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SUPREME COURT
Manila
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Third Division
JUL D$ 2016
THIRD DIVISION
G.R. No. 217575
SOUTH COTABATO
COMMUNICATIONS
CORPORATION and
GAUVAIN J. BENZONAN,
Present:
Petitioners,
VELASCO, JR., J., Chairperson,
PERALTA,
PEREZ,
REYES, and
JARDELEZA, * JJ.
- versus -
HON. PATRICIA STO. TOMAS,

SECRETARY OF LABOR AND
EMPLOYMENT, ROLANDO
FABRIGAR, MERLYN VELARDE,
VINCE LAMBOC, FELIPE
GALINDO, LEONARDO MIGUEL,
JULIUS RUBIN, EDEL RODEROS,
MERLYN COLIAO, and EDGAR
JOPSON,
Respondents.
Promulgated:
June 15,
;gz-6
DECISION
VELASCO, JR., J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules

of Court, seeking to reverse and set aside the Decision 1 dated November 28,
2014 and Resolution dated March 5, 2015 of the Court of Appeals (CA) in
CA-G.R. SP No. 00179-MIN, affirming the Orders dated November 8, 2004
and February 24, 2005 issued by the Secretary of Labor and Employment.
Factual Antecedents
On January 19, 2004, the Department of Labor and Employment

Region-XII (DOLE) conducted a Complaint Inspection2 at the premises of
DXCP Radio Station, which is owned by petitioner South Cotabato
Communications Corporation. The inspection yielded a finding of violation
On leave.
1
Penned by Associate Justice Maria Filomena D. Singh and concurred in by Associate Justices
Rornulo V. Borja and Rafael Antonio M. Santos.
2
Pursuant to Inspection Authority No. Rl201-0401-Cl-052.
Decision
G.R. No. 217575
of labor standards provisions of the Labor Code involving the nine (9)
private respondents, such as:
I.
2.
3.
4.
5.
6.
7.
Underpayment of Wages
Underpayment of 13 111 Month Pay
Non-payment of the five (5) days Service Incentive Leave Pay
Non-payment of Rest Day Premium Pay
Non-payment of the Holiday Premium Pay
Non-remittance of SSS Contributions
Some employees are paid on commission basis aside from their
allowance[ s]3
Consequently, the DOLE issued a Notice of Inspection Result

directing petitioner corporation and/or its president, petitioner Gauvain J.
Benzonan (Benzonan), to effect restitution and/or correction of the alleged
violations within five (5) days from notice. Due to petitioners' failure to
comply with its directive, the DOLE scheduled on March 3, 2004 a
Summary Investigation at its Regional Office No. XII, Provincial Extension
Office, in General Santos City. However, petitioners failed to appear despite
due notice. Another hearing was scheduled on April 1, 2004 wherein
petitioners' counsel, Atty. Thomas Jacobo (Atty. Jacobo), failed to attend
due to an alleged conflict in schedule. Instead, his secretary, Nona Gido,
appeared on his behalf to request a resetting, which the DOLE Hearing
Officer denied. 4 Thus, in an Order dated May 20, 2004, the DOLE RegionXII OIC Regional Director (DOLE Regional Director) directed petitioners to
pay private respondents the total amount of P759, 752, representing private
respondents' claim for wage differentials, 13 111 month pay differentials,
service incentive leave pay, holiday premium pay, and rest day premium
pay.
Therefrom, petitioners appealed to the Secretary of Labor, raising two
grounds: ( 1) denial of due process; and (2) lack of factual and legal basis of
the assailed Order.
The denial of due process was predicated on the refusal of the Hearing
Officer to reset the hearing set on April 1, 2004, which thus allegedly
deprived petitioners the opportunity to present their evidence. Likewise,
petitioners asserted that the Order of the Regional Director does not state
that an employer-employee relationship exists between petitioners and
private respondents, which is necessary to confer jurisdiction to the DOLE
over the alleged violations.
In an Order5 dated November 8, 2004, the Secretary of Labor affirmed
the findings of the DOLE Regional Director on the postulate that petitioners
failed to question, despite notice of hearing, the noted violations or to submit
any proof of compliance therewith. And in view of petitioners' failure to
present their evidence before the Regional Director, the Secretary of Labor
3
Rollo, p. 89.
Id. at 62-63.
Id. at 89-92.
Decision
G.R. No. 217575
adopted the findings of the Labor Inspector and considered the interviews
conducted as substantial evidence. The Secretary of Labor likewise
sustained what is considered as the straight computation method adopted by
6
the Regional Office as regards the monetary claims of private respondents,
thus:
WHEREFORE, presmises considered, the appeal by DXCP Radio
Station and Engr. Gauvain Benzonan is hereby DISMISSED for lack of
merit. The Order dated May [20], 2004 of the Regional Director, directing
appellants to pay the nine (9) appellees the aggregate amount of Seven
Hundred Fifty Nine Thousand Seven Hundred Fifty Two Pesos
111
(Php759,752.00), representing their claims for wage differentials, 13
month pay differentials, service incentive leave pay, holiday pay premium
and rest day premium, is AFFIRMED.
SO ORDERED.
Petitioners moved for, but was denied, reconsideration of the

Secretary of Labor's Order.
Petitioners elevated the case to the Court of Appeals (CA) via a
Petition for Certiorari under Rule 65 of the Rules of Court. By a Resolution 7
dated July 20, 2005, the CA dismissed the petition owing to procedural
infirmities because petitioners failed to attach a Secretary's Certificate
evidencing the authority of petitioner Benzonan, as President, to sign the
petition. On appeal, 8 this Court remanded the case back to the CA for
determination on the merits. 9
Ruling of the Court of Appeals
In its Decision dated November 28, 2014 in CA-G.R. SP No. 001 79MIN, the CA upheld the Secretary of Labor, holding that petitioners cannot
claim denial of due process, their failure to present evidence being attributed
to their negligence.
Petitioners moved for the reconsideration of the Decision, grounded
on similar arguments raised before the Secretary of Labor, citing in addition,
the pronouncement of the National Labor Relations Commission (NLRC) in
the related case of NLRC No. MAC-01-010053-2008 entitled Rolando
Fabrigar, et. al. v. DXCP Radio Station, et. al. There, the NLRC held that
no employer-employee relationship exists between petitioners and private
respondents Rolando Fabrigar (Fabrigar), Edgar Jopson (Jopson), and
Merlyn Velarde (Velarde). For clarity, two separate actions were instituted
by private respondents Fabrigar, Jopson, and Velarde against petitioners: the
6
Id. at 91.
Id. at 262-264.
8
Id. at 301-340, Petition for Review on Certiorari dated July 17, 2006.
9
Decision dated December 15, 2010 in G.R. No. 173326, penned by Associate Justice Teresita J.
Leonardo-De Castro and concurred in by Chief Justice Renato C. Corona and Associate Justices Presbitero
J. Velasco, Jr., Mariano C. Del Castillo, and Jose Portugal Perez.
7
Decision
G.R. No. 2 I 7575
first, for violation of labor standards provisions with the DOLE; and the
second, for illegal dismissal filed with the NLRC. The latter case arose from
the three respondents' claim of constructive dismissal effected by petitioners
following the inspection by the DOLE. In ruling for petitioners, the NLRC,
in its Resolution 10 dated April 30, 2008, declared that there is no employeremployee relationship between the parties, thus negating the notion of
constructive dismissal.
The CA denied petitioners' motion for reconsideration in its
Resolution dated March 5, 2014. Hence, this petition.
Petitioners presently seek the reversal of the CA's Decision and
Resolution and ascribe the following errors to the court a quo:
I.
The [CA] did not completely and properly dispose of the case
pending before it as it never resolved all justiciable issues raised x
x x, particularly, that the determination of presence or absence of
employer-employee relationship is indispensable in the resolution
of this case as jurisdiction is dependent upon it.
II.
There is [no] single basis, either factual or legal, for the issuance of
the May 20, 2004 Order of the Regional Director x x x against the
petitioners as it was issued relying merely on pure allegations and
without any substantial proof on the part of the claimants, contrary
to law and jurisprudence.
III.
The [CA] gravely erred in ruling that the Secretary of Labor x x x

did not act in a whimsical and capricious manner or with grave
abuse of discretion tantamount to lack or excess of jurisdiction in
affirming the Order of the [Regional Director] despite the glaring
fact that no evidence were submitted by private respondents as to
the basis of [their] claim and nature of their employment.
IV.
The [CA] erred in ruling that the Secretary of Labor x x x did not
deny [petitioners their] right to due process in affirming the x x x
Order of [the] Regional Director x x x notwithstanding [the
evidence] submitted before her [that there] exist no employeremployee relation[ ship] among the parties and that the [DO LE] has
no jurisdiction over the case. 11
In the matter of denial of due process, petitioners maintain that they

were prevented from presenting evidence to prove that private respondents
are not their employees when the Regional Director submitted the case for
resolution without affording them an opportunity to ventilate their case or
rebut the findings of the inspection. [n addition, petitioners assail the Order
of the Regional Director for want of factual and legal basis, particularly the
lack of categorical finding on the existence of an employer-employee
relationship between the parties-an element which petitioners insist is a
10
11
Id. at 647-651.
Id. at 37-38.
Decision
G.R. No. 217575
prereqms1te for the exercise of the DOLE' s jurisdiction, 12 following

People's Broadcasting (Bomba Radyo, Phils., Inc.) v. The Secretary of
Labor and Employment, et al. 13 Petitioners likewise note that the November
8, 2004 Order of the DOLE Secretary denying petitioner's appeal, as well as
the Decision of the CA, is silent on the employer-employee relationship
issue, which further suggests that no real and proper determination of the
existence of such relationship was ever made by these tribunals.
In its Comment, the DOLE counters that the results of the interviews
conducted in the premises of DXCP in the course of its inspection constitute
substantial evidence that served as basis for the monetary awards to private
respondents. 14
From the foregoing, the issue for the resolution can be reduced into
the question of whether the CA erred in upholding the November 8, 2004
Order of the Secretary of Labor, which in tum affirmed the May 20, 2004
Order of the Regional Director. Inextricably linked to the resolution of the
said issue is a determination of whether an employer-employee relationship
had sufficiently been established between the parties as to warrant the
assumption of jurisdiction by the DOLE and issuance of the said May 20,
2004 and November 8, 2004 Orders.
The Court's Ruling
Petitioners were not denied due process
Petitioners' claim of denial of due process deserves scant

consideration. The essence of due process, jurisprudence teaches, is simply
an opportunity to be heard, or, as applied to administrative proceedings,
an opportunity to explain one's side or an opportunity to seek a
reconsideration of the action or ruling complained of. 15 As long as the
parties are, in fine, given the opportunity to be heard before judgment is
rendered, the demands of due process are sufficiently met. 16
That petitioners were given ample opportunity to present their
evidence before the Regional Director is indisputable. They were notified of
the summary investigations conducted on March 3, 2004 and April 1, 2004,
both of which they failed to attend. To justify their non-appearance,
petitioners claim they requested a resetting of the April 1, 2004 hearing due
to the unavailability of their counsel. 17 However, no such explanation was
proffered as to why they failed to attend the first hearing. At any rate, it
12
Rollo, pp. 41-42.

G.R. No. 179652, May 8, 2009, 587 SCRA 724.
14
DOLE Comment, p. 6.
15
Sarapat v. Salanga, G.R. No. 154110, November 23, 2007, 538 SCRA 324; citing Westmont
Pharmaceuticals, Inc. v. Samaniego, G.R. Nos. 146653-54 & 147407-408, February 20, 2006, 482 SCRA
611, 619.
16
Montemayor v. Bunda/ian. et. al., G.R. No. 149335, July I, 2003, 405 SCRA 264.
17
Rollo, p. 32.
13
Decision
G.R. No. 217575
behooved the petitioners to ensure that they, as well as their counsel, would
be available on the dates set for the summary investigation as this would
enable them to prove their claim of non-existence of an employer-employee
relationship. Clearly, their own negligence did them in. Their lament that
they have been deprived of due process is specious.
This thus brings to the fore the issues of whether the Orders of the
Regional Director and Secretary of Labor are supported by factual and legal
basis, and, concomitantly, whether an employer-employee relationship was
sufficiently established between petitioners and private respondents as to
warrant the exercise by the DOLE of jurisdiction.
At the outset, the determination as to whether such employeremployee relationship was, indeed, established requires an examination of
facts. It is a well-settled rule that findings of fact of quasi-judicial agencies
are accorded great respect, even finality, by this Court. This proceeds from
the general rule that this Court is not a trier of facts, as questions of fact are
contextually for the labor tribunals to resolve, and only errors of law are
generally reviewed in petitions for review on certiorari criticizing the
decisions of the CA. 18
The findings of fact should, however, be supported by substantial
evidence from which the said tribunals can make their own independent
evaluation of the facts. In labor cases, as in other administrative and quasijudicial proceedings, the quantum of proof necessary is substantial evidence,
or such amount of relevant evidence which a reasonable mind might accept
as adequate to justify a conclusion. 19 Although no particular form of
evidence is required to prove the existence of an employer-employee
relationship, and any competent and relevant evidence to prove the
relationship may be admitted, 20 a finding that the relationship exists must
nonetheless rest on substantial evidence. 21
In addition, the findings of fact tainted with grave abuse of discretion
will not be upheld. This Court will not hesitate to set aside the labor
tribunal's findings of fact when it is clearly shown that they were arrived at
arbitrarily or in disregard of the evidence on record or when there is showing
of fraud or error oflaw. 22
This case clearly falls under the exception. After a careful review of
this case, the Court finds that the DOLE failed to establish its jurisdiction
over the case.
18
Magsaysay Maritime Services and Princess Cruise lines, ltd. v. Laurel, G.R. No. 195518,
March 20, 2013, 694 SCRA 225.

19
Tenaza, et. al. v. R. Villegas Tar:i Transport, G.R. No. 192998, April 2, 2014.
Legend Hotel (Manila) v. Rea/uyo, G.R. No. 153511, July 18, 2012, July 18, 2012, 677 SCRA
10, 19; citing Opu/encia Ice Plant and Storage v. NlRC, G.R. No. 98368, December 15, 1993, 228 SCRA
20
473.
21
22
legend Hotel (Manila) v. Realuyo, G.R. No. 1.'i351 I, July 18, 2012, 677 SCRA JO.
People's Broadcasting (Bombo Radyo, Phils .. Inc.) v. The Secretary of labor and Employment,
et al., supra note 13.
Decision
G.R. No. 217575
The assailed May 20, 2004 Order of the Regional Director and
November 8, 2004 Order of the Secretary of Labor were issued pursuant to
Article 128 of the Labor Code, to wit:
ART. 128. Visitorial and e71forcement power. - (a) The Secretary
of Labor and Employment or his duly authorized representatives,
including labor regulation officers, shall have access to employer's records
and premises at any time of the day or night whenever work is being
undertaken therein, and the right to copy therefrom, to question any
employee and investigate any fact, condition or matter which may be
necessary to determine violations or which may aid in the enforcement of
this Code and of any labor law, wage order or rules and regulations issued
pursuant thereto.
(b) Notwithstanding the provisions of Articles 129 and 217 of this
Code to the contrary, and in cases where the relationship of employeremployee still exists, the Secretary of Labor and Employment or his duly
authorized representatives shall have the power to issue compliance orders
to give effect to the labor standards provisions of this Code and other labor
legislation based on the findings of labor employment and enforcement
officers or industrial safety engineers made in the course of inspection.
The Secretary or his duly authorized representatives shall issue writs of
execution to the appropriate authority for the enforcement of their orders,
except in cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by
documentary proofs which were not considered in the course of
inspection. (As amended by Republic Act No. 7730, June 2, 1994). xx x
Under the aforequoted provision, the Secretary of Labor, or any of his

or her authorized representatives, is granted visitorial and enforcement
powers for the purpose of determining violations of, and enforcing, the
Labor Code and any labor law, wage order, or rules and regulations issued
pursuant thereto. Indispensable to the DOLE' s exercise of such power is the
existence of an actual employer-employee relationship between the parties.
The power of the DOLE to determine the existence of an employeremployee relationship between petitioners and private respondents in order
to carry out its mandate under Article 128 has been established beyond cavil
in Bomba Radyo, 23 thus:
It can be assumed that the DOLE in the exercise of its visitorial
and enforcement power somehow has to make a determination of the
existence of an employer-employee relationship. Such prerogatival
determination, however, cannot be coextensive with the visitorial and
enforcement power itself. Indeed, such determination is merely
preliminary, incidental and collateral to the DOLE's primary function of
enforcing labor standards provisions. The determination of the existence
of employer-employee relationship is still primarily lodged with the
NLRC. This is the meaning of the clause "in cases where the relationship
of employer-employee still exists" in Art. 128 (b ).
23
Id.
Decision
G.R. No. 217575
Thus, before the DOLE may exercise its powers under Article 128,
two important questions must be resolved: (I) Does the employeremployee relationship still exist, or alternatively, was there ever an
employer-employee relationship to speak of; and (2) Are there violations
of the Labor Code or of any labor law?
The existence of an employer-employee relationship is a
statutory prerequisite to and a limitation on the power of the
Secretary of Labor, one which the legislative branch is entitled to
impose. The rationale underlying this limitation is to eliminate the
prospect of competing conclusions of the Secretary of Labor and the
NLRC, on a matter fraught with questions of fact and law, which is best
resolved by the quasi-judicial body, which is the NRLC, rather than an
administrative official of the executive branch of the government. If the
Secretary of Labor proceeds to exercise his visitorial and enforcement
powers absent the first requisite, as the dissent proposes, his office confers
jurisdiction on itself which it cannot otherwise acquire. (emphasis ours)
The foregoing ruling was further reiterated and clarified in the

resolution of the reconsideration of the same case, wherein the jurisdiction
of the DOLE was delineated vis-a-vis the NLRC where the employeremployee relationship between the parties is at issue:
No limitation in the law was placed upon the power of the DOLE
to determine the existence of an employer-employee relationship. No
procedure was laid down where the DOLE would only make a preliminary
finding, that the power was primarily held by the NLRC. The law did not
say that the DOLE would first seek the NLRC's determination of the
existence of an employer-employee relationship, or that should the
existence of the employer-employee relationship be disputed, the DOLE
would refer the matter to the NLRC. The DOLE must have the power to
determine whether or not an employer-employee relationship exists,
and from there to decide whether or not to issue compliance orders in
accordance with Art. 128(b) of the Labor Code, as amended by RA
7730.
The DOLE, in determining the existence of an employeremployee relationship, has a ready set of guidelines to follow, the same
guide the courts themselves use. The elements to determine the
existence of an employment relationship are: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power
of dismissal; (4) the employer's power to control the employee's
conduct. The use of this test is not solely limited to the NLRC. The
DOLE Secretary, or his or her representatives, can utilize the same test,
even in the course of inspection, making use of the same evidence that
would have been presented before the NLRC. (emphasis ours)
Like the NLRC, the DOLE has the authority to rule on the existence
of an employer-employee relationship between the parties, considering that
the existence of an employer-employee relationship is a condition sir.e qua
non for the exercise of its visitorial power.
Nevertheless, it must be
emphasized that without an employer-employee relationship, or if one has
already been terminated, the Secretary of Labor is without jurisdiction to
determine if violations of labor standards provision had in fact been
Decision
G.R. No. 217575
committed, 24 and to direct employers to comply with their alleged violations

of labor standards.
The Orders of the Regional Director and the Secretary of

Labor do not contain clear and distinct factual basis
necessary to establish the jurisdiction of the DOLE and to
justify the monetary awards to private respondents
For expediency, the May 20, 2004 Order of the Regional Director is
pertinently reproduced hereunder:
ORDER
This refers to the Complaint Inspection conducted at DXCP Radio
Station and/or Engr. Gauvain Benzonan, President, located at NH Lagao
Road, General Santos City on January 19, 2004 pursuant to Inspection
Authority No. R1201-0401-CI-052 which resulted to the discovery of the
Labor Standards violations, namely:
1.
2.
3.
4.
5.
6.
7.
Underpayment of Wages
Underpayment of 13th Month Pay
Non-payment of the five (5) days Service Incentive
Leave Pay
Non-payment of Rest Day Premium Pay
Non-payment of the Holiday Premium Pay
Non-remittance of SSS Contributions
Some employees are paid on commission basis
aside from their allowance[ s]
Proceeding from the conduct of such inspection was the issuance

of the Notice of Inspection Result requiring the respondent DXCP Radio
Station and/or Engr. Gauvain Bcnzonan, President, to effect restitution
and/or correction of the noted violations at the plant/company level within
five (5) calendar days from notice thereof. But, Engr. Gauvain Benzonan
failed to do so.
On March 3, 2004, a summary investigation was conducted at the
[DOLE], Regional Office No. XII, Provincial Extension Office, General
Santos City. In that scheduled Summary Investigation, only complainants
appeared, assisted by Mr. Fred Huervana, National President of the
Philippine Organization of Labor Unions, xx x while respondent failed to
appear despite due notice.
On April 1, 2004, another Summary Investigation was conducted x
x x [There] complainants appeared, x x x while respondent was
represented by Ms. Nona Gido, Secretary of Atty. Thomas Jacobo, counsel
for the respondent. During the deliberation, Ms. Nona Gido manifested
that her presence in that scheduled summary investigation was to request
for the re-scheduling of such hearing, however, such request was denied.
Mr. Fred Huervana declared that as he gleaned from the Notice of
24
People's Broadcasting (Bomba Radyo, Phils.. Inc.) v. The Secretary of labor and Employment,
et. al, G.R. No. 179652, March 6, 2012, 667 SCRA 538.
/
Decision
10
G.R. No. 217575
Inspection Result issued by the labor inspector, the Non-payment of the

Provisional Emergency Relief Allowance (PERA) was not included from
among the discovered violations, hence he requested that it should be
included in the computation. Such request was denied x x x. Further, Mr.
Fred Huervana, declared that this case be submitted for decision based on
the merit of the case.
Failure of the parties to reach a final settlement prompted this
Office to compute the entitlements of the seven (7) affected workers for
their salary differential, underpayment of 13 111 month pay, non-payment of
the five (5) days service incentive leave pay, non-payment of holiday
premium pay and non-payment of rest day premium pay in the total
amount of SEVEN HUNDRED FIFTY NINE THOUSAND SEVEN
HUNDRED FIFTY TWO PESOS (P759, 752.00) x x x. 25
In determining the existence of an employer-employee relationship,

Bomba Radyo specifies the guidelines or indicators used by courts, i.e. (I)
the selection and engagement of the employee; (2) the payment of wages;
(3) the power of dismissal; and (4) the employer's power to control the
employee's conduct. The DOLE Secretary, or his or her representatives, can
utilize the same test, even in the course of inspection, making use of the
26
same evidence that would have been presented before the NLRC.
As can be gleaned from the above-quoted Order, the Regional
Director merely noted the discovery of violations of labor standards
provisions in the course of inspection of the DXCP premises. No such
categorical determination was made on the existence of an employeremployee relationship utilizing any of the guidelines set forth. In a word,
the Regional Director had presumed, not demonstrated, the existence of the
relationship. Of particular note is the DOLE's failure to show that
petitioners, thus, exercised control over private respondents' conduct in the
workplace. The power of the employee to control the work of the employee,
or the control test, is considered the most significant determinant of the
existence of an employer-employee relationship. 27
Neither did the Orders of the Regional Director and Secretary of
Labor state nor make reference to any concrete evidence to supp01i a finding
of an employer-employee relationship and justify the monetary awards to
private respondents. Substantial evidence, such as proofs of employment,
clear exercise of control, and the power to dismiss that prove such
relationship and that petitioners committed the labor laws violations they
were adjudged to have committed, are grossly absent in this case.
Furthermore, the Orders dated May 20, 2004 and November 8, 2004 do not
even allude to the substance of the interviews during the inspection that
became the basis of the finding of an employer-employee relationship.
25
Rollo, pp. 62-63.

People's Broadcasting (Bomba Radyo. Phils .. Inc.) v. The Secretary of Labor and Employment,
27
Coca Cola Bottlers Phils .. Inc. v. NLRC, G.R. No. 120466, May 17, 1999, 307 SCRA 13 L 139.
26
Decision
11
G.R. No. 217575
The Secretary of Labor adverts to private respondents' allegation in

their Reply 28 to justify their status as employees of petitioners. The proffered
justification falls below the quantum of proof necessary to establish such
fact as allegations can easily be concocted and manufactured. Private
respondents' allegations are inadequate to support a conclusion absent other
concrete proof that would support or corroborate the same. Mere allegation,
without more, is not evidence and is not equivalent to proof. 29 Hence,
private respondents' allegations, essentially self-serving statements as they
are and devoid under the premises of any evidentiary weight, can hardly be
taken as the substantial evidence contemplated for the DOLE's conclusion
that they are employees of petitioners.
In a similar vein, the use of the straight computation method in
awarding the sum of P759, 752 to private respondents, without reference to
any other evidence other than the interviews conducted during the
inspection, is highly telling that the DOLE failed to consider evidence in
arriving at its award and leads this Court to conclude that such amount was
arrived at arbitrarily.
It is quite implausible for the nine (9) private respondents to be
entitled to uniform amounts of Service Incentive Leave (SIL) pay, holiday
pay premium, and rest day premium pay for three (3) years, without any
disparity in the amounts due them since entitlement to said benefits would
largely depend on the actual rest days and holidays worked and amount of
remaining leave credits in a year. Whoever claims entitlement to the
benefits provided by law should establish his or her right thereto. 30 The
burden of proving entitlement to overtime pay and premium pay for holidays
and rest days lies with the employee because these are not incurred in the
normal course ofbusiness. 31 In the case at bar, evidence pointing not only to
the existence of an employer-employee relationship between the petitioners
and private respondents but also to the latter's entitlement to these benefits
are miserably lacking.
It may be that petitioners have failed to refute the allegation that
private respondents were employees of DXCP. Nevertheless, it was
incumbent upon private respondents to prove their allegation that they were,
indeed, under petitioners' employ and that the latter violated their labor
rights. A person who alleges a fact has the onus of proving it and the proof
should be clear, positive and convincing. 32 Regrettably, private respondents
failed to discharge this burden. The pronouncement in Bombyo Radyo that
the determination by the DOLE of the existence of an employer-employee
28
Rollo, p. 91; Order dated November 8, 2004.

Centro Project Manpower Services Corporation v. Naluis, G.R. No. 160123, June 17, 2015.
30
Javier v. Fly Ace Corporation, G.R. No. 192558, February 15, 2012; citing Cootauco v. MMS
Phil. Maritime Services, Inc., G.R. No. 184722, March 15, 20 I 0, 615 SCRA 529
31
loon, et. al. v. Power Master, Inc., G.R. No. 189404, December 11, 2013; citing lagatic v.
NLRC, 349 Phil. 172, 185-186 (1998).
32
Basay v. Hacienda Consolacion, G.R. No. 175532, April 19, 2010, 618 SCRA 422; citing
/,eopo'd lntegmted Se,.,;ces, Inc. v. MocaUnao, G.R. No. 159808, September JO, 2008, 567 SCRA 192,
29
200.
/"-
Decision
12
G.R. No. 217575
relationship must be respected should not be construed so as to dispense

with the evidentiary requirement when called for.
It cannot be stressed enough that the existence of an employer-
employee relationship between the parties is essential to confer jurisdiction

of the case to the DOLE. Without such express finding, the DOLE cannot
assume to have jurisdiction to resolve the complaints of private respondents
as jurisdiction in that instance lies with the NLRC. 33
The Orders of the Regional Director and Secretary of Labor
do not comply with Article VIII, Section 16 of the Constitution
As a necessary corollary to the foregoing considerations, another wellgrounded reason exists to set aside the May 20, 2004 Order of the Regional
Director and November 8, 2004 Order of the Secretary of Labor. The said
Orders contravene Article VIII, Section 14 of the Constitution, which
requires courts to express clearly and distinctly the facts and law on which
decisions are based, to wit:
Section 14. No decision shall be rendered by any court without
expressing therein clearly and distinctly the facts and the law on which it
is based.
No petition for review or motion for reconsideration of a decision
of the court shall be refused due course or denied without stating the legal
basis therefor.
As stressed by this Court in San Jose v. NLRC, 34 faithful compliance

by the courts and quasi-judicial bodies, such as the DOLE, with Art. VIII,
Sec. 14 is a vital element of due process as it enables the parties to know
how decisions are arrived at as well as the legal reasoning behind them.
Thus:
This Court has previously held that judges and arbiters should
draw up their decisions and resolutions with due care, and make certain
that they truly and accurately reflect their conclusions and their final
dispositions. A decision should faithfully comply with Section 14, Article
VIII of the Constitution which provides that no decision shall be rendered
by any court without expressing therein clearly and distinctly the facts of
the case and the law on which it is based. If such decision had to be
completely overturned or set aside, upon the modified decision, such
resolution or decision should likewise state the factual and legal
foundation relied upon. The reason for this is obvious: aside from being
required by the Constitution, the court should be able to justify such a
sudden change of course; it must be able to convincingly explain the
taking back of its solemn conclusions and pronouncements in the earlier
decision. The same thing goes for the findings of fact made by the NLRC,
as it is a settled rule that such findings are entitled to great respect and
33
People's Broadcasting (Bomba Radyo, Phils., Inc.) v. The Secretary of Labor and Employment.
" G.R. No. 121227, August 17, 1998, 294 SCRA 3 36; dting Juan Saha/la. et al. v. NLRC, G .R.
Nos. 102472-84, August 22, 1996, 260 SCRA 697.
/
/
'-
Decision
13
G.R. No. 217575
even finality when supported by substantial evidence; otherwise, they shall

be struck down for being whimsical and capricious and arrived at with
grave abuse of discretion. It is a requirement of due process and fair play
that the parties to a litigation be informed of how it was decided, with an
explanation of the factual and legal reasons that led to the conclusions of
the court. A decision that does not clearly and distinctly state the facts and
the law on which it is based leaves the parties in the dark as to how it was
reached and is especially prejudicial to the losing party, who is unable to
pinpoint the possible errors of the court for review by a higher tribunal. x
xx
To this end, University of the Philippines v. Hon. Dizon 35 instructs

that the Constitution and the Rules of Court require not only that a decision
should state the ultimate facts but also that it should specify the supporting
evidentiary facts, for they are what are called the findings of fact. A decision
that does not clearly and distinctly state the facts and the law on which it is
based leaves the parties in the dark as to how it was reached and is especially
prejudicial to the losing party, who is unable to pinpoint the possible errors
of the court (or quasi-judicial body) for review by a higher tribunal. 36
Accordingly, this Court will not hesitate to strike down decisions
rendered not hewing to the Constitutional directive, as it did to a Decision
37
rendered by the NLRC in Anina, et al. v. Hinatuan Mining Corporation for
non-observance of the said requirement:
In the present case, the NLRC was definitely wanting in the
observance of the aforesaid constitutional requirement. Its assailed fivepage Decision consisted of about three pages of quotation from the labor
arbiter's decision, including the dispositive portion, and barely a page (two
short paragraphs of two sentences each) of its own discussion of its
reasons for reversing the arbiter's findings. It merely raised a doubt on the
motive of the complaining employees and took "judicial notice that in one
area of Mindanao, the mining industry suffered economic difficulties." In
affirming peremptorily the validity of private respondents' retrenchment
program, it surmised that "[i]f small mining cooperatives experienced the
same fate, what more with those highly mechanized establishments."
The Court is not unmindful of the State's policy to zealously

safeguard the rights of our workers, as no less than the Constitution itself
mandates the State to afford full protection to labor. Nevertheless, it is
equally true that the law, in protecting the rights of the laborer, authorizes
neither oppression nor self-destruction of the employer. 38 The constitutional
policy to provide full protection to labor is not meant to be a sword to
oppress employers. 39 Certainly, an employer cannot be made to answer for
claims that have neither been sufficiently proved nor substantiated.
35
G.R. No. 171182, August 23, 2012.

Anina, et. al. v. Hinatuan Mining Corporation, et. al, G.R. No. 123226, May 21, 1998; citing
Sabal/av. NLRC, August 22, 1996, 260 SCRA 697.
36
37
38
Id.
Serrano v. NLRC, 380 Phil. 416 (2000).

39
Agabon v. NLRC, G.R. No. 158693, November 17, 2004.
Decision
14
G.R. No. 217575
WHEREFORE, the petition is GRANTED. The Decision dated

November 28, 2014 and Resolution dated March 5, 2015 of the Court of
Appeals in CA-G.R. SP No. 00179-MIN are accordingly REVERSED and
SET ASIDE. The Order of the then Secretary of Labor and Employment
dated November 8, 2004 denying petitioners' appeal and the Order of the
Regional Director, DOLE Regional Office No. XII, dated May 20, 2004, are
ANNULLED, without prejudice to whatever right or cause of action private
respondents may have against petitioners.
SO ORDERED.
Decision
G.R. No. 217575
15
WE CONCUR:
REZ
Associate Justice
(On Leave)
FRANCIS H. JARDELEZA
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court's Division.
PRESBITEJl'O J. VELASCO, JR.

sociate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the
Division Chairperson's Attestation, I certify that the conclusions in the
above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court's Division.
TRUE COPY
nClerkofCourt
Third Division
JUL 0 t 20\6
MARIA LOURDES P.A. SERENO

Chief Justice
l\epublic of tbe
<!Court
,.. ,..
;!fmanila
THIRD DIVISION
HILARIO DASCO,
RE YMIR PARAFINA,
RICHARD PARAFINA,
EDILBERTO ANIA,
MICHAEL ADANO,
JAIME BOLO, RUBEN E. GULA,
ANTONIO CUADERNO and
JOVITO CATANGUI,
Petitioners,
G.R. No. 211141

Present:
VELASCO, JR., J.,
Chairperson,
PERALTA,
PEREZ,
REYES, and
JARDELEZA, JJ
- versus -
PHILTRANCO SERVICE
ENTERPRISES INC./CENTURION Promulgated:
SOLANO, Manager,
><').
lu,ti
June 29, 2016
x-------------------------------------------DECISION
REYES,J.:
This appeal by petition for review on certiorari 1 seeks to annul and set
aside the Decision2 dated August 30, 2013 and Resolution3 dated January 28,
2014 of the Court of Appeals (CA) in CA-G.R. SP No. 126210, which
nullified and set aside the Decision4 dated February 22, 2012 and Resolution5
Rollo, pp. 8-24.
Penned by Associate Justice Hakim S. Abdulwahid, with Associate Justices Marlene GonzalesSison and Edwin D. Sorongon concurring; id. at 27-35.
3
Id. at 37-38.
4
Rendered by Presiding Commissioner Gerardo C. Nograles, with Commissioners Perlita B.
Velasco and Romeo L. Go concurring; id. at 49-55.
5
Id. at 56-57.
Decision
G.R. No. 211141
dated May 30, 2012 of the National Labor Relations Commission (NLRC) in
NLRC-NCR Case No. 07-10173-11, and reinstated the Decision 6 dated
October 17, 2011 of the Labor Arbiter (LA), dismissing the monetary claims
of Hilario Dasco, Reymir Parafina, Richard Parafina, Edilberto Ania, Michael
Adano, Jaime Bolo, Ruben E. Gula, Antonio Cuademo and Jovito Catangui
(petitioners).
The Facts
This case stemmed from a complaint7 for regularization,

underpayment of wages, non-payment of service incentive leave (SIL) pay,
and attorney's fees, filed by the petitioners against Philtranco Service
Enterprises Inc., (PSEI), a domestic corporation engaged in providing public
utility transportation, and its Manager, Centurion Solano (respondents).
On various dates from 2006 to 2010, the petitioners were employed by
the respondents as bus drivers and/or conductors with travel routes of Manila
(Pasay) to Bicol, Visayas and Mindanao, and vice versa. 8
On July 4, 2011, the petitioners filed a case against the respondents
alleging that: ( 1) they were already qualified for regular employment status
since they have been working with the respondents for several years; (2)
they were paid only P404.00 per round trip, which lasts from two to five
days, without overtime pay and below the minimum wage rate; (3) they
cannot be considered as field personnel because their working hours are
controlled by the respondents from dispatching to end point and their travel
time is monitored and measured by the distance because they are in the
business of servicing passengers where time is of the essence; and (4) they
had not been given their yearly five-day SIL since the time they were hired
by the respondents. 9
Issued by Labor Arbiter Enrique L. Flores, Jr.; id. at 58-62.

Id. at 63-66.
Name
Reymir Parafina
Richard Parafina
Edilberto U. Ania
Michael Adano
Jaime T. Bolo
Ruben E. Gula
Antonio M. Cuaderno
Jovito P. Catangui
Hilario Dasco
Id. at 68-69.
Id. at 69-71.
Date Hired
4/24/2010
4/8/2008
3/22/2009
I 1/20/2008
4/8/2008
2/8/2009
4/20/2010
2/17/2006
10/6/2007
Routes
Manila-Sorsogon and vice versa
Manila-Davao and vice versa
Manila-Daet and vice versa
Salary
P404.00/day
P404.00/day
P404.00/day
P404.00/day
P404.00/day
P404.00/day
P404.00/day
P404.00/day
P404.00/day
Decision
G.R. No. 211141
In response, the respondents asserted that: ( 1) the petitioners were

paid on a fixed salary rate of P0.49 centavos per kilometer run, or minimum
wage, whichever is higher; (2) the petitioners are seasonal employees since
their contracts are for a fixed period and their employment was dependent on
the exigency of the extraordinary public demand for more buses during peak
months of the year; and (3) the petitioners are not entitled to overtime pay
and SIL pay because they are field personnel whose time outside the
company premises cannot be determined with reasonable certainty since
they ply provincial routes and are left alone in the field unsupervised. 10
Ruling of the LA
On October 17, 2011, the LA rendered a Decision 11 in favor of the

respondents but declared the petitioners as regular employees of the
respondents. 12 The LA held that the respondents were able to prove that the
petitioners were paid on a fixed salary of P0.49 per kilometer run, or
minimum wage, whichever is higher. The LA also found that the petitioners
are not entitled to holiday pay and SIL pay because they are considered as
field personnel. 13
Dissatisfied with the LA's decision, the petitioners interposed a
Partial Appeal 14 filed on December 8, 2011 before the NLRC.
Ruling of the NLRC
In a Decision 15 dated February 22, 2012, the NLRC granted the

petitioners' appeal and modified the LA's decision, the dispositive part of
which reads:
WHEREFORE, premises considered, the Partial Appeal is
GRANTED. The Decision of the [LA] dated October 17, 2011 is hereby
MODIFIED in that [PSEI] is directed to pay [the petitioners] wage
differentials covering a period of three (3) years counted backwards from
the time they filed their complaint against respondents but taking into
consideration the respective dates of employment and the prevailing
minimum wage rate applicable. [PSEI] is likewise directed to pay [the
petitioners SIL] and overtime benefits limited also for a period of three (3)
years counted backwards from the time they filed their complaint against
respondents.
IO
II
12
13
14
15
Id.
Id.
Id.
Id.
Id.
Id.
at 77-79.
at 58-62.
at 62.
at 60.
at 103-112.
at 49-55.
Decision
G.R. No. 211141
SO ORDERED. 16
The NLRC held that the petitioners are not field personnel considering
that they ply specific routes with fixed time schedules determined by the
respondents; thus, they are entitled to minimum wage, SIL pay, and
overtime benefits. 17 With regard to the respondents' claim that the
petitioners have a fixed term contract, the NLRC concurred with the findings
of the LA that the respondents failed to show any document, such as
employment contracts and employment records, that would show the dates
of hiring, as well as the fixed period agreed upon. 18
The respondents filed a Motion for Reconsideration 19 on March 12,
2012 but it was denied in a Resolution20 dated May 30, 2012; hence, they
1
filed a Petition for Certiorari2 before the CA.
Meanwhile, during the pendency of this case before the CA, the
petitioners filed a motion for issuance of writ of execution to enforce the
NLRC decision. Accordingly, a Writ of Execution dated November 6, 2012
was issued. By virtue of such writ, two units of buses owned by PSEI were
levied and sold in a public auction, for the amount of P600,000.00.
22
Thereafter, a corresponding Sheriff's Certificate of Sale was issued.
Ruling of the CA
The CA, in its Decision23 dated August 30, 2013, reversed and set
aside the NLRC rulings and reinstated the LA's decision. Consequently, the
writ of execution, levy, auction sale and certificate of sale of PSEI's
properties were declared null and void. The petitioners and the NLRC
Sheriff were directed to return the subject properties or tum over the
monetary value thereof to the respondents. 24
In overturning the NLRC's decision, the CA considered the
petitioners as field workers and, on that basis, denied their claim for
benefits, such as overtime pay and SIL pay. According to the CA, there was
no way for the respondents to supervise the petitioners on their job. The
petitioners are practically on their own in plying the routes in the field, as in
fact, they can deviate from the fixed routes, take short cuts, make detours,
16
17
18
19
20
21
22
23
24
Id.
Id.
Id.
Id.
Id.
Id.
Id.
Id.
Id.
at 54-55.
at 53-54.
at 53.
at 113-117
at 56-57.
at 118-126.
at 34.
at 27-35.
at 34-35.
Decision
G.R. No. 211141
and take breaks, among others. The petitioners work time and performance
are not constantly supervised by the respondents, thus making them field
personnel. 25
Aggrieved by the foregoing disquisition, the petitioners moved for
reconsideration26 but it was denied by the CA in its Resolution27 dated
January 28, 2014. Hence, the present petition for review on certiorari.
The Issue
The main issue in this case is whether the petitioners as bus drivers
and/or conductors are field personnel, and thus entitled to overtime pay and
SIL pay. 28
Ruling of the Court
The petition is impressed with merit.

Again, the Court reiterates that as a rule, it is not a trier of facts and
this applies with greater force in labor cases. Hence, factual findings of
quasi-judicial bodies like the NLRC, particularly when they coincide with
those of the LA and if supported by substantial evidence, are accorded
respect and even finality by this Court. But where the findings of the NLRC
and the LA are contradictory, as in the present case, this Court may delve
into the records and examine for itself the questioned findings. 29
Nevertheless, the facts and the issues surrounding this petition are no
longer novel for this Court. The determination of whether bus drivers and/or
conductors are considered as field personnel was already threshed out in the
case of Auto Bus Transport Systems, Inc. v. Bautista, 30 where the Court
explained that:
As a general rule, [field personnel] are those whose
performance of their job/service is not supervised by the
employer or his representative, the workplace being away
from the principal office and whose hours and days of work
cannot be determined with reasonable certainty; hence, they
are paid specific amount for rendering specific service or
performing specific work. If required to be at specific
25
26
27
28
29
30
Id. at 33-34.
Id. at 39-46.
Id. at 37-38.
Id.at17.
Victory Liner, Inc. v. Race, 548 Phil. 282, 293 (2007).
497 Phil. 863 (2005).
Decision
G.R. No. 211141
places at specific times, employees including drivers cannot

be said to be field personnel despite the fact that they are
performing work away from the principal office of the
employee. x x x
xx xx
x x x At this point, it is necessary to stress that the definition of a
"field personnel" is not merely concerned with the location where the
employee regularly performs his \luties but also with the fact that the
employee's performance is unsupervised by the employer. As discussed
above, field personnel are those who regularly perform their duties away
from the principal place of business of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty.
Thus, in order to conclude whether an employee is a field employee, it is
also necessary to ascertain if actual hours of work in the field can be
determined with reasonable certainty by the employer. In so doing, an
inquiry must be made as to whether or not the emrloyee's time and
performance are constantly supervised by the employer. 1
Guided by the foregoing norms, the NLRC properly concluded that

the petitioners are not field personnel but regular employees who perform
tasks usually necessary and desirable to the respondents' business.
Evidently, the petitioners are not field personnel as defined above and the
NLRC's finding in this regard is
by the established facts of this
case: (1) the petitioners, as bus drivers and/or conductors, are directed to
transport their passengers at a specified time and place; (2) they are not
given the discretion to select and contract with prospective passengers; (3)
their actual work hours could be determined with reasonable certainty, as
well as their average trips per month; and (4) the respondents supervised
their time and performance of duties.
In order to monitor their drivers and/or conductors, as well as the
passengers and the bus itself, the bus companies put checkers, who are
assigned at tactical places along the travel routes that are plied by their
buses. The drivers and/or conductors are required to be at the specific bus
terminals at a specified time. In addition, there are always dispatchers in
each and every bus terminal, who supervise and ensure prompt departure at
specified times and arrival at the estimated proper time. Obviously, these
drivers and/or conductors cannot be considered as field personnel because
they are under the control and constant supervision of the bus companies
while in the performance of their work.
As correctly observed by the NLRC:
31
Id. at 873-874, citing the Bureau of Working Conditions, Advisory Opinion to Philippine
Technical-Clerical Commercial Employees Association.
Decision
G.R. No. 211141
[I]t is undisputed that [the petitioners] as bus drivers/conductors ply

specific routes of [PSEI], xx x averaging 2 to 5 days per round trip. They
follow fixed time schedules of travel and follow the designated route of
[PSEI]. Thus, in carrying out their functions as bus drivers/conductors,
they are not at liberty to deviate from the fixed time schedules for
departure or arrival or change the routes other than those specifically
designated for [PSEI], in accordance with the franchise granted to the
[PSEI] as a public utility provider. In other words, [the petitioners] are
clearly under the strict supervision and control of [PSEI] in the
performance of their functions otherwise the latter will not be able to carry
out its business as public utility service provider in accordance with its
franchise. 32
The Court agrees with the above-quoted findings of the NLRC.

Clearly, the petitioners, as bus drivers and/or conductors, are left alone in the
field with the duty to comply with the conditions of the respondents'
franchise, as well as to take proper care and custody of the bus they are
using. Since the respondents are engaged in the public utility business, the
petitioners, as bus drivers and/or conductors, should be considered as regular
employees of the respondents because they perform tasks which are directly
and necessarily connected with the respondents' business. Thus, they are
consequently entitled to the benefits accorded to regular employees of the
respondents, including overtime pay and SIL pay.
WHEREFORE, the petition is GRANTED. The Decision dated

August 30, 2013 and Resolution dated January 28, 2014 of the Court
of Appeals in CA-G.R. SP No. 126210 are REVERSED and SET
ASIDE. The Decision dated February 22, 2012 and Resolution dated
May 30, 2012 of the National Labor Relations Commission in NLRC-NCR
Case No. 07-10173-11 are REINSTATED.
SO ORDERED.
Associate Justice
32
Rollo, pp. 53-54.
Decision
G.R. No. 211141
WE CONCUR:
PRESBITE.RR}J J. VELASCO, JR.
Justice
Chairperson
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that
the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court's
Division.
J. VELASCO, JR.
As-ociate Justice
Chairperson
Decision
G.R. No. 211141
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the
Division Chairperson's Attestation, I certify that the conclusions in the
above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court's Division.
MARIA LOURDES P.A. SERENO

Chief Justice
U; , ,:::, :;:_;,
rhini
or Court
JUL 2 9 2016

SUPREME COURT
Manila
EN BANC
G.R. Nos. 82763-64 March 19, 1990
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRA, and LABOR
ALLIANCE FOR NATIONAL DEVELOPMENT, respondents.
The Legal Counsel for petitioner.
Piorello E. Azura, Errol Ismael, B. Palaci and Maria Lourdes C. Legaspi for APT.
Pablo B. Castillon for respondent LAND.
MELENCIO-HERRERA, J.:
This Petition for Certiorari addresses itself to the 12 February 1986 Order of the National Labor Relations Commission directing
petitioner Development Bank of the Philippines (DBP) to remit the sum of P6,292,380.00 "out of proceeds of the foreclosed properties
of Lirag Textile Mills Inc., sold at public auction in order to satisfy the judgment" in NLRC Cases Nos. NCR-3-2581-82 and 2-209082.
The background facts of these two cases may be summarized as follows:
The complainants in the two cases filed below were former employees of Lirag Textile Mills, Inc. (LIRAG, for short). LIRAG was a
mortgage debtor of DBP. Private respondent Labor Alliance for National Development (LAND, for brevity) was the bargaining
representative of the more or less 800 former rank and file employees of LIRAG. Around September 1981, LIRAG started terminating
the services of its employees on the ground of retrenchment. By December of the said year there were already 180 regular employees
separated from the service. LIRAG has since ceased operations presumably due to financial reverses.
In February 1982, Joselito Albay, one of the employees dismissed in September 1981, filed a complaint before the National Labor
Relations Commission (NLRC) against LIRAG for illegal dismissal (Case No. 2-2090-82). On 1 March 1982, LAND, on behalf of
180 dismissed members, also filed a Complaint against LIRAG seeking separation pay, 13th month pay, gratuity pay, sick leave and
vacation leave pay and emergency allowance (Case No. 3-2581-82). These two cases were consolidated and jointly heard by the
NLRC. Said complainants have since been joined by supervisors and managers.
In a Decision, dated 30 July 1982, Labor Arbiter Apolinar L. Sevilla ordered LIRAG to pay the individual complainants. The NLRC
(Third Division) affirmed the same on 28 March 1982. That judgment became final and executory.
On 15 April 1983, a Writ of Execution was issued. On the same day, DBP extrajudicially foreclosed the mortgaged properties for
failure of LIRAG to pay its mortgage obligation. As the only bidder at the foreclosure sale, DBP acquired said mortgaged properties
for P31,346,462.90. Since DBP was the sole mortgagee, no actual payment was made, the amount of the bid having been merely
credited in partial satisfaction of LIRAG's indebtedness.
By reason of said foreclosure, the Writ of Execution issued in favor of the complainants remained unsatisfied. A Notice of Levy on
Execution on the properties of LIRAG was then entered.
On 7 December 1984, LAND filed a "Motion for Writ of Execution and Garnishment" of the proceeds of the foreclosure sale.
On 30 May 1985, upon motion of LAND, Labor Arbiter Apolinar L. Sevilla ordered the DBP impleaded "in the interest of justice and
due process," and required it to intervene.
On 12 February 1986, and over the opposition of DBP, Labor Arbiter Sevilla granted the Writ of Garnishment and directed DBP to
remit to the NLRC the sum of P6,292,380.00 out of the proceeds of the foreclosed properties of LIRAG sold at public auction in order
to satisfy the judgment previously rendered.
DBP sought reconsideration of the above Order on the grounds of NLRC's lack of jurisdiction over it since it was not a party to the
case, and that it was deprived of its property without due process of law. Public respondent, Labor Arbiter Isabel P. Ortiguerra denied
reconsideration on 25 May 1987. DBP appealed that denial to the NLRC.
In the meantime, on 3 February 1987, by virtue of Proclamation Nos. 50 and 50-A, the Asset Privatization Trust (APT) became the
transferee of the DBP foreclosed assets of LIRAG. On 12 July 1989, by virtue of that transfer, we deemed APT impleaded as a partypetitioner and gave it time within which to file its pleading. It submitted a Memorandum on 22 November 1989.
It appears that on 21 December 1987, a partial Compromise Agreement was entered into between APT and LAND (Litex Chapter)
whereby APT paid the complainants-employees, ex gratia, the sum of P750,000.00 "in full settlement of their claims, past and present,
with respect to all assets of LITEX transferred by DBP to APT." That amount was received by LAND's local President. Apparently,
however, on 25 January 1988, LAND, through its national President, filed its opposition to the Compromise Agreement for being
contrary to law, morals and public policy.
On 25 March 1988, the NLRC (First Division) affirmed the appealed Order and dismissed the DBP appeal.
DBP is now before us seeking a review and reversal. On 30 January 1989, the Court resolved to give due course to the petition and to
require the parties to submit simultaneous memoranda. On 1 February 1990, the Court's Second Division referred the case to the
Court en banc, which the latter accepted on the same date.
It is true that DBP was not an original party and that it was ordered impleaded only after the Writs of Execution were not satisfied
because the properties levied upon on execution had been foreclosed extrajudicially by it. DBP had to be impleaded, however, for the
proper satisfaction of a final judgment. Being an incident in the execution of the final judgment award, NLRC retained jurisdiction and
control over the case and could issue such orders as were necessary for the implementation of that award. Its inclusion as a party could
not have been accomplished at the earlier stages of the proceedings because at the time of the filing of the Complaint, private
respondents' cause of action was only against LIRAG.
DBP cannot rightfully contend that it was deprived of due process. It was given the opportunity to be heard and to present its
evidence. It had actually filed its Opposition to the Motion for Execution and Garnishment filed by LAND on 7 January 1985, and the
Order granting the Motion was issued only after hearing. DBP had also addressed an appeal to the NLRC. It had submitted, therefore,
to the jurisdiction of the NLRC.
Now, for the core issue whether or not the NLRC gravely abused its discretion in affirming the Order of the Labor Arbiter granting
the Writ of Garnishment out of the proceeds of LIRAG's properties foreclosed by DBP to satisfy the judgment in these cases.
We are constrained to rule in the affirmative.
Article 110 of the Labor Code provides:
Art. 110. Worker preference in case of bankruptcy. In the event of bankruptcy or liquidation of an employer's business, his
workers shall enjoy first preference as regards wages due them for services rendered during the period prior to the bankruptcy
or liquidation, any provision to the contrary notwithstanding. Unpaid wages shall be paid in full before other creditors may
establish any claim to a share in the assets of the employer.
In implementation of the foregoing, Section 10, Rule VIII, Book III of the Revised Rules and Regulations Implementing the Labor
Code, as amended, provides:
Sec. 10. Payment of wages in case of bankruptcy. Unpaid wages earned by the employees before the declaration of
bankruptcy or judicial liquidation of the employer's business shall be given first preference and shall be paid in full before
other creditors may establish any claim to a share in the assets of the employer. (Emphasis supplied).
In interpreting the foregoing provisions, the Court, in Development Bank of the Philippines vs. Santos (G.R. Nos. 78261-62, 8 March
1989), categorically stated:
It is quite clear from the provision that a declaration of bankruptcy or a judicial liquidation must be present before the
workers preference may be enforced. Thus, Article 110 of the Labor Code and its implementing rule cannot be invoked by
the respondents in this case absent a formal declaration of bankruptcy or a liquidation order. . . .
Since then, however, Article 110 has been amended by Republic Act No. 6715 and now reads as follows:
Sec. 1. Article 110 of Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the Philippines, is
hereby further amended to read as follows:
Art. 110. Worker preference in case of bankruptcy. In the event of bankruptcy or liquidation of an employer's business, his
workers shall enjoy first preference as regards their unpaid wages and other monetary claims, any provision of law to the
contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before the claims of the Government
and other creditors may be paid. (Amendments emphasized).
The amendment expands worker preference to cover not only unpaid wages but also other monetary claims to which even claims of
the Government must be deemed subordinate.
Section 10, Rule III, Book III of the Omnibus Rules Implementing the Labor Code has also been amended by Section 1 of the Rules
and Regulations Implementing RA 6715 as approved by the then Secretary of Labor and Employment on 24 May 1989, and now
provides:
Sec. 10. Payment of wages and other monetary claims in case of bankruptcy. In case of bankruptcy or liquidation of the
employer's business, the unpaid wages and other monetary claims of the employees shall be given first preference and shall
be paid in full before the claims of government and other creditors may be paid.
Notably, the terms "declaration" of bankruptcy or "judicial" liquidation have been eliminated. Does this mean then that liquidation
proceedings have been done away with?
We opine in the negative, upon the following considerations:
1. Because of its impact on the entire system of credit, Article 110 of the Labor Code cannot be viewed in isolation but must be read in
relation to the Civil Code scheme on classification and preference of credits.
Article 110 of the Labor Code, in determining the reach of its terms, cannot be viewed in isolation. Rather, Article 110 must
be read in relation to the provisions of the Civil Code concerning the classification, concurrence and preference of credits,
which provisions find particular application in insolvency proceedings where the claims of all creditors, preferred or nonpreferred, may be adjudicated in a binding manner. . . . Republic vs. Peralta (G.R. No. L-56568, May 20, 1987, 150 SCRA
37).
2. In the same way that the Civil Code provisions on classification of credits and the Insolvency Law have been brought into harmony,
so also must the kindred provisions of the Labor Law be made to harmonize with those laws.
3. In the event of insolvency, a principal objective should be to effect an equitable distribution of the insolvent's property among his
creditors. To accomplish this there must first be some proceeding where notice to all of the insolvents's creditors may be given and
where the claims of preferred creditors may be bindingly adjudicated (De Barretto vs. Villanueva, No. L-14938, December 29, 1962, 6
SCRA 928). The rationale therefore has been expressed in the recent case of DBP vs. Secretary of Labor (G.R. No. 79351, 28
November 1989), which we quote:
A preference of credit bestows upon the preferred creditor an advantage of having his credit satisfied first ahead of other
claims which may be established against the debtor. Logically, it becomes material only when the properties and assets of the
debtors are insufficient to pay his debts in full; for if the debtor is amply able to pay his various creditors in full, how can the
necessity exist to determine which of his creditors shall be paid first or whether they shall be paid out of the proceeds of the
sale the debtor's specific property? Indubitably, the preferential right of credit attains significance only after the properties of
the debtor have been inventoried and liquidated, and the claims held by his various creditors have been established (Kuenzle
& Streiff (Ltd.) vs. Villanueva, 41 Phil 611 (1916); Barretto vs. Villanueva, G.R. No. 14938, 29 December 1962, 6 SCRA
928; Philippine Savings Bank vs. Lantin, G.R. 33929, 2 September 1983, 124 SCRA 476).
4. A distinction should be made between a preference of credit and a lien. A preference applies only to claims which do not attach to
specific properties. A lien creates a charge on a particular property. The right of first preference as regards unpaid wages recognized
by Article 110 does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in
their favor, a preference in application. It is a method adopted to determine and specify the order in which credits should be paid in the
final distribution of the proceeds of the insolvent's assets. It is a right to a first preference in the discharge of the funds of the judgment
debtor.
In the words of Republic vs. Peralta, supra:
Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees for unpaid wages either
upon all of the properties or upon any particular property owned by their employer. Claims for unpaid wages do not therefore
fall at all within the category of specially preferred claims established under Articles 2241 and 2242 of the Civil Code, except
to the extent that such complaints for unpaid wages are already covered by Article 2241, number 6: "claims for laborers
wages, on the goods manufactured or the work done;" or by Article 2242, number 3: "claims of laborers and other workers
engaged in the construction, reconstruction or repair of buildings, canals and other works, upon said buildings, canals and
other works, upon said buildings, canals and other works." To the extent that claims for unpaid wages fall outside the scope
of Article 2241, number 6 and 2242, number 3, they would come within the ambit of the category of ordinary preferred
credits under Article 2244.
5. The DBP anchors its claim on a mortgage credit. A mortgage directly and immediately subjects the property upon which it is
imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted (Article 2176, Civil
Code). It creates a real right which is enforceable against the whole world. It is a lien on an identified immovable property, which a
preference is not. A recorded mortgage credit is a special preferred credit under Article 2242 (5) of the Civil Code on classification of
credits. The preference given by Article 110, when not falling within Article 2241 (6) and Article 2242 (3) of the Civil Code and not
attached to any specific property, is an ordinary preferred credit although its impact is to move it from second priority to first priority
in the order of preference established by Article 2244 of the Civil Code (Republic vs. Peralta, supra).
In fact, under the Insolvency Law (Section 29) a creditor holding a mortgage or lien of any kind as security is not permitted to vote in
the election of the assignee in insolvency proceedings unless the value of his security is first fixed or he surrenders all such property to
the receiver of the insolvent's estate.
6. Even if Article 110 and its Implementing Rule, as amended, should be interpreted to mean "absolute preference," the same should
be given only prospective effect in line with the cardinal rule that laws shall have no retroactive effect, unless the contrary is provided
(Article 4, Civil Code). Thereby, any infringement on the constitutional guarantee on non-impairment of the obligation of contracts
(Section 10, Article III, 1987 Constitution) is also avoided. In point of fact, DBP's mortgage credit antedated by several years the
amendatory law, RA No. 6715. To give Article 110 retroactive effect would be to wipe out the mortgage in DBP's favor and expose it
to a risk which it sought to protect itself against by requiring a collateral in the form of real property.
In fine, the right to preference given to workers under Article 110 of the Labor Code cannot exist in any effective way prior to the time
of its presentation in distribution proceedings. It will find application when, in proceedings such as insolvency, such unpaid wages
shall be paid in full before the "claims of the Government and other creditors" may be paid. But, for an orderly settlement of a debtor's
assets, all creditors must be convened, their claims ascertained and inventoried, and thereafter the preferences determined in the course
of judicial proceedings which have for their object the subjection of the property of the debtor to the payment of his debts or other
lawful obligations. Thereby, an orderly determination of preference of creditors' claims is assured (Philippine Savings Bank vs.
Lantin, No. L-33929, September 2, 1983, 124 SCRA 476); the adjudication made will be binding on all parties-in-interest, since those
proceedings are proceedings in rem; and the legal scheme of classification, concurrence and preference of credits in the Civil Code,
the Insolvency Law, and the Labor Code is preserved in harmony.
WHEREFORE, Certiorari is GRANTED, and the assailed Decision of public respondent, the National Labor Relations Commission
(NLRC), dated 25 March 1988, is hereby SET ASIDE.
The Development Bank of the Philippines, the Asset Privatization Trust, the Labor Alliance for National Development (LAND), and
other creditors who may be so minded, are hereby directed, within sixty (60) days from notice, to institute involuntary insolvency
proceedings before the proper Court where all the assets of Lirag Textile Mills, Inc., may be inventoried, the preferences of all its
creditors determined, and their claims discharged in a binding and conclusive manner. No costs.
SO ORDERED.
Fernan, C.J., Narvasa, Gutierrez, Jr., Feliciano, Gancayco, Bidin, Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur.
Separate Opinions
CRUZ, J., dissenting:
I was the lone dissenter in Republic v. Peralta, 150 SCRA 37, which is the mainstay of the present majorityponencia. Even then, I was
convinced that it was the intention of the legislature to give absolute preference to the workers' claims pursuant to the social justice
policy. The amendment of Article 110 of the Labor Code only strengthens that conviction and, I like to think, vindicates my original
position. I reiterate it now and repeat that:
Social Justice is not a mere catch phrase to be mouthed with sham fervor in Labor Day celebrations for the delectation and
seduction of the working class. It is a mandate we should pursue with energy and sincerity if we are to truly insure the dignity
and well-being of the laborer.
I am proud to dissent once again on the side of labor.
PADILLA, J., dissenting:
The material facts are riot disputed. Lirag Textile (LIRAG) ceased operations by early 1982. Pursuant to a final and executory
judgment of the NLRC, dated 20 March 1983, LIRAG was adjudged liable to its workers for unpaid wages and salaries which, as of
12 February 1986, amounted to P6,292,380.00.
LIRAG's only remaining asset was mortgaged to Development Bank of the Philippines (DBP) which on 15 April 1983 foreclosed the
mortgage and acquired said property at public auction for P31,346.462.90, in partial satisfaction of LIRAG's indebtedness to DBP.
LIRAG's workers through their union (LAND) thereupon sought to garnish on DBP the proceeds of the foreclosure sale, to the extent
of their adjudged unpaid wages (P6,292,380.00). The NLRC ruled for LAND over DBP's objection. The issue therefore, in practical
terms, is whether P6,292,380.00 should be deducted from the P31,346,462.90 realized by DBP from the foreclosure sale of LIRAG's
property, to fully satisfy LAND's claim for LIRAG workers' unpaid wages, thereby leaving a balance of P25,054,082.90 only in
partial satisfaction of LIRAG's debt to DBP.
The majority holds that LAND may not enforce its first preference in the satisfaction of unpaid monetary claims of its members, viz.
LIRAG's workers, over that of DBP, in the absence of a formal declaration of bankruptcy or judicial liquidation of LIRAG's business.
I regret that I cannot join the majority ruling in the light of the amendment to Article 110 of the Labor Code by Republic Act 6715,
approved on 2 March 1989, and the resultant amendment of Section 10, Rule VIII, Book III of the Revised Rules and Regulations
Implementing the Labor Code.
Before its amendment by Republic Act 6715, Article 110 of the Labor Code provided
Worker preference in case of bankruptcy. In the event of bankruptcy or liquidation of an employer's business, his workers
shall enjoy first preference as regards wages due them for services rendered during the period prior to the bankruptcy or
liquidation, any provision of law to the contrary notwithstanding. Unpaid wages shall be paid in full before other creditors
may establish any claim to a share in the assets of the employer.
After Republic Act 6715, Art. 110 now provides:
Worker preference in case of bankruptcy. In the event of bankruptcy or liquidation of an employer's business, his workers
shall enjoy first preference as regards their wages and other monetary claims, any provisions of law to the contrary
notwithstanding. Such unpaid wages and monetary claims shall be paid in full before claims of the government and other
creditors may be paid.
Section 10 of the Implementing Rules, before Republic Act 6715 provided:
Payment of wages in case of bankruptcy. Unpaid wages earned by the employees before the declaration of bankruptcy or
judicial liquidation of the employer's business shall be given first preference and shall be paid in full before other creditors
may establish any claim to a share in the assets of the employer.
After Republic Act 6715, Section 10 of the Rules now provides:
Payment of wages and other monetary claims in case of bankruptcy. In case of bankruptcy or liquidation of the employer's
business, the unpaid wages and other monetary claims of the employees shall be given first preference and shall be paid in
full before the claims of government and other creditors may be paid.
The majority, in my considered opinion, has failed to fully take into account the radical change introduced by Republic Act 6715 into
the system of priorities or preferences among credits or creditors ordained by the Civil Code.
Under the provisions of the Civil Code, specifically, Articles 2241 and 2242, jointly with Articles 2246 to 2249, a two-tier order of
preference of credits is established. The first tier includes only taxes, duties and fees on specific movable or immovable property. All
other special preferred credits stand on a second tier. 1
Under the system of preferences in the Civil Code, only taxes enjoy absolute preference i.e., they exclude the credits of the lower
order until such taxes are fully satisfied out of the proceeds of the sale of the property subject of the preference, and taxes can even
exhaust such proceeds. All other special preferred credits enjoy no priority among themselves but must be paid or satisfied pro rata.
To make the prorating fully effective, the preferred creditors enumerated in Nos. 2 to 13 of Article 2241 and Nos. 2 to 10 of Article
2242 must be convened and the import of their claims ascertained in some proceeding where the claims of all may be bindingly
adjudicated.
With the amendment of Article 110 of the Labor Code by Republic Act 6715, a three-tier order of preference is established wherein
unpaid wages and other monetary claims of workers enjoy absolute preference over all other claims, including those of the
Government, in cases where a debtor-employer is unable to pay in full all his obligations. The absolute preference given to monetary
claims of workers, to which claims of the Government,i.e., taxes, are now subordinated, manifests the clear and deliberate intent of
our lawmaker to put flesh and blood into the expressed Constitutional policy of protecting the rights of workers and promoting their
welfare. 2
I thus take exception to the proposition that a prior formal declaration of insolvency or bankruptcy or a judicial liquidation of the
employer's business is a condition sine qua non to the operation of the preference accorded to workers under Article 110 of the Labor
Code, for the following specific reasons:
First, the majority reads into the aforesaid law and implementing rule a qualification that is not there. Nowhere is it stated in
the present law and its new implementing rule that a prior declaration of bankruptcy or judicial liquidation is a condition sine qua
non to the operation of Article 110. In fact, it will be noted that the phrase declaration of bankruptcy or judicial liquidation of the
employer's business, which formerly appeared in Section 10, Rule VIII, Book III of the Revised Rules and Regulations Implementing
the Labor Code has been deleted in the new implementing rule. What is to me even more obvious and, therefore, significant in the
present law and implementing new rule is the unconditional and unqualified grant of priority to workers' monetary claims over and
above all other claims as against all the assets of an employer incapable of fully paying his obligations.
Second, a proceeding in rem, by its nature, seeks to bar any other person who claims any interest in the property or right subject of the
suit. To my mind, such a proceeding is not essential or necessary to enforce the workers' preferential right over the assets of the
insolvent debtor as against other creditors of the lower tier, as Article 110 of the Labor Code itself bars the satisfaction of claims of
other creditors, including the Government, until unpaid wages and monetary claims of the workers are first satisfied in full. Further, it
appears that such a proceeding is essential only where the credits are concurring and enjoy no preference over one another, but not
when the law accords to one of the credits absolute priority and undisputed supremacy. This submission finds support, by analogy, in
the case of De Barreto vs. Villanueva, where the Court stated:
Thus it becomes evident that one preferred creditor's third party claim to the proceeds of the foreclosure (as in the case now
before us) is not the proceeding contemplated by law for the enforcement of preference under Article 2242, unless the
claimant were enforcing credit for taxes that enjoy absolute priority. If none of the claim is for taxes, a dispute between two
creditors will not enable the court to ascertain the prorata dividend corresponding to each, because the rights of other
creditors likewise enjoying preference under Article 2242 cannot be ascertained. 3 (Emphasis ours)
In sum, it is to me clear that, whether or not there be a judicial proceeding in rem, i.e., insolvency, bankruptcy or liquidation
proceedings, the fact remains that Congress intends that the assets of the insolvent debtor be held, first and above all else, to satisfy in
full the unpaid wages and monetary claims of its workers. Translated into the case at bar, a formal declaration of insolvency or
bankruptcy or judicial liquidation of the employer's business should not be a price imposed upon the workers to enable them to get
their much needed and already adjudicated unpaid wages. This position, I believe, is only in keeping with a fundamental state policy
enshrined in the Constitutional mandate to accord protection to labor. The legislative intent being clear and manifest, it is the duty of
this Court, I submit, not to decimate but to give it breath and life.
ACCORDINGLY, I vote to DISMISS the DBP petition and to AFFIRM the resolution of the NLRC in favor of LAND.
Paras, J., concur.
SARMIENTO, J., dissenting:

I join Mr. Justice Teodoro Padilla in his dissent. It is also my considered opinion that under Republic Act No. 6715, the payment of
unpaid wages and other benefits to labor enjoys preference over all other indebtedness, including taxes, of management, with or
without a declaration of insolvency.
It is likewise so, because labor enjoys protection not only from statute but from the very Constitution. Thus:
Sec. 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their
welfare. (Article II)
xxx xxx xxx
Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality or employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions
of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and
benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and employers and the preferential use of
voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster
industrial peace.
The State shall regulate the relations between workers and employers recognizing the right of labor to its just share in the
fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and growth. (Article
XIII)
On the other hand, under the Labor Code:
Art. 3. Declaration of basic policy The State shall afford protection to labor, promote full employment, ensure equal work
opportunities regardless of sex, race or creed and regulate the relations between workers and employers. The State shall
assure the rights of workers to self-organization, collective bargaining security of tenure, and just and humane conditions of
work.
Art. 4. Construction in favor of labor All doubts in the implementation and interpretation of the provisions of this code,
including its implementing rules and regulations, shall be resolved in favor of labor.
Under the Civil Code:
Art. 1700. The relations between capital and labor are not merely contractual. They are so impressed with public interest that
labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on labor unions,
collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects.
xxx xxx xxx
Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent
living for the laborer.
It is true that under the Charter, "[n]o person shall be deprived," among other things, "of property without due process of law,"
however, the basic document also states, that:
Sec. 6. The use of property bears a social function, and all economic agents shall contribute to the common good. Individuals
and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own,
establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene
when the common good so demands. (Article XII)
Pascual says that in any productive economy, the first factor is labor. [PASCUAL, LABOR AND TENANCY RELATIONS LAW 2
(1975 ed.)]. I agree with him. For in any enterprise, it is labor on which management depends to run its business, to till its land, and to
make its money. Yet, labor has been the doormat of the economy when it should be its hub. And now, we will make them fall in line
along with creditors of management in collecting what it (labor) already owns its just wages. I do not think that this is in accord
with established State policies.
Footnotes
PADILLA, J., dissenting:
1 Republic v. Peralta, 150 SCRA 37.
2 Art. II, Section 18 of the 1987 Constitution provides:
The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare.
3 De Barreto v. Villanueva, 6 SCRA 928.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 126773 April 14, 1999
RUBBERWORLD (PHILS.), INC., or JULIE YAP ONG, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, MARILYN F. ARELLANO, EMILY S. LEGASPI, MYRNA S.
GALGANA, MERCEDITA R. SONGCO, WILFREDO V. SANTOS, JOSEPHINE S. RAMOS, REDENTOR G. HONA, LUZ
B. HONA, ROLANDO B. CRUZ, GUILLERMA R. MUZONES, CARMELITA V. HALILI, SUSAN A. REYES, EMILY A.
ROBILLOS, PLACIDO REYES, MANOLITO DELA CRUZ, VICTORINO C. FRANCISCO, ROGER B. MARIAS,
VIOLETA ALEJO, RICARDO T. TORRES, EMMA DELA TORRE, PERLA N. MANZANERO, FRANCISCO D.
SERDONCILLO, LUISITO P. HERNANDEZ, RAYMOND PEREA, EDITHA A. SERDONCILLO, FRANCISCO GENER,
MARIO B. REYES, VALERIANO A. HERRERA, JORGE S. SEERES, ELENA S. IGNACIO, EMERITA S. CACHERO,
NERIZA G. ENRIQUEZ, LOLITA M. FABULAR, NORMITA M. HERNANDEZ, DOMINADOR P. ENRIQUEZ,
respondents.
PANGANIBAN, J
Presidential Decree 902-A, as amended, provides that "upon the appointment of a management committee, rehabilitation receiver,
board or body pursuant to this Decree, all actions for claims against corporations, partnerships, or associations under management or
receivership pending before any court, tribunal, board or body shall be suspended accordingly. 1 Such suspension is intended to give
enough breathing space for the management committee or rehabilitation receiver to make the business viable again, without having to
divert attention and resources to litigations in various fora. Among the actions suspended are those for money claims before labor
tribunals, like the National Labor Relations Commission (NLRC) and the labor arbiters.
Statement of the Case
The foregoing summarizes this Court's grant of the Petition for Certiorari under Rule 65 of the Rules of Court, assailing the April 26,
1996 Resolution 2 promulgated by the NLRC 3 which upheld the labor arbiter's refusal to suspend proceedings involving monetary
claims of the petitioner's employees.
Petitioner likewise assails the June 20, 1996 NLRC Resolution 4 which denied its Motion for Reconsideration.
On November 20, 1996, this Court issued a temporary restraining order, signed by then Chief Justice Andres R. Narvasa, "restraining
the public respondents from further conducting proceedings in the aforesaid cases effective immediately . . .
The Facts
The facts are undisputed. They are narrated by the Office of the Solicitor general as follows:
Petitioner . . . is a domestic corporation which used to be in the business of manufacturing footwear, bags and garments. It
filed with the Securities and Exchange Commission on November 24, 1994 a petition for suspension of payments praying
that it be declared in a state of suspension of payments and that the SEC accordingly issue an order restraining its creditors
from enforcing their claims against petitioner corporation. It further prayed for the creation of a management committee as
well as for the approval of the proposed rehabilitation plan and memorandum of agreement between petitioner corporation
and its creditors.
In an order dated December 28, 1994, the SEC favorably ruled on the petition for suspension of payments thusly:
Accordingly, with the creation of the Management Committee, all actions for claims against Rubberworld
Philippines, Inc. pending before any court, tribunal, office, board, body Commission of Sheriff are hereby deemed
SUSPENDED.
Consequently, all pending incidents for preliminary injunctions, writ of attachments (sic), foreclosures and the like
are hereby rendered moot and academic.
Private respondents, who claim to be employees of petitioner corporation, filed against petitioners [from] April to July 1995
their respective complaints for illegal dismissal, unfair labor practice, damages and payment of separation pay, retirement
benefits, 13th month pay and service incentive pay.
Petitioners moved to suspend the proceedings in the above labor cases on the strength of the SEC Order dated December 28,
1994. Likewise, petitioners cited the rulings of BF Homes vs. Court of Appeals (190 SCRA 262), Alemar's Sibal &
Sons. Inc., vs. Elbinias (186 SCRA 94) and Bank of Philippine Islands vs. Court of Appeals (229 SCRA 223) to support their
motion to suspend the proceedings in the labor cases.
In an Order dated September 25, 1995, the Labor Arbiter denied the aforesaid motion holding that the injunction contained in
the SEC Order applied only to the enforcement of established rights and did not include the suspension of proceedings
involving claims against petitioner which have yet to be ascertained. The Labor Arbiter further held that the order of the SEC
suspending all actions for claims against petitioners does not cover the claims of private respondents in the labor cases
because said claims and the concomitant liability of petitioners still had to be determined, thus carrying no dissipation of the
assets of petitioners.1wphi1.nt
Petitioners appealed the adverse order of the Labor Arbiter to public respondent which, in a Resolution dated April 26, 1996,
dismissed the appeal for lack of merit and, instead, sustained the rulings of the Labor Arbiter.
The motion for reconsideration of petitioners fared no better and was denied by public respondent in a Resolution dated June
20, 1996. 5
Hence, this petition. 6
The Issue
Petitioner raises only one issue:
Whether or not the Respondent NLRC acted without or in excess of jurisdiction or with grave abuse of discretion amounting
to lack of jurisdiction in affirming the order of Labor Arbiter Voltaire A. Balitaan denying petitioners' motion to suspend
proceedings despite the Order of the Securities and Exchange Commission under Sec. 6 (c) of P.D. 902-A directing the
suspension of all actions against a company under the first stages of insolvency proceedings. 7
This Court's Ruling
The petition is meritorious.
Sole Issue: Suspension of Proceedings
Jurisprudence teaches us:
. . . where the petition filed is one for declaration of a state of suspension of payments due to a recognition of the inability to
pay one's debts and liabilities, and where the petitioning corporation either: (a) has sufficient property to cover all its debts
but foresees the impossibility of meeting them when they fall due (solvent but illiquid) or (b) has no sufficient property
(insolvent) but is under the management of a rehabilitation receiver or a management committee, the applicable law is P.D.
902-A pursuant to Sec. 5 par. (d) thereof. However, if the petitioning corporation has no sufficient assists to cover its
liabilities and is not under a rehabilitation receiver or a management committee created under P.D. 902-A and does not seek
merely to have the payments of its debts suspended, but seeks a declaration of insolvency . . . the applicable law is Act 1956
[The Insolvency Law] on voluntary Insolvency, . . . 8
In the case at bar, Petitioner Rubberworld filed before the SEC a Petition for Declaration of Suspension of Payments, as well as a
proposed rehabilitation plan. On December 28, 1994, the SEC ordered the creation of a management committee and the suspension of
all actions for claims against Rubberworld. Clearly, the applicable law is PD 902-A, as amended, the relevant provisions of which
read:
Sec. 5. In addition to the regulatory adjudicative functions of the Commission over corporations, partnerships and other forms
of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive
jurisdiction to hear and decide cases involving:
xxx xxx xxx
d) Petitions of corporations, partnerships or associations to be declared in the state of payments in cases where the
corporation, partnership or association possesses sufficient property to cover all its debts regulatory but foresees the
impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association
has no sufficient assets to cover its liabilities, but is under the management of a rehabilitation receiver or management
committee created pursuant to this Decree.
Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:
xxx xxx xxx
c) To appoint one or more receivers of the property, real or personal, which is the subject of the action pending before the
Commission in accordance with the pertinent provisions of the Rules of Court in such other cases whenever necessary in
order to preserve the rights of the parties-litigants and/or protect the interest of the investing public and creditors: . .
. Provided, finally, That upon appointment of a management committee, the rehabilitation receiver, board or body, pursuant
to this Decree, all actions for claims against corporations, partnerships, or associations under management or receivership
pending before any court, tribunal, board or body shall be suspended accordingly.
It is plain from the foregoing provisions of law that "upon the appointment [by the SEC] of a management committee or a
rehabilitation receiver," all actions for claims against the corporation pending before any court, tribunal or board shall ipso jure be
suspended. 9 The justification for the automatic stay of all pending actions for claims "is to enable the management committee or the
rehabilitation receiver to effectively exercise its/his powers free from any judicial or extra-judicial interference that might unduly
hinder or prevent the "rescue" of the debtor company. To allow such other actions to continue would only add to the burden of the
management committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the
corporation instead of being directed toward its restructuring and rehabilitation. 10
Parenthetically, the rehabilitation of a financially distressed corporation benefits its employees, creditors, stockholders and, in a larger
sense, the general public, And in considering whether to rehabilitate or not, the SEC gives preference to the interest of creditors,
including employees. The reason its that shareholders can recover their investments only upon liquidation of the corporation, and only
if there are assets remaining after all corporate creditors are paid. 11
Labor Claims Included in Suspension Order
The solicitor general, representing Public Respondent NLRC, argues that the rationale for an automatic stay will not be frustrated even
if the NLRC proceeds with the disposition of these labor cases, because any favorable obtained by the private respondents would only
establish their rights as creditors. The solicitor general also contends that the assailed Resolutions of the NLRC will not result in an
undue preference for the assets of Rubberworld, as the private respondents will still present their claims before the management
committee. 12
We disagree. The law is clear: upon the creation of a management committee or the appointment of a rehabilitation receiver, all claims
for actions "shall be suspended accordingly." No exception in favor of labor claims is mentioned in the law. Since the law makes no
distinction or exemptions, neither should this Court. Ubi lex non distinguit nec nos distinguere debemos. 13 Allowing labor cases to
proceed clearly defeats the purpose of the automatic stays and severally encumbers the management committee's and resources. The
said committee would need to defend against these suits, to the detriment of its primary and urgent duty to work towards rehabilitating
the corporation and making it viable again. The rule otherwise would open the floodgates to other similarly situated claimants and
forestall if not defeat the rescue efforts. Besides, even if the NLRC awards the claims of private respondents, as it did, its ruling could
not be enforced as long as the petitioner is under the management committee. 14
In Chua v. National Labor Relations Commission, 15 we ruled that labor claims cannot proceed independently of a bankruptcy
liquidation proceeding, since these claims "would spawn needless controversy, delays, and confusion." 16 With more reason, allowing
labor claims to continue in spite of a SEC suspension order in a rehabilitation case would merely lead to such results.
The solicitor general insists that since Article 217 of the Labor Code 17 vested [public respondent with jurisdiction to hear and decide
these labor cases, the NLRC did not exceed its jurisdiction when it refused to suspend the proceeding therein. 18 The Court is not
persuaded.
Article 217 of the Labor Code should be construed not in isolation but in harmony with PD 902-A, according to the basic rule in
statutory construction that implied repeals are not favored. 19 Indeed, it is axiomatic that each and every statute must be construed in a
way that would avoid conflict with existing laws. 20 true, the NLRC has the power to hear and decide labor disputes, but such authority
is deemed suspended when PD 902-A is put into effect by the Securities and Exchange Commission.
Preference in Favor of Workers in Case of Bankruptcy or Liquidation
The private respondents contend that automatic stay under PD 902-A is not applicable to the instant case; otherwise, the preference
granted to workers by Article 110 of the Labor Code would be rendered ineffective. 21This contention is misleading.
The preferential right of workers and employees under Article 110 of the Labor code may be invoked only upon the institution of
insolvency or judicial liquidation proceeding. 22 Indeed, it is well-settled that "a declaration of bankruptcy or a judicial liquidation
must be present before preferences over various money claims may be enforced." 23 But debtors resort to preference of credit
giving preferred creditors the rights to have their claims paid ahead of those of other claimants only when their assets are
insufficient to pay their debts fully. 24 The purpose of rehabilitation proceedings is precisely to enable the company to gain a new lease
on life and thereby allow creditors to be paid their claims from its earnings. In insolvency proceedings, on the other hand, the
company stops operating, and the claims of creditors are satisfied from the assets of the insolvent corporation. The present case
involves the rehabilitation, not the liquidation, of petitioner-corporation. Hence, the preference of credit granted to workers or
employees under Article 110 of the Labor Code is not applicable.
Duration of Automatic Stay Under PD 902-A
Finally, private respondents posit that under Section 6 of the Insolvency Law, the December 28, 1994 Order of the SEC suspending all
actions for claims against Rubberworld should have expired after three months, in the absence of an agreement between the company
and the corporate creditors. 25 Private respondents also accuse the SEC of abusing its power by "allowing said suspension order to
remain pending for many years without resolving and approving any rehabilitation plan." 26 They contend that "[t]his is fatal to the
instant petition for it had been a party to the abuse by the SEC of its suspension order." 27
This Court notes that PD 902-A itself does not provide for the duration of the automatic stay. Neither does the Order 28 of the SEC.
Hence, the suspensive effect has no time limit and remains in force as long as reasonably necessary to accomplish the purpose of the
Order. 29 On the other hand, the attack against the SEC's alleged "abuse of power" is misplaced. Under review in this Petition
for Certiorari are Resolutions of the NLRC, nor of the SEC. The scope of this review is thus limited to whether the NLRC gravely
abused or exceeded its jurisdiction in refusing to heed the SEC Order of Suspension and in issuing its challenged Resolutions. In any
event, the bare allegation of inaction is insufficient to condemn the Securities and Exchange Commission and the management
committee where, it should be noted, all affected parties, including the labor union in the company, are represented.
WHEREFORE, the petition is hereby GRANTED. The assailed Resolutions of the NLRC dated April 26, 1996, and June 20, 1996, are
REVERSED and SET ASIDE. No costs.1wphi1.nt
SO ORDERED.
Romero, Vitug, Purisima and Gonzaga-Reyes, JJ., concur.
Footnotes
1 Sec. 6 (c).
2 Rollo, pp. 25-28.
3 Third Division, composed of Comm. Joaquin A. Tanodra, ponente; Pres. Comm. Lourdes C. Javier and Comm. Ireneo B. Bernardo, both concurring.
4 Ibid., pp. 29-30.
5 Memorandum for Public Respondent, pp. 1-3; rollo, pp. 250-252.
6 The case was deemed submitted for resolution upon receipt by the Court of the Memorandum for Private Respondents on April 20, 1998.
7 Memorandum for Petitioner, p. 14; rollo, p. 229.
8 Ching v. Land Bank of the Philippines, 201 SCRA 190, 199, September 2, 1991, per Fernan, CJ.
9 See Barotac Mills, Inc. v. Courts of Appeals, 275 SCRA 497, 503, July 15, 1997, per Davide, Jr., CJ.
10 BF Homes, Incorporated v. Court of Appeals, 190 SCRA 262, 269, October 3, 1990, per Cruz, J.
11 Jose C. Campos Jr., and Maria Clara Lopez-Campos, The Corporation Code Comments, Notes and Selected Cases, p. 27 (1990).
12 Memorandum for Public Respondents, p. 7; rollo, p. 256.
13 Colgate Palmolive v. Gimenez, 1 SCRA 267, January 28, 1961.
14 See BF Homes, Incorporated v. Court of Appeals, supra, p. 268.
15 190 SCRA 558, October 17, 1990, per Gutierrez, Jr., J.
16 Ibid., p. 576.
17 Art. 217 Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of
stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:
1 Unfair labor practice cases
2 Termination disputes
3 If accompanied with a claim for reinstatement those cases that workers may file involving wages rates of pay hours of work and other terms and conditions of
employment
4 Claims for actual moral exemplary and other forms of damages arising from the employer-employee relations
5 Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts.
6 Except claims for Employees Compensation, Social Security, Medicare and maternity benefits all other claims arising from employer-employee relations, including
those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for
reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters
(c) Cases arising from the interpretation of collective bargaining agreements and those arising from the interpretation or enforcement of company personnel policies
shall be disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided in said agreements.
18 Memorandum for Public Respondent, pp. 4-6; rollo, pp. 253-255.
19 See Ching v. Land Bank of the Philippines, supra, p. 202. See also Governor Pablo P. Garcia et,al, v. Hon. Jose P. Burgos et, al., GR No. 124130, pp. 28-29, June
29, 1998; citing Frivaldo v. Commission on Elections, 257 SCRA 727, 743-744, June 28, 1996.
20 Sajonas v. Court of Appeals, 258 SCRA 79, July 5, 1996.
21 Memorandum for Private Respondent, pp. 6-7; rollo, pp. 268-269.
Art. 110. Workers preference in case of bankruptcy. In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as
regards their wages and other monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full
before claims of the government and other creditors may be paid.
22 Development Bank of the Philippines v. Secretary of Labor, 179 SCRA 630, 634, November 28, 1989.
23 Chua v. National Labor Relation Commission, supra, p. 575.
24 Development Bank of the Philippines v. Secretary of Labor, supra, pp. 634-635.
25 Memorandum for Private Respondent, pp. 9-10; rollo, pp. 271-272.
26 Ibid., p. 10; rollo, p. 272.
27 Ibid.
28 See rollo, pp. 31-35.
29 BF Homes, Incorporated v. Court of Appeals, supra, p. 268.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 102636 September 10, 1993
METROPOLITAN BANK & TRUST COMPANY EMPLOYEES UNION-ALU-TUCP and ANTONIO V.
BALINANG,petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and METROPOLITAN BANK and TRUST
COMPANY, respondents.
Gilbert P. Lorenzo for petitioners.
Marcial G. dela Fuente for private respondents.
VITUG, J.:
In this petition for certiorari, the Metropolitan Bank & Trust Company Employees Union-ALU-TUCP (MBTCEU) and its president,
Antonio V. Balinang, raise the issue of whether or not the implementation by the Metropolitan Bank and Trust Company of Republic
Act No. 6727, mandating an increase in pay of P25 per day for certain employees in the private sector, created a distortion that would
require an adjustment under said law in the wages of the latter's other various groups of employees.
On 25 May 1989, the bank entered into a collective bargaining agreement with the MBTCEU, granting a monthly P900 wage increase
effective 01 January 1989, P600 wage increase 01 January 1990, and P200 wage increase effective 01 January 1991. The MBTCEU
had also bargained for the inclusion of probationary employees in the list of employees who would benefit from the first P900 increase
but the bank had adamantly refused to accede thereto. Consequently, only regular employees as of 01 January 1989 were given the
increase to the exclusion of probationary employees.
Barely a month later, or on 01 January 1989, Republic Act 6727, "an act to rationalize wage policy determination be establishing the
mechanism and proper standards thereof, . . . fixing new wage rates, providing wage incentives for industrial dispersal to the
countryside, and for other purposes," took effect. Its provisions, pertinent to this case, state:
Sec. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates of all workers and employees in the private
sector, whether agricultural or non-agricultural, shall be increased by twenty-five pesos (P25) per day, . . .: Provided, That
those already receiving above the minimum wage rates up to one hundred pesos(P100.00) shall also receive an increase of
twenty-five pesos (P25.00) per day, . . .
xxx xxx xxx
(d) If expressly provided for and agreed upon in the collective bargaining agreements, all increase in the daily basic wage
rates granted by the employers three (3) months before the effectivity of this Act shall be credited as compliance with the
increases in the wage rates prescribed herein, provided that, where such increases are less than the prescribed increases in the
wage rates under this Act, the employer shall pay the difference. Such increase shall not include anniversary wage increases,
merit wage increase and those resulting from the regularization or promotion of employees.
Where the application of the increases in the wage rates under this Section results in distortions as defined under existing
laws in the wage structure within an establishment and gives rise to a dispute therein, such dispute shall first be settled
voluntarily between the parties and in the event of a deadlock, the same shall be finally resolved through compulsory
arbitration by the regional branches of the National Labor Relations Commission (NLRC) having jurisdiction over the
workplace.
It shall be mandatory for the NLRC to conduct continous hearings and decide any dispute arising under this Section within
twenty (20) calendar days from the time said dispute is formally submitted to it for arbitration. The pendency of a dispute
arising from a wage distortion shall not in any way delay the applicability of the increase in the wage rates prescribed under
this Section.
Pursuant to the above provisions, the bank gave the P25 increase per day, or P750 a month, to its probationary employees and to those
who had been promoted to regular or permanent status before 01 July 1989 but whose daily rate was P100 and below. The bank
refused to give the same increase to its regular employees who were receiving more than P100 per day and recipients of the P900
CBA increase.
Contending that the bank's implementation of Republic Act 6727 resulted in the categorization of the employees into (a) the
probationary employees as of 30 June 1989 and regular employees receiving P100 or less a day who had been promoted to permanent
or regular status before 01 July 1989, and (b) the regular employees as of 01 July 1989, whose pay was over P100 a day, and that,
between the two groups, there emerged a substantially reduced salary gap, the MBTCEU sought from the bank the correction of the
alleged distortion in pay. In order to avert an impeding strike, the bank petitioned the Secretary of Labor to assume jurisdiction over
the case or to certify the same to the National Labor Relations Commission (NLRC) under Article 263 (g) of the Labor Code. 1The
parties ultimately agreed to refer the issue for compulsory arbitration to the NLRC.
The case was assigned to Labor Arbiter Eduardo J. Carpio. In his decision of 05 February 1991, the labor arbiter disregard with the
bank's contention that the increase in its implementation of Republic Act 6727 did not constitute a distortion because "only 143
employees or 6.8% of the bank's population of a total of 2,108 regular employees" benefited. He stressed that "it is not necessary that a
big number of wage earners within a company be benefited by the mandatory increase before a wage distortion may be considered to
have taken place," it being enough, he said, that such increase "result(s) in the severe contraction of an intentional quantitative
difference in wage between employee groups."
The labor arbiter concluded that since the "intentional quantitative difference" in wage or salary rates between and among groups of
employees is not based purely on skills or length of service but also on "other logical bases of differentiation, a P900.00 wage gap
intentionally provided in a collective bargaining agreement as a quantitative difference in wage between those who WERE regular
employees as of January 1, 1989 and those who WERE NOT as of that date, is definitely a logical basis of differentiation (that)
deserves protection from any distorting statutory wage increase." Otherwise, he added, "a minimum wage statute that seek to uplift the
economic condition of labor would itself destroy the mechanism of collective bargaining which, with perceived stability, has been
labor's constitutional and regular source of wage increase for so long a time now." Thus, since the "subjective quantitative difference"
between wage rates had been reduced from P900.00 to barely P150.00, correction of the wage distortion pursuant to Section 4(c) of
the Rules Implementing Republic Act 6727 should be made.
The labor arbiter disposed of the case, thus:
WHEREFORE, premises considered, the respondent is hereby directed to restore to complainants and their members the
Nine Hundred (P900.00) Pesos CBA wage gap they used to enjoy over non-regular employees as of January 1, 1989 by
granting them a Seven Hundred Fifty (P750.00) Pesos monthly increase effective July 1, 1989.
SO ORDERED. 2
The bank appealed to the NLRC. On 31 May 1991, the NLRC Second Division, by a vote of 2 to 1, reversed the decision of the Labor
Arbiter. Speaking, through Commissioners Rustico L. Diokno and Domingo H. Zapanta, the NLRC said:
. . . a wage distortion can arise only in a situation where the salary structure is characterized by intentional quantitative
differences among employee groups determined or fixed on the basis of skills, length of service, or other logical basis of
differentiation and such differences or distinction are obliterated (In Re: Labor Dispute at the Bank of the Philippine Islands,
NCMB-RB-7-11-096-89, Secretary of Labor and Employment, February 18, 1991).
As applied in this case, We noted that in the new wage salary structure, the wage gaps between Level 6 and 7 levels 5 and 6,
and levels 6 and 7 (sic) were maintained. While there is a noticeable decrease in the wage gap between levels 2 and 3, Levels
3 and 4, and Levels 4 and 5, the reduction in the wage gaps between said levels is not significant as to obliterate or result in
severe contraction of the intentional quantitative differences in salary rates between the employees groups. For this reason,
the basis requirement for a wage in this case. Moreover, there is nothing in the law which would justify an across-the-board
adjustment of P750.00 as ordered by the labor Arbiter.
WHEREFORE, premises considered, the appealed decision is hereby set aside and a new judgment is hereby entered,
dismissing the complaint for lack of merit.
SO ORDERED. 3
In her dissent, Presiding Commissioner Edna Bonto-Perez opined:
There may not be an obliteration nor elimination of said quantitative distinction/difference aforecited but clearly there is a
contraction. Would such contraction be severe as to warrant the necessary correction sanctioned by the law in point, RA
6727? It is may considered view that the quantitative intended distinction in pay between the two groups of workers in
respondent company was contracted by more than fifty (50%) per cent or in particular by more or less eighty-three (83%) per
cent hence, there is no doubt that there is an evident severe contraction resulting in the complained of wage distortion.
Nonetheless, the award of P750.00 per month to all of herein individual complainants as ordered by the Labor Arbiter below,
to my mind is not the most equitable remedy at bar, for the same would be an across the board increase which is not the
intention of RA 6727. For that matter, herein complainants cannot by right claim for the whole amount of P750.00 a month or
P25.00 per day granted to the workers covered by the said law in the sense that they are not covered by the said increase
mandated by RA 6727. They are only entitled to the relief granted by said law by way of correction of the pay scale in case of
distortion in wages by reason thereof.
Hence, the formula offered and incorporated in Wage Order No. IV-02 issued on 21 May 1991 by the Regional Tripartite
Wages and Productivity Commission for correction of pay scale structures in case of wage distortion as in the case at bar
which is:
Minimum Wage = % x Prescribed = Distortion

Increased Adjustment
Actual Salary
would be the most equitable and fair under the circumstances obtaining in this case.
For this very reason, I register my dissent from the majority opinion and opt for the modification of the Labor Arbiter's
decision as afore-discussed. 4
The MBTCEU filed a motion for reconsideration of the decision of the NLRC; having been denied, the MBTCEU and its president
filed the instant petition for certiorari, charging the NLRC with gave abuse of discretion by its refusal (a) "to acknowledge the
existence of a wage distortion in the wage or salary rates between and among the employee groups of the respondent bank as a result
of the bank's partial implementation" of Republic Act 6727 and (b) to give due course to its claim for an across-the-board P25 increase
under Republic Act No. 6727. 5
We agree with the Solicitor General that the petition is impressed with merit. 6
The term "wage distortion", under the Rules Implementing Republic Act 6727, is defined, thus:
(p) Wage Distortion means a situation where an increase in prescribed wage rates results in the elimination or severe
contradiction of intentional quantitative differences in wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills, length of service,
or other logical bases of differentiation.
The issue of whether or not a wage distortion exists as a consequence of the grant of a wage increase to certain employees, we agree,
is, by and large, a question of fact the determination of which is the statutory function of the NLRC. 7 Judicial review of labor cases,
we may add, does not go beyond the evaluation of the sufficiency of the evidence upon which the labor official's findings rest. 8 As
such, factual findings of the NLRC are generally accorded not only respect but also finality provided that its decision are supported by
substantial evidence and devoid of any taint of unfairness of arbitrariness. 9 When, however, the members of the same labor tribunal
are not in accord on those aspects of a case, as in this case, this Court is well cautioned not to be as so conscious in passing upon the
sufficiency of the evidence, let alone the conclusions derived therefrom.
In this case, the majority of the members of the NLRC, as well as its dissenting member, agree that there is a wage distortion arising
from the bank's implementation of the P25 wage increase; they do differ, however, on the extent of the distortion that can warrant the
adoption of corrective measures required by law.
The definition of "wage distortion," 10 aforequoted, shows that such distortion can so exist when, as a result of an increase in the
prescribed wage rate, an "elimination or severe contraction of intentional quantitative differences in wage or salary rates" would occur
"between and among employee groups in an establishment as to effectively obliterate the distinctions embodied in such wage structure
based on skills, length of service, or other logical bases of differentiation." In mandating an adjustment, the law did not require that
there be an elimination or total abrogation of quantitative wage or salary differences; a severe contraction thereof is enough. As has
been aptly observed by Presiding Commissioner Edna Bonto-Perez in her dissenting opinion, the contraction between personnel
groupings comes close to eighty-three (83%), which cannot, by any stretch of imagination, be considered less than severe.
The "intentional quantitative differences" in wage among employees of the bank has been set by the CBA to about P900 per month as
of 01 January 1989. It is intentional as it has been arrived at through the collective bargaining process to which the parties are thereby
concluded. 11 The Solicitor General, in recommending the grant of due course to the petition, has correctly emphasized that the
intention of the parties, whether the benefits under a collective bargaining agreement should be equated with those granted by law or
not, unless there are compelling reasons otherwise, must prevail and be given effect. 12
In keeping then with the intendment of the law and the agreement of the parties themselves, along with the often repeated rule that all
doubts in the interpretation and implementation of labor laws should be resolved in favor of labor, 13 we must approximate an
acceptable quantitative difference between and among the CBA agreed work levels. We, however, do not subscribe to the labor
arbiter's exacting prescription in correcting the wage distortion. Like the majority of the members of the NLRC, we are also of the
view that giving the employees an across-the-board increase of P750 may not be conducive to the policy of encouraging "employers to
grant wage and allowance increases to their employees higher than the minimum rates of increases prescribed by statute or
administrative regulation," particularly in this case where both Republic Act 6727 and the CBA allow a credit for voluntary
compliance. As the Court, through Associate Justice Florentino Feliciano, also pointed out in Apex Mining Company, Inc. v. NLRC: 14
. . . . (T)o compel employers simply to add on legislated increases in salaries or allowances without regard to what is already
being paid, would be to penalize employers who grant their workers more than the statutorily prescribed minimum rates of
increases. Clearly, this would be counter-productive so far as securing the interests of labor is concerned. . . .
We find the formula suggested then by Commissioner Bonto-Perez, which has also been the standard considered by the regional
Tripartite Wages and Productivity Commission for the correction of pay scale structures in cases of wage distortion, 15 to well be the
appropriate measure to balance the respective contentions of the parties in this instance. We also view it as being just and equitable.
WHEREFORE, finding merit in the instant petition for certiorari, the same is GRANTED DUE PROCESS, the questioned NLRC
decision is hereby SET ASIDE and the decision of the labor arbiter is REINSTATED subject to the MODIFICATION that the wage
distortion in question be corrected in accordance with the formula expressed in the dissenting opinion of Presiding Commissioner
Edna Bonto-Perez. This decision is immediately executory.
SO ORDERED.
Bidin, Romero and Melo, JJ., concur.
Feliciano, J., is on leave.
Footnotes
1 This provision states:
(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interests, the Secretary of
Labor and Employment may assume jurisdiction over the dispute and decide it or certify the same to the Commission for compulsory arbitration. Such assumption or
certification shall have the effect of automatically enjoining the intended or impending strike or lockout as specified in the assumption or certification order. . . .
2 Rollo, p. 35-37.
3 Ibid., pp. 49-50.
4 Ibid., pp. 55-56.
5 Ibid., p. 12.
6 Manifestation in lieu of Comment, p. 1; Rollo, p. 134.
7 Cardona v. NLRC, G.R. No. 89007, March 11, 1991, 195 SCRA 92.
8 Philippine Overseas Drilling and Oil Development Corporation v. Ministry of Labor, G.R. No. 55703, November 27, 1986, 146 SCRA 79, 88.
9 Artex Development Co., Inc., v. NLRC, G.R. No. 65045, July 20, 1990, 187 SCRA 611, 615; Five J Taxi v. NLRC, G.R. No. 100138, August 5, 1992, 212 SCRA
225.
10 This is now under Art. 124 of the Labor Code as amended by Rep. Act 6727.
11 Plastic Town Center Corporation v. NLRC, G.R. No. 81176, April 19, 1989, 172 SCRA 580, 585.
12 Filipinas Golf & Country Club, Inc. v. NLRC, G.R. No. 61918, August 23, 1989, 176 SCRA 625, 632.
13 International Pharmaceuticals, Inc. v. Secretary of Labor, G.R. Nos. 92981-83, January 9, 1992, 205 SCRA 59.
14 G.R. No. 86200, February 25, 1992, 206 SCRA 497, 501.
15 See: Employers Confederation of the Philippines v. National Wages and Productivity Commission, G.R. No. 96169, September 24, 1991, 201 SCRA 759, 767.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 131247 January 25, 1999
PRUBANKERS ASSOCIATION, petitioner,
vs.
PRUDENTIAL BANK & TRUST COMPANY, respondent.
PANGANIBAN, J.:
Wage distortion presupposes an increase in the compensation of the lower ranks in an office hierarchy wirhout a corresponding raise
for higher-tiered employees in the same region of the country, resulting in the elimination or the severe diminution of the distinction
between the two groups. Such distortion does not arise when a wage order gives employees in one branch of a bank higher
compensation than that given to their counterparts in other regions occupying the same pay scale, who are not covered by said wage
order. In short, the implementation of wage orders in one region but not in others does not in itself necessarily result in wage
distortion.
The Case
Before us is a Petition for Review on Certiorari, challenging the November 6, 1997 Decision 1 of the Court of Appeals in CA-GR SP
No. 42525. The dispositive portion of the challenged Decision reads:
WHEREFORE, the petition is GRANTED. The assailed decision of the Voluntary Arbitration Committee dated June 18,
1996 is hereby REVERSED and SET ASIDE for having been issued with grave abuse of discretion tantamount to lack of or
excess of jurisdiction, and a new judgment is rendered finding that no wage distortion resulted from the petitioner's separate
and regional implementation of Wage Order No. VII-03 at its Cebu, Mabolo and P. del Rosario.
The June 18, 1996 Decision of the Voluntary Arbitration Commitee, 2 which the Court of Appeals reversed and set aside, disposed as
follows:
WHEREFORE, it is hereby ruled that the Bank's separate and regional implementation of Wage Order No. VII-03 at its
Cebu, Mabolo and P. del Rosario branches created a wage distortion in the Bank nationwide which should be resolved in
accordance with Art. 124 of the Labor Code. 3
The Facts
The facts of the case are summarized by the Court of Appeals thus:
On November 18, 1993, the Regional Tripartite Wages and Productivity Board of Region V issued Wage Order No. RB 0503 which provided for a Cost of Living Allowance (COLA) to workers in the private sector who ha[d] rendered service for at
least three (3) months before its effectivity, and for the same period [t]hereafter, in the following categories: SEVENTEEN
PESOS AND FIFTY CENTAVOS (P17.50) in the cities of Naga and Legaspi; FIFTEEN PESOS AND FIFTY CENTAVOS
(P15.50) in the municipalities of Tabaco, Daraga, Pili and the city of Iriga; and TEN PESOS (P10.00) for all other areas in
the Bicol Region.
Subsequently on November 23, 1993, the Regional Tripartite Wages and Productivity Board of Region VII issued Wage
Order No. RB VII-03, which directed the integration of the COLA mandated pursuant to Wage Order No. RO VII-02-A into
the basic pay of all workers. It also established an increase in the minimum wage rates for all workers and and employees in
the private sector as follows: by Ten Pesos (P10.00) in the cities of Cebu, Mandaue and Lapulapu; Five Pesos (P5.00) in the
municipalities of Compostela, Liloan, Consolacion, Cordova, Talisay, Minglanilla, Naga and the cities of Davao, Toledo,
Dumaguete, Bais, Canlaon and Tagbilaran.
The petitioner then granted a COLA of P17.50 to its employees at its Naga Branch, the only branch covered by Wage Order
No. RB 5-03, and integrated the P150.00 per month COLA into the basic pay of its rank-and-file employees at its Cebu,
Mabolo and P. del Rosario branches, the branches covered by Wage Order No. RB VII-03.
On June 7, 1994, respondent Prubankers Association wrote the petitioner requesting that the Labor Management Committee
be immediately convened to discuss and resolve the alleged wage distortion created in the salary structure upon the
implementation of the said wage orders. Respondent Association then demanded in the Labor Management Committee
meetings that the petitioner extend the application of the wage orders to its employees outside Regions V and VII, claiming
that the regional implementation of the said orders created a wage distortion in the wage rates of petitioner's employees
nationwide. As the grievance could not be settled in the said meetings, the parties agreed to submit the matter to voluntary
arbitration. The Arbitration Committee formed for that purpose was composed of the following: public respondent Froilan M.
Bacungan as Chairman, with Attys. Domingo T. Anonuevo and Emerico O. de Guzman as members. The issue presented
before the Committee was whether or not the bank's separate and regional implementation of Wage Order No. 5-03 at its
Naga Branch and Wage Order No. VII-03 at its Cebu, Mabolo and P. del Rosario branches, created a wage distortion in the
bank nationwide.
The Arbitration Committee on June 18, 1996 rendered questioned decision. 4
Ruling of the Court of Appeals
In ruling that there was no wage distortion, the Court of Appeals held that the variance in the salary rates of employees in different
regions of the country was justified by RA 6727. It noted that "the underlying considerations in issuing the wage orders are diverse,
based on the distinctive situations and needs existing in each region. Hence, there is no basis to apply the salary increases imposed by
Wage Order No. VII-03 to employees outside of Region VII." Furthermore, the Court of Appeals ruled that "the distinctions between
each employee group in the region are maintained, as all employees were granted an increase in minimum wage rate. 5
The Issues
In its Memorandum, petitioner raises the following issues:
I
Whether or not the Court of Appeals departed from the usual course of judicial procedure when it disregarded the factual
findings of the Voluntary Arbitration Committee as to the existence of wage distortion.
II
Whether or not the Court of Appeals committed grave error in law when it ruled that wage distortion exists only within a
region and not nationwide.
III
Whether or not the Court of Appeals erred in implying that the term "establishment" as used in Article 125 of the Labor Code
refers to the regional branches of the bank and not to the bank as a whole.
The main issue is whether or not a wage distortion resulted from respondent's implementation of the aforecited Wage Orders. As a
preliminary matter, we shall also take up the question of forum-shopping.
The Court's Ruling
The petition is devoid of merit.
Preliminary Issue: Forum-Shopping

Respondent asks for the dismissal of the petition because petitioner allegedly engaged in forum-shopping. It maintains that petitioner
failed to comply with Section 2 of Rule 42 of the Rules of Court, which requires that parties must certify under oath that they have not
commenced any other action involving the same issues in the Supreme Court, the Court of Appeals, or different divisions thereof, or
any other tribunal or agency; if there is such other action or proceeding, they must state the status of the same; and if they should
thereafter learn that a similar action or proceeding has been filed or is pending before the said courts, they should promptly inform the
aforesaid courts or any other tribunal or agency within five days therefrom. Specifically, petitioner accuses respondent of failing to
inform this Court of the pendency of NCMB-NCR-RVA-O4-012-97 entitled "In Re: Voluntary Arbitration between Prudential Bank
and Prubankers Association" (hereafter referred to as "voluntary arbitration case"), an action involving issues allegedly similar to
those raised in the present controversy.
In its Reply, petitioner effectively admits that the voluntary arbitration case was already pending when it filed the present petition.
However, it claims no violation of the rule against forum-shopping, because there is no identity of causes of action and issues between
the two cases.
We sustain the respondent. The rule on forum-shopping was first included in Section 17 of the Interim Rules and Guidelines issued by
this Court on January 11, 1983, which imposed a sanction in this wise: "A violation of the rule shall constitute contempt of court and
shall be a cause for the summary dismissal of both petitions, without prejudice to the taking of appropriate action against the counsel
or party concerned." Thereafter, the Court restated the rule in Revised Circular No. 28-91 and Administrative Circular No. 04-94.
Ultimately, the rule was embodied in the 1997 amendments to the Rules of Court.
As explained by this Court in First Philippine International Bank v. Court of Appeals, 8 forum-shopping exists where the elements
of litis pendentia are present, and where a final judgment in one case will amount to res judicata in the other. Thus, there is forumshopping when, between an action pending before this Court and another one, there exist: "a) identity of parties, or at least such parties
as represent the same interests in both actions, b) identity of rights asserted and relief prayed for, the relief being founded on the same
facts, and c) the identity of the two preceding particulars is such that any judgement rendered in the other action, will, regardless of
which party is successful amount to res judicata in the action under consideration; said requisites also constitutive of the requisites
for auter action pendant or lis pendens." 9 Another case elucidates the consequence of forum-shopping: "[W]here a litigant sues the
same party against whom another action or actions for the alleged violation of the same right and the enforcement of the same relief
is/are still pending, the defense of litis pendentia in one case is a bar to the others; and, a final judgment in one would constitute res
judicata and thus would cause the dismissal of the rest." 10
The voluntary arbitration case involved the issue of whether the adoption by the Bank of regionalized hiring rates was valid and
binding. On the other hand, the issue now on hand revolves around the existence of a wage distortion arising from the Bank's separate
and regional implementation of the two Wage Orders in the affected branches. A closer look would show that, indeed, the requisites of
forum-shopping are present.
First, there is identity of parties. Both cases are between the Bank and the Association acting on behalf of all its members. Second,
although the respective issues and reliefs prayed for in the two cases are stated differently, both actions boil down to one single issue:
the validity of the Bank's regionalization of its wage structure based on RA 6727. Even if the voluntary arbitration case calls for
striking, down the Bank's regionalized hiring scheme while the instant petition calls for the correction of the alleged wage distortion
caused by the regional implementation of Wage Order No. VII-03, the ultimate relief prayed for in both cases is the maintenance of
the Bank's national wage structure. Hence, the final disposition of one would constitute res judicata in the other. Thus, forumshopping is deemed to exist and, on this basis, the summary dismissal of both actions is indeed warranted.
Nonetheless, we deem it appropriate to pass upon the main issue on its merit in view of its importance.
Main Issue: Wage Distortion
The statutory definition of wage distortion is found in Article 124 of the Labor Code, as amended by Republic Act No. 6727, which
reads:
Art. 124. Standards/Criteria for Minimum Wage Fixing . . .
As used herein, a wage distortion shall mean a situation where an increase in prescribed wage results in the elimination of
severe contraction of intentional quantitative differences in wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills, length of service,
or other logical bases of differentiation.
Elaborating on this statutory definition, this Court ruled: "Wage distortion presupposes a classification of positions and ranking of
these positions at various levels. One visualizes a hierarchy of positions with corresponding ranks basically in terms of wages and
other emoluments. Where a significant change occurs at the lowest level of positions in terms of basic wage without a corresponding
change in the other level in the hierarchy of positions, negating as a result thereof the distinction between one level of position from
the next higher level, and resulting in a parity between the lowest level and the next higher level or rank, between new entrants and old
hires, there exists a wage distortion. . . . . The concept of a wage distortion assumes an existing grouping or classification of
employees which establishes distinctions among such employees on some relevant or legitimate basis. This classification is reflected
in a differing wage rate for each of the existing classes of employees" 11
Wage distortion involves four elements:
1. An existing hierarchy of positions with corresponding salary rates
2. A significant change in the salary rate of a lower pay class without a concomitant increase in the salary rate of a higher one
3. The elimination of the distinction between the two levels
4. The existence of the distortion in the same region of the country
In the present case, it is clear that no wage distortion resulted when respondent implemented the subject Wage Orders in the covered
branches. In the said branches, there was an increase in the salary rates of all pay classes. Furthermore, the hierarchy of positions
based on skills, lengh of service and other logical bases of differentiation was preserved. In other words, the quantitative difference in
compensation between different pay classes remained the same in all branches in the affected region. Put differently, the distinction
between Pay Class 1 and Pay Class 2, for example, was not eliminated as a result of the implementation of the two Wage Orders in the
said region. Hence, it cannot be said that there was a wage distortion.
Petitioner argues that a wage distortion exists, because the implementation of the two Wage Orders has resulted in the discrepancy in
the compensation of employees of similar pay classification in different regions. Hence, petitioner maintains that, as a result of the two
Wage Orders, the employees in the affected regions have higher compensation than their counterparts of the same level in other
regions. Several tables are presented by petitioner to illustrate that the employees in the regions covered by the Wage Orders are
receiving more than their counterparts in the same pay scale in other regions.
The Court is not persuaded. A wage parity between employees in different rungs, is not at issue here, but a wage disparity between
employees in the same rung but located in different regions of the country.
Contrary to petitioner's postulation, a disparity in wages between employees holding similar positions but in different regions does not
constitute wage distortion as contemplated by law. As previously enunciated, it is the hierarchy of positions and the disparity of their
corresponding wages and other emoluments that are sought to be preserved by the concept of wage distortion. Put differently, a wage
distortion arises when a wage order engenders wage parity between employees in different rungs of the organizational ladder of the
same establishment. It bears emphasis that wage distortion involves a parity in the salary rates of different pay classes which, as a
result, eliminates the distinction between the different ranks in the same region.
Different Regional Wages Mandated by RA 6727

Petitioner's claim of wage distortion must also be denied for one other reason. The difference in wages between employees in the same
pay scale in different regions is not the mischief sought to be banished by the law. In fact, Republic Act No. 6727 (the Wage
Rationalization Act), recognizes "existing regional disparities in the cost of living." Section 2 of said law provides:
Sec 2. It is hereby declared the policy of the State to rationalize the fixing of minimum wages and to promote productivityimprovement and gain-sharing measures to ensure a decent standard of living for the workers and their families; to guarantee
the rights of labor to its just share in the fruits of production; to enhance employment generation in the countryside through
industry dispersal; and to allow business and industry reasonable returns on investment, expansion and growth.
The State shall promote collective bargaining as the primary mode of settling wages and other terms and conditions of
employment; and whenever necessary, the minimum wage rates shall be adjusted in a fair and equitable manner, considering
existing regional disparities in the cost of living and other socio-economic factors and the national economic and social
development plans.
RA 6727 also amended Article 124 of the Labor Code, thus:
Art. 124. Standards/Criteria for Minimum Wage Fixing. The regional minimum wages to be established by the
Regional Board shall be as nearly adequate as is economically feasible to maintain the minimum standards of living
necessary for the health, efficiency and general well-being of the employees within the frame work of the national
economic and social development program. In the determination of such regional minimum wages, the Regional
Board shall, among other relevant factors, consider the following:
a.
The demand for living wages;
b.
Wage adjustment vis-a-vis the consumer price index;
c.
The cost of living and changes or increases therein;
d.
The needs of workers and their families;
e.
The need to induce industries to invest in the countryside;
f.
Improvements in standards of living;
g.
The prevailing wage levels;
h.
Fair return of the capital invested and capacity to pay of employers;
I.
II.
Effects on employment generation and family income; and

The equitable distribution of income and wealth along the imperatives of social and economic development.
From the above-quoted rationale of the law, as well as the criteria enumerated, a disparity in wages between employees with similar
positions in different regions is necessarily expected. In insisting that the employees of the same pay class in different regions should
receive the same compensation, petitioner has apparently misunderstood both the meaning of wage distortion and the intent of the law
to regionalize wage rates.
It must be understood that varying in each region of the country are controlling factors such as the cost of living; supply and demand
of basic goods, services and necessities; and the purchasing power of the peso. Other considerations underscore the necessity of the
law. Wages in some areas may be increased in order to prevent migration to the National Capital Region and, hence, to decongest the
metropolis. Therefore, what the petitioner herein bewails is precisely what the law provides in order to achieve its purpose.
Petitioner claims that it "does not insist that the Regional Wage Boards created pursuant to RA 6727 do not have the authority to issue
wage orders based on the distinctive situations and needs existing in each region. So also, . . . it does not insist that the [B]ank should
not implement regional wage orders. Neither does it seek to penalize the Bank for following Wage Order VII-03. . . . What it simply
argues is that it is wrong for the Bank to peremptorily abandon a national wage structure and replace the same with a regionalized
structure in violation of the principle of equal pay for equal work. And, it is wrong to say that its act of abandoning its national wage
structure is mandated by law."
As already discussed above, we cannot sustain this argument. Petitioner contradicts itself in not objecting, on the one hand, to the right
of the regional wage boards to impose a regionalized wage scheme; while insisting, on the other hand, on a national wage structure for
the whole Bank. To reiterate, a uniform national wage structure is antithetical to the purpose of RA 6727.
The objective of the law also explains the wage disparity in the example cited by petitioner: Armae Librero, though only in Pay Class
4 in Mabolo, was, as a result of the Wage Order, receiving more than Bella Cristobal, who was already in Pay Class 5 in Subic. 12 RA
6727 recognizes that there are different needs for the different situations in different regions of the country. The fact that a person is
receiving more in one region does not necessarily mean that he or she is better off than a person receiving less in another region. We
must consider, among others, such factors as cost of living, fulfillment of national economic goals, and standard of living. In any
event, this Court, in its decisions, merely enforces the law. It has no power to pass upon its wisdom or propriety.
Equal Pay for Equal Work

Petitioner also avers that the implementation of the Wage Order in only one region violates the equal-pay-for-equal-work principle.
This is not correct. At the risk of being repetitive, we stress that RA 6727 mandates that wages in every region must be set by the
particular wage board of that region, based on the prevailing situation therein. Necessarily, the wages in different regions will not be
uniform. Thus, under RA 6727, the minimum wage in Region 1 may be different from that in Region 13, because the socioeconomic
conditions in the two regions are different.
Meaning of "Establishment"
Petitioner further contends that the Court of Appeals erred in interpreting the meaning of "establishment" in relation to wage
distortion. It quotes the RA 6727 Implementing Rules, specifically Section 13 thereof which speaks of "workers working in branches
or agencies of establishments in or outside the National Capital Region." Petitioner infers from this that the regional offices of the
Bank do not themselves constitute, but are simply branches of, the establishment which is the whole bank. In effect, petitioner argues
that wage distortion covers the pay scales even of employees in different regions, and not only those of employees in the same region
or branch. We disagree.
Sec. 13 provides that the "minimum wage rates of workers working in branches or agencies of establishments in or outside the
National Capital Region shall be those applicable in the place where they are sanctioned" The last part of the sentence was omitted by
petitioner in its argument. Given the entire phrase, it is clear that the statutory provision does not support petitioner's view that
"establishment" includes all branches and offices in different regions.
Further negating petitioner's theory is NWPC Guideline No. 1 (S. 1992) entitled "Revised Guidelines on Exemption From Compliance
With the Prescribed Wage/Cost of Living Allowance Increases Granted by the Regional Tripartite Wages and Productivity Board,"
which states that "establishment" "refers to an economic unit which engages in one or predominantly one kind of economic activity
with a single fixed location."
Management Practice
Petitioner also insists that the Bank has adopted a uniform wage policy, which has attained the status of an established management
practice; thus, it is estopped from implementing a wage order for a specific region only. We are not persuaded. Said nationwide
uniform wage policy of the Bank had been adopted prior to the enactment of RA 6727. After the passage of said law, the Bank was
mandated to regionalize its wage structure. Although the Bank implemented Wage Order Nos. NCR-01 and NCR-02 nationwide
instead of regionally even after the effectivity of RA 6727, the Bank at the time was still uncertain about how to follow the new law.
In any event, that single instance cannot be constitutive of "management practice."
WHEREFORE, the petition is DENIED and the assailed Decision is AFFIRMED. Costs against petitioner.1wphi1.nt
SO ORDERED.
Romero, Vitug, Purisima and Gonzaga-Reyes, JJ., concur.
Footnotes
1 Penned by J. Delilah Vidallon-Magtolis, acting chairman, Ninth Division; with the concurrence of JJ. Hilarion L. Aquino and Marina L. Buzon, members.
2 Composed of Dean Froilan M. Bacungan, chairman; Attys. Domingo T. Anonuevo and Emerico O. de Guaman, members.
3 CA Decision, p. 1; rollo, p. 41.
4 CA Decision, pp. 1-2; rollo, p. 41-42.
5 Ibid., pp. 3-4; rollo, pp. 43-44.
6 Petitioner's Memorandum p. 18; rollo, p. 169.
7 This case was deemed submitted for resolution upon receipt by the Court on September 9, 1998 of respondent's Memorandum.
8 252 SCRA 259, January 24, 1996, per Panganiban, J.
9 Buan v. Lopez Jr., 145 SCRA 34, per Narvasa, CJ; citing Moran, Comments on the Rules, 1979 ed., Vol. 1, pp. 484-485 and cases therein collated; Salacup v. Madela
Jr., 91 SCRA 275, June 29, 1979; PNB v. CA, 98 SCRA 207, June 25, 1980; Punongbayan v. Pineda, 131 SCRA 496, August 30, 1984; Arceo v. Oliveros, 134 SCRA
308, January 31, 1985; Laroza v. Guia, 134 SCRA 341, January 31, 1985.
10 First Philippine International Bank v. Court of Appeals, supra.
11 National Federation of Labor v. NLRC, 234 SCRA 311, July 21, 1994, per Feliciano, J. See alsoMetropolitan Bank and Trust Company Employees Union-ALUTUCP v. NLRC, 226 SCRA 268, September 10, 1993; Cardona v. NLRC, 195 SCRA 92, March 11, 1991; Associated Labor Unions-TUCP v. NLRC, 235 SCRA 395,
August 16, 1994.
12 Petitioner's Memorandum, p. 10; rollo, p. 161.

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..

Republic of the Philippines

l>id::iio Clerk of Court

HON. PATRICIA STO. TOMAS,

This is a Petition for Review on Certiorari under Rule 45 of the Rules

On January 19, 2004, the Department of Labor and Employment

G.R. No. 217575

Consequently, the DOLE issued a Notice of Inspection Result

G.R. No. 217575

Petitioners moved for, but was denied, reconsideration of the

G.R. No. 2 I 7575

The [CA] gravely erred in ruling that the Secretary of Labor x x x

In the matter of denial of due process, petitioners maintain that they

G.R. No. 217575

prereqms1te for the exercise of the DOLE' s jurisdiction, 12 following

Petitioners' claim of denial of due process deserves scant

Rollo, pp. 41-42.

G.R. No. 217575

March 20, 2013, 694 SCRA 225.

et al., supra note 13.

G.R. No. 217575

Under the aforequoted provision, the Secretary of Labor, or any of his

G.R. No. 217575

The foregoing ruling was further reiterated and clarified in the

G.R. No. 217575

committed, 24 and to direct employers to comply with their alleged violations

The Orders of the Regional Director and the Secretary of

Proceeding from the conduct of such inspection was the issuance

G.R. No. 217575

Inspection Result issued by the labor inspector, the Non-payment of the

In determining the existence of an employer-employee relationship,

Rollo, pp. 62-63.

G.R. No. 217575

The Secretary of Labor adverts to private respondents' allegation in

Rollo, p. 91; Order dated November 8, 2004.

G.R. No. 217575

relationship must be respected should not be construed so as to dispense

employee relationship between the parties is essential to confer jurisdiction

As stressed by this Court in San Jose v. NLRC, 34 faithful compliance

G.R. No. 217575

even finality when supported by substantial evidence; otherwise, they shall

To this end, University of the Philippines v. Hon. Dizon 35 instructs

The Court is not unmindful of the State's policy to zealously

G.R. No. 171182, August 23, 2012.

Serrano v. NLRC, 380 Phil. 416 (2000).

G.R. No. 217575

WHEREFORE, the petition is GRANTED. The Decision dated

G.R. No. 217575

PRESBITEJl'O J. VELASCO, JR.

MARIA LOURDES P.A. SERENO

G.R. No. 211141

June 29, 2016

G.R. No. 211141

This case stemmed from a complaint7 for regularization,

Issued by Labor Arbiter Enrique L. Flores, Jr.; id. at 58-62.

G.R. No. 211141

In response, the respondents asserted that: ( 1) the petitioners were

On October 17, 2011, the LA rendered a Decision 11 in favor of the

In a Decision 15 dated February 22, 2012, the NLRC granted the

G.R. No. 211141

G.R. No. 211141

The petition is impressed with merit.

G.R. No. 211141

places at specific times, employees including drivers cannot