not to another person is a mere conjecture. There is no
evidence to sustain the same. This Court has consistently held that litigations cannot be properly
resolved by suppositions, deductions, or even presumptions, with no basis in evidence, for the truth
must have to be determined by the hard rules of admissibility and proof.53

Self-serving and unsubstantiated declarations are insufficient to establish a case before quasi-
judicial bodies. Well-entrenched is the rule that the quantum of evidence required to establish a fact
in quasi-judicial bodies is substantial evidence. Substantial evidence is such amount of relevant
evidence which a reasonable mind might accept as adequate to support a conclusion, even if other
equally reasonable minds might opine otherwise.54

On petitioners' claim of abandonment by private respondent, well-settled is the rule that to constitute
abandonment of work, two elements must concur: (1) the employee must have failed to report for
work or must have been absent without valid or justifiable reason, and (2) there must have been a
clear intention on the part of the employee to sever the employer-employee relationship manifested
by some overt act. The employer has the burden of proof to show the employee's deliberate and
unjustified refusal to resume his employment without any intention of returning. Mere absence is not
sufficient. There must be an unequivocal intent on the part of the employee to discontinue his
employment.55

Private respondent's failure to report for work despite the August 8, 1998 letter sent by Apduhan to
private respondent advising the latter to report for work is not sufficient to constitute abandonment. It
is a settled rule that failure to report for work after a notice to return to work has been served does
not necessarily constitute abandonment.56

Private respondent mistakenly believed that the successive memoranda sent to her from March
1998 to June 1998 constituted discrimination, insensibility or disdain which was tantamount to
constructive dismissal. Thus, private respondent filed a case for constructive dismissal against
petitioners and consequently stopped reporting for work.

In the case of Lemery Savings & Loan Bank v. National Labor Relations Commission,57 the Court
held:
 It is true that the Constitution has placed a high regard for the welfare of the labor sector.
However, social and compassionate justice does not contemplate a situation whereby the
management stands to suffer for certain misconceptions created in the mind of an employee.
xxx

Nevertheless, the mistaken belief on the part of the employee should not lead to a
drastic conclusion that he has chosen to abandon his work. x x x We cannot readily
infer abandonment even if, sometime during the pendency of this case, he refused to heed
the warning given him by petitioner Dimailig while believing that he was dismissed through
no fault of his.58 (Emphasis supplied)

The Court finds that petitioners were not able to establish that private respondent deliberately
refused to continue her employment without justifiable reason. To repeat, the Court will not make a
drastic conclusion that private respondent chose to abandon her work on the basis of her mistaken
belief that she had been constructively dismissed by Uniwide.

Nonetheless, the Court agrees with the findings of the LA that the termination of private respondent
was grounded on the existence of just cause under Article 282 (c) of the Labor Code59 or willful
breach by the employee of the trust reposed on him by his employer or a duly authorized
representative.60

Private respondent occupies a managerial position. As a managerial employee, mere existence of a

basis for believing that such employee has breached the trust of his employer would suffice for his
dismissal.61

In Caoile v. National Labor Relations Commission,62 the Court distinguished the treatment of
managerial employees from that of rank-and-file personnel, insofar as the application of the loss of
trust and confidence is concerned. The Court held:

Thus, with respect to rank-and-file personnel, loss of trust and confidence as ground for valid
dismissal requires proof of involvement in the alleged events in question, and that mere
uncorroborated assertions and accusations by the employer will not be sufficient.63 But, as
regards a managerial employee, mere existence of a basis for believing that such
employee has breached the trust of his employer would suffice for his
dismissal. Hence, in the case of managerial employees, proof beyond reasonable doubt
is not required, it being sufficient that there is some basis for such loss of confidence,
such as when the employer has reasonable ground to believe that the employee
concerned is responsible for the purported misconduct, and the nature of his
participation therein renders him unworthy of trust and confidence demanded by his
position.64 (Emphasis supplied).

In order to give private respondent an opportunity to explain the several violations of company rules
she allegedly committed, private respondent was given several memoranda, to which she initially
responded. Also, to give private respondent an opportunity to be heard, defend herself, confront the
witnesses against her as well as to present her own evidence, Apduhan scheduled a hearing on
August 12, 1998, notice of which was sent on August 2, 1998 and duly received by private
respondent's husband on the same day.65 This fact alone would have indicated to private respondent
that there was no intention on the part of petitioners to effect her constructive dismissal. However,
private respondent opted to file the complaint for illegal dismissal the next day; and not to attend the
scheduled hearing on August 12, 1998. Thus, petitioners were justified to decide the case on the
basis of the records at hand.66
The irregularities and offenses committed by private respondent, corroborated by the various pieces
of evidence supporting such charges, i.e. records, reports and testimonies of Uniwide
employees,67 in the mind of the Court, constitute substantial evidence that private respondent is in
fact responsible for the alleged charges.

To disprove the charges against her, private respondent presented a letter68 dated July 29, 1998
from a former Uniwide employee, Luisa Astrologo (Astrologo), stating that the latter was urged by
her manager, a certain Ralph Galang, to testify against private respondent for improper behavior
concerning the "dented product for which private respondent is abusing her power of reserving and
picking the best product she can afford to dispatch."69 The letter, however, does not state that the
charges Astrologo imputed to private respondent were false. The letter merely states that Astrologo
"does not see anything wrong about the matter."70 Moreover, in her Memorandum,71 filed with the
Court, private respondent merely cited inconsistencies in the reports regarding the charges imputed
to her without denying the said allegations.

It is true that private respondent had risen from the ranks, from being a saleslady in 1981 to a Full
Assistant Store Manager in 1995. She worked for Uniwide for almost 17 years with a clean bill of
record. However, these facts are not sufficient to overcome the findings of petitioners that the private
respondent is guilty of the charges imputed to her.

Finally, the NLRC and the CA erred in finding that private respondent was denied due process.
Private respondent claims that she lost the opportunity to be heard when she was constructively
dismissed on July 31, 1998,72 and that it was only after she filed a complaint for illegal dismissal with
the NLRC on August 3, 1998 that petitioners notified the private respondent of the investigation
which will be conducted on August 12, 1998 concerning her alleged offenses. The Memorandum
dated August 2, 199873 completely demolishes such claims. It shows on its face that private
respondent received the Memorandum on August 2, 1998, a day before she filed the complaint for
illegal dismissal against petitioners; and that private respondent was notified that the hearing was
scheduled on August 12, 1998 and explicitly warned her that her failure to appear thereat shall mean
a waiver to be heard, and the case shall then be submitted for decision based on available papers
and evidence.

In reality, private respondent, as found earlier was not terminated on July 31, 1998. There was no
constructive dismissal. Again, the successive memoranda presented by private respondent and the
alleged July 31, 1998 shouting incident are not sufficient to establish her claim of harassment.

However, as to the September 1, 1998 Memorandum where the private complainant was dismissed
for loss of trust and confidence, the Court finds the notice of the scheduled August 12, 1998 hearing
sufficient compliance with the due process requirement.

The essence of due process is simply an opportunity to be heard, or as applied to administrative

proceedings, a fair and reasonable opportunity to explain one's side.74 It is not the denial of the right
to be heard but denial of the opportunity to be heard that constitutes violation of due process of
law.75 In the instant case, private respondent was again notified of the August 12, 1998 hearing
through a letter76 dated August 8, 1998 which was received by private respondent herself.77 Clearly,
private respondent was given an opportunity to be heard. However, private respondent chose not to
attend the scheduled hearing because of her mistaken belief that she had already been
constructively dismissed.

At this point, the Court agrees with and adopts the findings of the LA in his Decision:78
 We cannot, with due respect, subscribe to complainant's [herein private respondent] position
for it simply lacks evidence and that all that there is to it is seemingly a general allegation.
We examined the record and as we have done it we find no acts or incidents constituting
complainant's alleged "constructive dismissal". On the contrary, what is generally existing
thereat is that complainant was dismissed by the respondents [Uniwide and Apduhan] for an
array of violations consisting of, but not limited to the following: allowing entry of
unauthorized personnel inside a company restricted area; falsification of or inducing another
employee to falsify personnel or company records; sleeping during overnight work;
unauthorized search and bringing out of company records; unauthorized purchase of
damaged items; alteration of approval slips for the purchase of damaged items; unduly
reserving and buying of damaged items; and abandonment of work.

In fact, as it even appears the "constructive dismissal" allegedly committed on

complainant looks simply an excuse to avoid and/or evade the investigation and
consequences of the violations imputed against her while employed and/or acting as
respondent's assistant store manager. As shown on an earlier setting on the investigation
of her case, she filed a sick leave, thus causing the hearing/investigation to be rescheduled.
Again, upon rescheduling, complainant despite notice failed to appear or did not appear, this
time coming up with the excuse that she had been already "constructively dismissed". This
evasive attitude of her more than enough supports the impression that complainant could be
guilty or is guilty of the charges against her and believes that she might not be able to defend
herself. This is even bolstered by the information that complainant called on several of the
witnesses against her, simply to influence them and their testimonies. x x x Thus, viewed the
foregoing finding, we opined that complainant could not have been "constructively
dismissed."79 (Emphasis supplied)

It should be remembered that the Philippine Constitution, while inexorably committed towards the
protection of the working class from exploitation and unfair treatment, nevertheless mandates the
policy of social justice so as to strike a balance between an avowed predilection for labor, on the one
hand, and the maintenance of legal rights of capital, the proverbial hen that lays the golden egg, on
the other. Indeed, we should not be unmindful of the legal norm that justice is in every case for the
deserving, to be dispensed with in light of established facts, the applicable law, and existing
jurisprudence.80

WHEREFORE, the instant petition is GRANTED. The Decision dated November 23, 2001 and
Resolution dated July 23, 2002 of the Court of Appeals in CA-G.R. SP No. 64581 together with the
Decision dated December 27, 2000 of the National Labor Relations Commission are REVERSED
and SET ASIDE. The complaint of private respondent Amalia P. Kawada is DISMISSED.

SO ORDERED.
 33. Chiang Kai Shek College v. CA, G.R. No.152988, Aug 24, 2004

G.R. No. 152988 August 24, 2004

CHIANG KAI SHEK COLLEGE, and CHIEN YIN SHAO, petitioners,

vs.
HON. COURT OF APPEALS; HON. NATIONAL LABOR RELATIONS COMMISSION; HON.
COMMISSIONER VICTORIANO R. CALAYLAY, HON. PRESIDING COMMISSIONER RAUL T.
AQUINO, and HON. COMMISSIONER ANGELITA A. GACUTAN; and MS. DIANA P.
BELO, respondents.

DECISION

DAVIDE, JR., C.J.:

Assailed in this petition is the decision1 of 12 October 2001, as well as the resolution2 of 11 April
2002, of the Court Appeals in CA-G.R. SP No. 59996, which affirmed the decision3 of 29 February
2000 of the National Labor Relations Commission (NLRC) declaring that Diana P. Belo was illegally
dismissed as a teacher of petitioner Chiang Kai Shek College (CKSC).

The controversy began on 8 June 1992, when Ms. Belo, a teacher of CKSC since 1977, applied for
a leave of absence for the school year 1992-1993 because her children of tender age had no yaya to
take care of them. The then principal, Mrs. Joan Sy Cotio, approved her application. However, on 15
June 1992, Ms. Belo received a letter dated 9 June 1992 of Mr. Chien Yin Shao, President of CKSC,
informing her of the schools existing policy; thus:

Regarding your letter of request for leave of absence dated June 8, 1992, we would like to
inform you of the existing policy of our school:

(1) We could not assure you of any teaching load should you decide to return in the future.

(2) Only teachers in service may enjoy the privilege and benefits provided by our school.
Hence, your children are no longer entitled to free tuition starting school year 1992-1993.4

Ms. Belo, nonetheless, took her leave of absence. On 8 July 1992, she learned that Laurence, one
of her three children studying at the CKSC, was sent out of the examination room because his tuition
fees were not paid. This embarrassing incident impelled Ms. Belo to pay, allegedly under protest, all
the school fees of her children.5

In May 1993, after her one-year leave of absence, Ms. Belo presented herself to Ms. Cotio and
signified her readiness to teach for the incoming school year 1993-1994. She was, however, denied
and not accepted by Ms. Cotio. She then relayed the denial to Mr. Chien on 17 May 1993. On 21
July 1993, she received the reply of Mr. Chien dated 1 July 1993 informing her that her confirmation
to teach was filed late and that there was no available teaching load for her because as early as
April 21 of that year, the school had already hired non-permanent teachers.6
Adversely affected by the development, Ms. Belo filed with the Labor Arbitration Office a complaint
for illegal dismissal; non-payment of salaries, 13th month pay, living allowance, teacher's day pay;
loss of income; and moral damages.

In his decision7 of 18 October 1995, Labor Arbiter Donato G. Quinto, Jr., dismissed the complaint,
reasoning that Ms. Belo was not dismissed but that there was simply no available teaching load for
her. When in May 1993 she signified her intention to teach, the school had already acted on the
applications or re-applications to teach of probationary teachers. The schools policies, which were
articulated in Mr. Chiens letter of 9 June 1992 to Ms. Belo, were management prerogatives which
did not amount to her dismissal. Said policies were also the consequences of her leave of absence
and were not even questioned by her. The Labor Arbiter thus offered a Solomonic solution by
directing the petitioners to give her a teaching load in the ensuing year 1996-1997 and the
succeeding years without loss of seniority rights.8

On appeal9 by the private respondent, the NLRC reversed the decision of the Labor Arbiter. It
considered as misplaced the Labor Arbiters utter reliance on Mr. Chiens letter to Ms. Belo
enunciating the questioned school policies. It reasoned that if the school policy was to extend free
tuition fees to children of teachers in school, then the petitioners must have considered her "already
not in school or summarily dismissed or separated the very moment [she] applied for leave," for,
otherwise, her children would have been granted that privilege. Thus, it directed the petitioners to
immediately reinstate Ms. Belo to her former position with full back wages from the time of her
dismissal up to her actual reinstatement. It, however, dismissed Ms. Belo's prayer for moral and
exemplary damages and attorney's fees for lack of evidence that the petitioners acted in bad faith
and malice.

Their motion for reconsideration having been denied,10 the petitioners filed a petition for certiorari with
the Court of Appeals contending that the NLRC gravely abused its discretion amounting to lack of
jurisdiction in (a) overturning the factual determination of the Labor Arbiter despite the fact that Ms.
Belo stated in her Notice of Appeal that she was appealing only on a pure question of law; (b)
holding that Ms. Belo was constructively dismissed by the petitioners despite the uncontroverted
evidence that she was not illegally dismissed; and (c) granting Ms. Belo monetary awards.

On 12 October 2001, the Court of Appeals found that far from abusing its discretion, the NLRC acted
correctly when it ascertained that Ms. Belo was constructively dismissed. It declared as illegal, for
being violative of Ms. Belos right to security of tenure, the school policy that a teacher who goes on
leave cannot be assured of a teaching load. The school should have set aside a teaching load for
her after the expiration of her leave of absence. It would have been a different story, one indeed ripe
for termination of her employment, had Ms. Belo failed to report for work. As for the schools
contention that the NLRC was barred from resolving factual issues because of Ms. Belo's statement
that she was appealing the case on a pure question of law, the Court of Appeals declared that such
statement was a simple mistake in terminology, which is insufficient to deny an employee of her
rights under the law.

In its resolution dated 11 April 2002, the Court of Appeals denied the motion for reconsideration for
lack of merit.

Hence, on 11 June 2002,11 petitioner CKSC and its president Mr. Chien filed the present petition.
They claim that the Court of Appeals erred in affirming the NLRC decision which reversed the factual
findings of the Labor Arbiter even if the said findings were amply supported by clear and
uncontroverted evidence and had already attained finality, as Ms. Belo had appealed merely on a
question of law. The Court of Appeals also erred in upholding the NLRC decision which failed to
point out specifically the alleged particular portions of the records of the case, parties respective
position papers, and pleadings, much less particular testimonial and documentary evidence, that
warrant the patently erroneous and baseless conclusion that there was a "clear case of constructive
dismissal." The NLRC decision is in complete violation of Section 14, Article VIII of the Constitution,
which provides: "No decision shall be rendered by any court without expressing therein clearly and
distinctly the facts and the laws on which it is based." Likewise, the Court of Appeals has not only
completely and arbitrarily ignored and disregarded the facts and issues raised as an issue before it,
but also decided on the illegality of the schools policy, which was never raised before it or in any of
the forums below. Anent the free tuition fee benefit extended to children of teachers in service in
petitioner school, the same is a privilege granted not by law, but voluntarily by the said school.
Hence, the petitioner school could determine the conditions under which said privilege may be
enjoyed, such as, that only teachers in actual service can enjoy the privilege.

Amidst the convolution of issues proffered by the petitioners, the only issue that needs to be
determined and on which hinges the resolution of the other issues is whether the Court of Appeals
erred in affirming the NLRC decision that Ms. Belo was constructively, nay, illegally dismissed and
is, therefore, entitled to reinstatement and back wages.

It must be noted at the outset that Ms. Belo had been a full-time teacher in petitioner CKSC
continuously for fifteen years or since 1977 until she took a leave of absence for the school year
1992-1993. Under the Manual of Regulations for Private Schools, for a private school teacher to
acquire a permanent status of employment and, therefore, be entitled to a security of tenure, the
following requisites must concur: (a) the teacher is a full-time teacher; (b) the teacher must have
rendered three consecutive years of service; and (c) such service must have been satisfactory.12

Since Ms. Belo has measured up to these standards, she therefore enjoys security of tenure. The
fundamental guarantees of security of tenure and due process dictate that no worker shall be
dismissed except for just and authorized cause provided by law and after due notice and hearing.13

We agree with the Court of Appeals that the NLRC did not commit any grave abuse of discretion in
finding that Ms. Belo was constructively dismissed when the petitioners, in implementing their
policies, effectively barred her from teaching for the school year 1993-1994. The three policies are
(1) the non-assurance of a teaching load to a teacher who took a leave of absence; (2) the hiring of
non-permanent teachers in April to whom teaching loads were already assigned when Ms. Belo
signified in May 1993 her intention to teach; and (3) the non-applicability to children of teachers on
leave of the free tuition fee benefits extended to children of teachers in service.

Case law defines constructive dismissal as a cessation from work because continued employment is
rendered impossible, unreasonable, or unlikely; when there is a demotion in rank or a diminution in
pay or both; or when a clear discrimination, insensibility, or disdain by an employer becomes
unbearable to the employee.14

When in the school year 1992-1993, the petitioners already applied to Ms. Belos children the policy
of extending free tuition fee benefits only to children of teachers in service, Ms. Belo was clearly
discriminated by them. True, the policy was made known to Ms. Belo in a letter dated 9 June 1992,
but, this only additionally and succinctly reinforced the clear case of discrimination. Notably,
petitioners statements of policies dated 13 March 1992 for the school year 1992-1993 did not
include that policy; thus:

To : All Teachers and Staff of Chiang Kai Shek College

From : The President

 Pursuant to laws, rules and regulations promulgated by the proper government authorities of
the Philippines, the following procedure are hereby issued for proper compliance of all
concerned:

1. All teachers and staff who have rendered satisfactory service for a period of more than
three (3) full consecutive years (e.g. those who started working in June, 1988 or before) are
considered permanent employees and therefore need not re-apply for the forthcoming school
year 1992-1993.

2. However, should any teacher or staff of permanent status wish to resign or to retire after
this school year 1991-1992, he/she must file his/her written resignation or retirement
application on or before March 28, 1992, so that the school will have sufficient time to make
the necessary adjustments. Failure to file formal application on the part of the permanent
employee shall be construed as consent to work for another school year.

3. All probationary employees (e.g. those who started working after June, 1988) who wish to
continue their services in our school shall re-apply. Reapplications must be submitted on or
before March 28, 1992. Failure to submit reapplication shall be construed as not interested to
work for Chiang Kai Shek College in the coming school year 1992-1993.

4. All reapplications shall be acted upon and the decision of the administration will be
conveyed to the employees concerned on or before April 21, 1992. 15

It can be argued that the extension of free tuition fees to children of teachers in service was an
informal policy or custom. If it were so, there would have been no need to include this policy in the
schools written statement of policies dated 12 March 1993, which reads:

To : All Teachers and Staff of Chiang Kai Shek College

From : The Office of the President

Pursuant to laws, rules and regulations promulgated by the proper government authorities of
the Philippines, the following procedure are hereby issued for proper compliance of all
concerned:

1. All teachers and staff who have rendered satisfactory service for a period of more than
three (3) full consecutive years (e.g. those who started working in June, 1989 or before) are
considered permanent employees and therefore need not re-apply for the forthcoming school
year 1993-1994.

2. However, should any teacher or staff of permanent status wish to resign, to retire, or to
take a leave of absence after this school year 1992-1993, he/she must file his/her written
application on or before March 27, 1993, so that the school will have sufficient time to make
the necessary adjustments. Failure to file formal application on the part of the permanent
employee shall be construed as consent to work for another school year.

In accordance with our school policy, employees not in service are not entitled to any benefit
extended by our school.

3. All probationary employees (e.g. those who started working after June 1989) who wish to
continue their services in our school shall re-apply. Reapplications must be submitted on or
 before March 27, 1993. Failure to submit reapplication shall be construed as not interested to
work for Chiang Kai Shek College in the coming school year 1993-1994.

4. All reapplications shall be acted upon and the decision of the administration will be
conveyed to the employees concerned on or before April 21, 1993.16

A cursory analysis of the petitioners statements of policies dated 13 March 1992 and 12 March 1993
reveals that the lists of policies are essentially the same. Both are addressed to all teachers and staff
of petitioner school. However, the policy "that employees not in service are not entitled to any benefit
extended by the school" was not listed in the written statement of policies dated 13 March 1992. The
policy made its maiden appearance in petitioners statement of policies one year after or on 12
March 1993. It was, therefore, the policy of extending free tuition fees to children of teachers of the
school, whether on service or on leave, which existed as a matter of custom and practice. That is
why the school modified the privilege in written form.

Thus, when the petitioners retroactively applied the modified written policy to Ms. Belo, they
considered her already a teacher not in service. The NLRC was correct when it reasoned as follows:
"[I]f the school policy is to extend free tuition fees to children of teachers in school, then
respondents [petitioners herein] have considered [Ms. Belo] already not in school or summarily
dismissed or separated the very moment the latter applied for leave. Otherwise, [her] children
should have been granted the on-going privileges and benefits on free tuition fees, among others."

Ms. Belo was definitely singled out in the implementation of a future policy. This is grossly unfair and
unjust. The petitioners did not take heed of the principle enshrined in our labor laws that policies
should be adequately known to the employees and uniformly implemented to the body of employees
as a whole and not in isolation.

The continued employment of Ms. Belo was also rendered unlikely by the insistence of the
petitioners in implementing the alleged policy that a teacher who goes on leave for one year is not
assured of a teaching load. While this alleged policy was mentioned in Mr. Chiens letter of 9 June
1992, it was not included in the schools written statement of policies dated 13 March 1992. Hence, it
was then a non-existent policy. When a non-existent policy is implemented and, in this case, only to
Ms. Belo, it constitutes a clear case of discrimination.

Even if the policy of non-assurance of a teaching load existed as a matter of practice and custom, it
still glaringly contradicts petitioners written statement of policies dated 12 March 1993. Crystal clear
therefrom is the fact that only permanent teachers who wished "to resign, to retire, or to take a leave
of absence after the school year 1992-1993 must file their written application in March 1993." Those
who failed to file an application were expressly considered by the school as consenting to teach for
the succeeding school year. Additionally, the petitioners did not require permanent teachers with
satisfactory service to re-apply.

It, therefore, blows our mind why the petitioners would require Ms. Belo, a permanent teacher since
1977 with a satisfactory service record, to signify her intention to teach in March 1993. Plainly, the
petitioners violated their avowed policies. Since Ms. Belo was not retiring, resigning or filing another
leave of absence after the school year 1992-1993, the petitioners should have considered her as
consenting to teach for the incoming school year 1993-1994. In fact, they should not have required
her to re-apply to teach. In accordance with the written statement of policies dated 12 March 1993,
only probationary teachers are required by the petitioners to re-apply in March. Failure of
probationary teachers to re-apply in March is an indication of their lack of interest to teach again at
the school.
Petitioners invocation of the third policy that of giving teaching assignments to probationary
teachers in April to justify their refusal to provide Ms. Belo a teaching load is, therefore, a lame
excuse that rings of untruth and dishonesty. Patently clear is the illegal manner by which the
petitioners eased out Ms. Belo from the teaching corps.

Thus, the Court of Appeals justification in upholding the NLRC ruling attains an added judicial and
logical sting:

When respondent Belo reported for work after the termination of her one-year leave of
absence, it was obligatory for petitioner school to give her a teaching load. It was improper
for petitioner school to farm out subjects of respondent Belo to provisionary [sic] teacher
[sic]. The petitioner school should have assumed that respondent Belo was returning for
work after the expiration of her leave. It would have been a different story, if after the start of
classes, respondent Belo failed to report for work, then the school had a right to institute the
necessary proceeding for the termination of her employment.17

Likewise, we do not find merit in petitioners assertion that the Court of Appeals should not have
passed upon the illegality of the school policy of non-assurance of a teaching load, since the alleged
illegality was never raised as an issue before the respondent court or in the forums below. As
pointed out by the private respondent, that policy was part of the defense invoked by the petitioners
in the Arbiter level, in the NLRC, and in the respondent court to the charge of illegal dismissal; and,
hence, it must necessarily be passed upon and scrutinized. Besides, that policy is intimately
intertwined with the main issue of whether Ms. Belo was illegally dismissed.

We reject petitioners contention that "the NLRC decision failed to point out specifically the alleged
particular portions of the records of the case, parties respective position papers, and pleadings,
much less particular testimonial and documentary evidence, that warrant the patently erroneous and
baseless conclusion that there is a clear case of constructive dismissal." In fact, the NLRC
considered the same policies that the petitioners insist as their bases for maintaining that Ms. Belo
was not dismissed. It seems that the petitioners could only be persuaded if the reviewing bodies
unearthed a document that explicitly states that Ms. Belo was being constructively dismissed. This
phantom paper chase unveils the unsubstantiated and contrived claim of the petitioners. They need
only to look, for example, at the letter dated 9 June 1992 to Ms. Belo. The "policies" therein stated
are discernibly non-existent, or if existing as a matter of custom they grossly transgressed
petitioners formal written policies dated 13 March 1992 and 12 March 1993. Clear, therefore, is the
fact that the written formal policies apply to all teachers and staff except Ms. Belo.

Hence, there is no need to belabor the point that the NLRC decision clearly complied with the
requirement expressed under Section 14, Article VIII of the Constitution. The decision speaks for
itself.

Suffice it is to say, this case is an exception to the general rule that the factual findings and
conclusions of the Labor Arbiter are accorded weight and respect on appeal, and even finality. For
one thing, the findings of the NLRC and the Labor Arbiter are contrary to each other; hence, the
reviewing court may delve into the records and examine for itself the questioned findings.18

Further, we do not find merit in petitioners claim that Ms. Belos judicial admission that she was
appealing on a "pure question of law" precludes the review and reversal of the Labor Arbiters factual
finding that she was not illegally dismissed. Such claim is belied by the Notice of Appeal
itself,19 wherein Ms. Belo declared that she was appealing the decision of the Labor Arbiter to the
NLRC "on a pure question of law and for being contrary to law and jurisprudence applicable [to] the
case and the evidence on record, and rendered with grave abuse of discretion."20
Oddly, even the petitioners themselves maintain that to prove grave abuse of discretion, "it is
necessary to bring out questions of fact." Thus, in their own justification in resorting to both Rules 45
and 65 of the Rules of Court for the review and the nullification of the decision of the Court of
Appeals, they contend:

Clearly, petitioners remedy is two-fold under Rule 45 and 65. Under Rule 45, only
questions of law may be raised. Perhaps, respondents can now understand why petitioners
have used both Rules 45 and 65. And this is simply because by invoking said two rules, they
are not limited to raising questions of law, but they can raise both questions of fact and
law. To show that grave abuse of discretion has been committed under Rule 65, it is
necessary to bring out questions of fact, which was precisely done in the issues raised in
page 2 of the petition.21

Indeed, Ms. Belo questioned the legality of her dismissal and the denial of her monetary claims, as
well as her claim for damages. Both are essentially factual issues, since their determination
necessitates an evaluation of proof and not only a consideration of the applicable statutory and case
laws.

Basic is the distinction between legal and factual issues. A question of law exists when the doubt or
controversy concerns the correct application of law or jurisprudence to a certain set of facts; or when
the issue does not call for an examination of probative value of the evidence presented, the truth or
falsehood of facts being admitted. A question of fact exists when the doubt or difference arises as to
the truth or falsehood of facts or when the query invites calibration of the whole evidence considering
mainly the credibility of witnesses, the existence and relevancy of specific surrounding
circumstances, as well as their relation to each other and to the whole, and the probability of the
situation.22

More importantly, the Labor Arbiters conclusions are baseless, bereft of any rational basis,
unsupported by evidence on record, and glaringly erroneous. The decisions of the NLRC and the
Court of Appeals are the ones in harmony with the evidence on record.

In sum, we are convinced that Ms. Belo was unceremoniously and constructively dismissed by the
petitioners without just cause and without observing the twin requirements of due process, i.e., due
notice and hearing, in violation of the tenets of equity and fair play. Ms. Belo is, therefore, entitled to
reinstatement and back wages in accordance with the questioned Court of Appeals and NLRC
decisions.

the petition is DENIED. The decision of 12 October 2001 and resolution of 11 April 2002 of the
Court of Appeals in CA-GR. SP No. 59996 are hereby AFFIRMED.

Costs against the petitioners.

SO ORDERED.
 34. Globe Telecom Inc v. Florendo-Flores, G.R. No. 150092, Sept 27, 2002

[G.R. No. 150092. September 27, 2002]

GLOBE TELECOM, INC., DELFIN LAZARO, JR., and ROBERTO

GALANG,petitioners, vs. JOAN FLORENDO-
FLORES, respondent.

DECISION
BELLOSILLO, J.:

This is a petition for review under Rule 45 of the Rules of Court seeking to
annul and set aside the Decision of the Court of Appeals of 25 May 2001 in
[1]

CA-G.R. SP No. 60284 which affirmed the Decision of the National Labor
Relations Commission of 28 January 2000 in NLRC RAB-CAR 05-0170-98,
NLRC NCR CA No. 020270-99. [2]

Petitioner GLOBE TELECOM, INC. (GLOBE) is a corporation duly

organized and existing under the laws of the
Philippines. Petitioners Delfin Lazaro Jr. was its President and Roberto Galang
its former Director-Regional Sales. Respondent Joan Florendo-Flores was the
Senior Account Manager for Northern Luzon.
On 1 July 1998 Joan Florendo-Flores filed with the Regional Arbitration
Branch of the National Labor Relations Commission (NLRC) an amended
complaint for constructive dismissal against GLOBE, Lazaro, Galang, and
Cacholo M. Santos, her immediate superior, Luzon Head-Regional Sales. In
her affidavit submitted as evidence during the arbitration proceedings,
Florendo-Flores bared that Cacholo M. Santos never accomplished and
submitted her performance evaluation report thereby depriving her of salary
increases, bonuses and other incentives which other employees of the same
rank had been receiving; reduced her to a house-to-house selling agent
(person-to-person sales agent or direct sales agent) of company products
("handyphone") despite her rank as supervisor of company dealers and agents;
never supported her in the sales programs and recommendations she
presented; and, withheld all her other benefits, i.e., gasoline allowance, per
diems, representation allowance, and car maintenance, to her extreme pain and
humiliation.[3]
 GLOBE and its co-petitioners claimed that after receiving her salary in the
second week of May 1998 Florendo-Flores went AWOL (Absent Without Leave)
without signifying through letter or any other means that she was resigning from
her position; that notwithstanding her absence and the filing of her case,
respondent Florendo-Flores' employment was not terminated as shown by the
fact that salary was still provided her until July 1998 to be released upon her
presentation of the attendance-record sheet indicating that she already
returned and reported for work; that she continued to have the use a of company
car and company "handyphone" unit; that she was replaced only when her
absence became indefinite and intolerable as the marketing operations in
Northern Luzon began to suffer; that during the pre-trial conference it was
learned that Florendo-Flores' complaint rested on her alleged personal and
private disagreement with her immediate superior Cacholo M. Santos; that
there was no official act from GLOBE or from other officers of the company,
including respondents Lazaro and Galang, which called for Florendo-Flores'
termination, diminution in rank, seniority and benefits, or would imply, even
remotely, any of the same; and, that Florendo-Flores filed the complaint without
going through the grievance process of GLOBE's Human Resources
Department and without informing its officers of her problems with Cacholo M.
Santos.
Labor Arbiter Monroe C. Tabingan declared Florendo-Flores to have been
illegally dismissed and ordered petitioners to reinstate her without loss of
seniority rights and full benefits; and to pay full back wages, inclusive of basic
pay, allowances and bonuses as prayed for in the complaint amounting
to P307,625.00, exemplary damages in the sum of P200,000.00, and ten
percent (10%) of the total monetary award as attorney's fees. However, the
Labor Arbiter set aside the claim of abandonment as the company failed to send
the requisite notice to Florendo-Flores, hence, there was no adherence to
[4]

procedural due process. Although he recognized that the problem brewed and
eventually boiled over due to the acts of Cacholo M. Santos, GLOBE's former
Head of Regional Sales, Luzon Area, the Labor Arbiter found the company
negligent in monitoring all its key personnel, and thus assessed against it
exemplary damages at the same time deleting actual and moral damages. [5]

Petitioners appealed the decision to the NLRC which modified the judgment
of the Labor Arbiter. The NLRC ruled that petitioners did not dismiss Florendo-
Flores but that the latter actually abandoned her employment because of a
disagreement with her immediate superior which she failed to bring to the
attention of GLOBE and its officers, particularly petitioners Lazaro and
Galang. However, the NLRC declared that if only as an act of grace for the
[6]

latter's past services with the company, GLOBE, Lazaro and Galang should be
held accountable for the back wages of Florendo-Flores amounting
to P307,625.00 minus the amount of P63,000.00 for the value of the company
car in Florendo-Flores' possession, or the net amount of P244,625.00. [7]

Both parties elevated the NLRC decision to the Court of Appeals, each side
through a petition for certiorari. In its Resolution of 2 September 2000 the
appellate court dismissed the petition of Florendo-Flores for failure to append
the required verification and certification of non-forum shopping, while it gave
[8]

due course to the petition of GLOBE, Lazaro and Galang.

In their petition before the appellate court, GLOBE, Lazaro and Galang
averred that the NLRC committed grave abuse of discretion amounting to lack
or excess of jurisdiction when it ordered them to pay Florendo-Flores full back
wages and damages despite its express finding that they did not cause the
dismissal of Florendo-Flores as the latter had actually abandoned her
employment on account of her personal differences with her superior.
In its Decision of 25 May 2001 the Court of Appeals found that Florendo-
Flores was constructively dismissed and that payment of back wages and
damages was in order. On 21 June 2001 GLOBE, Lazaro and Galang filed a
motion for reconsideration but the motion was denied in the appellate court's
Resolution of 19 September 2001.
Petitioners pose the following questions in this petition: In a special civil
action for certiorari where factual findings are deemed to be final and
conclusive, can the Court of Appeals alter or substitute the findings of fact of
the lower court/tribunal? In the face of the finding of the NLRC that respondent
abandoned her employment because of a personal squabble with her
immediate superior, and that petitioners had nothing to do with the severance
of Flores' employment, can petitioners be held legally liable for back wages
while the guilty party Cacholo M. Santos is legally absolved of liability?
Petitioners submit that the answers to both questions must be in the
negative. They argue that the appellate court can neither alter nor substitute the
factual findings of the NLRC as they are legally deemed to be final and
conclusive in a certiorari proceeding. They contend that a special civil action for
certiorari is an extraordinary remedy created not to correct mistakes in the
factual findings or conclusions of the lower court or tribunal, but a remedy
intended to rectify jurisdictional errors and grave abuse of discretion. Thus, the
Court of Appeals cannot make its own factual findings and substitute them for
the factual findings of the NLRC, and on such basis render a decision.
Petitioners further note that the appellate court failed to address the issues
raised in their petition. They reiterate their position that they cannot be held
liable for payment of back wages as an act of grace in view of the express
finding by the NLRC that respondent abandoned her employment because of a
personal rift with her immediate superior and not due to any act attributable to
them. They stress that there can be no liability in the absence of any wrongful
act.
Invoking the principle of res inter alios acta declaring that the rights of a
party cannot be prejudiced by the act, declaration or omission of another,
petitioners insist that since the NLRC found that respondent's problems arose
from the acts and deeds of Santos, he alone should be held liable. Petitioners
find special exception to the NLRC's application of the concept of "act of grace"
to justify the award since an "act of grace is not a source of demandable
obligation. They argue that it is not within the power of any judicial or
administrative agency to compel an employer to be liberal.
In the review of an NLRC decision through a special civil action for certiorari,
resolution is confined only to issues of jurisdiction and grave abuse of discretion
on the part of the labor tribunal. Hence, the Court refrains from reviewing
[9]

factual assessments of lower courts and agencies exercising adjudicative

functions, such as the NLRC. Occasionally, however, the Court is constrained
to delve into factual matters where, as in the instant case, the findings of the
NLRC contradict those of the Labor Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may look
into the records of the case and re-examine the questioned findings. As a [10]

corollary, this Court is clothed with ample authority to review matters, even if
they are not assigned as errors in their appeal, if it finds that their consideration
is necessary to arrive at a just decision of the case. The same principles are
[11]

now necessarily adhered to and are applied by the Court of Appeals in its
expanded jurisdiction over labor cases elevated through a petition for certiorari;
thus, we see no error on its part when it made anew a factual determination of
the matters and on that basis reversed the ruling of the NLRC.
Glaring however is the discrepancy between the text of the decision of the
appellate court which declares that respondent Florendo-Flores "was unlawfully
constructively dismissed" from employment, and its dispositive portion which
[12]

declares that "the assailed judgment is affirmed." It should be noted that the
[13]

"assailed judgment" referred to the NLRC Decision which declared that

respondent was not illegally dismissed but that she abandoned her
employment. Even in the award of back wages and exemplary damages the
two (2) decisions are at odds: The award of back wages made by the NLRC
was a gratuity or an act of grace from petitioners while the award made by the
Court of Appeals could be assumed to be anchored on its finding of illegal
dismissal. How should the inconsistency be reconciled?
Where there is conflict between the dispositive portion of the decision and
the body thereof, the dispositive portion controls irrespective of what appears
in the body. While the body of the decision, order or resolution might create
[14]

some ambiguity in the manner the court's reasoning preponderates, it is the

dispositive portion thereof that finally invests rights upon the parties, sets
conditions for the exercise of those rights, and imposes the corresponding
duties or obligations. Hence, for the Court of Appeals to have affirmed the
[15]

assailed judgment is to adopt and uphold the NLRC finding of abandonment

and its award of full back wages to respondent as an "act of grace" from
petitioners.
However, we believe this is not the proper view as the records reveal that
respondent was constructively dismissed from service.
Constructive dismissal exists where there is cessation of work because
"continued employment is rendered impossible, unreasonable or unlikely, as an
offer involving a demotion in rank and a diminution in pay." All these are
[16]

discernible in respondent's situation. She was singularly edged out of

employment by the unbearable or undesirable treatment she received from her
immediate superior Cacholo M. Santos who discriminated against her without
reason - not preparing and submitting her performance evaluation report that
would have been the basis for her increased salary; not forwarding her project
proposals to management that would have been the source of commendation;
diminishing her supervisor stature by assigning her to house-to-house sales or
direct sales; and withholding from her the enjoyment of bonuses, allowances
and other similar benefits that were necessary for her efficient sales
performance. Although respondent continued to have the rank of a supervisor,
her functions were reduced to a mere house-to-house sales agent or direct
sales agent. This was tantamount to a demotion. She might not have suffered
any diminution in her basic salary but petitioners did not dispute her allegation
that she was deprived of all benefits due to another of her rank and position,
benefits which she apparently used to receive.
Far from pointing to Santos alone as the source of her woes, respondent
attributes her degraded state to petitioners as well. Florendo-Flores cited
petitioners' apathy or indifference to her plight as she was twice left out in a
salary increase in August 1987 and May 1998, without petitioners giving her
any reason. It eludes belief that petitioners were entirely in the dark as the
[17]

salary increases were granted to all employeesacross-the-board but

respondent was the only one left receiving a P19,100.00 per month basic salary
while the rest received a basic salary of almost P35,000.00 per month. It is [18]

highly improbable that the exclusion of respondent had escaped petitioners'

notice. The absence of an evaluation report from Santos should have been
noted by petitioners and looked into for proper action to have been made. If a
salary increase was unwarranted, then it should have been sufficiently
explained by petitioners to respondent.
Petitioners argue that respondent Florendo-Flores could have brought to
their attention the deplorable treatment she received from Santos by resorting
to the company's grievance machinery so that the problems in her relationship
with Santos could then have been easily ironed out, but she did not. It remains
uncontroverted that respondent had inquired from petitioners the reason why
her other benefits had been withheld and sought clarification for her undeserved
treatment but petitioner company and Santos remained mum. [19]

Thus, contrary to the observation of the NLRC, the dispute was not a mere
private spat between respondent Florendo-Flores and her immediate superior
Santos. Granting that this was the case, it had exceeded the periphery of simple
personal affairs that overflowed into the realm of respondent's employment.
Respondent narrates that sometime in June 1997 Santos wrote her a
baseless accusatory letter, and he together with GLOBE Sales Director Roberto
Galang, one of petitioners herein, verbally told her that she should resign from
her job, but she refused. Thereafter, in July 1997 and the months subsequent
[20]

thereto all of respondent's other benefits were withheld without any reason nor
explanation from the company. Even as petitioners endeavored to lay the
[21]

blame on Santos alone, he would not have been able to single-handedly

mastermind the entire affair as to influence Sales Director Galang and
manipulate the payroll. It only stands to reason that Santos was acting pursuant
to a management directive, or if not, then petitioners had condoned it, or at the
very least, were negligent in supervising all of their employees. As aptly
observed by the Labor Arbiter -

x x x x it would appear however that the respondent company was negligent in monitoring all its
key personnel. For it is the bounden duty of the corporate officialdom to constantly monitor their
managerial staff if only to ascertain the smooth flow of work and operations, which includes the
inter-personal relations of each and every key segment of the corporate machinery. For such, it
must be assessed with just and reasonable exemplary damages.[22]

The unauthorized absence of respondent should not lead to the drastic

conclusion that she had chosen to abandon her work. To constitute
abandonment, there must be: (a) failure to report for work or absence without
valid or justifiable reason; and, (b) a clear intention, as manifested by some
overt act, to sever the employer-employee relationship, requisites that are
[23]
negated by the immediate filing by respondent Florendo-Flores of a complaint
for constructive dismissal against petitioners. A charge of abandonment is
totally inconsistent with the immediate filing of a complaint for illegal dismissal;
more so, when it includes a prayer for reinstatement. [24]

The reduction of respondent's functions which were originally supervisory in

nature to a mere house-to-house sales agent or direct sales agent constitutes
a demotion in rank. For this act of illegal dismissal, she deserves no less than
full back wages starting from the time she had been illegally dismissed until her
actual reinstatement to her former position without loss of seniority rights and
other benefits - earned, accrued and demandable. She shall continue to enjoy
her benefits, privileges and incentives including the use of the company car
and "handyphone."
The managerial prerogative to transfer personnel must be exercised without
grave abuse of discretion.It must always bear in mind the basic elements of
justice and fair play. Having the right should not be confused with the manner
that right is exercised. Thus, it cannot be used as a subterfuge by the employer
to rid himself of an undesirable worker. [25]

In constructive dismissal, the employer has the burden of proving that the
transfer and demotion of an employee are for just and valid grounds such as
genuine business necessity. The employer must be able to show that the
[26]

transfer is not unreasonable, inconvenient, or prejudicial to the employee. It

must notinvolve a demotion in rank or a diminution of salary and other
benefits. If the employer cannot overcome this burden of proof, the employee's
demotion shall be tantamount to unlawful constructive dismissal.
It should be noted that the award of back wages in the instant case is
justified upon the finding of illegal dismissal, and not under the principle of "act
of grace" for past services rendered. There are occasions when the Court
exercises liberality in granting financial awards to employees, but even then
they contemplate only the award of separation pay and/or financial assistance,
and only as a measure of social justice when the circumstances of the case so
warrant, such as instances of valid dismissal for causes other than serious
misconduct or those reflecting on the employees' moral character. Proper [27]

regard for the welfare of the labor sector should not dissuade us from protecting
the rights of management such that an award of back wages should be
forthcoming only when valid grounds exist to support it.
An award of actual and moral damages is not proper as the dismissal is not
shown to be attended by bad faith, or was oppressive to labor, or done in a
manner contrary to morals, good customs or public policy. Exemplary [28]
damages are likewise not proper as these are imposed only if moral, temperate,
liquidated or compensatory damages are awarded. [29]

WHEREFORE, the judgment appealed from is MODIFIED. The Decision of

the Court of Appeals of 25 May 2001 in CA-G.R. SP No. 60284 affirming the
Decision of the National Labor Relations Commission of 28 January 2000
declaring that respondent Joan Florendo-Flores had abandoned her work is
SET ASIDE.Petitioners Globe Telecom, Inc., Delfin Lazaro, Jr., and Roberto
Galang are ordered to pay respondent Joan Florendo-Flores full back wages
from the time she was constructively dismissed on 15 May 1998 until the date
of her effective reinstatement, without qualification or deduction. Accordingly,
petitioners are ordered to cause the immediate reinstatement of respondent to
her former position, without loss of seniority rights and other benefits. No
pronouncement as to costs.
SO ORDERED.
 35. Philippine Appliance Corp v. CA, G.R. No. 149434, June 3, 2004

G.R. No. 149434 June 3, 2004

PHILIPPINE APPLIANCE CORPORATION (PHILACOR), petitioner,

vs.
THE COURT OF APPEALS, THE HONORABLE SECRETARY OF LABOR BIENVENIDO E.
LAGUESMA and UNITED PHILACOR WORKERS UNION-NAFLU, respondents.

DECISION

YNARES-SANTIAGO, J.:

Before us is an appeal by certiorari under Rule 45 of the Rules of Court which seeks to set aside the
decision1 of the Court of Appeals in CA-G.R. SP No. 59011, denying due course to petitioner
Philippine Appliance Corporations partial appeal, as well as the Resolution2 of the same court, dated
August 10, 2001, denying the motion for reconsideration.

Petitioner is a domestic corporation engaged in the business of manufacturing refrigerators, freezers

and washing machines. Respondent United Philacor Workers Union-NAFLU is the duly elected
collective bargaining representative of the rank-and-file employees of petitioner. During the collective
bargaining negotiations between petitioner and respondent union in 1997 (for the last two years of
the collective bargaining agreement covering the period of July 1, 1997 to August 31, 1999),
petitioner offered the amount of four thousand pesos (P4,000.00) to each employee as an "early
conclusion bonus". Petitioner claims that this bonus was promised as a unilateral incentive for the
speeding up of negotiations between the parties and to encourage respondent union to exert their
best efforts to conclude a CBA. Upon conclusion of the CBA negotiations, petitioner accordingly
gave this early signing bonus.3

In view of the expiration of this CBA, respondent union sent notice to petitioner of its desire to
negotiate a new CBA. Petitioner and respondent union began their negotiations. On October 22,
1999, after eleven meetings, respondent union expressed dissatisfaction at the outcome of the
negotiations and declared a deadlock. A few days later, on October 26, 1999, respondent union filed
a Notice of Strike with the National Conciliation and Mediation Board (NCMB), Region IV in
Calamba, Laguna, due to the bargaining deadlock.4

A conciliation and mediation conference was held on October 30, 1999 at the NCMB in Imus, Cavite,
before Conciliator Jose L. Velasco. The conciliation meetings started with eighteen unresolved items
between petitioner and respondent union. At the meeting on November 20, 1999, respondent union
accepted petitioners proposals on fourteen items,5 leaving the following items unresolved: wages,
rice subsidy, signing, and retroactive bonus.6

Petitioner and respondent union failed to arrive at an agreement concerning these four remaining
items. On January 18, 2000, respondent union went on strike at the petitioners plant at Barangay
Maunong, Calamba, Laguna and at its washing plant at Paraaque, Metro Manila. The strike lasted
for eleven days and resulted in the stoppage of manufacturing operations as well as losses for
petitioner, which constrained it to file a petition before the Department of Labor and Employment
(DOLE). Labor Secretary Bienvenido Laguesma assumed jurisdiction over the dispute and, on
January 28, 2000, ordered the striking workers to return to work within twenty-four hours from notice
and directed petitioner to accept back the said employees.7
On April 14, 2000, Secretary Laguesma issued the following Order:8

In view of the foregoing, we fix the wage increases at P30 per day for the first year and P25
for the second year.

The rice subsidy and retroactive pay base are maintained at their existing levels and rates.

Finally, this Office rules in favor of Companys proposal on signing bonus. We believe that a
P3,000 bonus is fair and reasonable under the circumstances.

WHEREFORE, premises considered, Philippine Appliance Corporation and United Philacor

Workers Union-NAFLU are hereby directed to conclude a Collective Bargaining Agreement
for the period July 1, 1999 to June 30, 2001. The agreement is to incorporate the disposition
set forth above and includes other items already agreed upon in the course of negotiation
and conciliation.

SO ORDERED. (Emphasis supplied)

On April 27, 2000, petitioner filed a Partial Motion for Reconsideration9 stating that while it accepted
the decision of Secretary Laguesma, it took exception to the award of the signing bonus. Petitioner
argued that the award of the signing bonus was patently erroneous since it was not part of the
employees salaries or benefits or of the collective bargaining agreement. It is not demandable or
enforceable since it is in the nature of an incentive. As no CBA was concluded through the mutual
efforts of the parties, the purpose for the signing bonus was not served. On May 22, 2000, Secretary
Laguesma issued an Order10 denying petitioners motion. He ruled that while the bargaining
negotiations might have failed and the signing of the agreement was delayed, this cannot be
attributed solely to respondent union. Moreover, the Secretary noted that the signing bonus was
granted in the previous CBA.

On June 2, 2000, petitioner filed a Petition for Certiorari with the Court of Appeals docketed as CA-
G.R. SP No. 59011 which was dismissed. The Labor Secretarys award of the signing bonus was
affirmed since petitioner itself offered the same as an incentive to expedite the CBA negotiations.
This offer was not withdrawn and was still outstanding when the dispute reached the DOLE. As
such, petitioner can no longer adopt a contrary stand and dispute its own offer.

Petitioner filed a Motion for Reconsideration but the same was denied. Hence this petition for review
raising a lone issue, to wit:

THE HONORABLE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE

OF DISCRETION WHEN IT RENDERED A DECISION NOT IN ACCORD WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT, SPECIFICALLY THE CALTEX
DOCTRINE OF 1997.

The petition is meritorious.

Petitioner invokes the doctrine laid down in the case of Caltex v. Brillantes,11 where it was held that
the award of the signing bonus by the Secretary of Labor was erroneous. The said case involved
similar facts concerning the CBA negotiations between Caltex (Philippines), Inc. and the Caltex
Refinery Employees Association (CREA). Upon referral of the dispute to the DOLE, then Labor
Secretary Brillantes ruled, inter alia:
 Fifth, specifically on the issue of whether the signing bonus is covered under the
"maintenance of existing benefits" clause, we find that a clarification is indeed imperative.
Despite the expressed provision for a signing bonus in the previous CBA, we uphold the
principle that the award for a signing bonus should partake the nature of an incentive and
premium for peaceful negotiations and amicable resolution of disputes which apparently are
not present in the instant case. Thus, we are constrained to rule that the award of signing
bonus is not covered by the "maintenance of existing benefits" clause.

On appeal to this Court, it was held:

Although proposed by [CREA], the signing bonus was not accepted by [Caltex Philippines,
Inc.]. Besides, a signing bonus is not a benefit which may be demanded under the law.
Rather, it is now claimed by petitioner under the principle of "maintenance of existing
benefits" of the old CBA. However, as clearly explained by [Caltex], a signing bonus may not
be demanded as a matter of right. If it is not agreed upon by the parties or unilaterally offered
as an additional incentive by [Caltex], the condition for awarding it must be duly satisfied. In
the present case, the condition sine qua non for its granta non-strike was not complied
with.

In the case at bar, two things militate against the grant of the signing bonus: first, the non-fulfillment
of the condition for which it was offered, i.e., the speedy and amicable conclusion of the CBA
negotiations; and second, the failure of respondent union to prove that the grant of the said bonus is
a long established tradition or a "regular practice" on the part of petitioner. Petitioner admits, and
respondent union does not dispute, that it offered an "early conclusion bonus" or an incentive for a
swift finish to the CBA negotiations. The offer was first made during the 1997 CBA negotiations and
then again at the start of the 1999 negotiations. The bonus offered is consistent with the very
concept of a signing bonus.

In the case of MERALCO v. The Honorable Secretary of Labor,12 we stated that the signing bonus is
a grant motivated by the goodwill generated when a CBA is successfully negotiated and signed
between the employer and the union. In that case, we sustained the argument of the Solicitor
General, viz:

When negotiations for the last two years of the 1992-1997 CBA broke down and the parties
sought the assistance of the NCMB, but which failed to reconcile their differences, and when
petitioner MERALCO bluntly invoked the jurisdiction of the Secretary of Labor in the
resolution of the labor dispute, whatever goodwill existed between petitioner MERALCO and
respondent union disappeared. . . .

Verily, a signing bonus is justified by and is the consideration paid for the goodwill that
existed in the negotiations that culminated in the signing of a CBA.13

In the case at bar, the CBA negotiation between petitioner and respondent union failed
notwithstanding the intervention of the NCMB. Respondent union went on strike for eleven days and
blocked the ingress to and egress from petitioners two work plants. The labor dispute had to be
referred to the Secretary of Labor and Employment because neither of the parties was willing to
compromise their respective positions regarding the four remaining items which stood unresolved.
While we do not fault any one party for the failure of the negotiations, it is apparent that there was no
more goodwill between the parties and that the CBA was clearly not signed through their mutual
efforts alone. Hence, the payment of the signing bonus is no longer justified and to order such
payment would be unfair and unreasonable for petitioner.
Furthermore, we have consistently ruled that a bonus is not a demandable and enforceable
obligation.14 True, it may nevertheless be granted on equitable considerations as when the giving of
such bonus has been the companys long and regular practice.15 To be considered a "regular
practice," however, the giving of the bonus should have been done over a long period of time, and
must be shown to have been consistent and deliberate.16The test or rationale of this rule on long
practice requires an indubitable showing that the employer agreed to continue giving the benefits
knowing fully well that said employees are not covered by the law requiring payment
thereof.17 Respondent does not contest the fact that petitioner initially offered a signing bonus only
during the previous CBA negotiation. Previous to that, there is no evidence on record that petitioner
ever offered the same or that the parties included a signing bonus among the items to be resolved in
the CBA negotiation. Hence, the giving of such bonus cannot be deemed as an established practice
considering that the same was given only once, that is, during the 1997 CBA negotiation.

WHEREFORE, premises considered, the instant petition is GRANTED. The decision of the Court of
Appeals in CA-G.R. SP No. 59011 affirming the Order of the Secretary of Labor and Employment,
directing petitioner Philippine Appliance Corporation to pay each of its employees a signing bonus in
the amount of Three Thousand Pesos (P3,000.00), is hereby REVERSED and SET ASIDE. No
pronouncement as to costs.

SO ORDERED.
 36. National Sugar Refineries Corp. v. NLRC, G.R. No. 101761, Mar 24, 1993

G.R. No. 101761. March 24, 1993.

NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION and NBSR SUPERVISORY UNION, (PACIWU) TUCP, respondents.

Jose Mario C. Bunag for petitioner.

The Solicitor General and the Chief Legal Officer, NLRC, for public respondent.

Zoilo V. de la Cruz for private respondent.

DECISION

REGALADO, J p:

The main issue presented for resolution in this original petition for certiorari is whether supervisory
employees, as defined in Article 212 (m), Book V of the Labor Code, should be considered as
officers or members of the managerial staff under Article 82, Book III of the same Code, and hence
are not entitled to overtime rest day and holiday pay.

Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully owned
and controlled by the Government, operates three (3) sugar refineries located at Bukidnon, Iloilo and
Batangas. The Batangas refinery was privatized on April 11, 1992 pursuant to Proclamation No. 50.
1 Private respondent union represents the former supervisors of the NASUREFCO Batangas Sugar
Refinery, namely, the Technical Assistant to the Refinery Operations Manager, Shift Sugar
Warehouse Supervisor, Senior Financial/Budget Analyst, General Accountant, Cost Accountant,
Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler Supervisor,, Shift Operations
Chemist, Shift Electrical Supervisor, General Services Supervisor, Instrumentation Supervisor,
Community Development Officer, Employment and Training Supervisor, Assistant Safety and
Security Officer, Head and Personnel Services, Head Nurse, Property Warehouse Supervisor, Head
of Inventory Control Section, Shift Process Supervisor, Day Maintenance Supervisor and Motorpool
Supervisor.

On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees,
from rank-and-file to department heads. The JE Program was designed to rationalized the duties
and functions of all positions, reestablish levels of responsibility, and recognize both wage and
operational structures. Jobs were ranked according to effort, responsibility, training and working
conditions and relative worth of the job. As a result, all positions were re-evaluated, and all
employees including the members of respondent union were granted salary adjustments and
increases in benefits commensurate to their actual duties and functions.

We glean from the records that for about ten years prior to the JE Program, the members of
respondent union were treated in the same manner as rank-and file employees. As such, they used
to be paid overtime, rest day and holiday pay pursuant to the provisions of Articles 87, 93 and 94 of
the Labor Code as amended. With the implementation of the JE Program, the following adjustments
were made: (1) the members of respondent union were re-classified under levels S-5 to S-8 which
are considered managerial staff for purposes of compensation and benefits; (2) there was an
increase in basic pay of the average of 50% of their basic pay prior to the JE Program, with the
union members now enjoying a wide gap (P1,269.00 per month) in basic pay compared to the
highest paid rank-and-file employee; (3) longevity pay was increased on top of alignment
adjustments; (4) they were entitled to increased company COLA of P225.00 per month; (5) there
was a grant of P100.00 allowance for rest day/holiday work.

On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which was
organized pursuant to Republic Act NO. 6715 allowing supervisory employees to form their own
unions, as the bargaining representative of all the supervisory employees at the NASUREFCO
Batangas Sugar Refinery.

Two years after the implementation of the JE Program, specifically on June 20, 1990, the members
of herein respondent union filed a complainant with the executive labor arbiter for non-payment of
overtime, rest day and holiday pay allegedly in violation of Article 100 of the Labor Code.

On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2 disposing as
follows:

"WHEREFORE, premises considered, respondent National Sugar refineries Corporation is hereby

directed to

1. pay the individual members of complainant union the usual overtime pay, rest day pay and holiday
pay enjoyed by them instead of the P100.00 special allowance which was implemented on June 11,
1988; and

2. pay the individual members of complainant union the difference in money value between the
P100.00 special allowance and the overtime pay, rest day pay and holiday pay that they ought to
have received from June 1, 1988.

All other claims are hereby dismissed for lack of merit.

SO ORDERED."

In finding for the members therein respondent union, the labor ruled that the along span of time
during which the benefits were being paid to the supervisors has accused the payment thereof to
ripen into contractual obligation; at the complainants cannot be estopped from questioning the
validity of the new compensation package despite the fact that they have been receiving the benefits
therefrom, considering that respondent union was formed only a year after the implementation of the
Job Evaluation Program, hence there was no way for the individual supervisors to express their
collective response thereto prior to the formation of the union; and the comparative computations
presented by the private respondent union showed that the P100.00 special allowance given
NASUREFCO fell short of what the supervisors ought to receive had the overtime pay rest day pay
and holiday pay not been discontinued, which arrangement, therefore, amounted to a diminution of
benefits.

On appeal, in a decision promulgated on July 19, 1991 by its Third Division, respondent National
Labor Relations Commission (NLRC) affirmed the decision of the labor arbiter on the ground that the
members of respondent union are not managerial employees, as defined under Article 212 (m) of
the Labor Code and, therefore, they are entitled to overtime, rest day and holiday pay. Respondent
NLRC declared that these supervisory employees are merely exercising recommendatory powers
subject to the evaluation, review and final action by their department heads; their responsibilities do
not require the exercise of discretion and independent judgment; they do not participate in the
formulation of management policies nor in the hiring or firing of employees; and their main function is
to carry out the ready policies and plans of the corporation. 3 Reconsideration of said decision was
denied in a resolution of public respondent dated August 30, 1991. 4

Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public respondent
commission committed a grave abuse of discretion in refusing to recognized the fact that the
members of respondent union are members of the managerial staff who are not entitled to overtime,
rest day and holiday pay; and in making petitioner assume the "double burden" of giving the benefits
due to rank-and-file employees together with those due to supervisors under the JE Program.

We find creditable merit in the petition and that the extraordinary writ of certiorari shall accordingly
issue.

The primordial issue to be resolved herein is whether the members of respondent union are entitled
to overtime, rest day and holiday pay. Before this can be resolved, however it must of necessity be
ascertained first whether or not the union members, as supervisory employees, are to be considered
as officers or members of the managerial staff who are exempt from the coverage of Article 82 of the
Labor Code.

It is not disputed that the members of respondent union are supervisory employees, as defined
employees, as defined under Article 212(m), Book V of the Labor Code on Labor Relations, which
reads:

"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay down and
execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharged, assign or
discipline employees. Supervisory employees are those who, in the interest of the employer
effectively recommend such managerial actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of independent judgment. All employees not falling
within any of those above definitions are considered rank-and-file employees of this Book."

Respondent NLRC, in holding that the union members are entitled to overtime, rest day and holiday
pay, and in ruling that the latter are not managerial employees, adopted the definition stated in the
aforequoted statutory provision.

Petitioner, however, avers that for purposes of determining whether or not the members of
respondent union are entitled to overtime, rest day and holiday pay, said employees should be
considered as "officers or members of the managerial staff" as defined under Article 82, Book III of
the Labor Code on "Working Conditions and Rest Periods" and amplified in Section 2, Rule I, Book
III of the Rules to Implement the Labor Code, to wit:

"Art. 82 Coverage. The provisions 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.

"As used herein, 'managerial employees' refer to those whose primary duty consists of the
management of the establishment in which they are employed or of a department or subdivision
thereof, and to other officers or members of the managerial staff." (Emphasis supplied.)

xxx xxx xxx

'Sec. 2. Exemption. The provisions of this rule shall not apply to the following persons if they
qualify for exemption under the condition set forth herein:

xxx xxx xxx

(b) Managerial employees, if they meet all of the following conditions, namely:

(1) Their primary duty consists of the management of the establishment in which they are employed
or of a department or subdivision thereof:

(2) They customarily and regularly direct the work of two or more employees therein:

(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and
recommendations as to the hiring and firing and as to the promotion or any other change of status of
other employees are given particular weight.

(c) Officers or members of a managerial staff if they perform the following duties and responsibilities:

(1) The primary duty consists of the performance of work directly related to management policies of
their employer;

(2) Customarily and regularly exercise discretion and independent judgment;

(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty
consists of the management of the establishment in which he is employed or subdivision thereof; or
(ii) execute under general supervision work along specialized or technical lines requiring special
training, experience, or knowledge; or (iii) execute under general supervision special assignments
and tasks; and

(4) Who do not devote more 20 percent of their hours worked in a work-week to activities which are
not directly and closely related to the performance of the work described in paragraphs (1), (2), and
above."

It is the submission of petitioner that while the members of respondent union, as supervisors, may
not be occupying managerial positions, they are clearly officers or members of the managerial staff
because they meet all the conditions prescribed by law and, hence, they are not entitled to overtime,
rest day and supervisory employees under Article 212 (m) should be made to apply only to the
provisions on Labor Relations, while the right of said employees to the questioned benefits should
be considered in the light of the meaning of a managerial employee and of the officers or members
of the managerial staff, as contemplated under Article 82 of the Code and Section 2, Rule I Book III
of the implementing rules. In other words, for purposes of forming and joining unions, certification
elections, collective bargaining, and so forth, the union members are supervisory employees. In
terms of working conditions and rest periods and entitlement to the questioned benefits, however,
they are officers or members of the managerial staff, hence they are not entitled thereto.

While the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every labor dispute will be automatically decided in favor of
labor. Management also has its own rights which, as such, are entitled to respect and enforcement
in the interest of simple fair play. Out of its 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. 5

This is one such case where we are inclined to tip the scales of justice in favor of the employer.

The question whether a given employee is exempt from the benefits of the law is a factual one
dependent on the circumstances of the particular case, In determining whether an employee is
within the terms of the statutes, the criterion is the character of the work performed, rather than the
title of the employee's position. 6

Consequently, while generally this Court is not supposed to review the factual findings of respondent
commission, substantial justice and the peculiar circumstances obtaining herein mandate a deviation
from the rule.

A cursory perusal of the Job Value Contribution Statements 7 of the union members will readily
show that these supervisory employees are under the direct supervision of their respective
department superintendents and that generally they assist the latter in planning, organizing, staffing,
directing, controlling communicating and in making decisions in attaining the company's set goals
and objectives. These supervisory employees are likewise responsible for the effective and efficient
operation of their respective departments. More specifically, their duties and functions include,
among others, the following operations whereby the employee:

1) assists the department superintendent in the following:

a) planning of systems and procedures relative to department activities;

b) organizing and scheduling of work activities of the department, which includes employee shifting
scheduled and manning complement;

c) decision making by providing relevant information data and other inputs;

d) attaining the company's set goals and objectives by giving his full support;

e) selecting the appropriate man to handle the job in the department; and

f) preparing annual departmental budget;

2) observes, follows and implements company policies at all times and recommends disciplinary
action on erring subordinates;

3) trains and guides subordinates on how to assume responsibilities and become more productive;

4) conducts semi-annual performance evaluation of his subordinates and recommends necessary

action for their development/advancement;

5) represents the superintendent or the department when appointed and authorized by the former;

6) coordinates and communicates with other inter and intra department supervisors when necessary;

7) recommends disciplinary actions/promotions;

8) recommends measures to improve work methods, equipment performance, quality of service and
working conditions;

9) sees to it that safety rules and regulations and procedure and are implemented and followed by all
NASUREFCO employees, recommends revisions or modifications to said rules when deemed
necessary, and initiates and prepares reports for any observed abnormality within the refinery;

10) supervises the activities of all personnel under him and goes to it that instructions to
subordinates are properly implemented; and

11) performs other related tasks as may be assigned by his immediate superior.

From the foregoing, it is apparent that the members of respondent union discharge duties and
responsibilities which ineluctably qualify them as officers or members of the managerial staff, as
defined in Section 2, Rule I Book III of the aforestated Rules to Implement the Labor Code, viz.: (1)
their primary duty consists of the performance of work directly related to management policies of
their employer; (2) they customarily and regularly exercise discretion and independent judgment; (3)
they regularly and directly assist the managerial employee whose primary duty consist of the
management of a department of the establishment in which they are employed (4) they execute,
under general supervision, work along specialized or technical lines requiring special training,
experience, or knowledge; (5) they execute, under general supervision, special assignments and
tasks; and (6) they do not devote more than 20% of their hours worked in a work-week to activities
which are not directly and clearly related to the performance of their work hereinbefore described.

Under the facts obtaining in this case, we are constrained to agree with petitioner that the union
members should be considered as officers and members of the managerial staff and are, therefore,
exempt from the coverage of Article 82. Perforce, they are not entitled to overtime, rest day and
holiday.

The distinction made by respondent NLRC on the basis of whether or not the union members are
managerial employees, to determine the latter's entitlement to the questioned benefits, is misplaced
and inappropriate. It is admitted that these union members are supervisory employees and this is
one instance where the nomenclatures or titles of their jobs conform with the nature of their
functions. Hence, to distinguish them from a managerial employee, as defined either under Articles
82 or 212 (m) of the Labor Code, is puerile and in efficacious. The controversy actually involved here
seeks a determination of whether or not these supervisory employees ought to be considered as
officers or members of the managerial staff. The distinction, therefore, should have been made along
that line and its corresponding conceptual criteria.

II. We likewise no not subscribe to the finding of the labor arbiter that the payment of the questioned
benefits to the union members has ripened into a contractual obligation.

A. Prior to the JE Program, the union members, while being supervisors, received benefits similar to
the rank-and-file employees such as overtime, rest day and holiday pay, simply because they were
treated in the same manner as rank-and-file employees, and their basic pay was nearly on the same
level as those of the latter, aside from the fact that their specific functions and duties then as
supervisors had not been properly defined and delineated from those of the rank-and-file. Such fact
is apparent from the clarification made by petitioner in its motion for reconsideration 8 filed with
respondent commission in NLRC Case No. CA No. I-000058, dated August 16, 1991, wherein, it
lucidly explained:
"But, complainants no longer occupy the same positions they held before the JE Program. Those
positions formerly classified as 'supervisory' and found after the JE Program to be rank-and-file were
classified correctly and continue to receive overtime, holiday and restday pay. As to them, the
practice subsists.

"However, those whose duties confirmed them to be supervisory, were re-evaluated, their duties re-
defined and in most cases their organizational positions re-designated to confirm their superior rank
and duties. Thus, after the JE program, complainants cannot be said to occupy the same positions."
9

It bears mention that this positional submission was never refuted nor controverted by respondent
union in any of its pleadings filed before herein public respondent or with this Court. Hence, it can be
safely concluded therefrom that the members of respondent union were paid the questioned benefits
for the reason that, at that time, they were rightfully entitled thereto. Prior to the JE Program, they
could not be categorically classified as members or officers of the managerial staff considering that
they were then treated merely on the same level as rank-and-file. Consequently, the payment
thereof could not be construed as constitutive of voluntary employer practice, which cannot be now
be unilaterally withdrawn by petitioner. To be considered as such, it should have been practiced over
a long period of time, and must be shown to have been consistent and deliberate. 10

The test or rationale of this rule on long practice requires an indubitable showing that the employer
agreed to continue giving the benefits knowingly fully well that said employees are not covered by
the law requiring payment thereof. 11 In the case at bar, respondent union failed to sufficiently
establish that petitioner has been motivated or is wont to give these benefits out of pure generosity.

B. It remains undisputed that the implementation of the JE Program, the members of private
respondent union were re-classified under levels S-5 S-8 which were considered under the program
as managerial staff purposes of compensation and benefits, that they occupied re-evaluated
positions, and that their basic pay was increased by an average of 50% of their basic salary prior to
the JE Program. In other words, after the JE Program there was an ascent in position, rank and
salary. This in essence is a promotion which is defined as the advancement from one position to
another with an increase in duties and responsibilities as authorized by law, and usually
accompanied by an increase in salary. 12

Quintessentially, with the promotion of the union members, they are no longer entitled to the benefits
which attach and pertain exclusively to their positions. Entitlement to the benefits provided for by law
requires prior compliance with the conditions set forth therein. With the promotion of the members of
respondent union, they occupied positions which no longer met the requirements imposed by law.
Their assumption of these positions removed them from the coverage of the law, ergo, their
exemption therefrom.

As correctly pointed out by petitioner, if the union members really wanted to continue receiving the
benefits which attach to their former positions, there was nothing to prevent them from refusing to
accept their promotions and their corresponding benefits. As the sating goes by, they cannot have
their cake and eat it too or, as petitioner suggests, they could not, as a simple matter of law and
fairness, get the best of both worlds at the expense of NASUREFCO.

Promotion of its employees is one of the jurisprudentially-recognized exclusive prerogatives of

management, provided it is done in good faith. In the case at bar, private respondent union has
miserably failed to convince this Court that the petitioner acted implementing the JE Program. There
is no showing that the JE Program was intended to circumvent the law and deprive the members of
respondent union of the benefits they used to receive.
Not so long ago, on this particular score, we had the occasion to hold that:

". . . it is the prerogative of the management to regulate, according to its discretion and judgment, all
aspects of employment. This flows from the established rule that labor law does not authorize the
substitution of the judgment of the employer in the conduct of its business. Such management
prerogative may be availed of without fear of any liability so long as it is exercised in good faith for
the advancement of the employer's interest and not for the purpose of defeating on circumventing
the rights of employees under special laws or valid agreement and are not exercised in a malicious,
harsh, oppressive, vindictive or wanton manner or out of malice or spite." 13

WHEREFORE, the impugned decision and resolution of respondent National Labor Relations
Commission promulgated on July 19, 1991 and August 30, 1991, respectively, are hereby
ANNULLED and SET ASIDE for having been rendered and adopted with grave abuse of discretion,
and the basic complaint of private respondent union is DISMISSED.
 37. Sevilla Trading Co. v. Semana, G.R. No. G.R. No. 152456, April 28, 2004

G.R. No. 152456 April 28, 2004

SEVILLA TRADING COMPANY, petitioner,

vs.
A.V.A. TOMAS E. SEMANA, SEVILLA TRADING WORKERS UNIONSUPER, respondents.

DECISION

PUNO, J.:

On appeal is the Decision1 of the Court of Appeals in CA-G.R. SP No. 63086 dated 27 November
2001 sustaining the Decision2 of Accredited Voluntary Arbitrator Tomas E. Semana dated 13
November 2000, as well as its subsequent Resolution3 dated 06 March 2002 denying petitioners
Motion for Reconsideration.

The facts of the case are as follows:

For two to three years prior to 1999, petitioner Sevilla Trading Company (Sevilla Trading, for
short), a domestic corporation engaged in trading business, organized and existing under
Philippine laws, added to the base figure, in its computation of the 13th-month pay of its
employees, the amount of other benefits received by the employees which are beyond the
basic pay. These benefits included:

(a) Overtime premium for regular overtime, legal and special holidays;

(b) Legal holiday pay, premium pay for special holidays;

(c) Night premium;

(d) Bereavement leave pay;

(e) Union leave pay;

(f) Maternity leave pay;

(g) Paternity leave pay;

(h) Company vacation and sick leave pay; and

(i) Cash conversion of unused company vacation and sick leave.

Petitioner claimed that it entrusted the preparation of the payroll to its office staff, including the
computation and payment of the 13th-month pay and other benefits. When it changed its person in
charge of the payroll in the process of computerizing its payroll, and after audit was conducted, it
allegedly discovered the error of including non-basic pay or other benefits in the base figure used in
the computation of the 13th-month pay of its employees. It cited the Rules and Regulations
Implementing P.D. No. 851 (13th-Month Pay Law), effective December 22, 1975, Sec. 2(b) which
stated that:
 "Basic salary" shall include all remunerations or earnings paid by an employer to an
employee for services rendered but may not include cost-of-living allowances granted
pursuant to P.D. No. 525 or Letter of Instruction No. 174, profit-sharing payments, and all
allowances and monetary benefits which are not considered or integrated as part of the
regular or basic salary of the employee at the time of the promulgation of the Decree on
December 16, 1975.

Petitioner then effected a change in the computation of the thirteenth month pay, as follows:

net basic pay

13th-month pay =
12 months

where:

net basic pay = gross pay (non-basic pay or other benefits)

Now excluded from the base figure used in the computation of the thirteenth month pay are the
following:

a) Overtime premium for regular overtime, legal and special holidays;

b) Legal holiday pay, premium pay for special holidays;

c) Night premium;

d) Bereavement leave pay;

e) Union leave pay;

f) Maternity leave pay;

g) Paternity leave pay;

h) Company vacation and sick leave pay; and

i) Cash conversion of unused vacation/sick leave.

Hence, the new computation reduced the employees thirteenth month pay. The daily piece-rate
workers represented by private respondent Sevilla Trading Workers Union SUPER (Union, for
short), a duly organized and registered union, through the Grievance Machinery in their Collective
Bargaining Agreement, contested the new computation and reduction of their thirteenth month pay.
The parties failed to resolve the issue.

On March 24, 2000, the parties submitted the issue of "whether or not the exclusion of leaves and
other related benefits in the computation of 13th-month pay is valid" to respondent Accredited
Voluntary Arbitrator Tomas E. Semana (A.V.A. Semana, for short) of the National Conciliation and
Mediation Board, for consideration and resolution.
The Union alleged that petitioner violated the rule prohibiting the elimination or diminution of
employees benefits as provided for in Art. 100 of the Labor Code, as amended. They claimed that
paid leaves, like sick leave, vacation leave, paternity leave, union leave, bereavement leave, holiday
pay and other leaves with pay in the CBA should be included in the base figure in the computation of
their 13th-month pay.

On the other hand, petitioner insisted that the computation of the 13th-month pay is based on basic
salary, excluding benefits such as leaves with pay, as per P.D. No. 851, as amended. It maintained
that, in adjusting its computation of the 13th-month pay, it merely rectified the mistake its personnel
committed in the previous years.

A.V.A. Semana decided in favor of the Union. The dispositive portion of his Decision reads as
follows:

WHEREFORE, premises considered, this Voluntary Arbitrator hereby declared that:

1. The company is hereby ordered to include sick leave and vacation leave, paternity
leave, union leave, bereavement leave and other leave with pay in the CBA,
premium for work done on rest days and special holidays, and pay for regular
holidays in the computation of the 13th-month pay to all covered and entitled
employees;

2. The company is hereby ordered to pay corresponding backwages to all covered

and entitled employees arising from the exclusion of said benefits in the computation
of 13th-month pay for the year 1999.

Petitioner received a copy of the Decision of the Arbitrator on December 20, 2000. It filed before the
Court of Appeals, a "Manifestation and Motion for Time to File Petition for Certiorari" on January 19,
2001. A month later, on February 19, 2001, it filed its Petition for Certiorari under Rule 65 of the
1997 Rules of Civil Procedure for the nullification of the Decision of the Arbitrator. In addition to its
earlier allegations, petitioner claimed that assuming the old computation will be upheld, the reversal
to the old computation can only be made to the extent of including non-basic benefits actually
included by petitioner in the base figure in the computation of their 13th-month pay in the prior years.
It must exclude those non-basic benefits which, in the first place, were not included in the original
computation. The appellate court denied due course to, and dismissed the petition.

Hence, this appeal. Petitioner Sevilla Trading enumerates the grounds of its appeal, as follows:

1. THE DECISION OF THE RESPONDENT COURT TO REVERT TO THE OLD

COMPUTATION OF THE 13th-MONTH PAY ON THE BASIS THAT THE OLD
COMPUTATION HAD RIPENED INTO PRACTICE IS WITHOUT LEGAL BASIS.

2. IF SUCH BE THE CASE, COMPANIES HAVE NO MEANS TO CORRECT ERRORS IN

COMPUTATION WHICH WILL CAUSE GRAVE AND IRREPARABLE DAMAGE TO
EMPLOYERS.4

First, we uphold the Court of Appeals in ruling that the proper remedy from the adverse decision of
the arbitrator is a petition for review under Rule 43 of the 1997 Rules of Civil Procedure, not a
petition for certiorari under Rule 65. Section 1 of Rule 43 states:

RULE 43
 Appeals from the Court of Tax Appeals and
Quasi-Judicial Agencies to the Court of Appeals

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 arbitrators authorized by law. [Emphasis supplied.]

It is elementary that the special civil action of certiorari under Rule 65 is not, and cannot be a
substitute for an appeal, where the latter remedy is available, as it was in this case. Petitioner Sevilla
Trading failed to file an appeal within the fifteen-day reglementary period from its notice of the
adverse decision of A.V.A. Semana. It received a copy of the decision of A.V.A. Semana on
December 20, 2000, and should have filed its appeal under Rule 43 of the 1997 Rules of Civil
Procedure on or before January 4, 2001. Instead, petitioner filed on January 19, 2001 a
"Manifestation and Motion for Time to File Petition for Certiorari," and on February 19, 2001, it filed a
petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. Clearly, petitioner Sevilla
Trading had a remedy of appeal but failed to use it.

A special civil action under Rule 65 of the Rules of Court will not be a cure for failure to timely file a
petition for review on certiorari under Rule 45 (Rule 43, in the case at bar) of the Rules of Court.
Rule 65 is an independent action that cannot be availed of as a substitute for the lost remedy of an
ordinary appeal, including that under Rule 45 (Rule 43, in the case at bar), especially if such loss or
lapse was occasioned by ones own neglect or error in the choice of remedies.5

Thus, the decision of A.V.A. Semana had become final and executory when petitioner Sevilla
Trading filed its petition for certiorari on February 19, 2001. More particularly, the decision of A.V.A.
Semana became final and executory upon the lapse of the fifteen-day reglementary period to
appeal, or on January 5, 2001. Hence, the Court of Appeals is correct in holding that it no longer had
appellate jurisdiction to alter, or much less, nullify the decision of A.V.A. Semana.

Even assuming that the present petition for certiorari under Rule 65 of the 1997 Rules of Civil
Procedure is a proper action, we still find no grave abuse of discretion amounting to lack or excess
of jurisdiction committed by A.V.A. Semana. "Grave abuse of discretion" has been interpreted to
mean "such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or,
in other words where the power is exercised in an arbitrary or despotic manner by reason of passion
or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty
or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law."6We find
nothing of that sort in the case at bar.

On the contrary, we find the decision of A.V.A. Semana to be sound, valid, and in accord with law
and jurisprudence. A.V.A. Semana is correct in holding that petitioners stance of mistake or error in
the computation of the thirteenth month pay is unmeritorious. Petitioners submission of financial
statements every year requires the services of a certified public accountant to audit its finances. It is
quite impossible to suggest that they have discovered the alleged error in the payroll only in 1999.
This implies that in previous years it does not know its cost of labor and operations. This is merely
basic cost accounting. Also, petitioner failed to adduce any other relevant evidence to support its
contention. Aside from its bare claim of mistake or error in the computation of the thirteenth month
pay, petitioner merely appended to its petition a copy of the 1997-2002 Collective Bargaining
Agreement and an alleged "corrected" computation of the thirteenth month pay. There was no
explanation whatsoever why its inclusion of non-basic benefits in the base figure in the computation
of their 13th-month pay in the prior years was made by mistake, despite the clarity of statute and
jurisprudence at that time.

The instant case needs to be distinguished from Globe Mackay Cable and Radio Corp. vs.
NLRC,7 which petitioner Sevilla Trading invokes. In that case, this Court decided on the proper
computation of the cost-of-living allowance (COLA) for monthly-paid employees. Petitioner
Corporation, pursuant to Wage Order No. 6 (effective 30 October 1984), increased the COLA of its
monthly-paid employees by multiplying the 3.00 daily COLA by 22 days, which is the number of
working days in the company. The Union disagreed with the computation, claiming that the daily
COLA rate of 3.00 should be multiplied by 30 days, which has been the practice of the company for
several years. We upheld the contention of the petitioner corporation. To answer the Unions
contention of company practice, we ruled that:

Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in
1982 and in compliance with Wage Orders Nos. 1 (26 March 1981) to 5 (11 June 1984),
should not be construed as constitutive of voluntary employer practice, which cannot now be
unilaterally withdrawn by petitioner. To be considered as such, it should have been practiced
over a long period of time, and must be shown to have been consistent and deliberate . . .
The test of long practice has been enunciated thus:

. . . Respondent Company agreed to continue giving holiday pay knowing fully

well that said employees are not covered by the law requiring payment of holiday
pay." (Oceanic Pharmacal Employees Union [FFW] vs. Inciong, 94 SCRA 270
[1979])

Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the
implementation of the Wage Orders. It was only when the Rules Implementing Wage Order
No. 4 were issued on 21 May 1984 that a formula for the conversion of the daily allowance to
its monthly equivalent was laid down.

Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for

erroneous application of the law . . .

In the above quoted case, the grant by the employer of benefits through an erroneous application of
the law due to absence of clear administrative guidelines is not considered a voluntary act which
cannot be unilaterally discontinued. Such is not the case now. In the case at bar, the Court of
Appeals is correct when it pointed out that as early as 1981, this Court has held in San Miguel
Corporation vs. Inciong8 that:

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 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 empathic in declaring that earnings and other remunerations which are not part
of the basic salary shall not be included in the computation of the 13th-month 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.

In the light of the clear ruling of this Court, there is, thus no reason for any mistake in the
construction or application of the law. When petitioner Sevilla Trading still included over the years
non-basic benefits of its employees, such as maternity leave pay, cash equivalent of unused
vacation and sick leave, among others in the computation of the 13th-month pay, this may only be
construed as a voluntary act on its part. Putting the blame on the petitioners payroll personnel is
inexcusable.

In Davao Fruits Corporation vs. Associated Labor Unions, we likewise held that:9
 The "Supplementary Rules and Regulations Implementing P.D. No. 851" which put to rest all
doubts in the computation of the thirteenth month pay, was issued by the Secretary of Labor
as early as January 16, 1976, barely one month after the effectivity of P.D. No. 851 and its
Implementing Rules. And yet, petitioner computed and paid the thirteenth month pay, without
excluding the subject items therein until 1981. Petitioner continued its practice in December
1981, after promulgation of the aforequoted San Miguel decision on February 24, 1981,
when petitioner purportedly "discovered" its mistake.

From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of
its employees thirteenth month pay, without the payments for sick, vacation and maternity leave,
premium for work done on rest days and special holidays, and pay for regular holidays. The
considerable length of time the questioned items had been included by petitioner indicates a
unilateral and voluntary act on its part, sufficient in itself to negate any claim of mistake.

A company practice favorable to the employees had indeed been established and the payments
made pursuant thereto, ripened into benefits enjoyed by them. And any benefit and supplement
being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the
employer, by virtue of Sec. 10 of the Rules and Regulations Implementing P.D. No. 851, and Art.
100 of the Labor Code of the Philippines which prohibit the diminution or elimination by the employer
of the employees existing benefits. [Tiangco vs. Leogardo, Jr., 122 SCRA 267 (1983)]

With regard to the length of time the company practice should have been exercised to constitute
voluntary employer practice which cannot be unilaterally withdrawn by the employer, we hold that
jurisprudence has not laid down any rule requiring a specific minimum number of years. In the above
quoted case of Davao Fruits Corporation vs. Associated Labor Unions,10 the company practice
lasted for six (6) years. In another case, Davao Integrated Port Stevedoring Services vs.
Abarquez,11 the employer, for three (3) years and nine (9) months, approved the commutation to
cash of the unenjoyed portion of the sick leave with pay benefits of its intermittent workers. While
in Tiangco vs. Leogardo, Jr.,12 the employer carried on the practice of giving a fixed monthly
emergency allowance from November 1976 to February 1980, or three (3) years and four (4)
months. In all these cases, this Court held that the grant of these benefits has ripened into company
practice or policy which cannot be peremptorily withdrawn. In the case at bar, petitioner Sevilla
Trading kept the practice of including non-basic benefits such as paid leaves for unused sick leave
and vacation leave in the computation of their 13th-month pay for at least two (2) years. This, we
rule likewise constitutes voluntary employer practice which cannot be unilaterally withdrawn by the
employer without violating Art. 100 of the Labor Code:

Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be
construed to eliminate or in any way diminish supplements, or other employee benefits being
enjoyed at the time of promulgation of this Code.

IN VIEW WHEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP
No. 63086 dated 27 November 2001 and its Resolution dated 06 March 2002 are
hereby AFFIRMED.

SO ORDERED.
 38. Manila Electric Company v. Secretary of Labor, G.R. No. 127598, Jan 27, 1999

G.R. No. 127598 February 22, 2000

MANILA ELECTRIC COMPANY, petitioner,

vs.
Hon. SECRETARY OF LABOR LEONARDO QUISUMBING and MERALCO EMPLOYEES and
WORKERS ASSOCIATION (MEWA), respondent.

RESOLUTION

YNARES-SANTIAGO, J.:

In the Decision promulgated on January 27, 1999, the Court disposed of the case as follows:

WHEREFORE, the petition is granted and the orders of public respondent Secretary of Labor
dated August 19, 1996 and December 28, 1996 are set aside to the extent set forth above.
The parties are directed to execute a Collective Bargaining Agreement incorporating the
terms and conditions contained in the unaffected portions of the Secretary of Labor's orders
of August 19, 1996 and December 28, 1996, and the modifications set forth above. The
retirement fund issue is remanded to the Secretary of Labor for reception of evidence and
determination of the legal personality of the MERALCO retirement fund.1

The modifications of the public respondent's resolutions include the following:

January 27, 1999 decision Secretary's resolution

Wages - P1,900.00 for 1995-96 P2,200.00

X'mas bonus - modified to one month 2 months

Retirees - remanded to the Secretary granted

Loan to coops - denied granted

GHSIP, HMP and

Housing loans - granted up to P60,000.00 granted

Signing bonus - denied granted

Union leave - 40 days (typo error) 30 days

High voltage/pole - not apply to those who are members of a team

not exposed to the risk

Collectors - no need for cash bond, no

need to reduce quota and MAPL

CBU - exclude confidential employees include

Union security - maintenance of membership closed shop

 Contracting out - no need to consult union consult first

All benefits - existing terms and conditions all terms

Retroactivity - Dec. 28, 1996-Dec. 27, 199(9) from Dec. 1, 1995

Dissatisfied with the Decision, some alleged members of private respondent union (Union for brevity)
filed a motion for intervention and a motion for reconsideration of the said Decision. A separate
intervention was likewise made by the supervisor's union (FLAMES2) of petitioner corporation
alleging that it has bona fide legal interest in the outcome of the case.3 The Court required the
"proper parties" to file a comment to the three motions for reconsideration but the Solicitor-General
asked that he be excused from filing the comment because the "petition filed in the instant case was
granted" by the Court.4 Consequently, petitioner filed its own consolidated comment. An "Appeal
Seeking Immediate Reconsideration" was also filed by the alleged newly elected president of the
Union.5 Other subsequent pleadings were filed by the parties and intervenors.

The issues raised in the motions for reconsideration had already been passed upon by the Court in
the January 27, 1999 decision. No new arguments were presented for consideration of the Court.
Nonetheless, certain matters will be considered herein, particularly those involving the amount of
wages and the retroactivity of the Collective Bargaining Agreement (CBA) arbitral awards.

Petitioner warns that if the wage increase of P2,200.00 per month as ordered by the Secretary is
allowed, it would simply pass the cost covering such increase to the consumers through an increase
in the rate of electricity. This is a non sequitur. The Court cannot be threatened with such a
misleading argument. An increase in the prices of electric current needs the approval of the
appropriate regulatory government agency and does not automatically result from a mere increase in
the wages of petitioner's employees. Besides, this argument presupposes that petitioner is capable
of meeting a wage increase. The All Asia Capital report upon which the Union relies to support its
position regarding the wage issue cannot be an accurate basis and conclusive determinant of the
rate of wage increase. Section 45 of Rule 130 Rules of Evidence provides:

Commercial lists and the like. Evidence of statements of matters of interest to persons
engaged in an occupation contained in a list, register, periodical, or other published
compilation is admissible as tending to prove the truth of any relevant matter so stated if that
compilation is published for use by persons engaged in that occupation and is generally used
and relied upon by them therein.

Under the afore-quoted rule, statement of matters contained in a periodical, may be admitted only "if
that compilation is published for use by persons engaged in that occupation and is generally used
and relied upon by them therein." As correctly held in our Decision dated January 27, 1999, the cited
report is a mere newspaper account and not even a commercial list. At most, it is but an analysis or
opinion which carries no persuasive weight for purposes of this case as no sufficient figures to
support it were presented. Neither did anybody testify to its accuracy. It cannot be said that
businessmen generally rely on news items such as this in their occupation. Besides, no evidence
was presented that the publication was regularly prepared by a person in touch with the market and
that it is generally regarded as trustworthy and reliable. Absent extrinsic proof of their accuracy,
these reports are not admissible.6 In the same manner, newspapers containing stock quotations are
not admissible in evidence when the source of the reports is available.7 With more reason, mere
analyses or projections of such reports cannot be admitted. In particular, the source of the report in
this case can be easily made available considering that the same is necessary for compliance with
certain governmental requirements.
Nonetheless, by petitioner's own allegations, its actual total net income for 1996 was P5.1 billion.8 An
estimate by the All Asia financial analyst stated that petitioner's net operating income for the same
year was about P5.7 billion, a figure which the Union relies on to support its claim. Assuming without
admitting the truth thereof, the figure is higher than the P4.171 billion allegedly suggested by
petitioner as its projected net operating income. The P5.7 billion which was the Secretary's basis for
granting the P2,200.00 is higher than the actual net income of P5.1 billion admitted by petitioner. It
would be proper then to increase this Court's award of P1,900.00 to P2,000.00 for the two years of
the CBA award. For 1992, the agreed CBA wage increase for rank-and-file was P1,400.00 and was
reduced to P1,350.00; for 1993; further reduced to P1,150.00 for 1994. For supervisory employees,
the agreed wage increase for the years 1992-1994 are P1,742.50, P1,682.50 and P1,442.50,
respectively. Based on the foregoing figures, the P2,000.00 increase for the two-year period
awarded to the rank-and-file is much higher than the highest increase granted to supervisory
employees.9 As mentioned in the January 27, 1999 Decision, the Court does "not seek to enumerate
in this decision the factors that should affect wage determination" because collective bargaining
disputes particularly those affecting the national interest and public service "requires due
consideration and proper balancing of the interests of the parties to the dispute and of those who
might be affected by the dispute."10 The Court takes judicial notice that the new amounts granted
herein are significantly higher than the weighted average salary currently enjoyed by other rank-and-
file employees within the community. It should be noted that the relations between labor and capital
is impressed with public interest which must yield to the common good.11 Neither party should act
oppressively against the other or impair the interest or convenience of the public.12Besides, matters
of salary increases are part of management prerogative.13

On the retroactivity of the CBA arbitral award, it is well to recall that this petition had its origin in the
renegotiation of the parties' 1992-1997 CBA insofar as the last two-year period thereof is concerned.
When the Secretary of Labor assumed jurisdiction and granted the arbitral awards, there was no
question that these arbitral awards were to be given retroactive effect. However, the parties dispute
the reckoning period when retroaction shall commence. Petitioner claims that the award should
retroact only from such time that the Secretary of Labor rendered the award, invoking the 1995
decision in Pier 8 case14 where the Court, citing Union of Filipino Employees v. NLRC,15 said:

The assailed resolution which incorporated the CBA to be signed by the parties was
promulgated on June 5, 1989, the expiry date of the past CBA. Based on the provision of
Section 253-A, its retroactivity should be agreed upon by the parties. But since no agreement
to that effect was made, public respondent did not abuse its discretion in giving the said CBA
a prospective effect. The action of the public respondent is within the ambit of its authority
vested by existing law.

On the other hand, the Union argues that the award should retroact to such time granted by the
Secretary, citing the 1993 decision of St. Luke's.16

Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of the
expiration of the previous CBA, contrary to the position of petitioner. Under the
circumstances of the case, Article 253-A cannot be properly applied to herein case. As
correctly stated by public respondent in his assailed Order of April 12, 1991 dismissing
petitioner's Motion for Reconsideration

Anent the alleged lack of basis for the retroactivity provisions awarded; we would
stress that the provision of law invoked by the Hospital, Article 253-A of the Labor
Code, speaks of agreements by and between the parties, and not arbitral awards . . .
 Therefore, in the absence of a specific provision of law prohibiting retroactivity of the
effectivity of arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of the
Labor Code, such as herein involved, public respondent is deemed vested with plenary and
discretionary powers to determine the effectivity thereof.

In the 1997 case of Mindanao Terminal,17 the Court applied the St. Luke's doctrine and ruled that:

In St. Luke's Medical Center v. Torres, a deadlock also developed during the CBA
negotiations between management and the union. The Secretary of Labor assumed
jurisdiction and ordered the retroaction of the CBA to the date of expiration of the previous
CBA. As in this case, it was alleged that the Secretary of Labor gravely abused its discretion
in making his award retroactive. In dismissing this contention this Court held:

Therefore, in the absence of a specific provision of law prohibiting retroactive of the

effectivity of arbitral awards issued by the Secretary of Labor pursuant to Article
263(g) of the Labor Code, such as herein involved, public respondent is deemed
vested with plenary and discretionary powers to determine the effectivity thereof.

The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective for a period of 2
years counted from December 28, 1996 up to December 27, 1999." Parenthetically, this actually
covers a three-year period. Labor laws are silent as to when an arbitral award in a labor dispute
where the Secretary had assumed jurisdiction by virtue of Article 263 (g) of the Labor Code shall
retroact. In general, a CBA negotiated within six months after the expiration of the existing CBA
retroacts to the day immediately following such date and if agreed thereafter, the effectivity depends
on the agreement of the parties.18 On the other hand, the law is silent as to the retroactivity of a CBA
arbitral award or that granted not by virtue of the mutual agreement of the parties but by intervention
of the government. Despite the silence of the law, the Court rules herein that CBA arbitral awards
granted after six months from the expiration of the last CBA shall retroact to such time agreed upon
by both employer and the employees or their union. Absent such an agreement as to retroactivity,
the award shall retroact to the first day after the six-month period following the expiration of the last
day of the CBA should there be one. In the absence of a CBA, the Secretary's determination of the
date of retroactivity as part of his discretionary powers over arbitral awards shall control.

It is true that an arbitral award cannot per se be categorized as an agreement voluntarily entered into
by the parties because it requires the interference and imposing power of the State thru the
Secretary of Labor when he assumes jurisdiction. However, the arbitral award can be considered as
an approximation of a collective bargaining agreement which would otherwise have been entered
into by the parties.19 The terms or periods set forth in Article 253-A pertains explicitly to a CBA. But
there is nothing that would prevent its application by analogy to an arbitral award by the Secretary
considering the absence of an applicable law. Under Article 253-A: "(I)f any such agreement is
entered into beyond six months, the parties shall agree on the duration of retroactivity thereof." In
other words, the law contemplates retroactivity whether the agreement be entered into before or
after the said six-month period. The agreement of the parties need not be categorically stated for
their acts may be considered in determining the duration of retroactivity. In this connection, the Court
considers the letter of petitioner's Chairman of the Board and its President addressed to their
stockholders, which states that the CBA "for the rank-and-file employees covering the period
December 1, 1995 to November 30, 1997 is still with the Supreme Court,"20 as indicative of
petitioner's recognition that the CBA award covers the said period. Earlier, petitioner's negotiating
panel transmitted to the Union a copy of its proposed CBA covering the same period inclusive.21 In
addition, petitioner does not dispute the allegation that in the past CBA arbitral awards, the Secretary
granted retroactivity commencing from the period immediately following the last day of the expired
CBA. Thus, by petitioner's own actions, the Court sees no reason to retroact the subject CBA
awards to a different date. The period is herein set at two (2) years from December 1, 1995 to
November 30, 1997.

On the allegation concerning the grant of loan to a cooperative, there is no merit in the union's claim
that it is no different from housing loans granted by the employer. The award of loans for housing is
justified because it pertains to a basic necessity of life. It is part of a privilege recognized by the
employer and allowed by law. In contrast, providing seed money for the establishment of the
employee's cooperative is a matter in which the employer has no business interest or legal
obligation. Courts should not be utilized as a tool to compel any person to grant loans to another nor
to force parties to undertake an obligation without justification. On the contrary, it is the government
that has the obligation to render financial assistance to cooperatives and the Cooperative Code does
not make it an obligation of the employer or any private individual.22

Anent the 40-day union leave, the Court finds that the same is a typographical error. In order to
avoid any confusion, it is herein declared that the union leave is only thirty (30) days as granted by
the Secretary of Labor and affirmed in the Decision of this Court.

The added requirement of consultation imposed by the Secretary in cases of contracting out for six
(6) months or more has been rejected by the Court. Suffice it to say that the employer is allowed to
contract out services for six months or more. However, a line must be drawn between management
prerogatives regarding business operationsper se and those which affect the rights of employees,
and in treating the latter, the employer should see to it that its employees are at least properly
informed of its decision or modes of action in order to attain a harmonious labor-management
relationship and enlighten the workers concerning their rights.23 Hiring of workers is within the
employer's inherent freedom to regulate and is a valid exercise of its management prerogative
subject only to special laws and agreements on the matter and the fair standards of justice.24 The
management cannot be denied the faculty of promoting efficiency and attaining economy by a study
of what units are essential for its operation. It has the ultimate determination of whether services
should be performed by its personnel or contracted to outside agencies. While there should be
mutual consultation, eventually deference is to be paid to what management decides.25 Contracting
out of services is an exercise of business judgment or management prerogative.26 Absent proof that
management acted in a malicious or arbitrary manner, the Court will not interfere with the exercise of
judgment by an employer.27 As mentioned in the January 27, 1999 Decision, the law already
sufficiently regulates this matter.28 Jurisprudence also provides adequate limitations, such that the
employer must be motivated by good faith and the contracting out should not be resorted to
circumvent the law or must not have been the result of malicious or arbitrary actions.29 These are
matters that may be categorically determined only when an actual suit on the matter arises.

WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and the assailed Decision
is MODIFIED as follows: (1) the arbitral award shall retroact from December 1, 1995 to November
30, 1997; and (2) the award of wage is increased from the original amount of One Thousand Nine
Hundred Pesos (P1,900.00) to Two Thousand Pesos (P2,000.00) for the years 1995 and 1996. This
Resolution is subject to the monetary advances granted by petitioner to its rank-and-file employees
during the pendency of this case assuming such advances had actually been distributed to them.
The assailed Decision is AFFIRMED in all other respects. 1wphi 1.nt

SO ORDERED.
 39. Davao Fruits Corporation v. Associated Labor Unions, G.R. No. 85073, Aug 24, 1993

G.R. No. 85073 August 24, 1993

DAVAO FRUITS CORPORATION, petitioner,

vs.
ASSOCIATED LABOR UNIONS (ALU) for in behalf of all the rank-and-file workers/employees
of DAVAO FRUITS CORPORATION and NATIONAL LABOR RELATIONS
COMMISSION, respondents.

Dominguez & Paderna Law Offices for petitioners.

The Solicitor General for public respondents.

QUIASON, J.:

This is a petition for certiorari to set aside the resolution of the National Labor Relations Commission
(NLRC), dismissing for lack of merit petitioner's appeal from the decision of the Labor Arbiter in
NLRC Case No. 1791-MC-X1-82.

On December 28, 1982 respondent Associated Labor Unions (ALU), for and in behalf of all the rank-
and-file workers and employees of petitioner, filed a complaint (NLRC Case No. 1791-MC-XI-82)
before the Ministry of Labor and Employment, Regional Arbitration Branch XI, Davao City, against
petitioner, for "Payment of the Thirteenth-Month Pay Differentials." Respondent ALU sought to
recover from petitioner the thirteenth month pay differential for 1982 of its rank-and-file employees,
equivalent to their sick, vacation and maternity leaves, premium for work done on rest days and
special holidays, and pay for regular holidays which petitioner, allegedly in disregard of company
practice since 1975, excluded from the computation of the thirteenth month pay for 1982.

In its answer, petitioner claimed that it erroneously included items subject of the complaint in the
computation of the thirteenth month pay for the years prior to 1982, upon a doubtful and difficult
question of law. According to petitioner, this mistake was discovered only in 1981 after the
promulgation of the Supreme Court decision in the case of San Miguel Corporation v. Inciong (103
SCRA 139).

A decision was rendered on March 7, 1984 by Labor Arbiter Pedro C. Ramos, in favor of respondent
ALU. The dispositive portion of the decision reads as follows:

WHEREFORE, in view of all the foregoing considerations, judgment is hereby

rendered ordering respondent to pay the 1982 13th month pay differential to all its
rank-and-file workers/employees herein represented by complainant Union (Rollo, p.
32).

Petitioner appealed the decision of the Labor Arbiter to the NLRC, which affirmed the said decision
accordingly dismissed the appeal for lack of merit.

Petitioner elevated the matter to this Court in a petition for review under Rule 45 of the Revised
Rules of Court. This error notwithstanding and in the interest of justice, this Court resolved to treat
the instant petition as a special civil action for certiorari under Rule 65 of the Revised Rules of Court
(P.D. No. 1391, Sec. 5; Rules Implementing P.D. No. 1391, Rule II, Sec. 7; Cando v. National Labor
Relations Commission, 189 SCRA 666 [1990]: Pearl S. Buck Foundation, Inc. v. National Labor
Relations Commission, 182 SCRA 446 [1990]).

The crux of the present controversy is whether in the computation of the thirteenth month pay given
by employers to their employees under P.D.
No. 851, payments for sick, vacation and maternity leaves, premiums for work done on rest days
and special holidays, and pay for regular holidays may be excluded in the computation and payment
thereof, regardless of long-standing company practice.

Presidential Decree No. 851, promulgated on December 16, 1975, mandates all employers to pay
their employees a thirteenth month pay. How this pay shall be computed is set forth in Section 2 of
the "Rules and Regulations Implementing Presidential Decree No. 851," thus:

SECTION 2. . . .

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

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

The Department of Labor and Employment issued on January 16, 1976 the "Supplementary Rules
and Regulations Implementing P.D. No. 851" which in paragraph 4 thereof further defines the term
"basic salary," thus:

4. Overtime pay, earnings and other renumerations which are not part of the basic
salary shall not be included in the computation of the 13th month pay.

Clearly, the term "basic salary" includes renumerations or earnings paid by the employer to
employee, but excludes cost-of-living allowances, profit-sharing payments, and all allowances and
monetary benefits which have not been considered as part of the basic salary of the employee as of
December 16, 1975. The exclusion of cost-of-living allowances and profit sharing payments shows
the intention to strip "basic salary" of payments which are otherwise considered as "fringe" benefits.
This intention is emphasized in the catch all phrase "all allowances and monetary benefits which are
not considered or integrated as part of the basic salary." Basic salary, therefore does not merely
exclude the benefits expressly mentioned but all payments which may be in the form of "fringe"
benefits or allowances (San Miguel Corporation v. Inciong, supra, at 143-144). In fact, the
Supplementary Rules and Regulations Implementing P.D. No. 851 are very emphatic in declaring
that overtime pay, earnings and other renumerations shall be excluded in computing the thirteenth
month pay.

In other words, whatever compensation an employee receives for an eight-hour work daily or the
daily wage rate in the basic salary. Any compensation or remuneration other than the daily wage
rate is excluded. It follows therefore, that payments for sick, vacation and maternity leaves, premium
for work done on rest days special holidays, as well as pay for regular holidays, are likewise
excluded in computing the basic salary for the purpose of determining the thirteen month pay.
Petitioner claims that the mistake in the interpretation of "basic salary" was caused by the opinions,
orders and rulings rendered by then Acting Labor Secretary Amado C. Inciong, expressly including
the subject items in computing the thirteenth month pay. The inclusion of these items is clearly not
sanctioned under P.D. No. 851, the governing law and its implementing rules, which speak only of
"basis salary" as the basis for determining the thirteenth month pay.

Moreover, whatever doubt arose in the interpretation of P.D. No. 851 was erased by the
Supplementary Rules and Regulations which clarified the definition of "basic salary."

As pointed out in San Miguel Corporation v. Inciong, (supra):

While doubt may have been created by the prior Rules and Regulations and
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 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 work 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 computation of the 13th month-pay. Then the exclusionary
provision would prove to be idle and with purpose.

The "Supplementary Rules and Regulations Implementing P.D. No. 851," which put to rest all doubts
in the computation of the thirteenth month pay, was issued by the Secretary of Labor as early as
January 16, 1976, barely one month after the effectivity of P.D. No. 851 and its Implementing Rules.
And yet, petitioner computed and paid the thirteenth month pay, without excluding the subject items
therein until 1981. Petitioner continued its practice in December 1981, after promulgation of the
afore-quoted San Miguel decision on February 24, 1981, when petitioner purportedly "discovered" its
mistake.

From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the computation of
its employees' thirteenth month pay, the payments for sick, vacation and maternity leaves, premiums
for work done on rest days and special holidays, and pay for regular holidays. The considerable
length of time the questioned items had been included by petitioner indicates a unilateral and
voluntary act on its part, sufficient in itself to negate any claim of mistake.

A company practice favorable to the employees had indeed been established and the payments
made pursuant thereto, ripened into benefits enjoyed by them. And any benefit and supplement
being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the
employer, by virtue of Section 10 of the Rules and Regulations Implementing P.D. No. 851, and
Article 100 of the labor of the Philippines, which prohibit the diminution or elimination by the
employer of the employees' existing benefits (Tiangco v. Leogardo, Jr., 122 SCRA 267, [1983]).
Petitioner cannot invoke the principle of solutio indebiti which as a civil law concept that is not
applicable in Labor Law. Besides, in solutio indebiti, the obligee is required to return to the obligor
whatever he received from the latter (Civil Code of the Philippines, Arts. 2154 and 2155). Petitioner
in the instant case, does not demand the return of what it paid respondent ALU from 1975 until 1981;
it merely wants to "rectify" the error it made over these years by excluding unilaterally from the
thirteenth month pay in 1982 the items subject of litigation. Solutio indebiti, therefore, is not
applicable to the instant case.

WHEREFORE, finding no grave abuse of discretion on the part of the NLRC, the petition is hereby
DISMISSED, and the questioned decision of respondent NLRC is AFFIRMED accordingly.
 40. Davao Integrated Port Stevedoring Services v. Abarquez, G.R. No. 102132, March 19,
1993

G.R. No. 102132. March 19, 1993.

DAVAO INTEGRATED PORT STEVEDORING SERVICES, petitioner, vs. RUBEN V. ABARQUEZ,

in his capacity as an accredited Voluntary Arbitrator and THE ASSOCIATION OF TRADE UNIONS
(ATU-TUCP), respondents.

Libron, Gaspar & Associates for petitioner.

Bansalan B. Metilla for Association of Trade Unions (ATUTUCP).

SYLLABUS

1. LABOR LAWS AND SOCIAL LEGISLATION; LABOR RELATIONS; COLLECTIVE BARGAINING

AGREEMENT; DEFINED; NATURE THEREOF; CONSTRUCTION TO BE PLACED THEREON.
A collective bargaining agreement (CBA), as used in Article 252 of the Labor Code, refers to a
contract executed upon request of either the employer or the exclusive bargaining representative
incorporating the agreement reached after negotiations with respect to wages, hours of work and all
other terms and conditions of employment, including proposals for adjusting any grievances or
questions arising under such agreement. While the terms and conditions of a CBA constitute the law
between the parties, it is not, however, an ordinary contract to which is applied the principles of law
governing ordinary contracts. A CBA, as a labor contract within the contemplation of Article 1700 of
the Civil Code of the Philippines which governs the relations between labor and capital, is not merely
contractual in nature but impressed with public interest, thus, it must yield to the common good. As
such, it must be construed liberally rather than narrowly and technically, and the courts must place a
practical and realistic construction upon it, giving due consideration to the context in which it is
negotiated and purpose which it is intended to serve.

2. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. It is thus erroneous for petitioner to isolate Section 1,
Article VIII of the 1989 CBA from the other related section on sick leave with pay benefits,
specifically Section 3 thereof, in its attempt to justify the discontinuance or withdrawal of the privilege
of commutation or conversion to cash of the unenjoyed portion of the sick leave benefit to regular
intermittent workers. The manner they were deprived of the privilege previously recognized and
extended to them by petitioner-company during the lifetime of the CBA of October 16, 1985 until
three (3) months from its renewal on April 15, 1989, or a period of three (3) years and nine (9)
months, is not only tainted with arbitrariness but likewise discriminatory in nature. It must be noted
that the 1989 CBA has two (2) sections on sick leave with pay benefits which apply to two (2) distinct
classes of workers in petitioner's company, namely: (1) the regular non-intermittent workers or those
workers who render a daily eight-hour service to the company and are governed by Section 1, Article
VIII of the 1989 CBA; and (2) intermittent field workers who are members of the regular labor pool
and the present regular extra labor pool as of the signing of the agreement on April 15, 1989 or
those workers who have irregular working days and are governed by Section 3, Article VIII of the
1989 CBA. It is not disputed that both classes of workers are entitled to sick leave with pay benefits
provided they comply with the conditions set forth under Section 1 in relation to the last paragraph of
Section 3, to wit: (1) the employee-applicant must be regular or must have rendered at least one
year of service with the company; and (2) the application must be accompanied by a certification
from a company-designated physician. the phrase "herein sick leave privilege," as used in the last
sentence of Section 1, refers to the privilege of having a fixed 15-day sick leave with pay which, as
mandated by Section 1, only the non-intermittent workers are entitled to. This fixed 15-day sick leave
with pay benefit should be distinguished from the variable number of days of sick leave, not to
exceed 15 days, extended to intermittent workers under Section 3 depending on the number of
hours of service rendered to the company, including overtime pursuant to the schedule provided
therein. It is only fair and reasonable for petitioner-company not to stipulate a fixed 15-day sick leave
with pay for its regular intermittent workers since, as the term "intermittent" implies, there is
irregularity in their work-days. Reasonable and practical interpretation must be placed on contractual
provisions. Interpetatio fienda est ut res magis valeat quam pereat. Such interpretation is to be
adopted, that the thing may continue to have efficacy rather than fail.

3. ID.; ID.; ID.; SICK LEAVE BENEFITS; NATURE AND PURPOSE. Sick leave benefits, like
other economic benefits stipulated in the CBA such as maternity leave and vacation leave benefits,
among others, are by their nature, intended to be replacements for regular income which otherwise
would not be earned because an employee is not working during the period of said leaves. They are
non-contributory in nature, in the sense that the employees contribute nothing to the operation of the
benefits. By their nature, upon agreement of the parties, they are intended to alleviate the economic
condition of the workers.

4. ID.; ID.; JURISDICTION OF VOLUNTARY ARBITRATOR; CASE AT BAR. Petitioner-

company's objection to the authority of the Voluntary Arbitrator to direct the commutation of the
unenjoyed portion of the sick leave with pay benefits of intermittent workers in his decision is
misplaced. Article 261 of the Labor Code is clear. The questioned directive of the herein public
respondent is the necessary consequence of the exercise of his arbitral power as Voluntary
Arbitrator under Article 261 of the Labor Code "to hear and decide all unresolved grievances arising
from the interpretation or implementation of the Collective Bargaining Agreement." We, therefore,
find that no grave abuse of discretion was committed by public respondent in issuing the award
(decision). Moreover, his interpretation of Sections 1 and 3, Article VIII of the 1989 CBA cannot be
faulted with and is absolutely correct.

5. ID.; CONDITIONS OF EMPLOYMENT; PROHIBITION AGAINST ELIMINATION OR DIMINUTION

OF BENEFITS; BENEFITS GRANTED PURSUANT TO COMPANY PRACTICE OR POLICY
CANNOT BE PEREMPTORILY WITHDRAWN. Whatever doubt there may have been early on
was clearly obliterated when petitioner-company recognized the said privilege and paid its
intermittent workers the cash equivalent of the unenjoyed portion of their sick leave with pay benefits
during the lifetime of the CBA of October 16, 1985 until three (3) months from its renewal on April 15,
1989. Well-settled is it that the said privilege of commutation or conversion to cash, being an existing
benefit, the petitioner-company may not unilaterally withdraw, or diminish such benefits. It is a fact
that petitioner-company had, on several instances in the past, granted and paid the cash equivalent
of the unenjoyed portion of the sick leave benefits of some intermittent workers. Under the
circumstances, these may be deemed to have ripened into company practice or policy which cannot
be peremptorily withdrawn.

DECISION

ROMERO, J p:

In this petition for certiorari, petitioner Davao Integrated Port Services Corporation seeks to reverse
the Award 1 issued on September 10, 1991 by respondent Ruben V. Abarquez, in his capacity as
Voluntary Arbitrator of the National Conciliation and Mediation Board, Regional Arbitration Branch XI
in Davao City in Case No. AC-211-BX1-10-003-91 which directed petitioner to grant and extend the
privilege of commutation of the unenjoyed portion of the sick leave with pay benefits to its
intermittent field workers who are members of the regular labor pool and the present regular extra
pool in accordance with the Collective Bargaining Agreement (CBA) executed between petitioner
and private respondent Association of Trade Unions (ATU-TUCP), from the time it was discontinued
and henceforth.

The facts are as follows:

Petitioner Davao Integrated Port Stevedoring Services (petitioner-company) and private respondent
ATU-TUCP (Union), the exclusive collective bargaining agent of the rank and file workers of
petitioner-company, entered into a collective bargaining agreement (CBA) on October 16, 1985
which, under Sections 1 and 3, Article VIII thereof, provide for sick leave with pay benefits each year
to its employees who have rendered at least one (1) year of service with the company, thus:

"ARTICLE VIII

Section 1. Sick Leaves The Company agrees to grant 15 days sick leave with pay each year to
every regular non-intermittent worker who already rendered at least one year of service with the
company. However, such sick leave can only be enjoyed upon certification by a company
designated physician, and if the same is not enjoyed within one year period of the current year, any
unenjoyed portion thereof, shall be converted to cash and shall be paid at the end of the said one
year period. And provided however, that only those regular workers of the company whose work are
not intermittent, are entitled to the herein sick leave privilege.

xxx xxx xxx

Section 3. All intermittent field workers of the company who are members of the Regular Labor
Pool shall be entitled to vacation and sick leaves per year of service with pay under the following
schedule based on the number of hours rendered including overtime, to wit:

Hours of Service Per Vacation Sick Leave

Calendar Year Leave

Less than 750 NII NII

751 825 6 days 6 days

826 900 7 7

901 925 8 8

926 1,050 9 9

1,051 1,125 10 10

1,126 1,200 11 11

1,201 1,275 12 12

1,276 1,350 13 13

1,351 1,425 14 14
1,426 1,500 15 15

The conditions for the availment of the herein vacation and sick leaves shall be in accordance with
the above provided Sections 1 and 2 hereof, respectively."

Upon its renewal on April 15, 1989, the provisions for sick leave with pay benefits were reproduced
under Sections 1 and 3, Article VIII of the new CBA, but the coverage of the said benefits was
expanded to include the "present Regular Extra Labor Pool as of the signing of this Agreement."
Section 3, Article VIII, as revised, provides, thus:

"Section 3. All intermittent field workers of the company who are members of the Regular Labor
Pool and present Regular Extra Labor Pool as of the signing of this agreement shall be entitled to
vacation and sick leaves per year of service with pay under the following schedule based on the
number of hours rendered including overtime, to wit:

Hours of Service Per Vacation Sick Leave

Calendar Year Leave

Less than 750 NII NII

751 825 6 days 6 days

826 900 7 7

901 925 8 8

926 1,050 9 9

1,051 1,125 10 10

1,126 1,200 11 11

1,201 1,275 12 12

1,276 1,350 13 13

1,351 1,425 14 14

1,426 1,500 15 15

The conditions for the availment of the herein vacation and sick leaves shall be in accordance with
the above provided Sections 1 and 2 hereof, respectively."

During the effectivity of the CBA of October 16, 1985 until three (3) months after its renewal on April
15, 1989, or until July 1989 (a total of three (3) years and nine (9) months), all the field workers of
petitioner who are members of the regular labor pool and the present regular extra labor pool who
had rendered at least 750 hours up to 1,500 hours were extended sick leave with pay benefits. Any
unenjoyed portion thereof at the end of the current year was converted to cash and paid at the end
of the said one-year period pursuant to Sections 1 and 3, Article VIII of the CBA. The number of
days of their sick leave per year depends on the number of hours of service per calendar year in
accordance with the schedule provided in Section 3, Article VIII of the CBA.

The commutation of the unenjoyed portion of the sick leave with pay benefits of the intermittent
workers or its conversion to cash was, however, discontinued or withdrawn when petitioner-company
under a new assistant manager, Mr. Benjamin Marzo (who replaced Mr. Cecilio Beltran, Jr. upon the
latter's resignation in June 1989), stopped the payment of its cash equivalent on the ground that they
are not entitled to the said benefits under Sections 1 and 3 of the 1989 CBA.

The Union objected to the said discontinuance of commutation or conversion to cash of the
unenjoyed sick leave with pay benefits of petitioner's intermittent workers contending that it is a
deviation from the true intent of the parties that negotiated the CBA; that it would violate the principle
in labor laws that benefits already extended shall not be taken away and that it would result in
discrimination between the non-intermittent and the intermittent workers of the petitioner-company.

Upon failure of the parties to amicably settle the issue on the interpretation of Sections 1 and 3,
Article VIII of the 1989 CBA, the Union brought the matter for voluntary arbitration before the
National Conciliation and Mediation Board, Regional Arbitration Branch XI at Davao City by way of
complaint for enforcement of the CBA. The parties mutually designated public respondent Ruben
Abarquez, Jr. to act as voluntary arbitrator.

After the parties had filed their respective position papers, 2 public respondent Ruben Abarquez, Jr.
issued on September 10, 1991 an Award in favor of the Union ruling that the regular intermittent
workers are entitled to commutation of their unenjoyed sick leave with pay benefits under Sections 1
and 3 of the 1989 CBA, the dispositive portion of which reads:

"WHEREFORE, premises considered, the management of the respondent Davao Integrated Port
Stevedoring Services Corporation is hereby directed to grant and extend the sick leave privilege of
the commutation of the unenjoyed portion of the sick leave of all the intermittent field workers who
are members of the regular labor pool and the present extra pool in accordance with the CBA from
the time it was discontinued and henceforth.

SO ORDERED."

Petitioner-company disagreed with the aforementioned ruling of public respondent, hence, the
instant petition.

Petitioner-company argued that it is clear from the language and intent of the last sentence of
Section 1, Article VIII of the 1989 CBA that only the regular workers whose work are not intermittent
are entitled to the benefit of conversion to cash of the unenjoyed portion of sick leave, thus: ". . . And
provided, however, that only those regular workers of the Company whose work are not intermittent
are entitled to the herein sick leave privilege."

Petitioner-company further argued that while the intermittent workers were paid the cash equivalent
of their unenjoyed sick leave with pay benefits during the previous management of Mr. Beltran who
misinterpreted Sections 1 and 3 of Article VIII of the 1985 CBA, it was well within petitioner-
company's rights to rectify the error it had committed and stop the payment of the said sick leave
with pay benefits. An error in payment, according to petitioner-company, can never ripen into a
practice.

We find the arguments unmeritorious.

A collective bargaining agreement (CBA), as used in Article 252 of the Labor Code, refers to a
contract executed upon request of either the employer or the exclusive bargaining representative
incorporating the agreement reached after negotiations with respect to wages, hours of work and all
other terms and conditions of employment, including proposals for adjusting any grievances or
questions arising under such agreement.

While the terms and conditions of a CBA constitute the law between the parties, 3 it is not, however,
an ordinary contract to which is applied the principles of law governing ordinary contracts. 4 A CBA,
as a labor contract within the contemplation of Article 1700 of the Civil Code of the Philippines which
governs the relations between labor and capital, is not merely contractual in nature but impressed
with public interest, thus, it must yield to the common good. As such, it must be construed liberally
rather than narrowly and technically, and the courts must place a practical and realistic construction
upon it, giving due consideration to the context in which it is negotiated and purpose which it is
intended to serve. 5

It is thus erroneous for petitioner to isolate Section 1, Article VIII of the 1989 CBA from the other
related section on sick leave with pay benefits, specifically Section 3 thereof, in its attempt to justify
the discontinuance or withdrawal of the privilege of commutation or conversion to cash of the
unenjoyed portion of the sick leave benefit to regular intermittent workers. The manner they were
deprived of the privilege previously recognized and extended to them by petitioner-company during
the lifetime of the CBA of October 16, 1985 until three (3) months from its renewal on April 15, 1989,
or a period of three (3) years and nine (9) months, is not only tainted with arbitrariness but likewise
discriminatory in nature. Petitioner-company is of the mistaken notion that since the privilege of
commutation or conversion to cash of the unenjoyed portion of the sick leave with pay benefits is
found in Section 1, Article VIII, only the regular non-intermittent workers and no other can avail of the
said privilege because of the proviso found in the last sentence thereof.

It must be noted that the 1989 CBA has two (2) sections on sick leave with pay benefits which apply
to two (2) distinct classes of workers in petitioner's company, namely: (1) the regular non-intermittent
workers or those workers who render a daily eight-hour service to the company and are governed by
Section 1, Article VIII of the 1989 CBA; and (2) intermittent field workers who are members of the
regular labor pool and the present regular extra labor pool as of the signing of the agreement on
April 15, 1989 or those workers who have irregular working days and are governed by Section 3,
Article VIII of the 1989 CBA.

It is not disputed that both classes of workers are entitled to sick leave with pay benefits provided
they comply with the conditions set forth under Section 1 in relation to the last paragraph of Section
3, to wit: (1) the employee-applicant must be regular or must have rendered at least one year of
service with the company; and (2) the application must be accompanied by a certification from a
company-designated physician.

Sick leave benefits, like other economic benefits stipulated in the CBA such as maternity leave and
vacation leave benefits, among others, are by their nature, intended to be replacements for regular
income which otherwise would not be earned because an employee is not working during the period
of said leaves. 6 They are non-contributory in nature, in the sense that the employees contribute
nothing to the operation of the benefits. 7 By their nature, upon agreement of the parties, they are
intended to alleviate the economic condition of the workers.

After a careful examination of Section 1 in relation to Section 3, Article VIII of the 1989 CBA in light
of the facts and circumstances attendant in the instant case, we find and so hold that the last
sentence of Section 1, Article VIII of the 1989 CBA, invoked by petitioner-company does not bar the
regular intermittent workers from the privilege of commutation or conversion to cash of the
unenjoyed portion of their sick leave with pay benefits, if qualified. For the phrase "herein sick leave
privilege," as used in the last sentence of Section 1, refers to the privilege of having a fixed 15-day
sick leave with pay which, as mandated by Section 1, only the non-intermittent workers are entitled
to. This fixed 15-day sick leave with pay benefit should be distinguished from the variable number of
days of sick leave, not to exceed 15 days, extended to intermittent workers under Section 3
depending on the number of hours of service rendered to the company, including overtime pursuant
to the schedule provided therein. It is only fair and reasonable for petitioner-company not to stipulate
a fixed 15-day sick leave with pay for its regular intermittent workers since, as the term "intermittent"
implies, there is irregularity in their work-days. Reasonable and practical interpretation must be
placed on contractual provisions. Interpetatio fienda est ut res magis valeat quam pereat. Such
interpretation is to be adopted, that the thing may continue to have efficacy rather than fail. 8

We find the same to be a reasonable and practical distinction readily discernible in Section 1, in
relation to Section 3, Article VIII of the 1989 CBA between the two classes of workers in the
company insofar as sick leave with pay benefits are concerned. Any other distinction would cause
discrimination on the part of intermittent workers contrary to the intention of the parties that mutually
agreed in incorporating the questioned provisions in the 1989 CBA.

Public respondent correctly observed that the parties to the CBA clearly intended the same sick
leave privilege to be accorded the intermittent workers in the same way that they are both given the
same treatment with respect to vacation leaves - non-commutable and non-cumulative. If they are
treated equally with respect to vacation leave privilege, with more reason should they be on par with
each other with respect to sick leave privileges. 9 Besides, if the intention were otherwise, during its
renegotiation, why did not the parties expressly stipulate in the 1989 CBA that regular intermittent
workers are not entitled to commutation of the unenjoyed portion of their sick leave with pay
benefits?

Whatever doubt there may have been early on was clearly obliterated when petitioner-company
recognized the said privilege and paid its intermittent workers the cash equivalent of the unenjoyed
portion of their sick leave with pay benefits during the lifetime of the CBA of October 16, 1985 until
three (3) months from its renewal on April 15, 1989. Well-settled is it that the said privilege of
commutation or conversion to cash, being an existing benefit, the petitioner-company may not
unilaterally withdraw, or diminish such benefits. 10 It is a fact that petitioner-company had, on
several instances in the past, granted and paid the cash equivalent of the unenjoyed portion of the
sick leave benefits of some intermittent workers. 11 Under the circumstances, these may be deemed
to have ripened into company practice or policy which cannot be peremptorily withdrawn. 12

Moreover, petitioner-company's objection to the authority of the Voluntary Arbitrator to direct the
commutation of the unenjoyed portion of the sick leave with pay benefits of intermittent workers in
his decision is misplaced. Article 261 of the Labor Code is clear. The questioned directive of the
herein public respondent is the necessary consequence of the exercise of his arbitral power as
Voluntary Arbitrator under Article 261 of the Labor Code "to hear and decide all unresolved
grievances arising from the interpretation or implementation of the Collective Bargaining
Agreement." We, therefore, find that no grave abuse of discretion was committed by public
respondent in issuing the award (decision). Moreover, his interpretation of Sections 1 and 3, Article
VIII of the 1989 CBA cannot be faulted with and is absolutely correct.

WHEREFORE, in view of the foregoing, the petition is DISMISSED. The award (decision) of public
respondent dated September 10, 1991 is hereby AFFIRMED. No costs.

SO ORDERED.