Labor Standard 6th Assignment Full

Republic of the Philippines
Supreme Court
Manila
SECOND DIVISION
C. PLANAS COMMERCIAL G.R. No. 144619

and/or MARCIAL COHU,
Petitioners, Present:
- versus - *PUNO, Chairman,

AUSTRIA-MARTINEZ,
CALLEJO, SR.,
NATIONAL LABOR RELATIONS TINGA, and
COMMISSION (Second Division), **CHICO-NAZARIO, JJ.
ALFREDO OFIALDA,
DIOLETO MORENTE Promulgated:
and RUDY ALLAUIGAN,
Respondents. November 11, 2005
x------------------------------------------------x
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari filed by C. Planas Commercial and/or Marcial Cohu,
(petitioners) assailing the Decision of the Court of Appeals (CA) dated January 19, 2000[1] which affirmed in
toto the decision of the National Labor Relations Commission (NLRC) and the Resolution dated August 15,
2000[2] denying petitioners motion for reconsideration.
On September 14, 1993, Dioleto Morente, Rudy Allauigan and Alfredo Ofialda (private
respondents) together with 5 others[3] filed a complaint for underpayment of wages, nonpayment of
overtime pay, holiday pay, service incentive leave pay and premium pay for holiday and rest day and night
shift differential against petitioners with the Arbitration Branch of the NLRC. The case was docketed as
NLRC Case No. 00-09-05804-93.[4]
In their position paper, private respondents alleged that petitioner Cohu, owner of C. Planas
Commercial, is engaged in wholesale of plastic products and fruits of different kinds with more than 24
employees; that private respondents were hired by petitioners on January 14, 1990, May 14, 1990 and
July 1, 1991, respectively, as helpers/laborers; that they were paid below the minimum wage law for the
past 3 years; that they were required to work for more than 8 hours a day without overtime pay; that they
never enjoyed holiday pay and did not have a rest day as they worked for 7 days a week; and they were
not paid service incentive leave pay although they had been working for more than one year. Private
respondent Ofialda asked for night shift differential as he had worked from 8 p.m. to 8 a.m. the following
day for more than one year.
Petitioners filed their comment admitting that private respondents were their helpers who used
to accompany the delivery trucks and helped in the loading and unloading of merchandise being
distributed to clients; that they usually started their work from 10 a.m. to 6 p.m.; that private respondents
stopped working with petitioners sometime in September 1993 as they were already working in other
establishments/stalls in Divisoria; that they only worked for 6 days a week; that they were not entitled to
holiday and service incentive leave pays for they were employed in a retail and service establishment
regularly employing less than ten workers.
On December 6, 1994, a decision[5] was rendered by the Labor Arbiter dismissing private
respondents money claims for lack of factual and legal basis. He made the following findings:
The basic issue raised before us is whether or not complainants are entitled to
the money claims.
The rule in this jurisdiction is that employers who are regularly employing not
more than ten workers in retail establishments are exempt from the coverage of the
minimum wage law.
In connection therewith and in consonance with Sec. 1, Rule 131 of the Rules of
Court, it is incumbent upon the party to support affirmative allegation that an employer
regularly employs more than ten (10) workers.
In the case at bar, complainants failed to substantiate their claim that the
respondent establishment regularly employs twenty (sic) (24) workers.
Accordingly, we have no factual basis to grant salary differentials to
complainants. In the same context, under Sec. 1 (b), Rule IV and Sec. 1(g), Rule V of the
Implementing Rules of the Labor Code, complainants are not entitled to legal holiday pay
and service incentive leave pay.
We also do not have sufficient factual basis to award overtime pay and premium
pay for holiday and rest day because complainants failed to substantiate that they
rendered overtime and during rest days.[6]
Private respondents filed their appeal with the NLRC which was opposed by petitioners. However,
pending the appeal, private respondents Morente[7] and Allauigan[8]filed their respective motions to
dismiss with release and quitclaim before the NLRC.
On September 30, 1997, the NLRC rendered its decision,[9] the dispostive portion of which reads:
WHEREFORE, in view of all the foregoing considerations, the decision appealed

from should be, as it is hereby, MODIFIED by directing the respondent to pay Alfredo
Ofialda, Diolito Morente and Rudy Allauigan the total amount of Seventy-Five Thousand
One Hundred Twenty Five Pesos (P75,125.00) representing their combined salary
differentials, holiday pay, and service incentive leave pay.
The NLRC made the following ratiocinations:
On claims for underpayment/non-payment of legally mandated wages and fringe

benefits where exemption from coverage of the minimum wage law is put up as a
defense, he who invokes such an exemption (usually the employer) has the burden of
showing the basis for the exemption like for instance the fact of employing regularly less
than ten workers.
In the instant case, complainants alleged that despite employing more than
twenty-four (24) workers in his establishment, hence covered by the minimum wage law,
nevertheless the individual respondent did not pay his workers the legal rates and
benefits due them since their employment. By way of answer, respondents countered
that they employ less than ten (10) persons, hence the money claims of complainants lack
factual and legal basis.
Stated differently, against complainants charge of underpayment in wages and non-

payment of fringe benefits legally granted to them, the respondents raised the defense
of exemption from coverage of the minimum wage law and in support thereof alleged
that they regularly employed less than ten (10) workers to serve as basis for their
exemption under the law, they (respondents) must prove that they employed less than
ten workers, instead of more than twenty-four (24) workers as alleged by the
complainants.
However, apart from their allegation, respondents presented no evidence to show the
number of workers they employed regularly. This failure is fatal to respondents defense.
This in turn brings us to the question of whether the complainants were underpaid and
unpaid of legal holiday pay and service incentive leave pay due them.
Stated earlier are the different amounts that each complainant was receiving by way of
salary on certain periods of their employment with respondents, which amounts
according to complainants are way below the minimum wage then prevailing. Considering
that respondents failed to present the payrolls or vouchers which could prove otherwise,
the money claims deserve favorable consideration.
Taking note of the 3 year prescription, the period covered is from September 14, 1990 to
September 14, 1993 when the instant case was filed, and based on a 6-day work per week,
the underpayment (salary differential), legal holiday pay, and service incentive leave pay
due to complainants, as computed, are as follows:
Salary Diff. Holiday Pay SILP

1. A. OFIALDA P14,934.00 P2,362.00 P1,180.00
2. D. MORENTE 23,964.00 3,258.00 1,730.00
3. R. ALLAUIGAN 22,609.00 3,258.00 1,730.00
With respect to the other claims, i.e., overtime pay and premium pay for holiday
and rest day, We find no reason to disturb the Labor Arbiters ruling thereon, that there is
no sufficient factual basis to award the claims because complainants failed to substantiate
that they rendered overtime and during rest days. These claims, unlike claims for
underpayment and non-payment of fringe benefits mandated by law, need to be proven
by the claimants.[10]
Petitioners filed a petition for certiorari[11] with prayer for temporary restraining order and
preliminary injunction before this Court on November 26, 1997. Respondents were required to file their
Comment but only public respondent NLRC, through the Solicitor General, complied therewith. In a
Resolution dated June 28, 1999,[12] the petition was referred to the CA pursuant to our ruling in St. Martin
Funeral Homes vs. NLRC.
On January 19, 2000,[13] the CA denied the petition for lack of merit and affirmed in toto the NLRC
decision. It said:
Having claimed exemption from the coverage of the minimum wage laws or
order, it was incumbent upon petitioner to prove such claim. Apart from simply denying
private respondents allegation that it employs more than 24 workers in its business,
petitioner failed to adduce evidence to prove that it is, indeed, a retail establishment
which employs less than ten (10) employees. Its failure to present records of its workers
and their respective wages gives rise to the presumption that these are adverse to its
claims. Indeed, it is hard to believe that petitioner does not keep such records. More so,
considering private respondents claim that petitioner employs more than twenty four
(24) employees and engaged in both wholesale and retail business of fruits by volume on
CONTAINER BASIS, not by price of fruit, but by container size retail, involving millions of
pesos capital, fruits coming from China, Australia and the United States (p. 170, Rollo).
Needless to say, the inclusion of respondents Morente and Allauigan in the NLRC
award is in order. In its decision, public respondent awarded P75,125.00, representing the
combined salary differentials, holiday pay and service incentive leave pay of all three (3)
private respondents. Of this, P28,952.00 is earmarked for respondent Morente,
and P27,597.00 for respondent Allauigan, both of whom executed quitclaims after
receiving P3,000.00 and P6,000.00 respectively, from petitioner.
On this score, the Court quotes with approval the arguments advanced by the
Solicitor General thus:
While a compromise agreement or amicable settlement is not

against public policy per se it must be shown however that it
was voluntarily entered into and represents a reasonable settlement, and
the consideration for the quitclaim is credible and reasonable (Santiago
v. NLRC, 198 SCRA 111 [1991]). For the law usually looks with disfavor
upon quitclaims and releases executed by employees usually resulting
from a compromise with their employers. (Velasco v. DOLE, 200 SCRA 201
[1991]). This is so because the employers and the employees obviously
do not stand on equal footing. Driven against the wall by the employer,
the employee is in no position to resist the money offered. (Lopez Sugar
Corp v. FFW-PLU, 189 SCRA 179 [1990]).
Thus, Fuentes v. NLRC, 167 SCRA 767 (1988) enunciates:

In the absence of any showing that the compromise settlement
and the quitclaims and releases entered into and made by the employees
were free, fair and reasonable- especially as to the amount or
consideration given by the employer in exchange therefore, the fact that
they executed the same and received their monetary benefits thereunder
does not militate against them. The Law does not consider as valid any
agreement to receive less compensation than what a worker is entitled
to receive.
In the case at bar, it will be noticed that the vouchers dated

September 13, 1995 and September 20, 1996 (pp. 194 and 197, NLRC
Record), submitted by petitioners (pp. 191-192, Record), show that
private respondent Allauigan was only paid P6,000.00 and
Morente, P3,000.00 --- when they are legally entitled to
receive P28,952.00 and P27,597.00, respectively. Under the
circumstances, subject compromise settlements cannot be considered
valid and binding upon the NLRC as they do not represent fair and
reasonable settlements, nor do they demonstrate voluntariness on the
part of private respondents Morente and Allauigan. These employees
should still be paid the full amounts of their salary differentials, holiday
pay and service incentive leave pay less the amounts they had already
received under the compromise settlements with petitioners (pp. 174-
175, Rollo).
Parenthetically, the Court notes that petitioner availed itself of this remedy
without first seeking a reconsideration of the assailed decision. As a general rule,
certiorari will not lie unless an inferior court, has through a motion for reconsideration, a
chance to correct the errors imputed to it. While the rule admits of exceptions, petitioner
has not shown any reason for this Court not to apply said rule, which would have justified
outright dismissal of the petition were it not for the Courts desire to resolve the case not
on a technicality but on the merits.[14]
Petitioners motion for reconsideration was denied in a Resolution dated August 15, 2000.[15]
Hence, the instant petition for review on certiorari filed by petitioners.
Petitioners insist that C. Planas Commercial is a retail establishment principally engaged in the
sale of plastic products and fruits to the customers for personal use, thus exempted from the application
of the minimum wage law; that it merely leases and occupies a stall in the Divisoria Market and the level
of its business activity requires and sustains only less than ten employees at a time. Petitioners contend
that private respondents were paid over and above the minimum wage required for a retail establishment,
thus the Labor Arbiter is correct in ruling that private respondents claim for underpayment has no factual
and legal basis. Petitioners claim that since private respondents alleged that petitioners employed 24
workers, it was incumbent upon them to prove such allegation which private respondents failed to do.
Petitioners also contend that the CA erred in applying strictly the rules of evidence against them
by holding that it was incumbent upon them to prove that their company is exempted from the minimum
wage law. They contend that they could not present records of their workers and their respective wages
because by the very nature of their business, the system of management is very loose and informal, thus
salaries and wages are paid by merely handing the money to the worker without the latter being required
to sign anything as proof of receipt. Thus, it would be unreasonable to insist upon petitioner to present
documents that they do not possess or keep in the first place.
We are not persuaded.
R.A. No. 6727 known as the Wage Rationalization Act provides for the statutory minimum wage
rate of all workers and employees in the private sector. Section 4 of the Act provides for exemption from
the coverage, thus:
Sec. 4.
...
(c) Exempted from the provisions of this Act are household or domestic helpers
and persons employed in the personal service of another, including family drivers.
Retail/service establishments regularly employing not more than ten (10)

workers may be exempted from the applicability of this Act upon application with and as
determined by the appropriate Regional Board in accordance with the applicable rules
and regulations issued by the Commission. Whenever an application for exemption has
been duly filed with the appropriate Regional Board, action on any complaint for alleged
non-compliance with this Act shall be deferred pending resolution of the application for
exemption by the appropriate Regional Board.
In the event that applications for exemptions are not granted, employees shall
receive the appropriate compensation due them as provided for by this Act plus interest
of one percent (1%) per month retroactive to the effectivity of this Act.
Clearly, for a retail/service establishment to be exempted from the coverage of the minimum
wage law, it must be shown that the establishment is regularly employing not more than ten (10) workers
and had applied for exemptions with and as determined by the appropriate Regional Board in accordance
with the applicable rules and regulations issued by the Commission. Petitioners main defense in
controverting private respondents claim for underpayment of wages is that they are exempted from the
application of the minimum wage law, thus the burden of proving[16] such exemption rests on petitioners.
Petitioners had not shown any evidence to show that they had applied for such exemption and if they had
applied, the same was granted.
In Murillo vs. Sun Valley Realty, Inc.[17] where the respondents claim that petitioners therein are
not entitled to service incentive leave pay inasmuch as establishment employing less than ten (10)
employees are exempted by the Labor Code and the Implementing Rules from paying service incentive
leave pay, we held:
..the clear policy of the Labor Code is to include all establishments, except a few
classes, under the coverage of the provision granting service incentive leave to workers.
Private respondents' claim is that they fell within the exception. Hence, it was incumbent
upon them to prove that they belonged to a class excepted by law from the general rule.
Specifically, it was the duty of respondents, not of petitioners, to prove that there were
less than ten (10) employees in the company. Having failed to discharge its task, private
respondents must be deemed to be covered by the general rule, notwithstanding the
failure of petitioners to allege the exact number of employees of the corporation. In other
words, petitioners must be deemed entitled to service incentive leave.[18]
Moreover, in C. Planas Commercial vs. NLRC,[19] where herein petitioners are also involved in a
case filed by one of its employees, we ruled:
Petitioners invoke the exemption provided by law for retail establishments which
employ not more than ten (10) workers to justify their non-liability for the salary
differentials in question. They insist that PLANAS is a retail establishment leasing a very
small and cramped stall in the Divisoria market which cannot accommodate more than
ten (10) workers in the conduct of its business.
We are unconvinced. The records disclose de los Reyes' clear entitlement to
salary differentials. Well-settled is the rule that factual findings of labor officials who are
deemed to have acquired expertise in matters within their jurisdiction are generally
accorded not only respect but even finality and bind this Court when supported by
substantial evidence or that amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion. Thus, as long as their decisions are devoid of
any unfairness or arbitratriness in the process of their deduction from the evidence
proferred by the parties before them, all that is left is our stamp of finality by affirming
the factual findings made by them. In this case, the award of salary differentials by the
NLRC in favor of de los Reyes was made pursuant to RA 6727 otherwise known as
the Wage Rationalization Act, and the Rules Implementing Wage Order Nos. NCR-01 and
NCR-01-A and Wage Order Nos. NCR-02 and NCR-02-A.
Petitioners claim exemption under the aforestated law. However, the best proof
that they could have adduced was their approved application for exemption in
accordance with applicable guidelines issued by the Commission. Section 4, subpar. (c) of
RA 6727 categorically provides:
Retail/service establishments regularly employing not more than

ten (10) workers may be exempted from the applicability of this Act upon
application with and as determined by the appropriate Regional Board in
accordance with the applicable rules and regulations issued by the
Commission. Whenever an application for exemption has been duly filed
with the appropriate Regional Board, action on any complaint for alleged
non-compliance with this Act shall be deferred pending resolution of the
application for exemption by the appropriate Regional Board. In the
event that applications for exemptions are not granted, employees shall
receive the appropriate compensation due them as provided for by this
Act plus interest of one percent (1%) per month retroactive to the
effectivity of this Act (emphasis supplied).
Extant in the records is the fact that petitioners had persistently raised the matter
of their exemption from any liability for underpayment without substantiating it by
showing compliance with the aforecited provision of law. It bears stressing that the NLRC
affirmed the Labor Arbiters award of salary differentials due to underpayment on the
ground that de los Reyes' claim therefor was not even denied or rebutted by petitioners.
More importantly, NLRC correctly upheld the Labor Arbiter's finding that PLANAS
employed around thirty (30) workers. We have every reason to believe that petitioners
need at least thirty (30) persons to conduct their business considering that Manager Cohu
did not submit any employment record to prove otherwise. As employer, Manager Cohu
ought to be the keeper of the employment records of all his workers. Thus, it was well
within his means to refute any monetary claim alleged to be unpaid. His inability to
produce the payrolls from their files without any satisfactory explanation can be
interpreted no less as suppression of vital evidence adverse to PLANAS.
Petitioners aver that the CA erred in ruling that private respondents Morente and Allauigan are still
entitled to monetary awards despite the latters execution of release and quitclaims because the
settlement was not voluntarily entered into by private respondents. Petitioners insist that both private
respondents Morente and Allauigan voluntarily entered into an amicable settlement with them on
September 17 and 18, 1995, respectively; that they were the ones who initiated the talks for settlement
and who pegged the amount; that they both voluntarily appeared before the Labor Arbiter to move for
the dismissal of their case insofar as their claims are concerned as well as submitted to the Labor Arbiter
their respective quitclaims and releases which were duly subscribed before the Labor Arbiter and duly
notarized.
We find merit in petitioners argument.
It has been held that not all quitclaims are per se invalid or against public policy, except (1) where
there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or (2) where the
terms of settlement are unconscionable on their face. In these cases, the law will step in to annul the
questionable transactions.[20] Such quitclaim and release agreements are regarded as ineffective to bar
the workers from claiming the full measure of their legal rights.[21]
We find these two instances not present in private respondents Allauigan and Morentes case.
They failed to refute petitioners allegation that the settlement was voluntarily made as they had not filed
any pleadings before the CA. Notably, we have required private respondents to file their comment on the
instant petition, however, they failed to do so. They were then required to show cause why they should
not be disciplinarily dealt with or held in contempt.[22] However, they still failed to file their comment,
thus, they were imposed a fine of P1,000.00[23] which was subsequently increased to P2,000.00 as there
was still no compliance. In a Resolution dated July 22, 2002, the Court ordered the National Bureau of
Investigation to arrest and detain private respondents and the private respondents to file their
comment.[24] As private respondents could not be located at their given address and they are not known
in their locality, the order of arrest and commitment was returned unserved,[25] thus the Court required
the Office of the Solicitor General to file the comment in behalf of all the respondents.[26] The Court finds
such inaction on the part of private respondents Allauigan and Morente an indication that they already
relented in their claims and gives credence to petitioners claim that they had voluntarily executed the
release and quitclaim and the motion to dismiss.
The CA found that the subject compromise agreements are not valid considering that they did not
represent the fair and reasonable settlements, i.e., that private respondent Allauigan was only
paid P6,000.00 and Morente, P3,000.00 --- when they are legally entitled to receive P28,952.00
and P27,597.00, respectively.
We do not agree. It bears stressing that at the time of the execution of the release and quitclaim,
the case filed by private respondents against petitioners was already dismissed by the Labor Arbiter and
it was pending appeal before the NLRC. Private respondents could have executed the release and
quitclaim because of a possibility that their appeal with the NLRC may not be successful. Since there was
yet no decision rendered by the NLRC when the quitclaims were executed, it could not be said that the
amount of the settlement is unconscionable. In any event, no deception has been established that would
justify the annulment of private respondents quitclaims.[27] In Mercer vs. NLRC,[28]we held that:
In Samaniego v. NLRC, we ruled that: A quitclaim executed in favor of a company

by an employee amounts to a valid and binding compromise agreement between them."
Recently, we held that in the absence of any showing that petitioner was "coerced
or tricked" into signing the above-quoted Quitclaim and Release or that the consideration
thereof was very low, she is bound by the conditions thereof.
As computed by the NLRC, private respondent Alfredo Ofialda is entitled to the payment of P14,934.00 as
salary differential, P2,362.00 as legal holiday pay and P1,180.00 as service incentive leave pay, all in the
total amount of P18,476.00.
WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appeals dated January 19,
2000 and its Resolution dated August 15, 2000 are AFFIRMEDwith MODIFICATION that petitioners are
ordered to pay private respondent Alfredo Ofialda the total amount of P18,476.00 and the monetary
awards in favor of private respondents Rudy Allauigan and Dioleto Morente are hereby DELETED.
SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 163419 February 13, 2008
TSPIC CORPORATION, petitioner,

vs.
TSPIC EMPLOYEES UNION (FFW), representing MARIA FE FLORES, FE CAPISTRANO, AMY
DURIAS,1CLAIRE EVELYN VELEZ, JANICE OLAGUIR, JERICO ALIPIT, GLEN BATULA, SER JOHN
HERNANDEZ, RACHEL NOVILLAS, NIMFA ANILAO, ROSE SUBARDIAGA, VALERIE CARBON, OLIVIA
EDROSO, MARICRIS DONAIRE, ANALYN AZARCON, ROSALIE RAMIREZ, JULIETA ROSETE, JANICE NEBRE,
NIA ANDRADE, CATHERINE YABA, DIOMEDISA ERNI,2 MARIO SALMORIN, LOIDA COMULLO,3 MARIE
ANN DELOS SANTOS,4 JUANITA YANA, and SUZETTE DULAY, respondents.
DECISION
VELASCO, JR., J.:
The path towards industrial peace is a two-way street. Fundamental fairness and protection to labor
should always govern dealings between labor and management. Seemingly conflicting provisions should
be harmonized to arrive at an interpretation that is within the parameters of the law, compassionate to
labor, yet, fair to management.
In this Petition for Review on Certiorari under Rule 45, petitioner TSPIC Corporation (TSPIC) seeks to
annul and set aside the October 22, 2003 Decision5 and April 23, 2004 Resolution6 of the Court of
Appeals (CA) in CA-G.R. SP No. 68616, which affirmed the September 13, 2001 Decision7 of Accredited
Voluntary Arbitrator Josephus B. Jimenez in National Conciliation and Mediation Board Case No. JBJ-
AVA-2001-07-57.
TSPIC is engaged in the business of designing, manufacturing, and marketing integrated circuits to serve
the communication, automotive, data processing, and aerospace industries. Respondent TSPIC
Employees Union (FFW) (Union), on the other hand, is the registered bargaining agent of the rank-and-
file employees of TSPIC. The respondents, Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn
Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, Rachel Novillas, Nimfa Anilao, Rose
Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta
Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo,
Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay, are all members of the Union.
In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA)8 for the years 2000
to 2004. The CBA included a provision on yearly salary increases starting January 2000 until January
2002. Section 1, Article X of the CBA provides, as follows:
Section 1. Salary/ Wage Increases.––Employees covered by this Agreement shall be granted

salary/wage increases as follows:
a) Effective January 1, 2000, all employees on regular status and within the bargaining
unit on or before said date shall be granted a salary increase equivalent to ten percent
(10%) of their basic monthly salary as of December 31, 1999.
b) Effective January 1, 2001, all employees on regular status and within the bargaining
unit on or before said date shall be granted a salary increase equivalent to twelve (12%)
of their basic monthly salary as of December 31, 2000.
c) Effective January 1, 2002, all employees on regular status and within the bargaining
unit on or before said date shall be granted a salary increase equivalent to eleven
percent (11%) of their basic monthly salary as of December 31, 2001.
The wage salary increase of the first year of this Agreement shall be over and above the
wage/salary increase, including the wage distortion adjustment, granted by the COMPANY on
November 1, 1999 as per Wage Order No. NCR-07.
The wage/salary increases for the years 2001 and 2002 shall be deemed inclusive of the
mandated minimum wage increases under future Wage Orders, that may be issued after Wage
Order No. NCR-07, and shall be considered as correction of any wage distortion that may have
been brought about by the said future Wage Orders. Thus the wage/salary increases in 2001 and
2002 shall be deemed as compliance to future wage orders after Wage Order No. NCR-07.
Consequently, on January 1, 2000, all the regular rank-and-file employees of TSPIC received a 10%
increase in their salary. Accordingly, the following nine (9) respondents (first group) who were already
regular employees received the said increase in their salary: Maria Fe Flores, Fe Capistrano, Amy Durias,
Claire Evelyn Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, and Rachel Novillas.9
The CBA also provided that employees who acquire regular employment status within the year but after
the effectivity of a particular salary increase shall receive a proportionate part of the increase upon
attainment of their regular status. Sec. 2 of the CBA provides:
SECTION 2. Regularization Increase.––A covered daily paid employee who acquires regular
status within the year subsequent to the effectivity of a particular salary/wage increase
mentioned in Section 1 above shall be granted a salary/wage increase in proportionate basis as
follows:
Regularization Period Equivalent Increase

- 1st Quarter 100%
nd
- 2 Quarter 75%
- 3rd Quarter 50%
th
- 4 Quarter 25%
Thus, a daily paid employee who becomes a regular employee covered by this Agreement only
on May 1, 2000, i.e., during the second quarter and subsequent to the January 1, 2000 wage
increase under this Agreement, will be entitled to a wage increase equivalent to seventy-five
percent (75%) of ten percent (10%) of his basic pay. In the same manner, an employee who
acquires regular status on December 1, 2000 will be entitled to a salary increase equivalent to
twenty-five percent (25%) of ten percent (10%) of his last basic pay.
On the other hand, any monthly-paid employee who acquires regular status within the term of
the Agreement shall be granted regularization increase equivalent to 10% of his regular basic
salary.
Then on October 6, 2000, the Regional Tripartite Wage and Productivity Board, National Capital Region,
issued Wage Order No. NCR-0810 (WO No. 8) which raised the daily minimum wage from PhP 223.50 to
PhP 250 effective November 1, 2000. Conformably, the wages of 17 probationary employees, namely:
Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie
Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin,
Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay (second group), were increased
to PhP 250.00 effective November 1, 2000.
On various dates during the last quarter of 2000, the above named 17 employees attained regular
employment11and received 25% of 10% of their salaries as granted under the provision on regularization
increase under Article X, Sec. 2 of the CBA.
In January 2001, TSPIC implemented the new wage rates as mandated by the CBA. As a result, the nine
employees (first group), who were senior to the above-listed recently regularized employees, received
less wages.
On January 19, 2001, a few weeks after the salary increase for the year 2001 became effective, TSPIC’s
Human Resources Department notified 24 employees,12 namely: Maria Fe Flores, Janice Olaguir, Rachel
Novillas, Fe Capistrano, Jerico Alipit, Amy Durias, Glen Batula, Claire Evelyn Velez, Ser John Hernandez,
Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie
Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin,
Loida Comullo, and Marie Ann Delos Santos, that due to an error in the automated payroll system, they
were overpaid and the overpayment would be deducted from their salaries in a staggered basis, starting
February 2001. TSPIC explained that the correction of the erroneous computation was based on the
crediting provision of Sec. 1, Art. X of the CBA.
The Union, on the other hand, asserted that there was no error and the deduction of the alleged
overpayment from employees constituted diminution of pay. The issue was brought to the grievance
machinery, but TSPIC and the Union failed to reach an agreement.
Consequently, TSPIC and the Union agreed to undergo voluntary arbitration on the solitary issue of
whether or not the acts of the management in making deductions from the salaries of the affected
employees constituted diminution of pay.
On September 13, 2001, Arbitrator Jimenez rendered a Decision, holding that the unilateral deduction
made by TSPIC violated Art. 10013 of the Labor Code. The fallo reads:
WHEREFORE, in the light of the law on the matter and on the facts adduced in evidence,
judgment is hereby rendered in favor of the Union and the named individual employees and
against the company, thereby ordering the [TSPIC] to pay as follows:
1) to the sixteen (16) newly regularized employees named above, the amount of
P12,642.24 a month or a total of P113,780.16 for nine (9) months or P7,111.26 for each
of them as well as an additional P12,642.24 (for all), or P790.14 (for each), for every
month after 30 September 2001, until full payment, with legal interests for every month
of delay;
2) to the nine (9) who were hired earlier than the sixteen (16); also named above, their
respective amount of entitlements, according to the Union’s correct computation,
ranging from P110.22 per month (or P991.98 for nine months) to P450.58 a month (or
P4,055.22 for nine months), as well as corresponding monthly entitlements after 30
September 2001, plus legal interests until full payment,
3) to Suzette Dulay, the amount of P608.14 a month (or P5,473.26), as well as

corresponding monthly entitlements after 30 September 2001, plus legal interest until
full payment,
4) Attorney’s fees equal to 10% of all the above monetary awards.
The claim for exemplary damages is denied for want of factual basis.
The parties are hereby directed to comply with their joint voluntary commitment to abide by
this Award and thus, submit to this Office jointly, a written proof of voluntary compliance with
this DECISION within ten (10) days after the finality hereof.
SO ORDERED.14
TSPIC filed a Motion for Reconsideration which was denied in a Resolution dated November 21, 2001.
Aggrieved, TSPIC filed before the CA a petition for review under Rule 43 docketed as CA-G.R. SP No.
68616. The appellate court, through its October 22, 2003 Decision, dismissed the petition and
affirmed in toto the decision of the voluntary arbitrator. The CA declared TSPIC’s computation allowing
PhP 287 as daily wages to the newly regularized employees to be correct, noting that the computation
conformed to WO No. 8 and the provisions of the CBA. According to the CA, TSPIC failed to convince the
appellate court that the deduction was a result of a system error in the automated payroll system. The
CA explained that when WO No. 8 took effect on November 1, 2000, the concerned employees were still
probationary employees who were receiving the minimum wage of PhP 223.50. The CA said that
effective November 1, 2000, said employees should have received the minimum wage of PhP 250. The
CA held that when respondents became regular employees on November 29, 2000, they should be
allowed the salary increase granted them under the CBA at the rate of 25% of 10% of their basic salary
for the year 2000; thereafter, the 12% increase for the year 2001 and the 10% increase for the year 2002
should also be made applicable to them.15
TSPIC filed a Motion for Reconsideration which was denied by the CA in its April 23, 2004 Resolution.
TSPIC filed the instant petition which raises this sole issue for our resolution: Does the TSPIC’s decision
to deduct the alleged overpayment from the salaries of the affected members of the Union constitute
diminution of benefits in violation of the Labor Code?
TSPIC maintains that the formula proposed by the Union, adopted by the arbitrator and affirmed by the
CA, was flawed, inasmuch as it completely disregarded the "crediting provision" contained in the last
paragraph of Sec. 1, Art. X of the CBA.
We find TSPIC’s contention meritorious.
A Collective Bargaining Agreement is the law between the parties
It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they
are obliged to comply with its provisions.16 We said so in Honda Phils., Inc. v. Samahan ng Malayang
Manggagawa sa Honda:
A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate
labor organization and the employer concerning wages, hours of work and all other terms and
conditions of employment in a bargaining unit. As in all contracts, the parties in a CBA may
establish such stipulations, clauses, terms and conditions as they may deem convenient
provided these are not contrary to law, morals, good customs, public order or public policy.
Thus, where the CBA is clear and unambiguous, it becomes the law between the parties and
compliance therewith is mandated by the express policy of the law. 17
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of their stipulations shall control.18 However, sometimes, as in
this case, though the provisions of the CBA seem clear and unambiguous, the parties sometimes arrive
at conflicting interpretations. Here, TSPIC wants to credit the increase granted by WO No. 8 to the
increase granted under the CBA. According to TSPIC, it is specifically provided in the CBA that "the
salary/wage increase for the year 2001 shall be deemed inclusive of the mandated minimum wage
increases under future wage orders that may be issued after Wage Order No. 7." The Union, on the
other hand, insists that the "crediting" provision of the CBA finds no application in the present case,
since at the time WO No. 8 was issued, the probationary employees (second group) were not yet
covered by the CBA, particularly by its crediting provision.
As a general rule, in the interpretation of a contract, the intention of the parties is to be

pursued.19 Littera necat spiritus vivificat. An instrument must be interpreted according to the intention
of the parties. It is the duty of the courts to place a practical and realistic construction upon it, giving due
consideration to the context in which it is negotiated and the purpose which it is intended to
serve.20 Absurd and illogical interpretations should also be avoided. Considering that the parties have
unequivocally agreed to substitute the benefits granted under the CBA with those granted under wage
orders, the agreement must prevail and be given full effect.
Paragraph (b) of Sec. 1 of Art. X of the CBA provides for the general agreement that, effective January 1,
2001, all employees on regular status and within the bargaining unit on or before said date shall be
granted a salary increase equivalent to twelve (12%) of their basic monthly salary as of December 31,
2000. The 12% salary increase is granted to all employees who (1) are regular employees and (2) are
within the bargaining unit.
Second paragraph of (c) provides that the salary increase for the year 2000 shall not include the increase
in salary granted under WO No. 7 and the correction of the wage distortion for November 1999.
The last paragraph, on the other hand, states the specific condition that the wage/salary increases for
the years 2001 and 2002 shall be deemed inclusive of the mandated minimum wage increases under
future wage orders, that may be issued after WO No. 7, and shall be considered as correction of the
wage distortions that may be brought about by the said future wage orders. Thus, the wage/salary
increases in 2001 and 2002 shall be deemed as compliance to future wage orders after WO No. 7.
Paragraph (b) is a general provision which allows a salary increase to all those who are qualified. It,
however, clashes with the last paragraph which specifically states that the salary increases for the years
2001 and 2002 shall be deemed inclusive of wage increases subsequent to those granted under WO No.
7. It is a familiar rule in interpretation of contracts that conflicting provisions should be harmonized to
give effect to all.21 Likewise, when general and specific provisions are inconsistent, the specific provision
shall be paramount to and govern the general provision.22 Thus, it may be reasonably concluded that
TSPIC granted the salary increases under the condition that any wage order that may be subsequently
issued shall be credited against the previously granted increase. The intention of the parties is clear: As
long as an employee is qualified to receive the 12% increase in salary, the employee shall be granted the
increase; and as long as an employee is granted the 12% increase, the amount shall be credited against
any wage order issued after WO No. 7.
Respondents should not be allowed to receive benefits from the CBA while avoiding the counterpart
crediting provision. They have received their regularization increases under Art. X, Sec. 2 of the CBA and
the yearly increase for the year 2001. They should not then be allowed to avoid the crediting provision
which is an accompanying condition.
Respondents attained regular employment status before January 1, 2001. WO No. 8, increasing the
minimum wage, was issued after WO No. 7. Thus, respondents rightfully received the 12% salary
increase for the year 2001 granted in the CBA; and consequently, TSPIC rightfully credited that 12%
increase against the increase granted by WO No. 8.
Proper formula for computing the salaries for the year 2001
Thus, the proper computation of the salaries of individual respondents is as follows:
(1) With regard to the first group of respondents who attained regular employment status before the
effectivity of WO No. 8, the computation is as follows:
For respondents Jerico Alipit and Glen Batula:23
Wage rate before WO No. 8………………………… PhP 234.67

Increase due to WO No. 8
setting the minimum wage at PhP 250.……………... 15.33
Total Salary upon effectivity of WO No. 8…………. PhP 250.00
Increase for 2001 (12% of 2000 salary)…….....……. PhP 30.00
Less the wage increase under WO No. 8……………. 15.33
Total difference between the wage increase
for 2001 and the increase granted under WO No. 8.. PhP 14.67
Wage rate by December 2000………………………. PhP 250.00
Plus total difference between the wage increase for 2001
and the increase granted under WO No. 8…….. 14.67
Total (Wage rate range beginning January 1, 2001) PhP 264.67
For respondents Ser John Hernandez and Rachel Novillas:24
Wage rate range before WO No. 8………………….. PhP 234.68

setting the minimum wage at PhP 250……………… 15.32
Total Salary upon effectivity of WO No. 8.………… PhP 250.00
Increase for 2001 (12% of 2000 salary)…………….. PhP 30.00
Less the wage increase under WO No. 8…………… 15.32
Total difference between the wage increase
for 2001 and the increase granted under WO No. 8… PhP 14.68
Wage rate by December 2000………………………. PhP 250.00
and the increase granted under WO No. 8…… 14.68
For respondents Amy Durias, Claire Evelyn Velez, and Janice Olaguir:25
Wage rate range before WO No. 8………….. PhP 240.26

setting the minimum wage at PhP 250……… 9.74
Total Salary upon effectivity of WO No. 8…. PhP 250.00
Increase for 2001 (12% of 2000 salary)…………… PhP 30.00
Less the wage increase under WO No. 8…………… 9.74
Total difference between the wage increase for 2001
and the increase granted under WO No. 8………… PhP 20.26
Wage rate by December 2000……………………… PhP 250.00
For respondents Ma. Fe Flores and Fe Capistrano:26
Wage rate range before WO No. 8…………… PhP 245.85

setting the minimum wage at PhP 250……….. 4.15
Total Salary upon effectivity of WO No. 8…... PhP 250.00
Increase for 2001 (12% of 2000 salary)…………… PhP 30.00
Less the wage increase under WO No. 8………......... 4.15
Total difference between the wage increase for 2001
and the increase granted under WO No. 8………… PhP 25.85
Wage rate by December 2000……………………… PhP 250.00
(2) With regard to the second group of employees, who attained regular employment status after the
implementation of WO No. 8, namely: Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso,
Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine
Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and
Suzette Dulay, the proper computation of the salaries for the year 2001, in accordance with the CBA, is
as follows:
Compute the increase in salary after the implementation of WO No. 8 by subtracting the minimum wage
before WO No. 8 from the minimum wage per the wage order to arrive at the wage increase, thus:
Minimum Wage per Wage Order………….. PhP 250.00

Wage rate before Wage Order…………….. 223.50
Wage Increase………………………………. PhP 26.50
Upon attainment of regular employment status, the employees’ salaries were increased by 25% of 10%
of their basic salaries, as provided for in Sec. 2, Art. X of the CBA, thus resulting in a further increase of
PhP 6.25, for a total of PhP 256.25, computed as follows:
Wage rate after WO No. 8………………………………. PhP 250.00

Regularization increase (25 % of 10% of basic salary) 6.25
Total (Salary for the end of year 2000)…………………. PhP 256.25
To compute for the increase in wage rates for the year 2001, get the increase of 12% of the employees’
salaries as of December 31, 2000; then subtract from that amount, the amount increased in salaries as
granted under WO No. 8 in accordance with the crediting provision of the CBA, to arrive at the increase
in salaries for the year 2001 of the recently regularized employees. Add the result to their salaries as of
December 31, 2000 to get the proper salary beginning January 1, 2001, thus:
Increase for 2001 (12% of 2000 salary)………………... PhP 30.75

Less the wage increase under WO No. 8………………. 26.50
Difference between the wage increase
for 2001 and the increase granted under WO No. 8…… PhP 4.25
Wage rate after regularization increase………………... PhP 256.25
Plus total difference between the wage increase and
the increase granted under WO No. 8…………………. 4.25
Total (Wage rate beginning January 1, 2001)…………. PhP 260.50
With these computations, the crediting provision of the CBA is put in effect, and the wage distortion
between the first and second group of employees is cured. The first group of employees who attained
regular employment status before the implementation of WO No. 8 is entitled to receive, starting
January 1, 2001, a daily wage rate within the range of PhP 264.67 to PhP 275.85, depending on their
wage rate before the implementation of WO No. 8. The second group that attained regular employment
status after the implementation of WO No. 8 is entitled to receive a daily wage rate of PhP 260.50
starting January 1, 2001.
Diminution of benefits
TSPIC also maintains that charging the overpayments made to the 16 respondents through staggered
deductions from their salaries does not constitute diminution of benefits.
We agree with TSPIC.
Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the
employees. There is diminution of benefits when it is shown that: (1) the grant or benefit is founded on
a policy or has ripened into a practice over a long period; (2) the practice is consistent and deliberate; (3)
the practice is not due to error in the construction or application of a doubtful or difficult question of
law; and (4) the diminution or discontinuance is done unilaterally by the employer.27
As correctly pointed out by TSPIC, the overpayment of its employees was a result of an error. This error
was immediately rectified by TSPIC upon its discovery. We have ruled before that an erroneously
granted benefit may be withdrawn without violating the prohibition against non-diminution of benefits.
We ruled in Globe-Mackay Cable and Radio Corp. v. NLRC:
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous
application of the law. Payment may be said to have been made by reason of a mistake in the
construction or application of a "doubtful or difficult question of law". (Article 2155, in relation
to Article 2154 of the Civil Code). Since it is a past error that is being corrected, no vested right
may be said to have arisen nor any diminution of benefit under Article 100 of the Labor Code
may be said to have resulted by virtue of the correction.28
Here, no vested right accrued to individual respondents when TSPIC corrected its error by crediting the
salary increase for the year 2001 against the salary increase granted under WO No. 8, all in accordance
with the CBA.
Hence, any amount given to the employees in excess of what they were entitled to, as computed above,
may be legally deducted by TSPIC from the employees’ salaries. It was also compassionate and fair that
TSPIC deducted the overpayment in installments over a period of 12 months starting from the date of
the initial deduction to lessen the burden on the overpaid employees. TSPIC, in turn, must refund to
individual respondents any amount deducted from their salaries which was in excess of what TSPIC is
legally allowed to deduct from the salaries based on the computations discussed in this Decision.
As a last word, it should be reiterated that though it is the state’s responsibility to afford protection to
labor, this policy should not be used as an instrument to oppress management and capital.29 In resolving
disputes between labor and capital, fairness and justice should always prevail. We ruled in Norkis Union
v. Norkis Trading that in the resolution of labor cases, we have always been guided by the State policy
enshrined in the Constitution: social justice and protection of the working class. Social justice does not,
however, mandate that every dispute should be automatically decided in favor of labor. In any case,
justice is to be granted to the deserving and dispensed in the light of the established facts and the
applicable law and doctrine.30
WHEREFORE, premises considered, the September 13, 2001 Decision of the Labor Arbitrator in National
Conciliation and Mediation Board Case No. JBJ-AVA-2001-07-57 and the October 22, 2003 CA Decision in
CA-G.R. SP No. 68616 are hereby AFFIRMED with MODIFICATION. TSPIC is hereby ORDERED to pay
respondents their salary increases in accordance with this Decision, as follows:
Name of Employee Daily Wage No. of Working No. of Months Total Salary for
Rate Days in a Month in a Year 2001
Nimfa Anilao 260.5 26 12 81,276.00
Rose Subardiaga 260.5 26 12 81,276.00
Valerie Carbon 260.5 26 12 81,276.00
Olivia Edroso 260.5 26 12 81,276.00
Maricris Donaire 260.5 26 12 81,276.00
Analyn Azarcon 260.5 26 12 81,276.00
Rosalie Ramirez 260.5 26 12 81,276.00
Julieta Rosete 260.5 26 12 81,276.00
Janice Nebre 260.5 26 12 81,276.00
Nia Andrade 260.5 26 12 81,276.00
Catherine Yaba 260.5 26 12 81,276.00
Diomedisa Erni 260.5 26 12 81,276.00
Mario Salmorin 260.5 26 12 81,276.00
Loida Camullo 260.5 26 12 81,276.00
Marie Ann Delos Santos 260.5 26 12 81,276.00
Juanita Yana 260.5 26 12 81,276.00
Suzette Dulay 260.5 26 12 81,276.00
Jerico Alipit 264.67 26 12 82,577.04
Glen Batula 264.67 26 12 82,577.04
Ser John Hernandez 264.68 26 12 82,580.16
Rachel Novillas 264.68 26 12 82,580.16
Amy Durias 270.26 26 12 84,321.12
Claire Evelyn Velez 270.26 26 12 84,321.12
Janice Olaguir 270.26 26 12 84,321.12
Maria Fe Flores 275.85 26 12 86,065.20
Fe Capistrano 275.85 26 12 86,065.20
The award for attorney’s fees of ten percent (10%) of the total award is MAINTAINED.
SO ORDERED.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 91231 February 4, 1991
NESTLÉ PHILIPPINES, INC., petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION and UNION OF FILIPRO EMPLOYEES, respondents.
Siguion Reyna, Montecillo & Ongsiako for petitioner.
Banzuela, Flores, Miralles, Raneses, Sy, Taquio & Associates for private respondent.
GRIÑO-AQUINO, J.:
Nestlé Philippines, Inc., by this petition for certiorari, seeks to annul, on the ground of grave abuse of
discretion, the decision dated August 8, 1989 of the National Labor Relations Commission (NLRC),
Second Division, in Cert. Case No. 0522 entitled, "In Re: Labor Dispute of Nestlé Philippines, Inc." insofar
as it modified the petitioner's existing non-contributory Retirement Plan.
Four (4) collective bargaining agreements separately covering the petitioner's employees in its:
1. Alabang/Cabuyao factories;
2. Makati Administration Office. (Both Alabang/Cabuyao factories and Makati office were
represented by the respondent, Union of Filipro Employees [UFE]);
3. Cagayan de Oro Factory represented by WATU; and
4. Cebu/Davao Sales Offices represented by the Trade Union of the Philippines and Allied
Services (TUPAS),
all expired on June 30, 1987.
Thereafter, UFE was certified as the sole and exclusive bargaining agent for all regular rank-and-file
employees at the petitioner's Cagayan de Oro factory, as well as its Cebu/Davao Sales Office.
In August, 1987, while the parties, were negotiating, the employees at Cabuyao resorted to a
"slowdown" and walk-outs prompting the petitioner to shut down the factory. Marathon collective
bargaining negotiations between the parties ensued.
On September 2, 1987, the UFE declared a bargaining deadlock. On September 8, 1987, the Secretary of
Labor assumed jurisdiction and issued a return to work order. In spite of that order, the union struck,
without notice, at the Alabang/Cabuyao factory, the Makati office and Cagayan de Oro factory on
September 11, 1987 up to December 8, 1987. The company retaliated by dismissing the union officers
and members of the negotiating panel who participated in the illegal strike. The NLRC affirmed the
dismissals on November 2, 1988.
On January 26, 1988, UFE filed a notice of strike on the same ground of CBA deadlock and unfair labor
practices. However, on March 30, 1988, the company was able to conclude a CBA with the union at the
Cebu/Davao Sales Office, and on August 5, 1988, with the Cagayan de Oro factory workers. The union
assailed the validity of those agreements and filed a case of unfair labor practice against the company
on November 16, 1988.
After conciliation efforts of the National Conciliation and Mediation Board (NCMB) yielded negative
results, the dispute was certified to the NLRC by the Secretary of Labor on October 28, 1988.
After the parties had filed their pleadings, the NLRC issued a resolution on June 5, 1989, whose
pertinent disposition regarding the union's demand for liberalization of the company's retirement plan
for its workers, provides as follows:
xxx xxx xxx
7. Retirement Plan
The company shall continue implementing its retirement plan modified as follows:
a) for fifteen years of service or less — an amount equal to 100% of the employee's monthly
salary for every year of service;
b) more than 15 but less than 20 years — 125% of the employee's monthly salary for every year
of service;
c) 20 years or more — 150% of the employee's monthly salary for every year of service. (pp. 58-
59, Rollo.)
Both parties separately moved for reconsideration of the decision.
On August 8, 1989, the NLRC issued a resolution denying the motions for reconsideration. With regard
to the Retirement Plan, the NLRC held:
Anent management's objection to the modification of its Retirement Plan, We find no cogent
reason to alter our previous decision on this matter.
While it is not disputed that the plan is non-contributory on the part of the workers, tills does
not automatically remove it from the ambit of collective bargaining negotiations. On the
contrary, the plan is specifically mentioned in the previous bargaining agreements (Exhibits "R-
1" and "R-4"), thereby integrating or incorporating the provisions thereof to the agreement. By
reason of its incorporation, the plan assumes a consensual character which cannot be
terminated or modified at will by either party. Consequently, it becomes part and parcel of CBA
negotiations.
However, We need to clarify Our resolution on this issue. When we increased the emoluments
in the plan, the conditions for the availment of the benefits set forth therein remain the same.
(p. 32, Rollo.)
On December 14, 1989, the petitioner filed this petition for certiorari, alleging that since its retirement
plan is non-contributory, it (Nestlé) has the sole and exclusive prerogative to define the terms of the
plan "because the workers have no vested and demandable rights thereunder, the grant thereof being
not a contractual obligation but merely gratuitous. At most the company can only be directed to
maintain the same but not to change its terms. It should be left to the discretion of the company on how
to improve or mollify the same" (p. 10, Rollo).
The Court agrees with the NLRC's finding that the Retirement Plan was "a collective bargaining issue
right from the start" (p. 109, Rollo) for the improvement of the existing Retirement Plan was one of the
original CBA proposals submitted by the UFE on May 8, 1987 to Arthur Gilmour, president of Nestlé
Philippines. The union's original proposal was to modify the existing plan by including a provision for
early retirement. The company did not question the validity of that proposal as a collective bargaining
issue but merely offered to maintain the existing non-contributory retirement plan which it believed to
be still adequate for the needs of its employees, and competitive with those existing in the industry. The
union thereafter modified its proposal, but the company was adamant. Consequently, the impassé on
the retirement plan become one of the issues certified to the NLRC for compulsory arbitration.
The company's contention that its retirement plan is non-negotiable, is not well-taken.1âwphi1 The
NLRC correctly observed that the inclusion of the retirement plan in the collective bargaining agreement
as part of the package of economic benefits extended by the company to its employees to provide them
a measure of financial security after they shall have ceased to be employed in the company, reward
their loyalty, boost their morale and efficiency and promote industrial peace, gives "a consensual
character" to the plan so that it may not be terminated or modified at will by either party (p. 32, Rollo).
The fact that the retirement plan is non-contributory, i.e., that the employees contribute nothing to the
operation of the plan, does not make it a non-issue in the CBA negotiations. As a matter of fact, almost
all of the benefits that the petitioner has granted to its employees under the CBA — salary increases,
rice allowances, mid-year bonuses, 13th and 14th month pay, seniority pay, medical and hospitalization
plans, health and dental services, vacation, sick & other leaves with pay — are non-contributory
benefits. Since the retirement plan has been an integral part of the CBA since 1972, the Union's demand
to increase the benefits due the employees under said plan, is a valid CBA issue. The deadlock between
the company and the union on this issue was resolvable by the Secretary of Labor, or the NLRC, after the
Secretary had assumed jurisdiction over the labor dispute (Art. 263, subparagraph [i] of the Labor Code).
The petitioner's contention, that employees have no vested or demandable right to a non-contributory
retirement plan, has no merit for employees do have a vested and demandable right over existing
benefits voluntarily granted to them by their employer. The latter may not unilaterally withdraw,
eliminate or diminish such benefits (Art. 100, Labor Code; Tiangco, et al. vs. Hon. Leogardo, et al., 122
SCRA 267).
This Court ruled similarly in Republic Cement Corporation vs. Honorable Panel of Arbitrators, G.R. No.
89766, Feb. 19, 1990:
. . . Petitioner's claim that retirement benefits, being noncontributory in nature, are not proper
subjects for voluntary arbitration is devoid of merit. The expired CBA previously entered into by
the parties included provisions for the implementation of a "Retirement and Separation Plan." it
is only to be expected that the parties would seek a renewal or an improvement of said item in
the new CBA. In fact, the parties themselves expressly included retirement benefits among the
economic issues to be resolved by voluntary arbitration. Petitioner is estopped from now
contesting the validity of the increased award granted by the arbitrators. (p. 145, Rollo.)
The NLRC's resolution of the bargaining deadlock between Nestlé and its employees is neither arbitrary,
capricious, nor whimsical. The benefits and concessions given to the employees were based on the
NLRC's evaluation of the union's demands, the evidence adduced by the parties, the financial capacity of
the Company to grant the demands, its longterm viability, the economic conditions prevailing in the
country as they affect the purchasing power of the employees as well as its concommitant effect on the
other factors of production, and the recent trends in the industry to which the Company belongs (p.
57, Rollo). Its decision is not vitiated by abuse of discretion.
WHEREFORE, the petition for certiorari is dismissed, with costs against the petitioner.
SO ORDERED.
Narvasa, Gancayco and Medialdea, JJ., concur.

Cruz, J., took no part.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 74156 June 29, 1988
GLOBE MACKAY CABLE AND RADIO CORPORATION, FREDERICK WHITE and JESUS
SANTIAGO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FFW-GLOBE MACKAY EMPLOYEES UNION and EDA
CONCEPCION, respondents.
Castillo, Laman, Tan & Pantaleon for petitioners.
Edwin D. Dellaban for private respondents.
MELENCIO-HERRERA, J.:
A special civil action for certiorari with a prayer for a Temporary Restraining Order to enjoin respondents
from enforcing the Decision of 10 March 1986 of the National Labor Relations Commission (NLRC), in
NCR Case No. 1-168-85 entitled "FFW-Globe Mackay Employees Union, et al., vs. Globe Mackay Cable &
Radio Corporation, et al.," the dispositive portion of which reads:
WHEREFORE, premises considered, the appealed Decision is as it is hereby SET ASIDE

and another one issued:
1. Declaring respondents-appellees (petitioners herein) guilty of illegal deductions of

cost-of-living allowance;
2. Ordering respondents-appellees to pay complainants-appellants their back

allowances reckoned from the time of illegal deduction; and
3. Ordering respondents-appellees from further illegally deducting the allowances of

complainants-appellants.
SO ORDERED.
Presiding Commissioner of the NLRC, Diego P. Atienza, concurred in the result, while Commissioner
Cleto T. Villaltuya dissented and voted to affirm in toto the Labor Arbiter's Decision.
On 19 May 1986, we issued the Temporary Restraining Order enjoining respondents from enforcing the
assailed Decision. On 2 September 1987, we gave due course to the petition and required the submittal
of memoranda, by the parties, which has been complied with.
The facts follow:
Wage Order No. 6, which took effect on 30 October 1984, increased the cost-of-living allowance of non-
agricultural workers in the private sector. Petitioner corporation complied with the said Wage Order by
paying its monthly-paid employees the mandated P3.00 per day COLA. However, in computing said
COLA, Petitioner Corporation multiplied the P 3.00 daily COLA by 22 days, which is the number of
working days in the company.
Respondent Union disagreed with the computation of the monthly COLA claiming that the daily COLA
rate of P3.00 should be multiplied by 30 days to arrive at the monthly COLA rate. The union alleged
furthermore that prior to the effectivity of Wage Order No. 6, Petitioner Corporation had been
computing and paying the monthly COLA on the basis of thirty (30) days per month and that this
constituted an employer practice, which should not be unilaterally withdrawn.
After several grievance proceedings proved futile, the Union filed a complaint against Petitioner
Corporation, its President, F. White, and Vice-President, J. Santiago, for illegal deduction,
underpayment, unpaid allowances, and violation of Wage Order No. 6. Petitioners White and Santiago
were sought to be held personally liable for the money claims thus demanded.
Labor Arbiter Adelaido F. Martinez sustained the position of Petitioner Corporation by holding that since
the individual petitioners acted in their corporate capacity they should not have been impleaded; and
that the monthly COLA should be computed on the basis of twenty two (22) days, since the evidence
showed that there are only 22 paid days in a month for monthly-paid employees in the company. His
reasoning, inter alia, was as follows:
To compel the respondent company to use 30 days in a month to compute the

allowance and retain 22 days for vacation and sick leave, overtime pay and other
benefits is inconsistent and palpably unjust. If 30 days is used as divisor, then it must be
used for the computation of all benefits, not just the allowance. But this is not fair to
complainants, not to mention that it will contravene the provision of the parties' CBA.
On appeal, the NLRC reversed the Labor Arbiter, as heretofore stated, and held that Petitioner
Corporation was guilty of illegal deductions, upon the following considerations: (1) that the P3.00 daily
COLA under Wage Order No. 6 should be paid and computed on the basis of thirty (30) days instead of
twenty-two (22) days since workers paid on a monthly basis are entitled to COLA on Saturdays, Sundays
and legal holidays "even if unworked;" (2) that the full allowance enjoyed by Petitioner Corporation's
monthly-paid employees before the CBA executed between the parties in 1982 constituted voluntary
employer practice, which cannot be unilaterally withdrawn; and (3) that petitioners White and Santiago
were properly impleaded as respondents in the case below.
Hence, this Petition, anchored on the charge of grave abuse of discretion by the NLRC.
We are constrained to reverse the reversal.
Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 uniformly read as follows:
Section 5. Allowance for Unworked Days.

All covered employees shall be entitled to their daily living allowance during the days
that they are paid their basic wage, even if unworked. (Emphasis supplied)
The primordial consideration, therefore, for entitlement to COLA is that basic wage is being paid. In
other words, the payment of COLA is mandated only for the days that the employees are paid their basic
wage, even if said days are unworked. So that, on the days that employees are not paid their basic wage,
the payment of COLA is not mandated. As held in University of Pangasinan Faculty Union vs. University
of Pangasinan, L-63122, February 20, 1984, 127 SCRA 691):
... it is evident that the intention of the law is to grant ECOLA upon the payment of basic
wages. Hence, we have the principle of 'No Pay, No ECOLA.
Applied to monthly-paid employees if their monthly salary covers all the days in a month, they are
deemed paid their basic wages for all those days and they should be entitled to their COLA on those
days "even if unworked," as the NLRC had opined. Peculiar to this case, however, is the circumstance
that pursuant to the Collective Bargaining Agreement (CBA) between Petitioner Corporation and
Respondent Union, the monthly basic pay is computed on the basis of five (5) days a week, or twenty
two (22) days a month. Thus, the pertinent provisions of that Agreement read:
Art. XV(a)—Eight net working hours shall constitute the regular work day for five days.
Art. XV(b)—Forty net hours of work, 5 working days, shall constitute the regular work
week.
Art. XVI, Sec. 1(b)—All overtime worked in excess of eight net hours daily or in excess of
5 days weekly shall be computed on hourly basis at the rate of time and one half.
The Labor Arbiter also found that in determining the hourly rate of monthly paid employees for
purposes of computing overtime pay, the monthly wage is divided by the number of actual work days in
a month and then, by eight (8) working hours. If a monthly-paid employee renders overtime work, he is
paid his basic salary rate plus one-half thereof. For example, after examining the specimen payroll of
employee Jesus L. Santos, the Labor Arbiter found:
the employee Jesus L. Santos, who worked on Saturday and Sunday was paid base pay
plus 50% premium. This is over and above his monthly basic pay as supported by the
fact that base pay was paid. If the 6th and 7th days of the week are deemed paid even if
unworked and included in the monthly salary, Santos should not have been paid his
base pay for Saturday and Sunday but should have received only the 50% overtime
premium.
Similarly, the specimen payrolls of employees, Dennis Dungon and Rene Sanvictores, showed that in
computing the vacation and sick leaves of the employees, Petitioner Corporation consistently used
twenty-two (22) days.
Under the peculiar circumstances obtaining, therefore, where the company observes a 5-day work
week, it will have to be held that the COLA should be computed on the basis of twenty two (22) days,
which is the period during which the monthly-paid employees of Petitioner Corporation receive their
basic wage. The CBA is the law between the parties and, if not acceptable, can be the subject of future
re-negotiation.
2) 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. Adequate proof is wanting in this respect. 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, L-50568, November 7, 1979, 94 SCRA
270). (Emphasis ours)
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,
thus:
Section 3. Application of Section 2--
xxx xxx xxx
(a) Monthly rates for non-agricultural workers covered Under PDs 1614, 1634, 1678 and
1713:
xxx xxx xxx
(3) For workers who do not work and are not considered paid on Saturdays and
Sundays:
P60 + P90 + P60 + (P2.00 x 262) divided by 12 = P 253.70 (Emphasis ours)
As the Labor Arbiter had analyzed said formula:
Under the aforecited formula/guideline, issued for the first time, when applied to a
company like respondent which observes a 5-day work week (or where 2 days in a
week, not necessarily Saturday and Sunday, are not considered paid), the monthly
equivalent of a daily allowance is arrived at by multiplying the daily allowance by 262
divided by 12. This formula results in the equivalent of 21.8 days in a month.
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous
application of the law. Payment may be said to have been made by reason of a mistake in the
construction or application of a "doubtful or difficult question of law." (Article 2155, 1 in relation to
Article 2154 2 of the Civil Code). Since it is a past error that is being corrected, no vested right may be
said to have arisen nor any diminution of benefit under Article 100 of the Labor Code3 may be said to
have resulted by virtue of the correction.
With the conclusions thus reached, there is no further need to discuss the liability of the officers of
Petitioner Corporation.
WHEREFORE, certiorari is granted, the Decision of the National Labor Relations Commission, dated 10
March 1986, is SET ASIDE, and the Decision of the Labor Arbiter, dated 9 May 1985, is hereby
REINSTATED. The Temporary Restraining Order heretofore issued is hereby made permanent.
SO ORDERED.
Yap, C.J., Paras, and Sarmiento, JJ., concur.
Padilla, J., took no part.
THIRD DIVISION
[G.R. No. 176675 : September 15, 2010]
SPS. ALFREDO BONTILAO AND SHERLINA BONTILAO, PETITIONERS, VS. DR. CARLOS GERONA,
RESPONDENT.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari[1] under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the June 28, 2006 Decision[2] and January 19, 2007 Resolution[3] of the Court of
Appeals (CA) in CA-G.R. CV No, 00201. The CA had reversed the March 23, 2004 Decision[4] of the
Regional Trial Court (RTC) of Cebu City, Branch 6 and dismissed petitioners' complaint in Civil Case No.
CEB-17822.
The facts are as follows:
On December 28, 1991, respondent Dr. Carlos Gerona, an orthopedic surgeon at the Vicente Gullas
Memorial Hospital, treated petitioners' son, eight (8)-year-old Allen Key Bontilao (Allen), for a fractured
right wrist. Respondent administered a "U-splint" and immobilized Allen's wrist with a cast, then sent
Allen home. On June 4, 1992, Allen re-fractured the same wrist and was brought back to the
hospital. The x-ray examination showed a complete fracture and displacement of the bone, with the
fragments overlapping each other. Respondent performed a closed reduction procedure, with Dr.
Vicente Jabagat (Dr. Jabagat) as the anesthesiologist. Then he placed Allen's arm in a plaster cast to
immobilize it. He allowed Allen to go home after the post reduction x-ray showed that the bones were
properly aligned, but advised Allen's mother, petitioner Sherlina Bontilao (Sherlina), to bring Allen back
for re-tightening of the cast not later than June 15, 1992.
Allen, however, was brought back to the hospital only on June 1992. By then, because the cast had not
been re-tightened, a rotational deformity had developed in Allen's arm. The x-ray examination showed
that the deformity was caused by a re-displacement of the bone fragments, so it was agreed that an
open reduction surgery will be conducted on June 24, 1992 by respondent, again with Dr. Jabagat as the
anesthesiologist.
On the said date, Sherlina was allowed to observe the operation behind a glass panel. Dr. Jabagat failed
to intubate the patient after five (5) attempts so anesthesia was administered through a gas
mask. Respondent asked Dr. Jabagat if the operation should be postponed given the failure to intubate,
but Dr. Jabagat said that it was alright to proceed. Respondent verified that Allen was breathing
properly before proceeding with the surgery.[5] As respondent was about to finish the suturing, Sherlina
decided to go out of the operating
room to make a telephone call and wait for her son. Later, she was informed that her son had died on
the operating table. The cause of death was "asphyxia due to congestion and edema of the epiglottis."[6]
Aside from criminal and administrative cases, petitioners filed a complaint for damages against both
respondent and Dr. Jabagat in the RTC of Cebu City alleging negligence and incompetence on the part of
the doctors. The documentary evidence and testimonies of several witnesses presented in the criminal
proceedings were offered and admitted in evidence at the RTC.
On March 23, 2004, the RTC decided in favor of the petitioners. It held that the doctrine of res ipsa
loquitur was applicable in establishing respondent's liability. According to the RTC, asphyxia or cardiac
arrest does not normally occur in an operation on a fractured bone in the absence of negligence in the
administration of anesthesia and the use of an endotracheal tube. Also, the instruments used in the
administration of anesthesia were all under the exclusive control of respondent and Dr. Jabagat, and
neither Allen nor his mother could be said to be guilty of contributory negligence. Thus, the trial court
held that respondent and Dr. Jabagat were solidarity liable for they failed to prove that they were not
negligent. The trial court likewise said that respondent cannot shift the blame solely to Dr. Jabagat as
the fault of the latter is also the fault of the former, respondent being the attending physician and being
equally in care, custody and control of Allen.[7]
Aggrieved, respondent appealed the trial court's decision to the CA. Dr. Jabagat, for his part, no longer
appealed the decision.
On June 28, 2006, the CA reversed the RTC's ruling. It held that the doctrine of res ipsa loquitur does not
apply for it must be satisfactorily shown that (1) the accident is of a kind which ordinarily does not occur
in the absence of someone's negligence; (2) the plaintiff was not guilty of contributory conduct; and (3)
the instrumentality which caused the accident was within the control of the defendant.
The CA held that while it may be true that an Open Reduction and Internal Fixation or ORIF could not
possibly lead to a patient's death unless somebody was negligent, still what was involved in this case
was a surgical procedure with all risks attendant, including death. As explained by the expert testimony,
unexplained death and mal-occurrence is a possibility in surgical procedures especially those involving
the administration of general anesthesia. It had also been established in both the criminal and
administrative cases against respondent that Allen's death was the result of the anesthesiologist's
negligence and not his.[8]
The CA added that the trial court erred in applying the "captain of the ship" doctrine to make
respondent liable even though he was the lead surgeon. The CA noted that unlike in Ramos v. Court of
Appeals,[9]relied upon by the trial court, the anesthesiologist was chosen by petitioners and no specific
act of negligence was attributable to respondent. The alleged failure to perform a skin test and a
tracheotomy does not constitute negligence. Tracheotomy is an emergency procedure, and its
performance is a judgment call of the attending physician as it is another surgical procedure done during
instances of failure of intubation. On the other hand, a skin test for a patient's possible adverse reaction
to the anesthesia to be administered is the anesthesiologist's decision. The CA also noted that the same
anesthesia was previously administered to Allen and he did not manifest any allergic reaction to
it. Finally, unlike in the Ramos case, respondent arrived only a few minutes late for the surgery and he
was able to complete the procedure within the estimated time frame of less than an hour.
Petitioners filed the present petition on the following grounds:
[1] THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE REGIONAL TRIAL COURT BY
DISMISSING THE COMPLAINT IN SO FAR AS THE
SURGEON, DR. CARLOS GERONA IS CONCERNED [AFTER] CONCLUDING THAT HE IS NOT SOLIDARILY
LIABLE WITH HIS CO-DEFENDANT, DR. VICENTE JABAGAT, THE ANESTHESIOLOGIST, IN THE ABSENCE OF
ANY NEGLIGENT ACT ON HIS PART.
[2] THE COURT OF APPEALS ERRED WHEN IT MISAPPRECIATED ESSENTIAL FACTS OF THE CASE THAT LED
TO ITS FINDINGS THAT DOCTRINE OF RES IPSA LOQUITfUJR AS APPLIED IN THE RAMOS CASE IS NOT
APPLICABLE IN THE INSTANT CASE.[10]
Essentially, the issue before us is whether respondent is liable for damages for Allen's death.
Petitioners argued that the doctrine of res ipsa loquitur applies to the present case because Allen was
healthy, fully conscious, coherent, and ambulant when he went to the hospital to correct a deformed
arm. Yet, he did not survive the operation, which was not even an emergency surgery but a corrective
one. They contend that respondent, being the lead surgeon, should be held liable for the negligence of
the physicians and nurses working with him during the operation.
On the other hand, respondent posited that he should not be held solidarity liable with Dr. Jabagat as
they were employed independently from each other and their services were divided as their best
judgment dictated. He insisted that the captain-of-the-ship doctrine had long been abandoned
especially in this age of specialization. An anesthesiologist and a surgeon are specialists in their own
field and neither one (1) could dictate upon the other. The CA was correct in finding that
the Ramos case does not apply to respondent. Dr. Jabagat was contracted separately from respondent
and was chosen by petitioner Sherlina. Respondent was only a few minutes late from the operation and
he waited for the signal of the anesthesiologist to start the procedure. He also determined the
condition of Allen before and after the operation.
We affirm the assailed CA decision.
The trial court erred in applying the doctrine of res ipsa loquitur to pin liability on respondent for Allen's
death. Res ipsa loquitur is a rebuttable presumption or inference that the defendant was negligent. The
presumption only arises upon proof that the instrumentality causing injury was in the defendant's
exclusive control, and that the accident was one (1) which ordinarily does not happen in the absence of
negligence. It is a rule of evidence whereby negligence of the alleged wrongdoer may be inferred from
the mere fact that the accident happened, provided that the character of the accident and
circumstances attending it lead reasonably to the belief that in the absence of negligence it would not
have occurred and that the thing which caused injury is shown to have been under the management and
control of the alleged wrongdoer.[11]
Under this doctrine, the happening of an injury permits an inference of negligence where the plaintiff
produces substantial evidence that the injury was caused by an agency or instrumentality under the
exclusive control and management of the defendant, and that the injury was such that in the ordinary
course of things would not happen if reasonable care had been used.[12]
However, res ipsa loquitur is not a rigid or ordinary doctrine to be perfunctorily used but a rule to be
cautiously applied, depending upon the circumstances of each case.[13] In malpractice cases, the
doctrine is generally restricted to situations where a layman is able to say, as a matter of common
knowledge and observation, that the consequences of professional care were not as such as would
ordinarily have followed if due care had been exercised. In other words, as held in Ramos v. Court of
Appeals,[14] the real question is whether or not in the process of the operation, any extraordinary
incident or unusual event outside of the routine performance occurred which is beyond the regular
scope of professional activity in such operations, and which, if unexplained, would
themselves reasonably speakto the average man as the negligent cause or causes of the untoward
consequence.
Here, we find that the CA correctly found that petitioners failed to present substantial evidence of any
specific act of negligence on respondent's part or of the surrounding facts and circumstances which
would lead to the reasonable inference that the untoward consequence was caused by respondent's
negligence. In fact, under the established facts, respondent appears to have observed the proper
amount of care required under the circumstances. Having seen that Dr. Jabagat failed in the intubation,
respondent inquired from the latter, who was the expert on the matter of administering anesthesia,
whether the surgery should be postponed considering the failure to intubate. Respondent testified,
WITNESS:
A- Actually sir, if I may cut short, I'm sorry. I don't know what is the term of this sir. But what
actually, what we had was that Dr. Jabagat failed in the intubation. He was not able to insert
the tube.
ATTY. PADILLA:
Q- And you noticed that he failed?

A- Yes, sir.
xxxx
ATTY. PADILLA:
Q- And you noticed that he failed and still you continued the surgery, Dr. Gerona?
A- Yes, I continued the surgery.
xxxx
COURT:
Q- Did not Dr. Jabagat advise you not to proceed with the operation because the tube cannot be
inserted?
A- No, sir. In fact, I was the one who asked him, sir, the tube is not inserted, shall we postpone
this for another date? He said, it's alright.[15]
Respondent further verified that Allen was still breathing by looking at his chest to check that there was
excursion before proceeding with the surgery.[16] That respondent decided to continue with the surgery
even though there was a failure to intubate also does not tend to establish liability, contrary to the trial
court's ruling. Petitioners failed to present substantial proof that intubation was an indispensable
prerequisite for the operation and that it would be grave error for any surgeon to continue with the
operation under such circumstances. In fact, the testimony of the expert witness presented by the
prosecution in the criminal proceedings and admitted into evidence at the RTC, was even to the effect
that the anesthesia could be administered by alternative means such as a mask and that the operation
could proceed even without intubation.[17]
There was also no indication in the records that respondent saw or should have seen that something
was wrong as to prompt him to act differently than he did in this case. The anesthesia used in the
operation was the same anesthesia used in the previous closed reduction procedure, and Allen did not
register any adverse reaction to it. In fact, respondent knows the anesthesia Ketalar to be safe for
children. Dr. Jabagat was also a specialist and more competent than respondent to determine whether
the patient has been properly anesthetized for the operation, all things considered. Lastly, it appears
that Allen started experiencing difficulty in breathing only after the operation, when respondent was
already about to jot down his post-operation notes in the adjacent room. Respondent was called back
to the operating room after Dr. Jabagat failed to appreciate a heartbeat on the patient.[18] He acted
promptly and called for other doctors to assist and revive Allen, but to no avail.
Moreover, we note that in the instant case, the instrument which caused the damage or injury was not
even within respondent's exclusive management and control as Dr. Jabagat was exclusively in control
and management of the anesthesia and the endotracheal tube. The doctrine of res ipsa loquitur allows
the mere existence of an injury to justify a presumption of negligence on the part of the person who
controls the instrument causing the injury, provided that the following requisites concur:
1. The accident is of a kind which ordinarily does not occur in the absence of someone's negligence:
2. It is caused by an instrumentality within the exclusive control of the defendant or defendants; and
3. The possibility of contributing conduct which would make the plaintiff responsible is eliminated.[19]
Here, the respondent could only supervise Dr. Jabagat to make sure that he was performing his
duties. But respondent could not dictate upon Dr. Jabagat the particular anesthesia to administer, the
dosage thereof, or that it be administered in any particular way not deemed appropriate by Dr.
Jabagat. Respondent's specialization not being in the field of anesthesiology, it would be dangerous for
him to substitute his judgment for Dr. Jabagat's decisions in matters that fall appropriately within the
scope of Dr. Jabagat's expertise.
Under the above circumstances, although the Court commiserates with the petitioners on their infinitely
sorrowful loss, the Court cannot properly declare that respondent failed to exercise the required
standard of care as lead surgeon as to hold him liable for damages for Allen's death.
In civil cases, the burden of proof to be established by preponderance of evidence is on the plaintiff who
is asserting the affirmative of an issue.20 Unless the party asserting the affirmative of an issue sustains
the burden of proof, his or her cause will not succeed.
WHEREFORE, the petition is DENIED. The Decision dated June 28, 2006 and Resolution dated January
19, 2007 of the Court of Appeals in CA-G.R. CV No. 00201 are AFFIRMED.
No pronouncement as to costs.
SO ORDERED
SUPREME COURT
Manila
EN BANC
G.R. No. L-7349 July 19, 1955
ATOK-BIG WEDGE MUTUAL BENEFIT ASSOCIATION, petitioner,

vs.
ATOK-BIG WEDGE MINING COMPANY, INCORPORATED, respondents.
Pablo C. Sanidad for petitioner.

Roxas and Sarmiento for respondents.
REYES, J. B. L., J.:
On September 4, 1950, the petitioner labor union, the Atok-Big Wedge Mutual Benefit Association,
submitted to the Atok-Big Wedge Mining Co., Inc. (respondent herein) several demands, among
which was an increase of P0.50 in daily wage. The matter was referred by the mining company to
the Court of Industrial Relations for arbitration and settlement (Case No. 523-V). In the course of
conciliatory measures taken by the Court, some of the demands were granted, and others (including
the demand for increased wages) rejected, and so, hearings proceeded and evidence submitted on
the latter. On July 14, 1951, the Court rendered a decision (Record, pp. 25-32) fixing the minimum
wage at P2.65 a day with the rice ration, or P3.20 without rice ration; denying the deduction from
such minimum wage, of the value of housing facilities furnished by the company to the laborers, as
well as the efficiency bonus given to them by the company; and ordered that the award be made
effective retroactively from the date of the demand, September 4, 1950, as agreed by the parties.
From this decision, the mining company appealed to this Court (G.R. No. L-5276).
Subsequently, an urgent petition was presented in Court on October 15, 1952 by the Atok-Big
Wedge Mining Company for authority to stop operations and lay off employees and laborers, for the
reason that due to the heavy losses, increased taxes, high cost of materials, negligible quantity of
ore deposits, and the enforcement of the Minimum Wage Law, the continued operation of the
company would lead to its immediate bankruptcy and collapse (Rec. pp. 100-109). To avert the
closure of the company and the consequent lay-off of hundreds of laborers and employees, the
Court, instead of hearing the petition on the merits, convened the parties for voluntary conciliation
and mediation. After lengthy discussions and exchange of views, the parties on October 29, 1952
reached an agreement effective from August 4, 1952 to December 31, 1954 (Rec. pp. 18-23). The
Agreement in part provides:
That the petitioner, Atok-Big Wedge Mining Company, Incorporated, agrees to abide by
whatever decision that the Supreme Court may render with respect to Case No. 523-V (G.R.
5276) and Case No. 523-1 (10) (G.R. 5594).
xxx xxx xxx
III
xxx xxx xxx
That the petitioner, Atok-Big Wedge Mining Company, Incorporated, and the respondent,
Atok-Big Wedge Mutual Benefit Association, agree that the following facilities heretofore
given or actually being given by the petitioner to its workers and laborers, and which
constitute as part of their wages, be valued as follows:
P.55 per
Rice ration day
Housing facility 40 per day
All other facilities such as recreation
facilities, medical treatment to
dependents of laborers, school
facilities, rice ration during off-days,
water, light, fuel, etc., equivalent to
at least 85 per day
It is understood that the said amount of facilities valued at the abovementioned prices, may be
charged in full or partially by the Atok-Big Wedge Mining Company, Inc., against laborer or
employee, as it may see fit pursuant to the exigencies of its operation.
The agreement was submitted to the Court for approval and on December 26, 1952, was approved
by the Court in an order giving it effect as an award or decision in the case (Rec., p. 24).
Later, Case No. G.R. No. L-5276 was decided by this Court (promulgated March 3, 1953), affirming
the decision of the Court of Industrial Relations fixing the minimum cash wage of the laborers and
employees of the Atok-Big Wedge Mining Co. at P3.20 cash, without rice ration, or P2.65, with rice
ration. On June 13, 1953, the labor union presented to the Court a petition for the enforcement of the
terms of the agreement of October 29, 1952, as allegedly modified by the decision of this Court in
G.R. No. L-5276 and the provisions of the Minimum Wage Law, which has since taken effect,
praying for the payment of the minimum cash wage of P3.45 a day with rice ration, or P4.00 without
rice ration, and the payment of differential pay from August 4, 1952, when the award became
effective. The mining company opposed the petition claiming that the Agreement of October 29,
1952 was entered into by the parties with the end in view that the company's cost of production be
not increased in any way, so that it was intended to supersede whatever decision the Supreme
Court would render in G.R. No. L-5276 and the provisions of the Minimum Wage Law with respect to
the minimum cash wage payable to the laborers and employees. Sustaining the opposition, the
Court of Industrial Relations, in an order issued on September 22, 1953 (Rec. pp. 44-49), denied the
petition, upon the ground that when the Agreement of the parties of October 29, 1952 was entered
into by them, they already knew the decision of said Court (although subject to appeal to the
Supreme Court) fixing the minimum cash wage at P3.20 without rice ration, or P2.65 with rice ration,
as well as the provisions of the Minimum Wage Law requiring the payment of P4 minimum daily
wage in the provinces effective August 4, 1952; so that the parties had intended to be regulated by
their Agreement of October 29, 1952. On the same day, the Court issued another order (Rec. pp.
50-55), denying the claim of the labor union for payment of an additional 50 per cent based on the
basic wage of P4 for work on Sundays and holidays, holding that the payments being made by the
company were within the requirements of the law. Its motion for the reconsideration of both orders
having been denied, the labor union filed this petition for review by certiorari.
The first issue submitted to us arises from an apparent contradiction in the Agreement of October
29, 1952. By paragraph III thereof, the parties by common consent evaluated the facilities furnished
by the Company to its laborers (rice rations, housing, recreation, medical treatment, water, light, fuel,
etc.) at P1.80 per day, and authorized the company to have such value "charge in full or partially —
against any laborer or employee as it may see fit"; while in paragraph I, the Company agreed to
abide by the decision of this Court (pending at the time the agreement was had) in G.R. No. L-5594;
and as rendered, the decision was to the effect that the Company could deduct from the minimum
wage only the value of the rice ration.
It is contended by the petitioner union that the two provisions should be harmonized by holding
paragraph III (deduction of all facilities) to be merely provisional, effective only while this Court had
not rendered its decision in G.R. No. L-5594; and that the terms of said paragraph should be
deemed superseded by the decision from the time the latter became final, some four or five months
after the agreement was entered into; in consequence, (it is claimed), the laborers became entitled
by virtue of said decision to the prevailing P4.00 minimum wage with no other deduction than that of
the rice ration, or a net cash wage of P3.45.
This contention, in our opinion, is untenable. The intention of the parties could not have been to
make the arrangement in paragraph III a merely provisional arrangement pending the decision of the
Supreme Court for "this agreement" was expressly made retroactive and effective as of August 4,
1952, and to be in force up to and including December 31, 1954" (Par. IV). When concluded on
October 29, 1952, neither party could anticipate the date when the decision of the Supreme Court
would be rendered; nor is any reason shown why the parties should desire to limit the effects of the
decision to the period 1952-1954 if it was to supersede the agreement of October 29, 1952.
To ascertain the true import of paragraph I of said Agreement providing that the respondent
company agreed to abide by whatever decision the Supreme Court would render in G.R. No. L-
5276, it is important to remember that, as shown by the records, the agreement was prompted by an
urgent petition filed by the respondent mining company to close operations and lay-off laborers
because of heavy losses and the full enforcement of the Minimum Wage Law in the provinces,
requiring it to pay its laborers the minimum wage of P4; to avoid such eventuality, through the
mediation of the Court of Industrial Relations, a compromise was reached whereby it was agreed
that the company would pay the minimum wage fixed by the law, but the facilities then being
received by the laborers would be evaluated and charged as part of the wage, but without in any
way reducing the P2.00 cash portion of their wages which they were receiving prior to the agreement
(hearing of Oct. 28, 1952, CIR, t.s.n. 47). In other words, while it was the objective of the parties to
comply with the requirements of the Minimum Wage Law, it was also deemed important that the
mining company should not have to increase the cash wages it was then paying its laborers, so that
its cost of production would not also be increased, in order to prevent its closure and the lay-off of
employees and laborers. And as found by the Court below in the order appealed from (which finding
is conclusive upon us), "it is this eventuality that the parties did not like to happen, when they have
executed the said agreement" (Rec. p. 49). Accordingly, after said agreement was entered into, the
Company started paying its laborers a basic cash or "take-home" wage of P2.20 (Rec. p. 9),
representing the difference between P4 (minimum wage) and P1.80 (value of all facilities).
With this background, the provision to abide by our decision in G.R. No. L-5276 can only be
interpreted thus: That the company agreed to pay whatever award this Court would make in said
case from the date fixed by the decision (which was that of the original demand, September 4, 1950)
up to August 3, 1952 (the day previous to the effectivity of the Compromise Agreement) and from
August 4, 1954 to December 31, 1954, they are to be bound by their agreement of October 29,
1952.
This means that during the first period (September 4, 1950 to August 3, 1952), only rice rations
given to the laborers are to be regarded as forming part of their wage and deductible therefrom. The
minimum wage was then fixed (by the Court of Industrial Relations, and affirmed by this Court) at
P3.20 without rice ration, or P2.65 with rice ration. Since the respondent company had been paying
its laborers the basic cash or "take-home" wage of P2 prior to said decision and up to August 3,
1952, the laborers are entitled to a differential pay of P0.65 per working day from September 4, 1950
(the date of the effectivity of the award in G.R. L-5276) up to August 3, 1952.
From August 4, 1952, the date when the Agreement of the parties of October 29, 1952 became
effective (which was also the date when the Minimum Wage Law became fully enforceable in the
provinces), the laborers should be paid a minimum wage of P4 a day. From this amount, the
respondent mining company is given the right to charge each laborer "in full or partially", the facilities
enumerated in par. III of the Agreement; i.e., rice ration at P0.55 per day, housing facility at P0.40
per day, and other facilities "constitute part of his wages". It appears that the company had actually
been paying its laborers the minimum wage of P2.20 since August 4, 1952; hence they are not
entitled to any differential pay from this date.
Petitioner argues that to allow the deductions stipulated in the Agreement of October 29, 1952 from
the minimum daily wage of P4 would be a waiver of the minimum wage fixed by the law and hence
null and void, since Republic Act No. 602, section 20, provides that "no agreement or contract, oral
or written, to accept a lower wage or less than any other under this Act, shall be valid". An
agreement to deduct certain facilities received by the laborers from their employer is not a waiver of
the minimum wage fixed by the law. Wage, as defined by section 2 of Republic Act No. 602,
"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." Thus, the law permits the
deduction of such facilities from the laborer's minimum wage of P4, as long as their value is "fair and
reasonable". It is not here claimed that the valuations fixed in the Agreement of October 29, 1952
are not fair and reasonable. On the contrary, the agreement expressly states that such valuations:
"have been arrived at after careful study and deliberation by both representatives of both
parties, with the assistance of their respective counsels, and in the presence of the
Honorable Presiding Judge of the Court of Industrial Relations" (Rec. p. 2).
Neither is it claimed that the parties, with the aid of the Court of Industrial Relations in a dispute
pending before it, may not fix by agreement the valuation of such facilities, without referring the
matter to the Department of Labor.
Petitioner also argues that to allow the deductions of the facilities appearing in the
Agreement referred to, would be contrary to the mandate of section 19 of the law, that
"nothing in this Act . . . justify an employer . . . in reducing supplements furnished on the date
of enactment.
The meaning of the term "supplements" has been fixed by the Code of Rules and Regulations
promulgated by the Wage Administration Office to implement the Minimum Wage Law (Ch. 1, [c]),
as:
extra renumeration or benefits received by wage earners from their employees 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; sick, 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.
"Supplements", therefore, constitute extra renumeration 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 the 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. It is thus clear that the facilities mentioned in the agreement of
October 29, 1952 do not come within the term "supplements" as used in Art. 19 of the Minimum
Wage Law.
For the above reasons, we find the appeal from the Order of the Court a quo of September 22, 1953
denying the motion of the petitioner labor union for the payment of the minimum wage of P3.45 per
day plus rice ration, or P4 without rice ration, to be unmeritorious and untenable.
The second question involved herein relates to the additional compensation that should be paid by
the respondent company to its laborers for work rendered on Sundays and holidays. It is admitted
that the respondent company is paying an additional compensation of 50 per cent based on the
basic "cash portion" of the laborer's wage of P2.20 per day; i.e., P1.10 additional compensation for
each Sunday or holiday's work. Petitioner union insists, however, that this 50 per cent additional
compensation should be computed on the minimum wage of P400 and not on the "cash portion" of
the laborer's wage of P2.20, under the provisions of the Agreement of October 29, 1952 and the
Minimum Wage Law.
SEC. 4. Commonwealth Act No. 444 (otherwise known as the Eight Hour Labor Law) provides:
No person, firm, or corporations, business establishment or place or center of labor shall

compel an employee or laborer to work during Sundays and holidays, unless he is paid an
additional sum of at least twenty-five per centum of his regular renumeration:
The minimum legal additional compensation for work on Sundays and legal holidays is, therefore, 25
per cent of the laborer's regular renumeration. Under the Minimum Wage Law, this minimum
additional compensation is P1 a day (25 per cent of P4, the minimum daily wage).
While the respondent company computes the additional compensation given to its laborers for work
on Sundays and holidays on the "cash portion" of their wages of P2.20, it is giving them 50 per cent
thereof, or P1.10 a day. Considering that the minimum additional compensation fixed by the law is
P1 (25 per cent of P4), the compensation being paid by the respondent company to its laborers is
even higher than such minimum legal additional compensation. We, therefore, see no error in the
holding of the Court a quo that the respondent company has not violated the law with respect to the
payment of additional compensation for work rendered by its laborers on Sundays and legal
holidays.
Finding no reason to sustain the present petition for review, the same is, therefore, dismissed, with
costs against the petitioner Atok-Big Wedge Mutual Benefit Association.
Bengzon, Acting C.J., Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo, Labrador, and
Concepcion, JJ.,concur.
SUPREME COURT
Manila
EN BANC
G.R. No. L-5103 December 24, 1952
PHILIPPINE EDUCATION CO., INC., petitioner,

vs.
COURT OF INDUSTRIAL RELATIONS and UNION OF PHILIPPINE EDUCATION EMPLOYEES
(NLU),respondents.
Marcial Esposo for petitioner.

Eulogio R. Lerum and M.A. Ferrer for respondents.
PADILLA, J.:
On August 1950 the respondent Union of Philippine Education Employees (NLU) filed a petition in
the Court of Industrial Relations submitting a 17-point demand for arbitration and adjudication (Case
No. 489-V). On 27 November, the respondent union filed in the same case a motion. (No. 489-V[4]),
pleading —
1. That it had been the established policy and practice of the respondent to consider its
employees and laborers as part-owners of its business and to grant them a share in the
profits annually in the form of a bonus:
2. That for the fiscal year ending on March 31, 1950, the respondent made a net profit of
P513,666.39 out of its invested capital of P1,973,300.00;
3. That on September 20, 1950, a demand was made by the petitioner on the respondent for
the payment of the bonus corresponding to the share of the employees and laborers in the
profits made by it, but by reason of the union activities of the said employees and laborers,
the respondent refused to pay the same;
4. That a profit of twelve percent of the capital invested had been considered by this court as
a fair return on investments.
The motion ends with a prayer that the petitioner "be ordered to pay its employees and laborers as
their share in the profits in the form of a bonus the amount of P513,666.39 less an amount
corresponding the 12 per cent of P1,973,300 as the profit of the company on its invested capital."
Petitioner's answer denied the allegations of the respondent union that it had considered its
employees and laborers as part owners of its business and that for that reason granted them a share
in the profits annually in the form of bonuses, the truth being that bonuses have been paid by the
company in its discretion, merely as a gift to deserving employees as it saw fit; admitted that it had
realized profits amounting to P513,666.39 upon its invested capital of P1,973,300.00; that a demand
for payment of bonuses was made but they were not paid not because of union activities but of
losses sustained by reason of the strike and of the damaging effects of the import and exchange
controls; alleged that the court did not have jurisdiction over the matter of the motion and could not
entertain it for the reason that the basic petition of the respondent union contained no demand for
payment of bonus, and that it would be taking property without due process of law and, therefore,
unconstitutional, if the court would compel the petitioner to pay its employees and laborers the profits
it had realized in excess of 12 per cent of its invested capital.
On 30 July 1951 the Court of Industrial Relations issued an order directing the petitioner to pay the
amount of P90,706.36 set aside as bonus to its officers and employees who had been in the service
during the fiscal year ending 31 March 1950 in proportion to their respective salaries and length of
service. This order was followed by another in banc denying unanimously a motion for
reconsideration.
The case is now before us upon a petition for a writ of certiorari to review the order.
It is contented that in accordance with sections 2 and 4 of Rule 2, which discourage multiplicity of
suits or splitting a cause of action, the petition filed on 9 August 1950 which failed to include a
demand for the payment of bonus may be pleased in abatement of the motion praying for such
payment. This is true in ordinary civil suits but not in proceedings in the Court of Industrial Relations.
However, the original 17-demand petition was filed on 9 August 1950, the demand for the payment
of bonus was made on 20 September and the motion to compel the petitioner to pay it was filed on
27 November after the latter's refusal to pay the same, so that the motion may be deemed to be a
supplemental pleading of a demand which arose subsequent to the filing of the original petition. The
respondent union could not have included the demand for the payment of bonus in its original 17-
demand petition because on the date of its fling it did not know whether its demand for the payment
of bonus was to be granted. lawphil.net
Petitioner's admission of the facts pleaded in par. 2 of the motion of 27 November which reads thus
—
That for the fiscal year ending on March 31, 1950, the respondent made a net profit of
P513,666.39 out of its invested capital of P1,973,300.00.
despite the objection to the hearing of the motion to compel it to pay bonus upon its erroneous belief
that the Court had no jurisdiction to hear the motion which led it not to present any evidence,
dispenses with the presentation of evidence on the amount of profit realized out of the capital
invested in its business during the fiscal year ending 31 March 1950. Although there is no express
admission by the petitioners as to the sum of P90,706.36 set aside to pay bonus the evidence shows
that such amount has been set aside for the purpose (Exhibit F). The petitioner does not deny it.
Section 13 of Commonwealth Act No. 103 authorizes and empowers the Court of Industrial
Relations to make awards not only on the specific relief claimed or demand made by the parties to a
dispute, but also on such as it may deem necessary or expedient to settle or prevent further
disputes. One reason for denying the payment of bonus is the strike by members of the respondent
union which caused losses to the petitioner. The order of the respondent court states that the strike
staged on 20 August 1950 was declared legal in its order of 27 October from which no appeal was
taken. Another is the anticipated adverse effect on its business by the import and exchange controls.
As a rule, a bonus is an amount granted and paid to an employee for his industry and loyalty which
contributed to the success of the employer's business and made possible the realization of profits. It
is an act of generosity of the employer for which the employee ought to be thankful and grateful. It is
also granted by an enlightened employer to spur the employee to greater efforts for the success of
the business and realization of bigger profits. And the occasion for its grant and payment is usually
during the time of the year when people are more generous and inclined to give. This is the
Christmas holidays. If by the bookkeeping or accounting system the closing of the books is not made
at the end of the calendar year, bonus is granted at the close of the fiscal year when the net profits
realized in the preceding year are definitely known. From the legal point of view a bonus is not a
demandable and enforceable obligation. It is so when it is made a part of the wage or salary or
compensation. In such a case the latter would be a fixed amount and the former would be a
contingent one dependent upon the realization of profits. If there be more, there would be no bonus.
In the matter of Sullivan Dry Dock and Repair Corporation and Local 13, Industrial Union of Marine
and Shipbuilding Workers of America, C.I.O. (Decisions and Orders of the National Labor Relations
Board, Vol. 67, page 627), cited by the respondent court and the respondent union, the Christmas
bonus paid in previous years and paid in 1944 to other workers was withheld from the timekeepers;
the latter through their representative demanded its payment; the management refused to pay it but
proposed that the payment of bonus for the ensuing year (1945) be made the subject of bargaining
for contract. The company's attorney and labor relations officer stated that the bonus paid "has been
in existence for such a period of time that it has been, under the interpretation of the Wage
Stabilization Act, an integral part of the wage structure." (p. 632.) The bonus demanded was ordered
paid. The case of Singer Mfg. Co. vs. National Labor Relations Board, 119 F. 2d 131, invoked by the
respondent union on the matter of bonus, has no application to the present case because what the
Circuit Court of Appeals, Seventh Circuit, ruled is that the petitioner refused to bargain in good faith
with its employees and their designated bargaining agent and among the matters to be threshed out
was the payment of bonus as part of the wage. What would support, though faintly, respondent
union's position is the rule laid down by the Supreme Court of Washington (state) in Powell, et al. vs.
Republic Creosoting Co., 19P. 2d 919, where it was held (one justice dissenting) that bonus
payment made annually for over a period of years (from 1916 to 1929) by the employer to a branch
manager constituted, by implied agreement, part of the manager's salary.
As heretofore stated the payment of bonus is not from the legal point of view a contractual and
enforceable obligation. But the petitioner is not sued before a court of justice. It is before the Court of
Industrial Relations. And according to the law of its creation it may make an award for the purpose of
settling and preventing further disputes. And taking into consideration the facts and circumstances of
the case — that bonuses had been given to the employees at least in three previous years; that the
amount of P90,706.36 has been set aside for payment as bonus to its employees and laborers and
the reason for withholding the payment thereof was the strike staged by the employees and laborers
for more favorable working conditions which was declared legal by the respondent court — justice
and equity demand that bonus already set aside for its employees and laborers be paid to them. The
award would still be within the ambit of the respondent court's power and function which is mainly to
prevent further disputes and perhaps strikes which is so detrimental to both labor and management
and to the public weal. Whether this petition be deemed an appeal by certiorari under Rule 44 or one
of certiorari under Rule 67, it is clear that the respondent court had under and pursuant to the law of
its creation the power and authority to make the award complained of. The order appealed from is
affirmed, without costs.
Paras, C.J., Pablo, Bengzon, Tuason, Jugo, Bautista Angelo and Labrador, JJ., concur.
[G.R. No. 88168. August 30, 1990.]
TRADERS ROYAL BANK, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION & TRADERS ROYAL
BANK EMPLOYEES UNION, Respondents.
San Juan, Gonzalez, San Agustin & Sinense for Petitioner.
E.N.A. Cruz, Enfero & Associates for Private Respondent.
DECISION
GRIÑO-AQUINO, J.:
This petition for certiorari seeks to nullify or set aside the decision dated September 2, 1988 of the
National Labor Relations Commission, which found the petitioner, Traders Royal Bank (or TRB), guilty of
diminution of benefits due the private respondents and ordered it to pay the said employees’ claims for
differentials in their holiday, mid-year, and year-end bonuses.
On November 18, 1986, the Union, through its president, filed a letter-complaint against TRB with the
Conciliation Division of the Bureau of Labor Relations claiming that:jgc:chanrobles.com.ph
"First, the management of TRB per memo dated October 10, 1986 paid the employees their HOLIDAY
PAY, but has withheld from the Union the basis of their computation.
"Second, the computation in question, has allegedly decreased the daily salary rate of the employees.
This diminution of existing benefits has decreased our overtime rate and has affected the employees’
take home pay.
"Third, the diminution of benefits being enjoyed by the employees since time immemorial, e.g. mid-year
bonus, from two (2) months gross pay to two (2) months basic and year-end bonus from three (3)
months gross to only two (2) months.chanrobles lawlibrary : rednad
"Fourth, the refusal by management to recall active union members from the branches which were
being transferred without prior notice, solely at the instance of the branch manager." (p. 26, Rollo.).
In its answer to the union’s complaint, TRB pointed out that the NLRC, not the Bureau of Labor
Relations, had jurisdiction over the money claims of the employees.
On March 24, 1987, the Secretary of Labor certified the complaint to the NLRC for resolution of the
following issues raised by the complainants:jgc:chanrobles.com.ph
"1) The Management of TRB per memo dated October 10, 1986 paid the employees their holiday
pay but has withheld from the union the basis of their computation.
"2) The computation in question has allegedly decreased the daily salary rate of the employees. This
diminution of existing benefits has decreased our overtime rate and has affected the employees’ take
home pay.
"3) The diminution of benefits being enjoyed by the employees since the (sic) immemorial, e.g. mid-
year bonus, from two (2) months gross pay to two (2) months basic and year-end bonus from three (3)
months gross to only two (2) months.
"4) The refusal by management to recall active union members from the branches which were
being transferred without prior notice, solely at the instance of the branch, manager." (p. 28, Rollo.)
In the meantime, the parties who had been negotiating for a collective bargaining agreement, agreed on
the terms of the CBA, to wit:jgc:chanrobles.com.ph
"1. The whole of the bonuses given in previous years is not demandable, i.e., there is no diminution,
as to be liable for a differential, if the bonus given is less than that in previous years.
"2. Since only two months bonus is guaranteed, only to that extent are bonuses deemed part of
regular compensation.
"3. As regards the third and fourth bonuses, they are entirely dependent on the income of the bank,
and not demandable as part of compensation." (pp. 67-68, Rollo.).
Despite the terms of the CBA, however, the union insisted on pursuing the case, arguing that the CBA
would apply prospectively only to claims arising after its effectivity.chanrobles virtual lawlibrary
Petitioner, on the other hand, insisted that it had paid the employees holiday pay. The practice of giving
them bonuses at year’s end, would depend on how profitable the operation of the bank had been.
Generally, the bonus given was two (2) months basic mid-year and two (2) months gross end-year.
On September 2, 1988, the NLRC rendered a decision in favor of the employees, the dispositive portion
of which reads:jgc:chanrobles.com.ph
"WHEREFORE, judgment is hereby rendered in favor of the petitioner and ordering respondent bank to
pay petitioner members-employees the following:jgc:chanrobles.com.ph
"1. Holiday differential for the period covering 1983-1986 as embodied in Resolution No. 4984-1986
of respondent’s Board of Directors but to start from November 11, 1983 and using the Divisor 251 days
in determining the daily rate of the employees;
"2. Mid-year bonus differential representing the difference between two (2) months gross pay and
two (2) months basic pay and end-year bonus differential of one (1) month gross pay for 1986.
"The claim for holiday differential for the period earlier than November 11, 1983 is hereby dismissed,
the same having prescribed.
"Likewise, the charge of unfair labor practice against the respondent company is hereby dismissed for
lack of merit." (pp. 72-73, Rollo.).
A motion for reconsideration was filed by TRB but it was denied. Hence, this petition for certiorari.
There is merit in the petitioner’s contention that the NLRC gravely abused its discretion in ordering it to
pay mid-year/year-end bonus differential for 1986 to its employees.
A bonus is "a gratuity or act of liberality of the giver which the recipient has no right to demand as a
matter of right" (Aragon v. Cebu Portland Cement Co., 61 O.G. 4597). "It is something given in addition
to what is ordinarily received by or strictly due the recipient." The granting of a bonus is basically a
management prerogative which cannot be forced upon the employer "who may not be obliged to
assume the onerous burden of granting bonuses or other benefits aside from the employee’s basic
salaries or wages . . ." (Kamaya Point Hotel v. National Labor Relations Commission, Federation of Free
Workers and Nemia Quiambao, G.R. No. 75289, August 31, 1989).
It is clear from the above-cited rulings that the petitioner may not be obliged to pay bonuses to its
employees. The matter of giving them bonuses over and above their lawful salaries and allowances is
entirely dependent on the profits, if any, realized by the Bank from its operations during the past year.
From 1979-1985, the bonuses were less because the income of the Bank had decreased. In 1986, the
income of the Bank was only 20.2 million pesos, but the Bank still gave out the usual two (2) months
basic mid-year and two months gross year-end bonuses. The petitioner pointed out, however, that the
Bank weakened considerably after 1986 on account of political developments in the country. Suspected
to be a Marcos-owned or controlled bank, it was placed under sequestration by the present
administration and is now managed by the Presidential Commission on Good Government (PCGG).
In the light of these submissions of the petitioner, the contention of the Union that the granting of
bonuses to the employees had ripened into a company practice that may not be adjusted to the
prevailing financial condition of the Bank has no legal and moral bases. Its fiscal condition having
declined, the Bank may not be forced to distribute bonuses which it can no longer afford to pay and, in
effect, be penalized for its past generosity to its employees.
Private respondent’s contention, that the decrease in the mid-year and year-end bonuses constituted a
diminution of the employees’ salaries, is not correct, for bonuses are not part of labor standards in the
same class as salaries, cost of living allowances, holiday pay, and leave benefits, which are provided by
the Labor Code.
WHEREFORE, the petition for certiorari is granted. The decision of the National Labor Relations
Commission is modified by deleting the award of bonus differentials to the employees for 1986. In other
respects, the decision is affirmed. Costs against the respondent union.
SO ORDERED
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 111744 September 8, 1995
LOURDES G. MARCOS, ALEJANDRO T. ANDRADA, BALTAZARA J. LOPEZ AND VILMA L.

CRUZ, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and INSULAR LIFE ASSURANCE CO.,
LTD., respondents.
REGALADO, J.:
This petition for certiorari seeks the nullification of the decision1 of the National Labor Relations
Commission (NLRC) promulgated on May 31, 1992 in NLRC NCR CA No. 004120-92, and its
resolution dated August 27, 1993 denying petitioner's motion for reconsideration thereof. The said
decision set aside on appeal, the decision of Labor Arbiter Alex Arcadio Lopez ordering private
respondent to pay petitioners their service awards, anniversary bonus and prorated performance
bonus in the amount of P144,579.00 and 10% attorney's fees in the amount of P14,457.90.2
First, the undisputed facts.
Petitioners were regular employees of private respondent Insular Life Assurance Co:, Ltd., but they
were dismissed on November 1, 1990 when their positions were declared redundant. A special
redundancy benefit was paid to them, which included payment of accrued vacation leave and fifty
percent (50%) of unused current sick leave, special redundancy benefit, equivalent to three (3)
months salary for every year of service; and additional cash benefits, in lieu of other benefits
provided by the company or required by law.3
Before the termination of their services, petitioner Marcos had been in the employ of private
respondent for more than twenty (20) years, from August 26, ]970; petitioner Andrada, more than
twenty-five (25) years, from July 26, 1965; petitioner Lopez, exactly thirty (30) years, from October
31, 1960; and petitioner Cruz, more than twenty (20) years, from March 1, 1970.4
Petitioners, particularly Baltazara J. Lopez, sent a letter dated October 23, 1990 to respondent
company questioning the redundancy package, She claimed that they should receive their
respective service awards and other prorated bonuses which they had earned at the time they were
dismissed. In addition, Lopez argued that "the cash service awards have already been budgeted in a
fund distinct and apart from redundancy fund.5
Thereafter, private respondent required petitioners to execute a "Release and Quitclaim,"6 and
petitioners complied but with a written protest reiterating their previous demand that they were
nonetheless entitled to receive their service awards.
On March 21, 1991, petitioners inquired from the Legal Service of the Department of Labor and
Employment7whether respondent corporation could legally refuse the payment of their service
awards as mandated in their Employee's Manual.
About three months later the labor department issued its opinion, with pertinent authorities,
responding to petitioners' query as follows:
xxx xxx xxx
This Department believes that your query presents several issues. These shall be
addressed point by point, thus:
First, the Department deems the service award to be part of the

benefits of the employees of Insular Life. Company policies and
practices are fertile sources of employee's rights. These must be
applied uniformly as interpretation cannot vary from one employee to
another. . . .
xxx xxx xxx
While it may be argued that the above-cited case applies only to retirement benefits,
we find solace in the cases of Liberation Steamship Co., Inc. vs. CIR and National
Development Company vs. Unlicensed Crew members of Three Dons vessels (23
SCRA 1105) where the Supreme Court held that a gratuity or bonus, by reason of its
long and regular concession indicating company practice, may become regarded as
part of regular compensation and thus demandable.
xxx xxx xxx
Second, the award is earned at the pertinent anniversary date. At this time,
entitlement to the award becomes vested. The anniversary date is the only crucial
determining factor. Since the award accrues on that date, it is of no moment that the
entitled employee is separated from service (for whatever cause) before the awards
are physically handed out.
xxx xxx xxx
Third, even if the award has not accrued — as when an employee is separated from
service because of redundancy before the applicable 5th year anniversary, the
material benefits of the award must be given, prorated, by Insular Life. This is
especially true (in) redundancy, wherein he/she had no control.
xxx xxx xxx
Fourth, the fact that you were required to sign "Release and Quitclaim" does not
affect your right to the material benefits of the service award. . . .8
Meanwhile, in the same year, private respondent celebrated its 80th anniversary wherein the
management approved the grant of an anniversary bonus equivalent to one (1) month salary only to
permanent and probationary employees as of November 15, 1990.9
On March 26, 1991, respondent company announced the grant of performance bonus to both rank
and file employees and supervisory specialist grade and managerial staff equivalent to two (2)
months salary and 2.75 basic salary, respectively, as of December 30, 1990. The performance
bonus, however, would be given only to permanent employees as of March 30, 1991. 10
Despite the aforequoted opinion of the Department of Labor and Employment, private respondent
refused to pay petitioners service awards. This prompted the latter to file a consolidated complaint,
which was assigned to NLRC Labor Arbiter Lopez, for payment of their service awards, including
performance and anniversary bonuses.
In their complaint, petitioners contended that they are likewise entitled to the performance and
anniversary bonuses because, at the time the performance bonus was announced to be given, they
were only short of two (2) months service to be entitled to the full amount thereof as they had
already served the company for ten (10) months prior to the declaration of the grant of said benefit.
Also, they lacked only fifteen (15) days to be entitled to the full amount of the anniversary bonus
when it was announced to be given to employees as of November 15, 1990.
In a decision dated October 8, 1992, the labor arbiter ordered respondent company to pay
petitioners their service awards, anniversary bonuses and prorated performance bonuses, including
ten percent (10%) thereof as attorney's fees.
Respondent company appealed to public respondent NLRC claiming grave abuse of discretion
committed by the labor arbiter in holding it liable to pay said service award, performance and
anniversary bonuses, and in not finding that petitioners were estopped from claiming the same as
said benefits had already been given to them.
In setting aside the decision of the labor arbiter, respondent NLRC upheld the validity of the
quitclaim document executed by petitioners. For this conclusion, it rationalized that "(c)ertainly,
before complainants signed the quitclaim and release, they are aware of the nature of such
document. In fact, they never assailed the genuineness and due execution of the same. Hence, we
can safely say that they were not placed under duress or were compelled by means of force to sign
the document." 11
Furthermore, the NLRC held that "(n)either was there any unwritten agreement between
complainants and respondent upon separation, which entitled the former to other renumerations or
benefits. On the contrary, they voluntarily accepted the redundancy benefit package, otherwise, they
would not have been separated from employment." 12
Hence, this petition wherein it is postulated that the basic issue is whether or not respondent NLRC
committed reversible error or grave abuse of discretion in affirming the validity of the "Release and
Quitclaim" and, consequently, that petitioners are not entitled to payment of service awards and
other bonuses. 13 The Solicitor General public respondent NLRC and private respondent company
duly filed their respective comments. 14
In their petition, petitioners stress that they have actually devoted much, if not all, of their employable
life with private respondent; that given their length of service, their loyalty to the latter is easily
demonstrable; and that the same length of service had rendered slim, if not eliminated, their chances
of getting employed somewhere else." 15
On the other hand, respondent company reiterates its basic contention that the consideration for the
settlement of petitioners' claim is credible and reasonable, more than satisfies the legal requirement
therefor, and that petitioners, in executing the release and quitclaim, did so voluntarily and with full
knowledge of the consequences thereof. 16
The petition being meritorious, we find for petitioners.
Under prevailing jurisprudence, the fact that an employee has signed a satisfaction receipt for his
claims does not necessarily result in the waiver thereof. The law does not consider as valid any
agreement whereby a worker agrees to receive less compensation than what he is entitled to
recover. A deed of release or quitclaim cannot bar an employee from demanding benefits to which
he is legally entitled. 17
We have heretofore explained that the reason why quitclaims commonly frowned upon as contrary
to public policy, and why they are held to be ineffective to bar claims for the full measure of the
workers' legal rights, is the fact that the employer and the employee obviously do not stand on the
same footing. The employer drove the employee to the wall. The latter must have harsh necessities
of life. He thus found himself in no position to resist money proffered. His, then, is a case of
adherence, not of choice. One thing sure, however, is that petitioners did not relent on their claim.
They pressed it. They are deemed not have waived any of their rights. Renuntiatio non
praesumitur. 18
Along this line, we have more trenchantly declared that quitclaims and/or complete releases
executed by the employees do not estop them from pursuing their claims arising from unfair labor
practices of the employer. The basic reason for this is that such quitclaims and/or complete releases
are against public policy and, therefore, null and void. The acceptance of termination does not divest
a laborer of the right to prosecute his employer for unfair labor practice acts. 19 While there maybe
possible exceptions to this holding, we do not perceive any in the case at bar.
Furthermore, in the instant case, it is an undisputed fact that when petitioners signed the instrument
of release and quitclaim, they made a written manifestation reserving their right to demand the
payment of their service awards. 20The element of total voluntariness in executing that instrument is
negated by the fact that they expressly stated therein their claim for the service awards, a
manifestation equivalent to a protest and a disavowal of any waiver thereof.
As earlier stated, petitioners even sought the opinion of the Department of Labor and Employment to
determine where and how they stood in the controversy. This act only shows their adamant desire to
obtain their service awards and to underscore their disagreement with the "Release and Quitclaim"
they were virtually forced to sign in order to receive their separation pay.
We have pointed out in Veloso, et al., vs. Department of Labor and Employment, et al.,21 that:
While rights may be waived, the same must not be contrary to law, public order,
public policy, morals or good customs or prejudicial to a third person with a right
recognized by law.
Article 6 of the Civil Code renders a quitclaim agreement void ab initio where the
quitclaim obligates the workers concerned to forego their benefits while at the same
time exempting the employer from any liability that it may choose to reject. This runs
counter to Art. 22 of the Civil Code which provides that no one shall be unjustly
enriched at the expense of another.
We agree with the further observations of the Solicitor General who, in

recommending the setting aside of the decision of respondent NLRC, called attention
to the fact that "contrary to private respondent's contention, the "additional"
redundancy package does not and could not have covered the payment of the
service awards, performance and anniversary bonuses since the private respondent
company has initially maintained the position that petitioners are not legally entitled
to the same. . . . Surprisingly, in a sudden turnabout, private respondent now claims .
. . that the subject awards and bonuses are integrated in the redundancy package. It
is evident, therefore, that private respondent has not truly consolidated the payment
of the subject awards and bonuses in the redundancy package paid to the
petitioners. 22
We are likewise in accord with the findings of the labor arbiter that petitioners are
indeed entitled to receive service awards and other benefits, thus:
Since each of the complainants have rendered services to respondent in multiple(s)

of five years prior to their separation from employment, respondent should be paid
their service awards for 1990.
We are not impressed with the contention of the respondent that service award is a
bonus and therefore is an act of gratuity which the complainants have no right to
demand. Service awards are governed by respondent's employee's manual and (are)
therefore contractual in nature.
On the matter of anniversary and performance bonuses, it is not disputed that it is

respondent's practice to give an anniversary bonus every five years from its
incorporation; that pursuant to this practice, respondent declared an anniversary
bonus for its 80th Anniversary in 1990; that per terms of this declaration, only the
employees of respondent as of 15 November 1990 will be given the bonus; and that
complainants were separated from respondent only 25 days before :the respondent's
anniversary. On the other hand, it is also (not) disputed that respondent regularly
gives performance bonuses; that for its commendable performance in 1990,
respondent declared a performance bonus; that per terms of this declaration, only
permanent employees of respondent as of March 30, 1991 will be given this bonus;
and that complainants were employees of respondents for the first 10 months of
1990.
We cannot see any cogent reason why an anniversary bonus which respondent
gives only once in every five years were given to all employees of respondent as of
15 November 1990 (pro rata even to probationary employees; Annex 9) and not to
complainants who have rendered service to respondent for most of the five year
cycle. This is also true in the case of performance bonus which were given to
permanent employees of respondent as of 30 March 1991 and not to employees who
have been connected with respondent for most of 1990 but were separated prior to
30 March 1991.
We believe that the prerogative of the employer to determine who among its
employee shall be entitled to receive bonuses which are, as a matter of practice,
given periodically cannot be exercised arbitrarily. 23 (Emphasis and corrections in
parentheses supplied.)
The grant of service awards in favor of petitioners is more importantly underscored in the precedent
case of Insular Life Assurance Co., Ltd., et al. vs. NLRC, et al., 24 where this Court ruled that "as to
the service award differentials claimed by some respondent union members, the company policy
shall likewise prevail, the same being based on the employment contracts or collective bargaining
agreements between the parties. As the petitioners had explained, pursuant to their policies on the
matter, the service award differential is given at the end of the year to an employee who has
completed years of service divisible by 5.
A bonus is not a gift or gratuity, but is paid for some services or consideration and is in addition to
what would ordinarily be given. 25 The term "bonus" as used in employment contracts, also conveys
an idea of something which is gratuitous, or which may be claimed to be gratuitous, over and above
the prescribed wage which the employer agrees to pay.
While there is a conflict of opinion as to the validity of an agreement to pay additional sums for the
performance of that which the promisee is already under obligation to perform, so as to give the
latter the right to enforce such promise after performance, the authorities hold that if one enters into
a contract of employment under an agreement that he shall be paid a certain salary by the week or
some other stated period and, in addition, a bonus, in case he serves for a specified length of time,
there is no reason for refusing to enforce the promise to pay the bonus, if the employee has served
during the stipulated time, on the ground that it was a promise of a mere gratuity.
This is true if the contract contemplates a continuance of the employment for a definite term, and the
promise of the bonus is made at the time the contract is entered into. If no time is fixed for the
duration of the contract of employment, but the employee enters upon or continues in service under
an offer of a bonus if he remains therein for a certain time, his service, in case he remains for the
required time, constitutes an acceptance of the offer of the employer to pay the bonus and, after that
acceptance, the offer cannot be withdrawn, but can be enforced by the employee. 26
The weight of authority in American jurisprudence, with which we are persuaded to agree, is that
after the acceptance of a promise by an employer to pay the bonus, the same cannot be withdrawn,
but may be enforced by the employee. 27 However, in the case at bar, equity demands that the
performance and anniversary bonuses should be prorated to the number of months that petitioners
actually served respondent company in the year 1990. This observation should be taken into
account in the computation of the amounts to be awarded to petitioners.
WHEREFORE, the assailed decision and resolution of respondent National Labor Relations
Commission are hereby SET ASIDE and the decision of Labor Arbiter Alex Arcadio Lopez is
REINSTATED.
SO ORDERED.
Narvasa, C.J., Puno, Mendoza and Francisco, JJ., concur.
Footnotes
EN BANC
[G.R. No. 107487. September 29, 1997]
THE MANILA BANKING CORPORATION (Manilabank) and ARNULFO B. AURELLANO in his capacity as
Statutory Receiver of Manilabank, petitioners, vs. THE NATIONAL LABOR RELATIONS COMMISSION,
VICTOR L. MENDOZA, RODOLFO VE. TIMBOL, RUBEN G. ASEDILLO, FLORINDA S. DAYRIT, and 19 other
Senior Officers similarly situated; HORACE REYES and 14 other Senior Managers similarly situated;
AURORA VILLACERAN and 34 other Assistant Managers similarly situated; CONSUELO RIZARRI,
EMERENCIANA SAMSON, BRENDA C. BERMUDEZ, FLORYPEE ABRIGO, EMMA BALDERAMA, and 211
other Junior Officers similarly situated, respondents.
[G.R. No. 107902. September 29, 1997]
THE MANILA BANKING CORPORATION (Manilabank) and ARNULFO B. AURELLANO in his capacity as
Statutory Receiver of Manilabank, petitioners, vs. THE NATIONAL LABOR RELATIONS COMMISSION-NCR,
LABOR ARBITER FELIPE PATI and VICTOR L. MENDOZA, RODOLFO VE. TIMBOL, RUBEN G. ASEDILLO,
FLORINDA S. DAYRIT, and 19 other Senior Officers similarly situated; HORACE REYES, JOSE BELMONTE
and 14 other Senior Managers and 53 Managers similarly situated; AURORA VILLACERAN and 34 other
Assistant Managers similarly situated; CONSUELO RIZARRI, EMERENCIANA SAMSON, BRENDA C.
BERMUDEZ, FLORYPEE ABRIGO, EMMA BALDERAMA, and 211 other Junior Officers similarly situated,
respondents.
DECISION
KAPUNAN, J.:
The principal issue presented for resolution in these petitions for certiorari[1] under Rule 65 of the Rules
of Court is whether or not public respondent National Labor Relations Commission (NLRC) committed
grave abuse of discretion in affirming with slight modifications Labor Arbiter Felipe Patis decision
awarding herein private respondents claim of P193,338,212.33 consisting of:
1. Wage increase of 25% of gross monthly wage from January 1985 to December 1988;
2. Christmas Bonus of one and one-half (1-1/2) months pay from December 1985 to December 1987;
3. Mid-year Bonus of one (1) month pay from 1985 to 1988, inclusive;
4. Profit Sharing of 5% of net profit for 1985 and 1986;
5. Differentials on accrued leaves, retirement benefits and Christmas and Mid-year bonuses;
6. Longevity pay, Loyalty Bonus and Medical, Dental and Optical Benefits;
7. Uniform allowance of P600.00 per year from January 1985 to January 1988, inclusive;
8. One-half (1/2) month pay 1987 Christmas Bonus which was deducted from the retirement benefit of
each complainant;
9. Travel Plan and Car Plan with respect to the 23 complainants Senior Officers; and
10. Car Plan and Gasoline Allowance benefits with respect to the 15 complainants, Senior Managers and
54 Assistant Managers.
annual interest thereon of 12% and attorneys fees amounting to 10% of the said amount.
The antecedents show that on June 5, 1984, petitioner Manila Banking Corporation (Manilabank) was
placed under comptrollership by then Central Bank Governor Jose B. Fernandez in view of the banks
financial distress.[2]
The decision of the Monetary Board of the Central Bank was based on the findings that the bank was
experiencing liquidity problems and had incurred chronic reserve deficiencies against deposit liabilities.
In fact on May 23, 1984, a month before it was placed under comptrollership, Manilabank was
prohibited by the Monetary Board from granting new loans and making new investments except
investments in government securities with Central Bank support, and from declaring cash or stock
dividends.[3]
A February 19, 1986 Central Bank report on Manilabanks financial condition as of December 31, 1985
disclosed, among other things, that the banks operations for the preceding year resulted in a net loss of
P362.4 million. It likewise revealed that the banks financial condition continued to deteriorate.[4]
Consequently, on May 22, 1987, the Monetary Board issued Resolution No. 505 prohibiting Manilabank
from doing business in the Philippines. The said resolution reads:
Finding to be true the statements of the Assistant to the Governor and Officer-in-Charge, Supervision
and Examination Sector (SES) Department I, in his memorandum dated April 28, 1987 submitting a
report on the financial condition of the Manila Banking Corporation (TMBC) as of March 31, 1987, that
the financial condition of TMBC is one of insolvency and its continuance in business would involve
probable loss to its depositors and creditors and considering, among other things, that:
1. During the 3-month period January 1 to March 31, 1987, TMBC incurred losses of 62.3 million , before
interest on Central Bank overdraft and penalties on reserve deficiencies (242.9 million for the three
months);
2. Prior notices had been made to TMBC of a condition which may be considered as one indicating
insolvency as defined under Sec. 29 of R.A. No. 265, as amended, in various letters of Mr. Antonio T.
Castro, Jr., Special Assistant to the Governor and Head, SES Department I, dated December 9, 1985,
December 13, 1985 and October 16, 1986 and in a letter of the Governor, dated February 27, 1987;
3. Mr. Vicente G. Puyat, in response to his request conveyed by Mrs. Reyes to the Monetary Board, for a
chance to appear before the Monetary Board in representation of the majority stockholders of TMBC, in
connection with the rehabilitation plan for TMBC, had been invited three times to appear before the
Board: first, on May 13, 1987, then on May 18, 1987 upon his request, and on May 22, 1987, which
invitations he did not respond to himself and neither did he attend the Board meetings held on May 18,
1987 and May 22, 1987;
4. TMBC has not submitted a rehabilitation plan accepted to the Central Bank; and
5. The said Assistant to the Governor, who was present during the Monetary Board meeting held on
May 22, 1987, had categorically confirmed that, after considering all the adjustments, TMBC would still
be insolvent even with an additional capital infusion of P500 million.
the Board decided as follows:
1. To prohibit TMBC to do business in the Philippines and place its assets and affairs under receivership
in accordance with the provisions of Section 29 of R.A. No. 265, as amended; and
2. To designate the Assistant to the Governor and Officer-in-Charge, SES Department I, as Receiver of
TMBC, to immediately take charge of its assets and liabilities, as expeditiously as possible collect and
gather all the assets and administer the same for the benefit of its creditors exercising all the powers
necessary for these purposes including, but not limited to, bringing suits and foreclosing mortgages in its
name.[5]
Thereafter, Feliciano Miranda, Jr. was designated as receiver. He immediately took charge of the banks
assets and liabilities. He likewise terminated the employment of about 343 officers and top managers of
the bank. All these officers and top managers, who are private respondents herein, were paid whatever
separation and/or retirement benefits were due them.
On November 11, 1988, the Monetary Board issued Resolution No. 1003 ordering the liquidation of
Manilabank on account of insolvency. The resolution reads as follows:
Having determined and confirmed on the basis of the memorandum of the Special Assistant to the
Governor and Head, Supervision and Examination Sector (SES) Department I, and Receiver, The Manila
Banking Corporation (TMBC), dated November 4, 1988, submitting a report on the financial condition of
TMBC as of July 31, 1988, that the financial condition of the bank continues to be one of insolvency and
it can no longer resume business with safety to its depositors, creditors and the general public,
considering the opinion of the Central Bank legal counsel that, with the Supreme Courts decision dated
March 10, 1988 (a) setting aside the decision of the Court of Appeals sustaining the decision of the
Regional Trial Court to issue a writ of preliminary injunction dated July 14, 1987 against the enforcement
of Monetary Board Resolution No. 505 dated May 22, 1987, (b) dissolving the said writ of preliminary
injunction, and (c) making permanent the temporary restraining order issued by the Supreme Court on
February 16, 1988, the liquidation of TMBC may now be ordered by the Monetary Board and that its
authority to order such liquidation is not affected by the pendency of Civil Case No. 87-40659 nor of the
Supreme Courts resolution of March 10, 1988 (enjoining the Court of Appeals from interfering in the
receivership of TMBC), the Board decided as follows:
1. To order the liquidation of TMBC in accordance with Section 29 of R.A. No. 265, as amended; and
2. To designate Mr. Renan V. Santos, Special Assistant to the Governor, and Head, Supervision and
Examination Sector Department V, as Liquidator of TMBC.[6]
Of even date, private respondents filed a complaint against ManilaBank and its statutory receiver with
the arbitration branch of the National Labor Relations Commission (NLRC) claiming entitlement to the
following additional benefits alleged to have accrued from 1984 to their effective dates of termination,
viz: (a) Wage increases; (b) Christmas bonuses; (c) Mid-year bonuses; (d) Profit sharing; (e) Car and
travel plans; (f) Gasoline allowances; (g) Differentials on accrued leaves, retirement and other bonuses;
(h) Longevity pay and loyalty pay; (i) Medical, dental and optical benefits; and (j) Uniform allowances.[7]
Such claims to entitlement of the foregoing benefits was based on Manilabanks alleged practice, policy
and tradition of awarding said benefits. They contended that the policy has ripened into vested property
rights in their favor.
Manila bank, on its part, alleged that the additional benefits sought are without basis in fact and in law.
It argued that the same are conferred by management only when it deems necessary to do so. The
award of the said benefits is in the nature of a management prerogative which, it contended, can be
withheld by management upon a clear showing that the company is not in a position to grant them
either because of financial difficulties or circumstances which do not warrant conferment of such
benefits. And since it was experiencing financial distress, it claimed that it was in no position to give the
benefits sought. Additionally, it asseverated that it was deprived of its right to present evidence in a full-
blown trial by the labor arbiter.
On November 14, 1989, Labor Arbiter Felipe Pati rendered his decision ordering Manilabank and its
statutory receiver to pay in full all the claims of private respondents amounting to P193,338,212.33, plus
12% interest annually and 10% of the total award as attorneys fees. The dispositive portion of the
decision reads:
WHEREFORE, judgment is hereby rendered in favor of the complainants and against the respondents,
ordering and authorizing the Receiver RENAN V. SANTOS to pay, pursuant to the provisions of Article
110 of the Labor Code, as amended:
1.The complainants the net amount of claims due appearing opposite the name of each complainant
listed in the Computation of Net Claim consisting of six (6) pages hereto attached and made part of this
Decision;
2.The complainants counsel the amount equal to 10% of the total amount awarded to complainants in
this action as attorneys fees.
SO ORDERED.[8]
On November 25, 1989, petitioners Manilabank and the CB statutory receiver appealed to the NLRC and
posted an appeal bond in the form of a certification from the Central Bank to the effect that the portion
of Manilabanks funds in an amount equal to that of the total award of the labor arbiter, has been
reserved and set aside by the Central Bank to answer for the private respondents claims should they
finally be adjudged to be entitled thereto.
On December 8, 1989, private respondents opposed the appeal and filed a motion for the issuance of a
writ of execution of the labor arbiters judgment on the ground that the Central Bank certification cannot
be considered as an appeal bond.
On June 21, 1991, the NLRC issued an order requiring petitioners to deposit with the Cashier of the NLRC
a cash bond or its equivalent in treasury bills, warrants and/or other government securities in the
amount of P193,000,000.00, plus ten percent (10%) thereof as attorneys fees within ten (10) days from
receipt thereof.
On July 5, 1991, petitioners moved to reconsider said order. However, pending resolution of said motion
for reconsideration, petitioners submitted to the NLRC a Certificate of Time Deposit issued by the
Philippine National Bank (PNB) in the amount of P212,700,000.00, payable to the receiver of
Manilabank.
On January 16, 1992, the NLRC held a hearing where the parties agreed that the certificate of time
deposit submitted by Manilabank to the NLRC be considered substantial compliance of the requirement
of an appeal bond, on the condition that it will be periodically renewed and re-deposited with the NLRC
Cashier upon its maturity, and that the securities deposited should be free from any other claims or
liens.
On September 9, 1992, the NLRC issued a resolution on the merits of the case and, as above-stated,
affirmed with slight modifications, the decision of the labor arbiter. The decretal portion of the same
reads:
WHEREFORE, except for the modification we provided on the manner medical, dental and optical
benefits should be claimed/paid, and our awarding annual interest of 12% to whatever has been
awarded below, the appealed decision is hereby affirmed and respondents appeal is hereby dismissed.
SO ORDERED.[9]
Petitioners filed a motion for reconsideration from the aforequoted resolution.
On October 14, 1992, private respondents filed an ex parte motion for the issuance of a writ of
execution. Petitioners opposed the same, reasoning that the assets of Manilabank are exempt from
execution and that the NLRC resolution had not become final and executory.
On October 22, 1992, the NLRC issued an order directing petitioners, under pain of contempt, to renew
the certificate of time deposit and to have the same issued in the name of , and deposited with, the
cashier of the NLRC.
In response, petitioners Manilabank and Arnulfo Aurellano filed petition for certiorari before this Court,
docketed as G.R. No. 107487, to set aside said order alleging that the same was issued with grave abuse
of discretion because it (as re-phrased):
a. violated an existing statute.[10]
b. arbitrary compelled the Receiver to violate his statutory duty to preserve Manilabanks assets for the
benefit of all creditors.[11]
c. whimsically deprived petitioners of their right to file a motion for reconsideration of the Order.[12]
d. was not anchored upon any cogent reason other than to preempt petitioners from invoking the
corrective powers of this Honorable Court of last resort.[13]
On November 26, 1992, petitioners earlier motion for reconsideration of the NLRC Decision dated
September 9, 1992 was denied for lack of merit in an order which dispositively reads as follows:
Wherefore, premises considered, order is hereby issued:
1. denying respondents motion for reconsideration;
2. directing the NLRC Cashier to hold in her custody re-submitted Certificate of Time Deposit No.
890530-D dated October 27, 1992 with maturity date on December 28, 1992;
3. directing the respondents to post an additional bond, either in cash, surety, or certificate of time
deposit drawn in the name of the Cashier, NLRC, in the amount of P76,572,000.00 to cover, the
additional award detailed in our September 9, 1992 resolution;
4. directing, accordingly, the Executive Clerk to cause the personal service of this Order upon the parties,
particularly the respondents and their counsel; and
5. holding in abeyance the execution of our September 9, 1992 resolution (despite its finality now) for a
period of ten (10) calendar days from respondents receipt of this Order, with the warning, however, that
should this Commission not receive a restraining order from the Supreme Court within said period of ten
(10) calendar days, then a writ of execution will be issued to enforce our now final judgment.
SO ORDERED.[14]
Consequently, petitioners filed another petition for certiorari before this Court, this time docketed as
G.R. No. 107902, contending that:
a. Public respondents, in grave abuse of discretion, effectively violated petitioners right due process
because-
(1) The monstrous award totaling about P212 million was decided based purely on private respondents
worthless papers which were never identified nor supported by any single affidavit.
(2) The Labor Arbiter proceeded to decide the case solely on the bases of the pleadings filed, despite the
enormity of the claims and the reapeted demands for a full-dress trial (which, ironically, were initially
granted by the Office of the Labor Arbiter), made necessary by the conflicting factual allegations of the
parties and the worthless papers passed off by private respondents as their evidence.[15]
b. Public respondents unlawfully arrogated unto themselves the jurisdiction to pass upon the question
of Manilabanks insolvency, despite the pleaded pendency of that prejudicial question before the RTC of
Manila which had aquired exclusive jurisdiction to rule on the issue to the exclusion of all others.[16]
c. The money award adjudged against the insolvent Manilabank violates all notions of justice and equity,
considering that the beneficiaries thereof are former officers and top managers of Manilabank who,
being part of management, were partly to blame for the banks financial decline.[17]
d. A statutory receiver has the power to adopt and implement prudent policies aimed at preserving the
assets of an insolvent bank including regulating, according to his own discretion and judgment, all
aspects of employment.[18]
e. Public respondents arbitrary findings that salary increases, Christmas and mid-year bonuses and other
benefits have been regularly and unconditionally paid by Manilabank to private respondents, and that
Manilabank earned profits in 1984, 1985 and 1986, are contrary to the evidence on record and are
based on pure unsubstantiated guesswork. [19]
f. The award of attorneys fees is unconscionable, especially in light of its dissipative effect of the
remaining assets of the insolvent Manilabank and its prejudicial consequences on Manilabanks
stockholders and creditors.[20]
g. The NLRCs award of legal interest on the amount awarded by the labor arbiter and its order to deposit
an additional bond to cover such interest have no legal basis and give an undue advantage to other
creditors of the insolvent Manilabank.[21]
h. The NLRCs threat to execute the judgment would be unlawful if carried out, because Manilabanks
assets are legally exempt from execution.[22]
On December 9, 1992, this Court ordered that G.R. No. 107902 be consolidated with G.R. No.
107487.[23]
On December 16, 1992, this Court issued a Resolution temporarily enjoining public respondent NLRC
from enforcing and/or carrying out the decision of the labor arbiter dated November 14, 1989 and its
resolution dated September 9, 1992 and order dated November 26, 1992, all issued in NLRC NCR Case
No. 00-11-04624-88.[24]
G.R. No. 107902 is impressed with merit.
Both the Labor Arbiter and the NLRC opted to award all the additional benefits claimed by the 343
private respondents who had already been duly paid separation pay and/or retirement benefits upon
termination of their employment. The NLRC erroneously adopted the findings of the labor arbiter,
misapplying the time-honored rule that factual findings of quasi-judicial agencies are accorded not only
respect but even finality if supported by substantial evidence. It declared that the additional benefits
sought are in the nature of bonuses which when made part of the wage or salary or compensation of an
employee become demandable and enforceable.[25]
Both the Labor Arbiters and the NLRCs findings and conclusions are flawed.
By definition, a bonus is a gratuity or act of liberality of the giver which the recipient has no right to
demand as a matter of right.[26] It is something given in addition to what is ordinarily received by or
strictly due the recipient. The granting of a bonus is basically a management prerogative which cannot
be forced upon the employer who may not be obliged to assume the onerous burden of granting
bonuses or other benefits aside from the employees basic salaries or wages,[27] especially so if it is
incapable of doing so.
In Philippine Education Co., Inc. v. Court of Industrial Relations,[28] cited in Philippine duplicators, Inc. v.
NLRC,[29] the Court expounded on the nature of a bonus, thus:
As a rule, a bonus is an amount granted and paid to an employee for his industry and loyalty which
contributed to the success of the employers business and made possible the realization of profits. It is
an act of generosity of the employer for which the employee ought to be thankful and grateful. It is also
granted by an enlightened employer to spur the employee to greater efforts for the success of the
business and realization of bigger profits. xxx From the legal point of view, a bonus is not a demandable
and enforceable obligation. It is so when it is made part of the wage or salary or compensation. In such a
case the latter would be fixed amount and the former would be a contingent one dependent upon the
realization of profits. xxx . (Italics supplied).[30]
Clearly then, a bonus is an amount given ex gratia to an employee by an employer on account of success
in business or realization of profits. How then can an employer be made liable to pay additional benefits
in the nature of bonuses to its employees when it has been operating on considerable net losses for a
given period of time?
Records bear out that petitioner Manilabank was already in dire financial straits in the mid-80s. As early
as 1984, the Central Bank found that Manilabank had been suffering financial losses. Presumably, the
problems commenced even before their discovery in 1984. As earlier chronicled, the Central Bank
placed petitioner bank under comptrollership in 1984 because of liquidity problems and excessive
interbank borrowings. In 1987, it was placed under receivership and was ordered to close operation. In
1988, it was ordered liquidated.
It is evident, therefore, that petitioner bank was operating on net losses from the years 1984, 1985 and
1986, thus, resulting to its eventual closure in 1987 and liquidation in 1988. Clearly, there was no
success in business or realization of profits to speak of that would warrant the conferment of additional
benefits sought by private respondents. No company should be compelled to act liberally and confer
upon its employees additional benefits over and above those mandated by law when it is plagued by
economic difficulties and financial losses. No act of enlightened generosity and self-interest can be
exacted from near empty, if not empty, coffers.
Consequently, on the ten (10) items awarded to herein private respondents (enumerated at page 3)
which represent additional benefits, they having already been paid separation and retirement benefits,
we rule as follows:
First. The award of 5% profit sharing of petitioner banks net profits for the years 1985 and 1986 is
deleted as there were clearly no profits to share during that period given the banks financial status in
1985 and 1986 when it was operating on net losses.
Second. The award of wage increases and Christmas and mid-year bonuses from 1985 to 1988, being in
the nature of gratuities and dependent as they on the petitioners liberality and capability to give, is
likewise deleted for same reasons above stated.
Third. The award of differentials on accrued leaves, retirement benefits and Christmas and mid-year
bonuses is also deleted as a necessary and logical consequence of the denial of the wage increases and
Christmas and mid-year bonuses.
Fourth. The award of medical, dental and optical benefits is well-taken and, therefore, affirmed.
Fifth. The claim for travel plans for 23 senior officers, and car plans and gasoline allowances for 23 senior
officers, 15 senior managers and 54 assistant managers may only be granted to those officers who have
not yet availed of the said benefit subject to the proper determination by the labor arbiter.
Sixth and last. Claims for longevity pay, loyalty bonuses and uniform allowance of P600.00 for 1985 may
be granted given the apparent loyalty and allegiance shown by herein private respondents to petitioner
bank despite rough sailing during the said period of time.
That disposes of G.R. No. 107902.
With respect to G.R. No. 107487, the same is dismissed, the issues raised therein having been rendered
moot and academic by the foregoing disquisitions and disposition. Besides, it is beyond dispute that
employees indeed enjoy first preference in the event of bankruptcy or liquidation of an employers
business.[31]
WHEREFORE, premises considered, G.R. No. 107902 is GRANTED and is hereby REMANDED to the Labor
Arbiter for the proper computation of the monetary awards in accordance with the foregoing
disquisition and with reasonable dispatch. G.R. No. 107487 is hereby DISMISSED.
SO ORDERED.
SECOND DIVISION
[G.R. No. 129315. October 2, 2000]
OSIAS I. CORPORAL, SR., PEDRO TOLENTINO, MANUEL CAPARAS, ELPIDIO LACAP, SIMPLICIO PEDELOS,
PATRICIA NAS, and TERESITA FLORES, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, LAO
ENTENG COMPANY, INC. and/or TRINIDAD LAO ONG, respondents.
DECISION
QUISUMBING, J.:
This special civil action for certiorari seeks the review of the Resolution dated October 17, 1996 of public
respondent National Labor Relations Commission (First Division),[1] in NLRC NCR Case No. 00-04-03163-
95, and the Resolution dated March 5, 1997 denying the motion for reconsideration. The aforecited
October 17th Resolution affirmed the Decision dated September 28, 1996 of Labor Arbiter Potenciano S.
Cañizares dismissing the petitioners’ complaint for illegal dismissal and declaring that petitioners are not
regular employees of private respondent Lao Enteng Company, Inc..
The records of the case show that the five male petitioners, namely, Osias I. Corporal, Sr., Pedro
Tolentino, Manuel Caparas, Elpidio Lacap, and Simplicio Pedelos worked as barbers, while the two
female petitioners, Teresita Flores and Patricia Nas worked as manicurists in New Look Barber Shop
located at 651 P. Paterno Street, Quiapo, Manila owned by private respondent Lao Enteng Co. Inc..
Petitioner Nas alleged that she also worked as watcher and marketer of private respondent.
Petitioners claim that at the start of their employment with the New Look Barber Shop, it was a single
proprietorship owned and managed by Mr. Vicente Lao. In or about January 1982, the children of
Vicente Lao organized a corporation which was registered with the Securities and Exchange Commission
as Lao Enteng Co. Inc. with Trinidad Ong as President of the said corporation. Upon its incorporation, the
respondent company took over the assets, equipment, and properties of the New Look Barber Shop and
continued the business. All the petitioners were allowed to continue working with the new company
until April 15, 1995 when respondent Trinidad Ong informed them that the building wherein the New
Look Barber Shop was located had been sold and that their services were no longer needed.[2]
On April 28, 1995, petitioners filed with the Arbitration Branch of the NLRC, a complaint for illegal
dismissal, illegal deduction, separation pay, non-payment of 13th month pay, and salary differentials.
Only petitioner Nas asked for payment of salary differentials as she alleged that she was paid a daily
wage of P25.00 throughout her period of employment. The petitioners also sought the refund of the
P1.00 that the respondent company collected from each of them daily as salary of the sweeper of the
barber shop.
Private respondent in its position paper averred that the petitioners were joint venture partners and
were receiving fifty percent commission of the amount charged to customers. Thus, there was no
employer-employee relationship between them and petitioners. And assuming arguendo, that there
was an employer-employee relationship, still petitioners are not entitled to separation pay because the
cessation of operations of the barber shop was due to serious business losses.
Respondent Trinidad Lao Ong, President of respondent Lao Enteng Co. Inc., specifically stated in her
affidavit dated September 06, 1995 that Lao Enteng Company, Inc. did not take over the management of
the New Look Barber Shop, that after the death Lao Enteng petitioner were verbally informed time and
again that the partnership may fold up anytime because nobody in the family had the time to be at the
barber shop to look after their interest; that New Look Barber Shop had always been a joint venture
partnership and the operation and management of the barber shop was left entirely to petitioners; that
her father’s contribution to the joint venture included the place of business, payment for utilities
including electricity, water, etc. while petitioners as industrial partners, supplied the labor; and that the
barber shop was allowed to remain open up to April 1995 by the children because they wanted to give
the partners a chance at making it work. Eventually, they were forced to close the barber shop because
they continued to lose money while petitioners earned from it. Trinidad also added that private
respondents had no control over petitioners who were free to come and go as they wished. Admittedly
too by petitioners they received fifty percent to sixty percent of the gross paid by customers. Trinidad
explained that some of the petitioners were allowed to register with the Social Security System as
employees of Lao Enteng Company, Inc. only as an act of accommodation. All the SSS contributions were
made by petitioners. Moreover, Osias Corporal, Elpidio Lacap and Teresita Flores were not among those
registered with the Social Security System. Lastly, Trinidad avers that without any employee-employer
relationship petitioners claim for 13th month pay and separation pay have no basis in fact and in law.[3]
In a Decision dated September 28, 1995, Labor Arbiter Potenciano S. Cañizares, Jr. ordered the dismissal
of the complaint on the basis of his findings that the complainants and the respondents were engaged in
a joint venture and that there existed no employer-employee relation between them. The Labor Arbiter
also found that the barber shop was closed due to serious business losses or financial reverses and
consequently declared that the law does not compel the establishment to pay separation pay to
whoever were its employees.[4]
On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the complaint for want of
merit, ratiocinating thus:
Indeed, complainants failed to show the existence of employer-employee relationship under the
fourway test established by the Supreme Court. It is a common practice in the Barber Shop industry that
barbers supply their own scissors and razors and they split their earnings with the owner of the barber
shop. The only capital of the owner is the place of work whereas the barbers provide the skill and
expertise in servicing customers. The only control exercised by the owner of the barber shop is to
ascertain the number of customers serviced by the barber in order to determine the sharing of profits.
The barbers maybe characterized as independent contractors because they are under the control of the
barber shop owner only with respect to the result of the work, but not with respect to the details or
manner of performance. The barbers are engaged in an independent calling requiring special skills
available to the public at large.[5]
Its motion for reconsideration denied in the Resolution[6] dated March 5, 1997, petitioners filed the
instant petition assigning that the NLRC committed grave abuse of discretion in:
I. ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE PROVING THAT PETITIONERS WERE EMPLOYEES

OF RESPONDENT COMPANY IN RULING THAT PETITIONERS WERE INDEPENDENT CONTRACTORS.
II. NOT HOLDING THAT PETITIONERS WERE ILLEGALLY DISMISSED AND IN NOT AWARDING THEIR
MONEY CLAIMS.[7]
Petitioners principally argue that public respondent NLRC gravely erred in declaring that the petitioners
were independent contractors. They contend that they were employees of the respondent company
and cannot be considered as independent contractors because they did not carry on an independent
business. They did not cut hair, manicure, and do their work in their own manner and method. They
insist they were not free from the control and direction of private respondents in all matters, and their
services were engaged by the respondent company to attend to its customers in its barber shop.
Petitioners also stated that, individually or collectively, they do not have substantial capital nor
investments in tools, equipments, work premises and other materials necessary in the conduct of the
barber shop. What the barbers owned were merely combs, scissors, and razors, while the manicurists
owned only nail cutters, nail polishes, nippers and cuticle removers. By no standard can these be
considered “substantial capital” necessary to operate a barbers shop.
Finally, petitioners fault the NLRC for arbitrarily disregarding substantial evidence on record showing
that petitioners Pedro Tolentino, Manuel Caparas, Simplicio Pedelos, and Patricia Nas were registered
with the Social Security System as regular employees of the respondent company. The SSS employment
records in common show that the employer’s ID No. of Vicente Lao/Barber and Pawn Shop was 03-
0606200-1 and that of the respondent company was 03-8740074-7. All the foregoing entries in the SSS
employment records were painstakingly detailed by the petitioners in their position paper and in their
memorandum appeal but were arbitrarily ignored first by the Labor Arbiter and then by the respondent
NLRC which did not even mention said employment records in its questioned decision.
We found petition is impressed with merit.
In our view, this case is an exception to the general rule that findings of facts of the NLRC are to be
accorded respect and finality on appeal. We have long settled that this Court will not uphold erroneous
conclusions unsupported by substantial evidence.[8] We must also stress that where the findings of the
NLRC contradict those of the labor arbiter, the Court, in the exercise of its equity jurisdiction, may look
into the records of the case and reexamine the questioned findings.[9]
The issues raised by petitioners boil down to whether or not an employer-employee relationship existed
between petitioners and private respondent Lao Enteng Company, Inc. The Labor Arbiter has concluded
that the petitioners and respondent company were engaged in a joint venture. The NLRC concluded that
the petitioners were independent contractors.
The Labor Arbiter’s findings that the parties were engaged in a joint venture is unsupported by any
documentary evidence. It should be noted that aside from the self-serving affidavit of Trinidad Lao Ong,
there were no other evidentiary documents, nor written partnership agreements presented. We have
ruled that even the sharing of proceeds for every job of petitioners in the barber shop does not mean
they were not employees of the respondent company.[10]
Petitioner aver that NLRC was wrong when it concluded that petitioners were independent contractors
simply because they supplied their own working implements, shared in the earnings of the barber shop
with the owner and chose the manner of performing their work. They stressed that as far as the result
of their work was concerned the barber shop owner controlled them.
An independent contractor is one who undertakes “job contracting”, i.e., a person who (a) carries on an
independent business and undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to the results
thereof, and (b) has substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of the business.[11]
Juxtaposing this provision vis-à-vis the facts of this case, we are convinced that petitioners are not
“independent contractors”. They did not carry on an independent business. Neither did they undertake
cutting hair and manicuring nails, on their own as their responsibility, and in their own manner and
method. The services of the petitioners were engaged by the respondent company to attend to the
needs of its customers in its barber shop. More importantly, the petitioners, individually or collectively,
did not have a substantial capital or investment in the form of tools, equipment, work premises and
other materials which are necessary in the conduct of the business of the respondent company. What
the petitioners owned were only combs, scissors, razors, nail cutters, nail polishes, the nippers – nothing
else. By no standard can these be considered substantial capital necessary to operate a barber shop.
From the records, it can be gleaned that petitioners were not given work assignments in any place other
than at the work premises of the New Look Barber Shop owned by the respondent company. Also,
petitioners were required to observe rules and regulations of the respondent company pertaining,
among other things, observance of daily attendance, job performance, and regularity of job output. The
nature of work performed by were clearly directly related to private respondent’s business of operating
barber shops. Respondent company did not dispute that it owned and operated three (3) barber shops.
Hence, petitioners were not independent contractors.
Did an employee-employer relationship exist between petitioners and private respondent? The
following elements must be present for an employer-employee relationship to exist: (1) the selection
and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means;
and (4) the power to control the worker’s conduct, with the latter assuming primacy in the overall
consideration. Records of the case show that the late Vicente Lao engaged the services of the
petitioners to work as barbers and manicurists in the New Look Barber Shop, then a single
proprietorship owned by him; that in January 1982, his children organized a corporation which they
registered with the Securities and Exchange Commission as Lao Enteng Company, Inc.; that upon its
incorporation, it took over the assets, equipment, and properties of the New Look Barber Shop and
continued the business; that the respondent company retained the services of all the petitioners and
continuously paid their wages. Clearly, all three elements exist in petitioners’ and private respondent’s
working arrangements.
Private respondent claims it had no control over petitioners. The power to control refers to the
existence of the power and not necessarily to the actual exercise thereof, nor is it essential for the
employer to actually supervise the performance of duties of the employee. It is enough that the
employer has the right to wield that power.[12] As to the “control test”, the following facts indubitably
reveal that respondent company wielded control over the work performance of petitioners, in that: (1)
they worked in the barber shop owned and operated by the respondents; (2) they were required to
report daily and observe definite hours of work; (3) they were not free to accept other employment
elsewhere but devoted their full time working in the New Look Barber Shop for all the fifteen (15) years
they have worked until April 15, 1995; (4) that some have worked with respondents as early as in the
1960’s; (5) that petitioner Patricia Nas was instructed by the respondents to watch the other six (6)
petitioners in their daily task. Certainly, respondent company was clothed with the power to dismiss any
or all of them for just and valid cause. Petitioners were unarguably performing work necessary and
desirable in the business of the respondent company.
While it is no longer true that membership to SSS is predicated on the existence of an employee-
employer relationship since the policy is now to encourage even the self-employed dressmakers,
manicurists and jeepney drivers to become SSS members, we could not agree with private respondents
that petitioners were registered with the Social Security System as their employees only as an
accommodation. As we have earlier mentioned private respondent showed no proof to their claim that
petitioners were the ones who solely paid all SSS contributions. It is unlikely that respondents would
report certain persons as their workers, pay their SSS premium as well as their wages if it were not true
that they were indeed their employees.[13]
Finally, we agree with the labor arbiter that there was sufficient evidence that the barber shop was
closed due to serious business losses and respondent company closed its barber shop because the
building where the barber shop was located was sold. An employer may adopt policies or changes or
adjustments in its operations to insure profit to itself or protect investment of its stockholders. In the
exercise of such management prerogative, the employer may merge or consolidate its business with
another, or sell or dispose all or substantially all of its assets and properties which may bring about the
dismissal or termination of its employees in the process.[14]
Prescinding from the above, we hold that the seven petitioners are employees of the private respondent
company; as such, they are to be accorded the benefits provided under the Labor Code, specifically
Article 283 which mandates the grant of separation pay in case of closure or cessation of employer’s
business which is equivalent to one (1) month pay for every year of service.[15] Likewise, they are
entitled to the protection of minimum wage statutes. Hence, the separation pay due them may be
computed on the basis of the minimum wage prevailing at the time their services were terminated by
the respondent company. The same is true with respect to the 13th month pay. The Revised Guidelines
on the Implementation of the 13th Month Pay Law states that “all rank and file employees are now
entitled to a 13th month pay regardless of the amount of basic salary that they receive in a month. Such
employees are entitled to the benefit regardless of their designation or employment status, and
irrespective of the method by which their wages are paid, provided that they have worked for at least
one (1) month during a calendar year” and so all the seven (7) petitioners who were not paid their 13th
month pay must be paid accordingly.[16]
Anent the other claims of the petitioners, such as the P10,000.00 as penalty for non-compliance with
procedural process; P10,000.00 as moral damages; refund of P1.00 per day paid to the sweeper; salary
differentials for petitioner Nas; attorney’s fees), we find them without basis.
IN VIEW WHEREOF, the petition is GRANTED. The public respondent’s Decision dated October 17, 1996
and Resolution dated March 05, 1997 are SET ASIDE. Private respondents are hereby ordered to pay,
severally and jointly, the seven (7) petitioners their (1) 13th month pay and (2) separation pay
equivalent to one month pay for every year of service, to be computed at the then prevailing minimum
wage at the time of their actual termination which was April 15, 1995.
Costs against private respondents.
SO ORDERED.

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Republic of the Philippines

C. PLANAS COMMERCIAL G.R. No. 144619

- versus - *PUNO, Chairman,

WHEREFORE, in view of all the foregoing considerations, the decision appealed

On claims for underpayment/non-payment of legally mandated wages and fringe

Stated differently, against complainants charge of underpayment in wages and non-

Salary Diff. Holiday Pay SILP

While a compromise agreement or amicable settlement is not

Thus, Fuentes v. NLRC, 167 SCRA 767 (1988) enunciates:

In the case at bar, it will be noticed that the vouchers dated

Hence, the instant petition for review on certiorari filed by petitioners.

We are not persuaded.

Retail/service establishments regularly employing not more than ten (10)

Retail/service establishments regularly employing not more than

We find merit in petitioners argument.

In Samaniego v. NLRC, we ruled that: A quitclaim executed in favor of a company

G.R. No. 163419 February 13, 2008

TSPIC CORPORATION, petitioner,

VELASCO, JR., J.:

Section 1. Salary/ Wage Increases.––Employees covered by this Agreement shall be granted

Regularization Period Equivalent Increase

3) to Suzette Dulay, the amount of P608.14 a month (or P5,473.26), as well as

4) Attorney’s fees equal to 10% of all the above monetary awards.

We find TSPIC’s contention meritorious.

A Collective Bargaining Agreement is the law between the parties

As a general rule, in the interpretation of a contract, the intention of the parties is to be

Thus, the proper computation of the salaries of individual respondents is as follows:

For respondents Jerico Alipit and Glen Batula:23

Wage rate before WO No. 8………………………… PhP 234.67

For respondents Ser John Hernandez and Rachel Novillas:24

Wage rate range before WO No. 8………………….. PhP 234.68

Wage rate range before WO No. 8………….. PhP 240.26

For respondents Ma. Fe Flores and Fe Capistrano:26

Wage rate range before WO No. 8…………… PhP 245.85

Minimum Wage per Wage Order………….. PhP 250.00

Wage rate after WO No. 8………………………………. PhP 250.00

Increase for 2001 (12% of 2000 salary)………………... PhP 30.75

We agree with TSPIC.

Republic of the Philippines

G.R. No. 91231 February 4, 1991

NESTLÉ PHILIPPINES, INC., petitioner,

3. Cagayan de Oro Factory represented by WATU; and

all expired on June 30, 1987.

xxx xxx xxx

Both parties separately moved for reconsideration of the decision.

Narvasa, Gancayco and Medialdea, JJ., concur.

G.R. No. 74156 June 29, 1988

Castillo, Laman, Tan & Pantaleon for petitioners.

Edwin D. Dellaban for private respondents.

WHEREFORE, premises considered, the appealed Decision is as it is hereby SET ASIDE

1. Declaring respondents-appellees (petitioners herein) guilty of illegal deductions of

2. Ordering respondents-appellees to pay complainants-appellants their back

3. Ordering respondents-appellees from further illegally deducting the allowances of

To compel the respondent company to use 30 days in a month to compute the

We are constrained to reverse the reversal.

Section 5. Allowance for Unworked Days.

Section 3. Application of Section 2--

xxx xxx xxx

xxx xxx xxx

P60 + P90 + P60 + (P2.00 x 262) divided by 12 = P 253.70 (Emphasis ours)

As the Labor Arbiter had analyzed said formula:

Yap, C.J., Paras, and Sarmiento, JJ., concur.

Padilla, J., took no part.