Facts:
Consolidated petitions for review on certiorari. In
G.R. No. 164804, petitioners Virginia Sugue
(Sugue) and the Heirs of Renato
Valderrama (Valderrama) question the CA
decision which partly granted their appeal
but deleted the attorney’s fees and reduced
the moral and exemplary damages awarded
to them.
In G.R. No. 164784, petitioner Triumph
International (Phils.), Inc. (Triumph
hereafter) assails the CA decision for setting
aside an earlier decision3 of the National
Labor Relations Commission (NLRC) dated
June 13, 2001 which ruled in its favor.
Triumph hired Sugue in May 1990 as its
Assistant Manager for Marketing and was
subsequently promoted to Marketing
Services Manager with a monthly salary of
P82,500.00. On the other hand, Valderrama
was hired in April 1993 as Direct Sales
Manager with a monthly salary of
P121,000.00. Their main
function/responsibility was to ensure that
the company’s sales targets and objectives
were met.
Beginning sometime in October 1999, Triumph’s
top management began to notice a sharp
decline in the sales of the company.
Moreover, in the following months, the
actual sales figures continued to be
significantly below the sales targets set by
Valderrama himself. This persistent below
target sales performance was the subject of
correspondence between Valderrama and
his superiors from November 1999 to July
2000.
On June 1, 2000, Sugue and Valderrama filed a
complaint with the NLRC against Triumph
for payment of money claims arising from
allegedly unpaid vacation and sick leave
credits, birthday leave and 14th month pay
for the period 1999-2000.
On June 19, 2000, Sugue and Valderrama
personally attended the preliminary
conference of the said case. The following
day, a memorandum was issued by
Triumph’s Managing Director/General
Manager, Alfredo Escueta, reminding all
department heads of existing company
policy that requires department heads to
notify him (Escueta) before leaving the
office during work hours. That same day,
Triumph’s Personnel Manager, Ralph
Funtila, issued separate memoranda to
Sugue and Valderrama requiring them to
inform the office of the General Manager of
their whereabouts on June 19, 2000 from
9:06 a.m. to 11:15 a.m. They replied that
they attended the aforementioned
preliminary conference.
On June 23, 2000, Valderrama and Sugue were
directed to submit a written explanation as
to why they used company time and the
company vehicle and driver in attending the
preliminary conference at the NLRC and
why they left the office without advising the
Managing Director. They explained that they
believed they may use company time and
the company vehicle since the hearing they
attended was pursuant to a complaint that
they filed as employees of the company.
On June 28, 2000, Triumph charged the one-half
day utilized by Sugue and Valderrama in
attending the NLRC hearing on June 19,
2000 to their vacation leave credits.
Valserrama and Sugue were terminated
because of their unexplained absences,
prior to their actual termination they filed for
a complaint for constructive dismissal.
Labor arb favored Valderrama and Sugue.
NLRC reversed and favored Triumph. CA
favored Valderrama and Sugue but deleted
attorney’s fees and reduced the amount of
damages awarded. Both parties appealed.
Sugue and Valderrama discuss extensively
in their pleadings alleged denial of leave
applications and unpaid cash conversion of
unused leaves and other monetary benefits
which moved them to file a complaint for
monetary claims on June 1, 2000. And that
Triumph’s acts of harassment, upon which
they base their charge of constructive
dismissal, were in retaliation for their filing of
the aforementioned complaint for unpaid
benefits. The acts which purportedly show
discrimination and bad faith on the part of
Triumph are summarized below:
In the case of Valderrama:
1. The half-day he spent in attending the NLRC
hearing on June 19, 2000 was charged to his
vacation leave credit;
2. His application for sick leave for July 3 to 5, 2000
was disapproved; and
3. His request for executive check-up was denied.
In the case of Sugue:
1. The half-day she spent in attending the NLRC
hearing on June 19, 2000 was charged to her
vacation leave credit;
2. The approval of her application for leave of absence
for July 14 and 15, 2000 was made subject to the
condition that she should first submit a report on
the 2001 Marketing Plan;
3. The approval of her request for executive check-up
was deferred until after the visit of the company’s
regional marketing manager; and
4. A memorandum was issued instructing her to report
to her former assistant, Mr. Temblique, which was
allegedly tantamount to a demotion.
Issue: A. W/N the one-half day used by Sugue
and Valderrama in attending the NLRC
hearing can be charged to their vacation
leave credits.
B. W/N Sugue and Valderrama were validly
dismissed
Held: A. Yes it can be charged to their
vacation leave credits. The Court found no
reason to ascribe bad faith or malice to
Triumph for charging to the leave credits of
Sugue and Valderrama the half-day that
they spent in attending the preliminary
conference of the case they instituted
against Triumph. It is fair and reasonable for
Triumph to do so considering that Sugue
and Valderrama did not perform work for
one-half day on June 19, 2000. In of J.B.
Heilbronn Co. v. National Labor Union, this
Court held that:
“When the case of strikes, and according to the CIR
even if the strike is legal, strikers may not collect
their wages during the days they did not go to
work, for the same reasons if not more, laborers
who voluntarily absent themselves from work to
attend the hearing of a case in which they seek to
prove and establish their demands against the
company, the legality and propriety of which
demands is not yet known, should lose their pay
during the period of such absence from work. The
age-old rule governing the relation between labor
and capital or management and employee is that
a "fair day's wage for a fair day's labor." If there is
no work performed by the employee there can be
no wage or pay, unless of course, the laborer was
able, willing and ready to work but was illegally
locked out, dismissed or suspended. It is hardly
fair or just for an employee or laborer to fight or
litigate against his employer on the employer's
time.
In a case where a laborer absents himself from
work because of a strike or to attend a
conference or hearing in a case or incident
between him and his employer, he might
seek reimbursement of his wages from his
union which had declared the strike or filed
the case in the industrial court. Or, in the
present case, he might have his absence
from his work charged against his vacation
leave.” Triumph is justified in charging
Sugue and Valderrama’s half-day absence
to their vacation leave credits.
B. Yes, Sugue and Valderrama were validly
dismissed. For Valderrama, there was no
harassment found by the Court. The denial
of his application for sick leave was
because of his own fault, that he did not
comply with the requirement of medical
certificate, and thus his application was
denied. With regards to his application of
executive check-up, it was not denied but
merely deferred. Thus, his continued
absence was a valid ground for dismissal. It
should also be noted that he was applying
for Fila, a competitor company, while still
employed by Triumph.
In the case of Sugue, the Court found no act
harassment done by Tiumph against Sugue.
The approval of her application for leave of
absence for July 14 and 15, 2000 was made
subject to the condition that she should first
submit a report on the 2001 Marketing Plan
was only just, since her reports were
indispensable in the preparation of the 2001
Marketing Plan plus the fact that the
company had been experiencing a
significant decline in sales at that time.
The approval of her request for executive check-up
was deferred until after the visit of the company’s
regional marketing manager, this was merely
deferred the same as Valderrama’s application
since Triumph’s regional product manager was
scheduled to visit the country and their presence
is needed.
A memorandum was issued instructing her to report to
her former assistant, Mr. Temblique, which was
allegedly tantamount to a demotion. When Sugue
was directed to report to Temblique, she was not
being made to report to Temblique as Assistant
Manager for Direct Sales-SMSD but as the newly
designated OIC for Marketing, i.e., the officer
chiefly responsible for all marketing matters. She
continued to be the head of Marketing Services,
under the supervision of Temblique as OIC for
Marketing. Thus, her continued unexplained
absences became a valid ground for dismissal. It
is abandonment of work.
Facts:
This is a consolidated case/claim for non-
payment of salaries and wages, 13th month
pay, ECOLA and other fringe benefits as
rice, medical and clothing allowances,
submitted by complainant Rodolfo M. Retiso
and 165 others (private respondents here).
Private respondents were continuously
performing their task and were duly paid of
their salaries at their main office in Lezo
Aklan. On January 22, 1992 the office of
AKELCO was temporarily transferred
from Lezo, Aklan to Kalibo, Aklan as per
suggested by the Project Supervisor, Atty.
Leovigildo Mationg, since it is dangerous to
hold office in their Lezo head office.
Nevertheless, majority of the employees
including respondents herein continued
to report for work at Lezo Aklan and were
paid of their salaries as they claimed.
On February 6, 1992, the administrator of NEA,
Rodrigo Cabrera, wrote a letter addressed
to the Board of AKELCO, that he is not
interposing any objections to the action
taken by Mationg (regarding the transfer of
office).
On February 11, 1992, unnumbered resolution
was passed by the Board of AKELCO
withdrawing the temporary designation of
office at Kalibo, Aklan, and that the daily
operations must be held again at the main
office of Lezo, Aklan.
Respondents who were then reporting at the
Lezo office from January 1992 up to May
1992 were duly paid of their salaries (as
they claim that they were paid), while in the
meantime some of the employees through
the instigation of respondent Mationg
continued to remain and work at Kalibo,
Aklan;
From June 1992 up to March 18, 1993,
complainants who continuously reported
for work at Lezo, Aklan in compliance
with the aforementioned resolution were
not paid their salaries;
Starting March 19, 1993, respondents were
again allowed to draw their salaries; with the
exception of a few who were not paid their
salaries for the months of April and May
1993;
AKELCO alleges:
1. respondents voluntarily abandoned their
respective work/job assignments, without
any justifiable reason and without notifying
the management of the Aklan Electric
Cooperative, Inc. (AKELCO), hence the
cooperative suffered damages and systems
loss;
2. That the complainants herein defied the lawful
orders and other issuances by the General
Manager and the Board of Directors of the
AKELCO. Under the principle of "no work no
pay" they cannot claim salaries from June
1992 up to March 18, 1993.
Labor Arb dismissed the complaint filed by
respondents herein. NLRC reversed and set
aside the Labor Arbiter's decision and held
that private respondents are entitled to
unpaid wages from June 16, 1992 to March
18, 1993
Issue:
W/N private respondents here are entitled to
claim for unpaid wages from June 16, 1992
to March 18, 1993.
Held:
NO. The Court found that private
respondents had not rendered services from
June 16, 1992 to March 18, 1993 so as to
entitle them to payment of wages. NLRC
based its conclusion on the following:
(a) the letter dated April 7, 1993 of Pedrito L.
Leyson, Office Manager of AKELCO
addressed to AKELCO's General Manager,
Atty. Leovigildo T. Mationg, requesting for
the payment of private respondents' unpaid
wages from June 16, 1992 to March 18,
1993;
(b) the memorandum of said Atty. Mationg dated
14 April 1993, in answer to the letter request
of Pedrito Leyson where Atty. Mationg
made an assurance that he will recommend
such request;
(c) the private respondents' own computation of
their unpaid wages. We find that the
foregoing does not constitute substantial
evidence to support the conclusion that
private respondents are entitled to the
payment of wages from June 16, 1992 to
March 18, 1993. Substantial evidence is
that amount of relevant evidence which a
reasonable mind might accept as adequate
to justify a conclusion.14 These evidences
relied upon by public respondent did not
establish the fact that private respondents
actually rendered services in the Kalibo
office during the stated period.
The letter in (a) is self-serving since it was work but was illegally locked out,
written by one of the respondents herein, suspended or dismissed,23 or otherwise
thus not credible. On the other hand, illegally prevented from working,24 a
AKELCO's evidences show that on January situation which we find is not present in the
22, 1992, its Board of Directors passed a instant case. It would neither be fair nor just
resolution temporarily transferring the Office to allow private respondents to recover
from Lezo, Aklan to Amon Theater, Kalibo, something they have not earned and could
Aklan upon the recommendation of Atty. not have earned because they did not
Leovigildo Mationg, then project supervisor, render services at the Kalibo office during
on the ground that the office at Lezo was the stated period.
dangerous and unsafe. The transfer being a
valid exercise of management prerogatives, As to (c), competent proofs such as time cards
the respondents need to abide with the or office records were not presented to
transfer and they should report to the new show that they actually rendered
office, thus respondents' allegations that compensable service during the stated
they continued to report for work at Lezo to period to entitle them to wages. Further it
support their claim for wages has no basis. was found that the office was transferred
It is not for the respondents to determine and the respondents failed to prove that
W/N the transfer is illegal, there is an they indeed rendered service.
appropriate body for that, the presumption is
it is legal, thus employees should follow
first. The unnumbered resolution relied upon
by the respondents was never implemented
as it was not a valid act of petitioner's
Board. Such unnumbered resolution was
not a valid act of petitioners legitimate
Board considering the subsequent actions
taken by the petitioner's Board of Directors
decrying private respondents inimical act
and defiance, i.e. firing those who
participated in the illegal strike.
The letter reply (memorandum in (b)) of
Atty. Mationg to Leyson merely stated that
he will recommend the request for payment
of backwages to the Board of Directors for
their consideration and appropriate action
and nothing else, thus, the ultimate approval
will come from the Board of Directors.
Private respondents were dismissed by
petitioner effective January 31, 1992 and
were accepted back by petitioner, as an act
of compassion, subject to the condition of
"no work, no pay" effective March 1993
which explains why private respondents
were allowed to draw their salaries again.

The age-old rule governing the relation between

labor and capital, or management and
employee of a "fair day's wage for a fair
day's labor" remains as the basic factor in
determining employees' wages. If there is
no work performed by the employee there
can be no wage or pay unless, of course,
the laborer was able, willing and ready to
Facts:
• Spouses Norberto and Dorothea Tanongon own
and operate taxicabs under the names of "Arms
Taxi" and "Lin-lin Taxi." However, the taxicabs
are registered under the "kabit" system in the
name of Aida dela Cruz who holds a certificate of
public convenience to operate a taxicab service.
• In the early part of 1980, Ludivico Culla was hired
by the Tanongon spouses to work as mechanic,
shop manager, garage caretaker, dispatcher, and
liaison man in their taxi business, at a monthly
salary of P5,000 plus commission on the daily or
monthly gross income of the business in addition
to the payment of his SSS premiums.
• June 11, 1986 – Without Culla's consent, the
Tanongon spouses asked one of their taxi drivers
to force open his quarters in the Tanongon
compound at the St. Francis Subdivision in
Cainta, Rizal. They removed his personal
belongings and brought them to his residence in
Sta. Ana Manila.
• Culla filed with the Arbitration Branch of the
Ministry of Labor and Employment, a complaint
alleging that his ejectment from his living quarters
and dismissal from employment were illegal
because there was no prior investigation or
written notice of the charges against him. His
dismissal was allegedly due to his demands "for
the payment of the benefits, percentage and
privileges and premiums to the SSS".
• Tanongon spouses: They denied that they
were the operators of the Arms Taxi and Lin-lin
Taxi, and the existence of an employer-employee
relationship between them and Culla. They
averred that Arms Taxi is owned and operated by
Aida dela Cruz; that on April 25, 1986, they
bought Lin-lin Taxi from one Jose Lim, but its
ownership has not yet been transferred to them
as their application with the Land Transportation
Office is still pending.
• Aida dela Cruz: She admitted ownership and
operation of a fleet of taxicabs under the name
Arms Taxi and that she had entered into an
agreement with Dorothea Tanongon for the latter
to manage for a fee the operation of several of
her taxi units. Denying that she hired Culla, Dela
Cruz averred that at most. Culla could be
considered as an independent contractor paid on
a piece-work basis and therefore, he was not
entitled to regular benefits, much less to the
alleged 15% commission.
• Labor Arbiter in favor of Culla: He declared
that Culla was an employee of the Tanongon
spouses who operate some units of the Arms
Taxi and Lin-lin Taxi under the "kabit" system;
that Culla was illegally dismissed from
employment and that Aida dela Cruz should be
considered an indirect employer of Culla pursuant
to Arts. 106, 107 and 109 of the Labor Code.
However, he denied Culla's claim for 15%
commission on the gross earnings of the taxi
business as Culla failed "to substantially prove
the same by some precise, concrete and
convincing evidence". The agreement on the
commission "should have been in writing, note or
memorandum, and subscribed by the parties, to
be enforceable". He further held that Culla was
not entitled to the 13th month pay under PD 851
and to overtime pay, for time was not of the
essence in his kind of employment.
• The parties appealed to the NLRC.
o Culla was dissatisfied with the monetary awards,
because he was not given full backwages nor the
15% commission, incentive leave pay, damages,
and attorney's fees.
o Tanongon spouses alleged that Culla was an
independent contractor doing mainly the work of
a mechanic who was paid on a piece-work basis;
that he was free to accept repair jobs from other
customers, that he had no regular hours of work
and they had no control over his work except to
indicate what part of a taxicab needed to be
repaired.
• NLRC affirmed Labor Arbiter: There is
nothing on record to substantiate Culla’s claim for
commission.
• Culla argues in his petition that the payment to
him of P5,000 a month for his services was in
partial fulfillment of Tanongon's promise to pay
him a 15% commission, removing said
agreement from coverage of the Statute of
Frauds.
Issue: W/N Culla is entitled to commission. - NO
Ratio:
• An agreement for compensation of services
rendered is not one of the contracts mentioned in
Art. 1403 which must be in writing to be
enforceable by action.
• The payment of a P5,000 monthly salary to the
petitioner for his services may not be considered
as partial compliance by his employers with the
alleged agreement to pay him a commission or
percentage of the daily earnings of their taxi
business because a salary is different from a
commission. While a salary is a fixed
compensation for regular work or for continuous
service rendered over a period of time, a
commission is a percentage or allowance made
to a factor or agent for transacting business for
another. Thus, before invoking the exception to
the Statute of Frauds, petitioner should have
proven that he had received a commission, or
part of it, in the past.
• If it were true that there had been an agreement
regarding the payment of a 15% commission to
him, the petitioner would not have waited almost
6 years to claim it. Considerably delay in
asserting one's right is strongly persuasive of the
lack of merit of one's claim.
Facts:
• PFDA is a GOCC created by PD 977.
• Nov. 11, 1985 – It entered into a contract
with the Odin Security Agency for security
services of its Iloilo Fishing Port Complex in
Iloilo City.
• The contract also provided for a one year
renewable period unless terminated by
either of the parties.
• Oct. 24, 1987 – During the effectivity of the
Security Agreement, Odin requested PFDA
to adjust the contract rate in view of the
implementation of Wage Order No. 6 which
took effect on Nov. 1, 1984.
o Sec. 9 of Wage Order No. 6: In the case of
contracts for construction projects and for
security, janitorial and similar services, the
increases in the minimum wage and
allowance rates of the workers shall be
borne by the principal or client of the
construction/service contractor and the
contracts shall be deemed amended
accordingly, subject to the provisions of
Section 3(c) of this Order.
o Sec. 7, par. c of Security Services Contract
[automatic escalation of the rate per guard
in case of wage increase]: The terms and
conditions herein set forth shall be modified
by the applicable provisions of subsequent
laws or decrees, especially as they pertain
to increases in the minimum wage and
occupational benefits to workers.
• Requests for adjustment of the contract
price were reiterated on Jan. 14, 1988 and
Feb. 19, 1988 but were ignored by PFDA.
• June 7, 1988 – Odin filed a complaint for
unpaid amount of re-adjustment rate under
Wage Order No. 6 together with wage
salary differentials arising from the
integration of the cost of living allowance.
• PFDA filed a motion to dismiss:
o NLRC had no jurisdiction.
o Assuming it has, the security guards have
no legal personality to sue or be sued.
o Assuming individual guards have legal
personality, the action involves the
interpretation of contract over which it has
no authority.
• Labor Arbiter dismissed complaint: PFDA’s
being a GOCC would place it under the
scope and jurisdiction of the Civil Service
Commission.
• NLRC reversed: granted reliefs to Odin.
• PFDA filed a motion for reconsideration: the
stipulation under the contract allowing an
increase of wage rate is void ab initio.
Issue: W/N PFDA is liable for the wage
increase.
Held: YES.
Ratio:
• PFDA, a GOCC with a special charter, is
under the scope of civil service. However,
the guards are not employees of PFDA, as
explicitly provided in the contract of
services. There being no employer-
employee relationship between them, the
jurisdiction of the Civil Service Commission
may not be invoked.
• The contract entered into by PFDA which is
merely job contracting makes it an indirect
employer.
W/N an indirect employer is bound by the
rulings of the NLRC. YES.
• Notwithstanding that PFDA is a government
agency, its liabilities, which are joint and
solidary with that of the contractor, are
provided in Articles 106,107 and 109 of the
Labor Code. This places PFDA’s liability
under the NLRC.
• “Employer” under Book 3, Title II on Wages:
includes any person acting directly or
indirectly in the interest of an employer in
relation to an employee and shall include
the Government and all its branches,
subdivisions, and instrumentalities, all
GOCCs and institutions as well as non-profit
private institutions or organizations.
Who should carry the burden of the wage
increases? PFDA AND ODIN ARE
SOLIDARILY LIABLE.
• In job contracting, PFDA as principal is
jointly and severally liable with the
contractor for the payment of unpaid wages
(Art. 107 and 109 in relation to Art. 106 of
LC).
• Eagle Security v. NLRC (1989):
o That payment of wage increases are “to be
borne” by the principal does not mean that
the latter would directly pay the security
guards the wage and allowance increases
because there is no privity of contract
between them. The security guards’
contractual relationship is with their direct
 employer, and their immediate recourse is adequacy of the compensation that it
with the latter. demands for contractual services is its
o However, in order for the security agency to principal concern.
comply with the new rates, the Wage Order • By filing the complaint in its own behalf and
made specific provision to amend existing in behalf of the security guards, it wishes to
contracts for security services by allowing exculpate itself from liability (Eagle ruling:
the adjustments of the consideration paid by principal’s ultimate liability). Nonetheless,
the principal to the security agency employees must be guaranteed payment of
concerned, in the end, the ultimate liability the wages due them. They must be given
for the payment of the increases rests with ample protection mandated by the
the principal. Constitution (Art. II, Sec. 18 and Art. XIII,
• The Wage Orders are statutory and Sec. 3). Thus, to assure compliance with
mandatory and cannot be waived. The the Labor Code, the joint and several
contention that it was deprived due process liability of the contractor and the principal is
because there was no hearing does not mandated.
deserve merit. A decision on the merits is
proper where the issues raised by the
parties did not involve intricate questions of
law.
• PFDA cannot assail the contract for being
void ab ignition on the ground that it did not
comply with the bidding requirements set by
law. Services were already rendered and
PFDA benefitted from said contract for 2
years. It is therefore estopped from
assailing the contract.
• Odin entered into the contract when Wage
Order No. 6 had already been in force.
However, the rates of the security guards as
stipulated in the contract did not consider
the increases in the minimum wage
mandated by Wage Order No. 6. Thus, Odin
was equally guilty when it entered into the
contract with PFDA without considering
Wage Order No. 6.
• Odin: The Philippine Association of
Detective and Protective Agency Operators
(PADPAO) which fixes the contract rate of
the security agencies was unable to fix the
new contract rate until May 12, 1986.
• However, the PADPAO memorandum was
not necessary to make Wage Order No. 6
effective. It was merely an internal
agreement among the operators to set the
ceiling of the contract rates. It was aimed to
curb the practice of security agencies which
were in cutthroat competition to request for
wage adjustments after proposals were
accepted in good faith to the prejudice of
the parties.
• It was Odin which first deprived the security
personnel of their rightful wage under Wage
Order No. 6. As the employer, it is charged
with knowledge of labor laws and the
Facts: Petitioner Iran is engaged in softdrinks
merchandising and distribution in Cebu.
Petitioner hired respondents Petralba, Cadalso,
Labiaga and Colina as drivers/salesmen while
respondents Tecson, Gimena, Bandilao, Martin
and Gonzalgo were hired as truck helpers.
Drivers/salesmen drove petitioner’s delivery
trucks and promoted, sold and delivered
softdrinks to various outlets while the truck
helpers assisted in the delivery of softdrinks to
the different outlets covered by the
driver/salesmen service. As part of their
compensation, the driver/salesmen and truck
helpers of petitioner received commissions per
case of softdrinks. One day, Iran discovered cash
shortages and irregularities allegedly by
respondents. Pending the investigation, a return-
to-work order was issued but respondents were
not allowed to go on their respective routes. A
few days thereafter, respondents stopped
reporting for work, prompting petitioner to
conclude that the former had abandoned their
employment. Hence, petitioner terminated their
services. He filed a complaint for estafa. While
private respondents filed complaints for illegal
dismissal, and underpayment of wages and 13th
month pay among others.
Labor Arbiter found that petitioner had validly
terminated respondents but ruled that petitioner
had not complied with minimum wage
requirements in compensating private
respondents, and had failed to pay respondents
their 13th month pay.
NLRC affirmed the validity of dismissal, but found that
said dismissal did not comply with the procedural
requirements. NLRC also excluded particular
amounts received by respondents as part of their
13th month pay, and denied petitioner’s claim that
commissions be included in determining
compliance with the minimum wage: “xxx To
include the commission in the computation of
wage in order to comply with labor standard laws
is to negate the practice that a commission is
granted after an employee has already earned
the minimum wage or even beyond it xxx.”
Issues:
1. WON commissions earned by private
respondents in selling softdrinks are part of
the wages and hence included in
determining compliance with the minimum
wage requirement. [Yes, they are included]
2. WON petitioner is guilty of procedural lapses
in terminating private respondents. [Yes, he
failed to give notices.]
3. WON vouchers were petitioner’s payment of
13th month pay to respondents. [Yes, they
are.]
Held/Ratio: 1. Wage is defined by Art 97 (f) of
Labor Code. This definition explicitly
includes commissions as part of wages.
These commissions are direct
remunerations for services rendered. This
Court has taken judicial notice of the fact
that some salesmen do not receive any
basic salary but depend entirely on
commissions and allowances or
commissions alone, although an employer-
employee relationship exists. This salary
structure, however, does not detract from
the character of such commissions as part
of the salary or wage paid to each of its
salesmen for rendering services to the
corporation. Likewise, there is no law
mandating that commissions be paid
only after the minimum wage has been
paid to the employee. Verily, the
establishment of a minimum wage only sets
a floor below which an employee’s
remuneration cannot fall, not that
commissions are excluded from wages in
determining compliance with the minimum
wage law. This conclusion is bolstered by
Philippine Agricultural Commercial and
Industrial Workers Union vs. NLRC,
where this Court acknowledged that drivers
and conductors who are compensated purely on
a commission basis are automatically entitled to
the basic minimum pay mandated by law should
said commissions be less than their basic
minimum for eight hours work.
2. The employer must furnish the worker with
two written notices before the latter can be
legally terminated. Respondents were never
told in return-to-work order that their
dismissal was being sought, only that they
should settle their accountabilities. Also, as
correctly pointed out by the NLRC, in cases
of abandonment of work, notice should be
sent to the worker’s last known address.
This, petitioner had failed to do.
3. While it is true that the vouchers evidencing
payments of 13th month pay were
submitted only on appeal, NLRC should
have taken the same into account because
technical rules of evidence are not binding
in labor cases. The vouchers however do
not cover amounts for other years claimed
by private respondents. Hence, petitioner is
entitled to credit only the amounts paid for
the particular year covered by said
vouchers.
Facts: Herein 116 petitioners occupied the positions of
Technical Staff, Unit Manager, Section Manager,
Department Manager, Division Manager and Vice
President in the mill site of respondent Paper
Industries Corporation of the Philippines (PICOP)
in Bislig, Surigao del Sur. In 1992 PICOP
suffered a major financial setback and incurred
losses. Hence, it undertook a retrenchment
program and terminated the services of
petitioners. Accordingly, petitioners received
separation pay computed at the rate of one (1)
month basic pay for every year of service.
Petitioners, however, filed a complaint for
separation pay differentials. They believed that
the allowances they allegedly regularly received
on a monthly basis during their employment
should have been included in the computation of
their separation pay. The allowances include: (a)
staff/manager’s allowance, which includes free
water and electric consumption; (b) transportation
allowance; and (c) the Bislig Allowance which is
given to Division Managers and corporate officers
on account of the hostile environment prevailing
in Bislig.
The Executive Labor Arbiter opined that the subject
allowances, being customarily furnished by
respondent PICOP and regularly received by
petitioners, formed part of the latter's wages. He
based it on the ruling in Santos v. NLRC and
Soriano v. NLRC that separation pay when
awarded to an illegally dismissed employee in
lieu of reinstatement or to a retrenched employee
should be computed based not only on the basic
salary but also on the regular allowances that the
employee had been receiving. NLRC set aside
LA decision and considered instead the ruling in
Estate of the late Eugene J. Kneebone v. NLRC
where the Court held that representation and
transportation allowances were deemed not part
of salary. NLRC also found that petitioners'
allowances were contingency-based and thus not
included in their salaries. Petitioners however
submit that their allowances are included in the
definition of "facilities" in Art. 97, par. (f), of the
Labor Code, being necessary and indispensable
for their existence and subsistence. Furthermore
they claim that their availment of the monetary
equivalent of those "facilities" on a monthly basis
was characterized by permanency, regularity and
customariness.
Issue: WON staff/manager’s allowance, transportation
allowance, and the Bislig Allowance form part of
the salary base used in computing the separation
pay of petitioners [No, they are not part of the
salary]
Ratio: In case of retrenchment to prevent losses, the
employer has an obligation to grant to the
affected employees separation pay. In Songco
the Court explained that both words, “Pay” and
“salary”, generally refer to one and the same
meaning. Specifically, "wage" is defined Art. 97,
par. (f), of the Labor Code. Stated differently,
when an employer customarily furnishes his
employee board, lodging or other facilities, the
fair and reasonable value thereof, as determined
by the Secretary of Labor and Employment, is
included in "wage." In order to ascertain whether
the subject allowances form part of petitioner's
"wages," we divide the discussion on the
following – "customarily furnished; "board, lodging
or other facilities”; and "fair and reasonable value
as determined by the Secretary of Labor."
a. "Customary" is founded on long-established and
constant practice connoting regularity. The
receipt of an allowance on a monthly basis does
not ipso facto characterize it as regular and
forming part of salary because the nature of the
grant is a factor worth considering. We agree
with the observation of the Office of the Solicitor
General- that the subject allowances were
temporarily, not regularly, received by petitioners.
b. Sec. 5, Rule VII, Book III, of the Rules Implementing
the Labor Code gives meaning to the term
“facilities” as including articles or services for the
benefit of the employee or his family but
excluding tools of the trade or articles or service
primarily for the benefit of the employer or
necessary to the conduct of the employer's
business. The Staff /Manager's allowance may
fall under "lodging" but the transportation and
Bislig allowances are not embraced in "facilities"
on the main consideration that they are granted
for respondent PICOP's benefit and convenience;
this was supported by the circumstance that they
were not subjected to withholding tax.
c. The Secretary of Labor and Employment may from
time to time fix in appropriate issuances the "fair
and reasonable value of board, lodging and other
facilities customarily furnished by an employer to
his employees." Petitioners' allowances do not
represent such fair and reasonable value as
determined by the proper authority simply
because the Staff/Manager's allowance and
transportation allowance were amounts given by
respondent company in lieu of actual provisions
for housing and transportation needs whereas the
Bislig allowance was given in consideration of
being assigned to the hostile environment then
prevailing in Bislig.
In this case, as discussed above, the disputed
allowances were not regularly received by
petitioners hence the ruling in Santos, Soriano
and Insular is inapplicable. Neither is Kneebone
applicable, because the Court therein was tasked
to resolve the issue whether the representation
and transportation allowances formed part of
salary as to be considered in the computation of
retirement benefits. The ruling was in the
negative on the ground that the retirement plan of
the company expressly excluded such
allowances from salary.
Facts cash/wage commission (p14, under minimum
wage); basic wage/commissions (p17, under
amount and date of payment of 13th month pay);
computation/rationale (p.32, under separation
pay):
Private respondent F.E. Zuellig (M), Inc. filed with
the DOLE Regional Office No.4 an application for
the termination of services of herein petitioners
Songco, Cipres and Manuel allegedly due to
retrenchment by reason of financial losses.
It was opposed by petitioners contending that the
company was not incurring losses and instead
said termination was due to their membership in
the union. At the last hearing, nevertheless,
petitioners no longer contested their dismissal.
They now merely raise the issue of how to
compute their separation pays.
Petitioners selling for Zuellig received monthly
salaries of at least Php40,000.00 per month.
They also received commissions for every sale
made.
Petitioners contend that in computing the
separation pay due them, their basic salary,
earned sales commissions and allowances must
be added together.
Private respondent believes otherwise, asserting
that had it been the intention of the Labor Code or
its implementing rules to include commissions in
the definition of the term wage, said code and
rules could have said so in clear and unequivocal
terms.
The Labor Arbiter decided that petitioners should
be paid their separation pay equivalent to their
one month salary (exclusive of commissions,
allowances, etc.) for every year of service
rendered. The appeal to the NLRC was
dismissed for lack of merit. Hence, this petition.
Issue: WON petitioners’ basic salary, earned sales
commissions and allowances should be added
together to arrive at the proper separation pay to
be awarded to petitioners.
Held: Yes. Petition granted. Decision of the NLRC
modified by including allowances and
commissions in the separation pay of petitioners.
Case remanded to the Labor Arbiter for
computation and separation pay.
Ratio:
Part of Art.XIV of the CBA between petitioners
and private respondent partly provides that:
o Section l(a)-Any employee, who is separated
from employment due xxx permanent lay-off not
due to the fault of said employee shall receive
from the company a retirement gratuity in an
amount equivalent to one (1) month's salary per
year of service. One month of salary as used in
this paragraph shall be deemed equivalent to the
salary at date of retirement; years of service shall
be deemed equivalent to total service credits, a
fraction of at least six months being considered
Facts:
one year, including probationary employment.
(Emphasis by the Court)
See Art. 284
See Rule 1, Book VI, Secs.9(b) and 10 of the
implementing rules of the Labor Code
It was already held by the Court in Santos v
NLRC (1987) that in computing for back wages
and separation pay, the basic salary as well as
transportation and emergency living allowances
must be factored in.
Art. 97(f) of the code categorically includes
commission in the definition of “wage” while Art.
284 and its implementing rule regarding the
computation of termination pay (Rule 1, Book VI,
Secs.9(b) and 10) use “salary.” There should be
no doubt that commissions must be factored in
the computation of separation pay based on
salary or pay because there is no difference
between the terms “wage,” “salary” and “pay” in
reality. Whether salary may be said to be from
salarium or sal (the pay for Roman soldiers), it
still is compensation for services rendered, much
the same as a wage. In fact, authorities (like
Black’s Law Dictionary and Words and Phrases,
Vol.38 Permanent Edition) take the words wage,
pay and salary as synonymous to each other.
Hence, both salary and pay being the same with
wage, commissions must be considered included
in the former the same way it was included in the
latter when it was defined in 97(f) of the Code.
The Court also takes notice that some salesmen
do not receive any basic salary but merely
depend on commissions and allowances or
commissions alone. Hence, for not considering
commission as part of wage or salary, then the
ruling ought to be that these kind of employees
must not be entitled to separation pay, which
leads to an absurd ruling. This kind of
interpretation defeats the purpose of the law
which is to alleviate the difficulties a dismissed
worker encounters.
Further, as was held in Soriano v NLRC (1987),
commissions earned by actual market
transactions attributable to employees, as in this
case where petitioners earn from their selling of
respondent company’s products, must be
included in the computation of the separation pay.
Furthermore, the interpretation of the law, in case
of ambiguity, calls for its resolution in favor of the
workingman as provided in Art.4 of the Code and
in Art.1702 of the Civil Code also calls for the
construction of all labor legislations and contracts
in favor of the safety and decent living for the
laborer.
 A routine inspection was conducted in Boie-
Takeda where there was a finding that
commissions of its medical representatives were
not included in the computation of their 13th
month pay. Hence, in the Notice of Inspection
Results, petitioner corporation was given 10
calendar days to effect said correction of
allegedly 13th month underpayment from 1986 to
1988 in the amount of Php.558,810.89.
A similar inspection was conducted in Philippine
Fuji Xerox where a finding for underpayment of
13th month pay of more or less 62 employees
was found for the years 1986-1988. It was given
5 calendar days to effect the correction of said
finding.
Both contended that as regards computing 13th
month pay, the law (PD 851 otherwise known as
the 13th Month Pay Law) speaks of “regular” or
“basic” salary and therefore exclusive of all other
remunerations (like commissions to medical
representatives) not part of said regular salary.
Boie-Takeda pointed out further that commissions
are not given during periods their medical
representatives made no sale transactions, so
that commissions are not and cannot be legally
defined regular in nature.
Therefore, they conclude, the Revised Guidelines
in the Implementation of the 13th Month Pay Law,
so far as then Labor Secretary Drilon included
commissions in 13th month pays, was issued in
excess of the statutory authority conferred unto
him by law.
In response, respondents through the Solicitor
General questions the propriety of petitioners’
assailing of the constitutionality of PD 851 in a
petition for certiorari which ought to be limited to
correction of errors and/or defects of jurisdiction
and not to include collateral attack on the validity
and/or constitutionality of said law. Also,
Memorandum Order No. 28 of President Aquino
now included into the computation f 13th month
pay commissions (effectively amending PD 851).
Issue: WON 13th month pay is exclusive of all
remunerations, like commissions, not included in
regular salary.
Held: Yes. Consolidated petitions granted. Second
paragraph, Section 5(a) of the Revised
Guidelines on the Implementation of the 13th
Month Pay issued by Secretary Drilon on
November 1987 declared null and void for being
violative of the law said Guideline was to
implement, hence issued with grave abuse of
discretion correctible by the writ of prohibition and
certiorari. Assailed orders of the DOLE based on
said Guideline set aside.
Ratio:
Memorandum No.28 of President Aquino did not
repeal, supersede or abrogate the 13th Month
Pay law but it merely “modified” the latter’s
Section 1 by removing the Php 1,000.00 salary
ceiling, .i.e., entitlement to the 13th month pay
benefit is not anymore limited to employees
receiving a monthly basic salary of not more than
Php.1,000.00. Still, said benefit is to be computed
based on the basic salary as provided under PD
851.
The Court, in San Miguel v Inciong, 103 SCRA
139, define the expanse of the term “basic pay”
as used on PD 851, which includes:
o Cost-of-living allowances granted pursuant to PD
525 and LOI 174
o Profit-sharing payments (this and the former
considered as “fringe” benefits)
o All allowances and monetary benefits not
considered or integrated as part of the regular
basic salary of the employee at the time the
promulgation of said decree on 16 December
1975. (catch-all provision inclusive of all
additional allowances or fringe benefits)
Supplementary Rules and Regulations
Implementing PD 851 by then Secretary Blas
Ople declared that overtime pay, earnings and
other remunerations are excluded as part of the
basic salary and computation of the 13th month
pay. These “earnings and other remunerations”
includes payment for sick, vacation or maternity
leaves, premium for works performed on rest
days or special holidays, and pays for regular
holidays and night differentials. These are
supported by Labor Code Arts. 87 and 93(c).
“Basic salary” is to be understood as a “rate of
pay for a standard work period exclusive of such
additional payments as bonuses and overtime.
The holding in Songco v NLRC is different as the
term in said case to be included in the
computation of separation pay was the
unqualified term “salary” and hence defined as
referring to “direct remunerations for services
rendered.”
Facts:
• The NLRC affirmed the order of the Labor BONUSES COMMISSION
Arbiter directing petitioner to pay 13th Generally tied to the Intimately related to
month pay on the basis of their fixed wages productivity or or directly
plus sales commissions. Philippine profit generation of proportional to
Duplicators thus filed (a) Motion for Leave to the employer the extent or
Admit Second Motion for Reconsideration corporation energy of an
and (b) a Second Motion for employee’s
Reconsideration. endeavours
• Petitioner submits that the decision on their
Not directly dependent Paid upon specific
case should now be considered as
on the extent an results achieved
abandoned or reversed by the Boie-Takeda
individual exerts by a salesman-
decision.
himself employee
Issue/Held: Something extra for A percentage of the
1. Whether petitioner should pay 13th month which no specific sales closed by a
pay of its salesmen on the basis of their additional services salesman and
fixed wages plus sales commissions? Yes are rendered by operates as an
2. Whether Boie-Takeda decision is directly any particular integral part of
opposite with the decision in the Duplicators employee such salesman’s
case? No basic pay
3. Whether Boie-Takeda decision could be
applied on the basis of stare decisis? No. 2. In Boie-Takeda, the so-called
“commissions” paid or received by medical
Ratio: representatives were excluded from the
1. Commissions were an integral part of the term “basic salary” for purposes of
basic salary structure of Philippine computing their 13th month pay because
Duplicators’ employees-salesmen. these were paid to medical representatives
Commissions are not overtime payments, and rank-and-file employees as “productivity
nor profit-sharing payments not any other bonuses”. These commissions could not
fringe benefit. In fact, the fixed or have been “sales commissions” in the same
guaranteed portion of the ages paid o the sense that Philippine Duplicators pays its
Philippine Duplicators’ Salesmen salemen-employees.
represented only 15-30% of an employee’s
total earnings in a year. Boie-Takeda: second paragraph of Section 5(a)
Supplementary Rules and Regulations of Revised Guidelines Implementing the
Implementing PD No. 851 sought to clarify 13th Month Pay is NULL and VOID for there
the scope of items excluded in the is no legal basis for including within the term
computation of the 13th month pay. Among “commission” there used additional
those excluded in Sec. 4 are “earnings and payments to employees, which are, in the
other remunerations which are not part of nature of profit-sharing payments or
the basic salary”. In principle, where these bonuses.
earnings and remuneration are closely akin
to fringe benefits, overtime pay or profit- 3. The Boie-Takeda case was promulgated a
sharing payments, they are properly month after this court had rendered decision
excluded in computing the 13th month pay. in the instant case.
However, sales commissions which are
effectively an integral portion of the basic
salary structure of an employee, shall be
included in his 13th month pay.

PRODUCTIVITY SALES Facts:

• Nagkakaisang Lakas ng Manggagawa 2. Gratuity pay is not intended to pay a worker
(NLM)- Katipunan filed a complaint charging for actual services rendered. It is a money
the petitioner with: benefit given to the workers whose purpose
o Violation of Wage Order No. 5 by crediting is to reward employees for satisfactory
the P1.00 per day increase in the CBA as service. It is not mandatory and not
part of the compliance with said Wage considered as part of labor standard law.
Order Moreover, any doubts or ambiguity in the
o Unfair Labor Practice by giving only 26 days contract between management and union
instead of 30 days equivalent to 1 month as should be resolved in light of Article 1702.
gratuity pay to resigning employees More so, Civil Code provides that when
• Labor Arbiter ruled in favour of petitioner months are not designated by name, a
saying that (a) the P1.00 invreae was ahead month is understood to be 30 days.
of the implementation of the CBA provision
and (b) Since the workers are paid on a
daily basis and Sundays are constituted as
rest days, a worker could not expect a
month salary exceeding the equivalent of 26
days service.
• NLRC reversed Labor Arbiters’ decision.
Petitoners’ motion for reconsideration was
likewise dismissed. Hence, this petition.
• Petitioner: It did not credit the P1.00 per day
across the board increase under the CBA
as compliance with Wage Order No. 5 since
it gave an additional P3.00 per day to the
basic salary pursuant to said order. It
however, credited the P1.00 a day increase
under the Wage Order No. 4 since it
incurred a deficiency in the wage rate after
integrating the ECOLA with the basic pay
(as provided under Wage Order No. 4)

Issues/ Held:
1. Whether petitioners violated Wage Order
No. 5? Yes.
2. Whether grant of gratuity pay equivalent to
one month should be counted as 30 days?
Yes.

Ratio:
1. Plastic Town is bound by the CBA to grant
an increase on July 1, 1984. Section 3 of
the CBA states that CBA granted increases
shall be credited against future allowances
or wage orders. Thus, the CBA increase to
be effected on July 1 cannot be retroactively
applied to mean compliance with Wage
Order No. 4 (implemented on May 1) or
Wage Order No. 5 (implemented June 16).
The fact that petitioner had complied with
the 2 wage orders does not relieve it of its
obligation to grant the P1.00 increase under
the CBA.
Facts
- 1982, ALU, in behalf of all the rank-and-file
workers of Davao Fruits, filed a complaint
before the Ministry of Labor and
Employment for payment of 13th month pay
differentials, which include sick, vacation
and maternity leaves, premium for work
done on rest days and special holidays, and
pay for regular holidays. Davao Fruits has
been disregarding the company policy
regarding this since 1975 (7 years already).
- Davao Fruits answered that it erroneously
included the said items in the computation
of the 13th month pay for the years prior to
1982. Such mistake was allegedly
discovered only in 1981, in the case of San
Miguel vs. Inciong.
- Labor arbiter ruled in favor of ALU. Upon
appeal, NLRC ruled in favor of ALU.
Issue/Held
- May the payments for sick, vacation and
maternity leaves, premiums for work done
on rest days and special holidays, and pay
for regular holidays be excluded in the
computation and payment of 13th month
pay, regardless of long-standing company
practice (6 years)? NO
Ratio
- PD 851 mandates all employers to pay their
employees 13th month pay. The IRR of PD
851 provides for the computation of the 13th
month pay as 1/12 of the basic salary of an
employee within a calendar year, excluding
allowances and benefits not considered part
of the basic salary.
- DOLE issued Supplementary Rules and
Regulations Implementing PD 851. It
provides that overtime pay, earnings and
other remunerations which are not part of
the basic salary shall not be included in the
computation of the 13th month pay.
- Basic salary includes remunerations or
earnings paid by the employer to employee,
but excludes cost-of-living allowances,
profit-sharing payments, and all allowances
and monetary benefits which are not
considered part of the basic salary. There is
clearly an intention to strip “basic salary” of
“fringe” benefits.
- Whatever an employee receives as daily
wage rate is the basic salary. Any
compensation or remuneration outside the
daily wage rate is excluded. 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.
- San Miguel Corp. vs. Inciong Whatever
doubt created by PD 851 and its IRR, as
regards the definition of basic salary, was
erased by the Supplementary Rules and
Regulations Implementing PD 851 issued
by DOLE.
- PD 851 was in 1975 and the issuance of
DOLE was in 1976, but Davao Fruits
computed and paid 13th month beyond the
basic salary until 1981. For 6 years, Davao
Fruits had freely, voluntarily, and
continuously included in the computation of
the 13th month pay, other allowances and
benefits. This indicates a voluntary and
unilateral act on the part of Davao Fruits,
which negates their claim of mistake.
- A company practice favorable to the
employees had already been established.
They have already enjoying the benefits of
such practice. PD 851 IRR and the Labor
Code provide that any benefit being enjoyed
by the employees cannot be reduced,
diminished, discontinued, or eliminated by
the employer.
- Davao Fruits cannot invoke solutio indebiti,
which is a civil law concept not applicable in
labor law. Solutio indebiti requires the return
of what was paid by mistake. In the case at
bar, Davao is not asking for the return of
what it has paid in the previous years.