G.R. No. 101761. March 24, 1993.

NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION and NBSR SUPERVISORY UNION, (PACIWU) TUCP, respondents.
REGALADO, J p:
The main issue presented for resolution in this original petition for certiorari is whether supervisory
employees, as defined in Article 212 (m), Book V of the Labor Code, should be considered as officers or
members of the managerial staff under Article 82, Book III of the same Code, and hence are not entitled to
overtime rest day and holiday pay.
Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully owned and
controlled by the Government, operates three (3) sugar refineries located at Bukidnon, Iloilo and Batangas.
The Batangas refinery was privatized on April 11, 1992 pursuant to Proclamation No. 50. 1
Private respondent union represents the former supervisors of the NASUREFCO Batangas Sugar
Refinery, namely, the Technical Assistant to the Refinery Operations Manager, Shift Sugar Warehouse
Supervisor, Senior Financial/Budget Analyst, General Accountant, Cost Accountant, Sugar Accountant,
Junior Financial/Budget Analyst, Shift Boiler Supervisor,, Shift Operations Chemist, Shift Electrical
Supervisor, General Services Supervisor, Instrumentation Supervisor, Community Development Officer,
Employment and Training Supervisor, Assistant Safety and Security Officer, Head and Personnel Services,
Head Nurse, Property Warehouse Supervisor, Head of Inventory Control Section, Shift Process Supervisor,
Day Maintenance Supervisor and Motorpool Supervisor.
On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees, from rankand-file to department heads. The JE Program was designed to rationalized the duties and functions of all
positions, reestablish levels of responsibility, and recognize both wage and operational structures. Jobs
were ranked according to effort, responsibility, training and working conditions and relative worth of the job.
As a result, all positions were re-evaluated, and all employees including the members of respondent union
were granted salary adjustments and increases in benefits commensurate to their actual duties and
functions.
We glean from the records that for about ten years prior to the JE Program, the members of respondent
union were treated in the same manner as rank-and file employees. As such, they used to be paid
overtime, rest day and holiday pay pursuant to the provisions of Articles 87, 93 and 94 of the Labor Code
as amended.
With the implementation of the JE Program, the following adjustments were made: (1) the members of
respondent union were re-classified under levels S-5 to S-8 which are considered managerial staff for
purposes of compensation and benefits; (2) there was an increase in basic pay of the average of 50% of
their basic pay prior to the JE Program, with the union members now enjoying a wide gap (P1,269.00 per
month) in basic pay compared to the highest paid rank-and-file employee; (3) longevity pay was increased
on top of alignment adjustments; (4) they were entitled to increased company COLA of P225.00 per month;
(5) there was a grant of P100.00 allowance for rest day/holiday work.
On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which was organized
pursuant to Republic Act NO. 6715 allowing supervisory employees to form their own unions, as the
bargaining representative of all the supervisory employees at the NASUREFCO Batangas Sugar Refinery.
Two years after the implementation of the JE Program, specifically on June 20, 1990, the members of
herein respondent union filed a complainant with the executive labor arbiter for non-payment of overtime,
rest day and holiday pay allegedly in violation of Article 100 of the Labor Code.
On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2 disposing as follows:

"WHEREFORE, premises considered, respondent National Sugar refineries Corporation is hereby directed
to
1. pay the individual members of complainant union the usual overtime pay, rest day pay and holiday pay
enjoyed by them instead of the P100.00 special allowance which was implemented on June 11, 1988; and
2. pay the individual members of complainant union the difference in money value between the P100.00
special allowance and the overtime pay, rest day pay and holiday pay that they ought to have received from
June 1, 1988.
All other claims are hereby dismissed for lack of merit.
SO ORDERED."
In finding for the members therein respondent union, the labor ruled that the along span of time during
which the benefits were being paid to the supervisors has accused the payment thereof to ripen into
contractual obligation; at the complainants cannot be estopped from questioning the validity of the new
compensation package despite the fact that they have been receiving the benefits therefrom, considering
that respondent union was formed only a year after the implementation of the Job Evaluation Program,
hence there was no way for the individual supervisors to express their collective response thereto prior to
the formation of the union; and the comparative computations presented by the private respondent union
showed that the P100.00 special allowance given NASUREFCO fell short of what the supervisors ought to
receive had the overtime pay rest day pay and holiday pay not been discontinued, which arrangement,
therefore, amounted to a diminution of benefits.
On appeal, in a decision promulgated on July 19, 1991 by its Third Division, respondent National Labor
Relations Commission (NLRC) affirmed the decision of the labor arbiter on the ground that the members of
respondent union are not managerial employees, as defined under Article 212 (m) of the Labor Code and,
therefore, they are entitled to overtime, rest day and holiday pay. Respondent NLRC declared that these
supervisory employees are merely exercising recommendatory powers subject to the evaluation, review
and final action by their department heads; their responsibilities do not require the exercise of discretion
and independent judgment; they do not participate in the formulation of management policies nor in the
hiring or firing of employees; and their main function is to carry out the ready policies and plans of the
corporation. 3 Reconsideration of said decision was denied in a resolution of public respondent dated
August 30, 1991. 4
Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public respondent
commission committed a grave abuse of discretion in refusing to recognized the fact that the members of
respondent union are members of the managerial staff who are not entitled to overtime, rest day and
holiday pay; and in making petitioner assume the "double burden" of giving the benefits due to rank-and-file
employees together with those due to supervisors under the JE Program.
We find creditable merit in the petition and that the extraordinary writ of certiorari shall accordingly issue.
The primordial issue to be resolved herein is whether the members of respondent union are entitled to
overtime, rest day and holiday pay. Before this can be resolved, however it must of necessity be
ascertained first whether or not the union members, as supervisory employees, are to be considered as
officers or members of the managerial staff who are exempt from the coverage of Article 82 of the Labor
Code.
It is not disputed that the members of respondent union are supervisory employees, as defined employees,
as defined under Article 212(m), Book V of the Labor Code on Labor Relations, which reads:
"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay-off, recall, discharged, assign or discipline
employees. Supervisory employees are those who, in the interest of the employer effectively recommend
such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but

requires the use of independent judgment. All employees not falling within any of those above definitions
are considered rank-and-file employees of this Book."
Respondent NLRC, in holding that the union members are entitled to overtime, rest day and holiday pay,
and in ruling that the latter are not managerial employees, adopted the definition stated in the aforequoted
statutory provision.
Petitioner, however, avers that for purposes of determining whether or not the members of respondent
union are entitled to overtime, rest day and holiday pay, said employees should be considered as "officers
or members of the managerial staff" as defined under Article 82, Book III of the Labor Code on "Working
Conditions and Rest Periods" and amplified in Section 2, Rule I, Book III of the Rules to Implement the
Labor Code, to wit:
"Art. 82 Coverage. The provisions of this title shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent on him for support, domestic helpers,
persons in the personal service of another, and workers who are paid by results as determined by the
Secretary of Labor in Appropriate regulations.
"As used herein, 'managerial employees' refer to those whose primary duty consists of the management of
the establishment in which they are employed or of a department or subdivision thereof, and to other
officers or members of the managerial staff." (Emphasis supplied.)
xxx xxx xxx
'Sec. 2. Exemption. The provisions of this rule shall not apply to the following persons if they qualify for
exemption under the condition set forth herein:
xxx xxx xxx
(b) Managerial employees, if they meet all of the following conditions, namely:
(1) Their primary duty consists of the management of the establishment in which they are employed or of a
department or subdivision thereof:
(2) They customarily and regularly direct the work of two or more employees therein:
(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and
recommendations as to the hiring and firing and as to the promotion or any other change of status of other
employees are given particular weight.
(c) Officers or members of a managerial staff if they perform the following duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to management policies of their
employer;
(2) Customarily and regularly exercise discretion and independent judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty consists of
the management of the establishment in which he is employed or subdivision thereof; or (ii) execute under
general supervision work along specialized or technical lines requiring special training, experience, or
knowledge; or (iii) execute under general supervision special assignments and tasks; and
(4) Who do not devote more 20 percent of their hours worked in a work-week to activities which are not
directly and closely related to the performance of the work described in paragraphs (1), (2), and above."

It is the submission of petitioner that while the members of respondent union, as supervisors, may not be
occupying managerial positions, they are clearly officers or members of the managerial staff because they
meet all the conditions prescribed by law and, hence, they are not entitled to overtime, rest day and
supervisory employees under Article 212 (m) should be made to apply only to the provisions on Labor
Relations, while the right of said employees to the questioned benefits should be considered in the light of
the meaning of a managerial employee and of the officers or members of the managerial staff, as
contemplated under Article 82 of the Code and Section 2, Rule I Book III of the implementing rules. In other
words, for purposes of forming and joining unions, certification elections, collective bargaining, and so forth,
the union members are supervisory employees. In terms of working conditions and rest periods and
entitlement to the questioned benefits, however, they are officers or members of the managerial staff,
hence they are not entitled thereto.
While the Constitution is committed to the policy of social justice and the protection of the working class, it
should not be supposed that every labor dispute will be automatically decided in favor of labor.
Management also has its own rights which, as such, are entitled to respect and enforcement in the interest
of simple fair play. Out of its concern for those with less privileges in life, this Court has inclined more often
than not toward the worker and upheld his cause in his conflicts with the employer. Such favoritism,
however, has not blinded us to the rule that justice is in every case for the deserving, to be dispensed in the
light of the established facts and the applicable law and doctrine. 5
This is one such case where we are inclined to tip the scales of justice in favor of the employer.
The question whether a given employee is exempt from the benefits of the law is a factual one dependent
on the circumstances of the particular case, In determining whether an employee is within the terms of the
statutes, the criterion is the character of the work performed, rather than the title of the employee's position.
6
Consequently, while generally this Court is not supposed to review the factual findings of respondent
commission, substantial justice and the peculiar circumstances obtaining herein mandate a deviation from
the rule.
A cursory perusal of the Job Value Contribution Statements 7 of the union members will readily show that
these supervisory employees are under the direct supervision of their respective department
superintendents and that generally they assist the latter in planning, organizing, staffing, directing,
controlling communicating and in making decisions in attaining the company's set goals and objectives.
These supervisory employees are likewise responsible for the effective and efficient operation of their
respective departments. More specifically, their duties and functions include, among others, the following
operations whereby the employee:
1) assists the department superintendent in the following:
a) planning of systems and procedures relative to department activities;
b) organizing and scheduling of work activities of the department, which includes employee shifting
scheduled and manning complement;
c) decision making by providing relevant information data and other inputs;
d) attaining the company's set goals and objectives by giving his full support;
e) selecting the appropriate man to handle the job in the department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at all times and recommends disciplinary action on
erring subordinates;

3) trains and guides subordinates on how to assume responsibilities and become more productive;
4) conducts semi-annual performance evaluation of his subordinates and recommends necessary action for
their development/advancement;
5) represents the superintendent or the department when appointed and authorized by the former;
6) coordinates and communicates with other inter and intra department supervisors when necessary;
7) recommends disciplinary actions/promotions;
8) recommends measures to improve work methods, equipment performance, quality of service and
working conditions;
9) sees to it that safety rules and regulations and procedure and are implemented and followed by all
NASUREFCO employees, recommends revisions or modifications to said rules when deemed necessary,
and initiates and prepares reports for any observed abnormality within the refinery;
10) supervises the activities of all personnel under him and goes to it that instructions to subordinates are
properly implemented; and
11) performs other related tasks as may be assigned by his immediate superior.
From the foregoing, it is apparent that the members of respondent union discharge duties and
responsibilities which ineluctably qualify them as officers or members of the managerial staff, as defined in
Section 2, Rule I Book III of the aforestated Rules to Implement the Labor Code, viz.: (1) their primary duty
consists of the performance of work directly related to management policies of their employer; (2) they
customarily and regularly exercise discretion and independent judgment; (3) they regularly and directly
assist the managerial employee whose primary duty consist of the management of a department of the
establishment in which they are employed (4) they execute, under general supervision, work along
specialized or technical lines requiring special training, experience, or knowledge; (5) they execute, under
general supervision, special assignments and tasks; and (6) they do not devote more than 20% of their
hours worked in a work-week to activities which are not directly and clearly related to the performance of
their work hereinbefore described.
Under the facts obtaining in this case, we are constrained to agree with petitioner that the union members
should be considered as officers and members of the managerial staff and are, therefore, exempt from the
coverage of Article 82. Perforce, they are not entitled to overtime, rest day and holiday.
The distinction made by respondent NLRC on the basis of whether or not the union members are
managerial employees, to determine the latter's entitlement to the questioned benefits, is misplaced and
inappropriate. It is admitted that these union members are supervisory employees and this is one instance
where the nomenclatures or titles of their jobs conform with the nature of their functions. Hence, to
distinguish them from a managerial employee, as defined either under Articles 82 or 212 (m) of the Labor
Code, is puerile and in efficacious. The controversy actually involved here seeks a determination of whether
or not these supervisory employees ought to be considered as officers or members of the managerial staff.
The distinction, therefore, should have been made along that line and its corresponding conceptual criteria.
II. We likewise no not subscribe to the finding of the labor arbiter that the payment of the questioned
benefits to the union members has ripened into a contractual obligation.
A. Prior to the JE Program, the union members, while being supervisors, received benefits similar to the
rank-and-file employees such as overtime, rest day and holiday pay, simply because they were treated in
the same manner as rank-and-file employees, and their basic pay was nearly on the same level as those of
the latter, aside from the fact that their specific functions and duties then as supervisors had not been
properly defined and delineated from those of the rank-and-file. Such fact is apparent from the clarification

made by petitioner in its motion for reconsideration 8 filed with respondent commission in NLRC Case No.
CA No. I-000058, dated August 16, 1991, wherein, it lucidly explained:
"But, complainants no longer occupy the same positions they held before the JE Program. Those positions
formerly classified as 'supervisory' and found after the JE Program to be rank-and-file were classified
correctly and continue to receive overtime, holiday and restday pay. As to them, the practice subsists.
"However, those whose duties confirmed them to be supervisory, were re-evaluated, their duties re-defined
and in most cases their organizational positions re-designated to confirm their superior rank and duties.
Thus, after the JE program, complainants cannot be said to occupy the same positions." 9
It bears mention that this positional submission was never refuted nor controverted by respondent union in
any of its pleadings filed before herein public respondent or with this Court. Hence, it can be safely
concluded therefrom that the members of respondent union were paid the questioned benefits for the
reason that, at that time, they were rightfully entitled thereto. Prior to the JE Program, they could not be
categorically classified as members or officers of the managerial staff considering that they were then
treated merely on the same level as rank-and-file. Consequently, the payment thereof could not be
construed as constitutive of voluntary employer practice, which cannot be now be unilaterally withdrawn by
petitioner. To be considered as such, it should have been practiced over a long period of time, and must be
shown to have been consistent and deliberate. 10
The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed
to continue giving the benefits knowingly fully well that said employees are not covered by the law requiring
payment thereof. 11 In the case at bar, respondent union failed to sufficiently establish that petitioner has
been motivated or is wont to give these benefits out of pure generosity.
B. It remains undisputed that the implementation of the JE Program, the members of private respondent
union were re-classified under levels S-5 S-8 which were considered under the program as managerial staff
purposes of compensation and benefits, that they occupied re-evaluated positions, and that their basic pay
was increased by an average of 50% of their basic salary prior to the JE Program. In other words, after the
JE Program there was an ascent in position, rank and salary. This in essence is a promotion which is
defined as the advancement from one position to another with an increase in duties and responsibilities as
authorized by law, and usually accompanied by an increase in salary. 12
Quintessentially, with the promotion of the union members, they are no longer entitled to the benefits which
attach and pertain exclusively to their positions. Entitlement to the benefits provided for by law requires
prior compliance with the conditions set forth therein. With the promotion of the members of respondent
union, they occupied positions which no longer met the requirements imposed by law. Their assumption of
these positions removed them from the coverage of the law, ergo, their exemption therefrom.
As correctly pointed out by petitioner, if the union members really wanted to continue receiving the benefits
which attach to their former positions, there was nothing to prevent them from refusing to accept their
promotions and their corresponding benefits. As the sating goes by, they cannot have their cake and eat it
too or, as petitioner suggests, they could not, as a simple matter of law and fairness, get the best of both
worlds at the expense of NASUREFCO.
Promotion of its employees is one of the jurisprudentially-recognized exclusive prerogatives of
management, provided it is done in good faith. In the case at bar, private respondent union has miserably
failed to convince this Court that the petitioner acted implementing the JE Program. There is no showing
that the JE Program was intended to circumvent the law and deprive the members of respondent union of
the benefits they used to receive.
Not so long ago, on this particular score, we had the occasion to hold that:
". . . it is the prerogative of the management to regulate, according to its discretion and judgment, all
aspects of employment. This flows from the established rule that labor law does not authorize the
substitution of the judgment of the employer in the conduct of its business. Such management prerogative
may be availed of without fear of any liability so long as it is exercised in good faith for the advancement of

the employer's interest and not for the purpose of defeating on circumventing the rights of employees under
special laws or valid agreement and are not exercised in a malicious, harsh, oppressive, vindictive or
wanton manner or out of malice or spite." 13
WHEREFORE, the impugned decision and resolution of respondent National Labor Relations Commission
promulgated on July 19, 1991 and August 30, 1991, respectively, are hereby ANNULLED and SET ASIDE
for having been rendered and adopted with grave abuse of discretion, and the basic complaint of private
respondent union is DISMISSED.
G.R. No. 79255 January 20, 1992
UNION OF FILIPRO EMPLOYEES (UFE), petitioner, vs.
BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION and NESTL PHILIPPINES,
INC. (formerly FILIPRO, INC.), respondents.
GUTIERREZ, JR., J.:
This labor dispute stems from the exclusion of sales personnel from the holiday pay award and the change
of the divisor in the computation of benefits from 251 to 261 days.
On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the National Labor
Relations Commission (NLRC) a petition for declaratory relief seeking a ruling on its rights and obligations
respecting claims of its monthly paid employees for holiday pay in the light of the Court's decision
in Chartered Bank Employees Association v. Ople (138 SCRA 273 [1985]).
Both Filipro and the Union of Filipino Employees (UFE) agreed to submit the case for voluntary arbitration
and appointed respondent Benigno Vivar, Jr. as voluntary arbitrator.
On January 2, 1980, Arbitrator Vivar rendered a decision directing Filipro to:
pay its monthly paid employees holiday pay pursuant to Article 94 of the Code, subject only to the
exclusions and limitations specified in Article 82 and such other legal restrictions as are provided for in
the Code. (Rollo, p. 31)
Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2) the exclusion
of salesmen, sales representatives, truck drivers, merchandisers and medical representatives (hereinafter
referred to as sales personnel) from the award of the holiday pay, and (3) deduction from the holiday pay
award of overpayment for overtime, night differential, vacation and sick leave benefits due to the use of 251
divisor. (Rollo, pp. 138-145)
Petitioner UFE answered that the award should be made effective from the date of effectivity of the Labor
Code, that their sales personnel are not field personnel and are therefore entitled to holiday pay, and that
the use of 251 as divisor is an established employee benefit which cannot be diminished.
On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of the holiday
pay award shall retroact to November 1, 1974, the date of effectivity of the Labor Code. He adjudged,
however, that the company's sales personnel are field personnel and, as such, are not entitled to holiday
pay. He likewise ruled that with the grant of 10 days' holiday pay, the divisor should be changed from 251 to
261 and ordered the reimbursement of overpayment for overtime, night differential, vacation and sick leave
pay due to the use of 251 days as divisor.
Both Nestle and UFE filed their respective motions for partial reconsideration. Respondent Arbitrator
treated the two motions as appeals and forwarded the case to the NLRC which issued a resolution dated
May 25, 1987 remanding the case to the respondent arbitrator on the ground that it has no jurisdiction to
review decisions in voluntary arbitration cases pursuant to Article 263 of the Labor Code as amended by
Section 10, Batas Pambansa Blg. 130 and as implemented by Section 5 of the rules implementing B.P. Blg.
130.

However, in a letter dated July 6, 1987, the respondent arbitrator refused to take cognizance of the case
reasoning that he had no more jurisdiction to continue as arbitrator because he had resigned from service
effective May 1, 1986.
Hence, this petition.
The petitioner union raises the following issues:
1) Whether or not Nestle's sales personnel are entitled to holiday pay; and
2) Whether or not, concomitant with the award of holiday pay, the divisor should be changed from 251 to
261 days and whether or not the previous use of 251 as divisor resulted in overpayment for overtime, night
differential, vacation and sick leave pay.
The petitioner insists that respondent's sales personnel are not field personnel under Article 82 of the Labor
Code. The respondent company controverts this assertion.
Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as "nonagritultural employees who regularly perform their duties away from the principal place of business or
branch office of the employer and whose actual hours of work in the field cannot be determined with
reasonable certainty."
The controversy centers on the interpretation of the clause "whose actual hours of work in the field cannot
be determined with reasonable certainty."
It is undisputed that these sales personnel start their field work at 8:00 a.m. after having reported to the
office and come back to the office at 4:00 p.m. or 4:30 p.m. if they are Makati-based.
The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the sales
personnel's working hours which can be determined with reasonable certainty.
The Court does not agree. The law requires that the actual hours of work in the field be reasonably
ascertained. The company has no way of determining whether or not these sales personnel, even if they
report to the office before 8:00 a.m. prior to field work and come back at 4:30 p.m, really spend the hours in
between in actual field work.
We concur with the following disquisition by the respondent arbitrator:
The requirement for the salesmen and other similarly situated employees to report for work at the office
at 8:00 a.m. and return at 4:00 or 4:30 p.m. is not within the realm of work in the field as defined in the
Code but an exercise of purely management prerogative of providing administrative control over such
personnel. This does not in any manner provide a reasonable level of determination on the actual field
work of the employees which can be reasonably ascertained. The theoretical analysis that salesmen
and other similarly-situated workers regularly report for work at 8:00 a.m. and return to their home
station at 4:00 or 4:30 p.m., creating the assumption that their field work is supervised, is surface
projection. Actual field work begins after 8:00 a.m., when the sales personnel follow their field itinerary,
and ends immediately before 4:00 or 4:30 p.m. when they report back to their office. The period
between 8:00 a.m. and 4:00 or 4:30 p.m. comprises their hours of work in the field, the extent or scope
and result of which are subject to their individual capacity and industry and which "cannot be
determined with reasonable certainty." This is the reason why effective supervision over field work of
salesmen and medical representatives, truck drivers and merchandisers is practically a physical
impossibility. Consequently, they are excluded from the ten holidays with pay award. (Rollo, pp. 36-37)
Moreover, the requirement that "actual hours of work in the field cannot be determined with reasonable
certainty" must be read in conjunction with Rule IV, Book III of the Implementing Rules which provides:
Rule IV Holidays with Pay

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

xxx xxx xxx
(e) Field personnel and other employees whose time and performance is unsupervised by the
employer . . . (Emphasis supplied)
While contending that such rule added another element not found in the law (Rollo, p. 13), the petitioner
nevertheless attempted to show that its affected members are not covered by the abovementioned rule.
The petitioner asserts that the company's sales personnel are strictly supervised as shown by the SOD
(Supervisor of the Day) schedule and the company circular dated March 15, 1984 (Annexes 2 and 3, Rollo,
pp. 53-55).
Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did not add another
element to the Labor Code definition of field personnel. The clause "whose time and performance is
unsupervised by the employer" did not amplify but merely interpreted and expounded the clause "whose
actual hours of work in the field cannot be determined with reasonable certainty." The former clause is still
within the scope and purview of Article 82 which defines field personnel. Hence, in deciding whether or not
an employee's actual working hours in the field can be determined with reasonable certainty, query must be
made as to whether or not such employee's time and performance is constantly supervised by the
employer.
The SOD schedule adverted to by the petitioner does not in the least signify that these sales personnel's
time and performance are supervised. The purpose of this schedule is merely to ensure that the sales
personnel are out of the office not later than 8:00 a.m. and are back in the office not earlier than 4:00 p.m.
Likewise, the Court fails to see how the company can monitor the number of actual hours spent in field
work by an employee through the imposition of sanctions on absenteeism contained in the company
circular of March 15, 1984.
The petitioner claims that the fact that these sales personnel are given incentive bonus every quarter based
on their performance is proof that their actual hours of work in the field can be determined with reasonable
certainty.
The Court thinks otherwise.
The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume based on sales target;
(2) good collection performance; (3) proper compliance with good market hygiene; (4) good merchandising
work; (5) minimal market returns; and (6) proper truck maintenance. (Rollo, p. 190).
The above criteria indicate that these sales personnel are given incentive bonuses precisely because of the
difficulty in measuring their actual hours of field work. These employees are evaluated by the result of their
work and not by the actual hours of field work which are hardly susceptible to determination.
In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613 [1963]), the Court had
occasion to discuss the nature of the job of a salesman. Citing the case of Jewel Tea
Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, the Court stated:
The reasons for excluding an outside salesman are fairly apparent. Such a salesman, to a greater
extent, works individually. There are no restrictions respecting the time he shall work and he can earn
as much or as little, within the range of his ability, as his ambition dictates. In lieu of overtime he
ordinarily receives commissions as extra compensation. He works away from his employer's place of
business, is not subject to the personal supervision of his employer, and his employer has no way of
knowing the number of hours he works per day.
While in that case the issue was whether or not salesmen were entitled to overtime pay, the same rationale
for their exclusion as field personnel from holiday pay benefits also applies.

The petitioner union also assails the respondent arbitrator's ruling that, concomitant with the award of
holiday pay, the divisor should be changed from 251 to 261 days to include the additional 10 holidays and
the employees should reimburse the amounts overpaid by Filipro due to the use of 251 days' divisor.
Arbitrator Vivar's rationale for his decision is as follows:
. . . The new doctrinal policy established which ordered payment of ten holidays certainly adds to or
accelerates the basis of conversion and computation by ten days. With the inclusion of ten holidays as
paid days, the divisor is no longer 251 but 261 or 262 if election day is counted. This is indeed an
extremely difficult legal question of interpretation which accounts for what is claimed as falling within the
concept of "solutio indebti."
When the claim of the Union for payment of ten holidays was granted, there was a consequent need to
abandon that 251 divisor. To maintain it would create an impossible situation where the employees
would benefit with additional ten days with pay but would simultaneously enjoy higher benefits by
discarding the same ten days for purposes of computing overtime and night time services and
considering sick and vacation leave credits. Therefore, reimbursement of such overpayment with the
use of 251 as divisor arises concomitant with the award of ten holidays with pay. (Rollo, p. 34)
The divisor assumes an important role in determining whether or not holiday pay is already included in the
monthly paid employee's salary and in the computation of his daily rate. This is the thrust of our
pronouncement inChartered Bank Employees Association v. Ople (supra). In that case, We held:
It is argued that even without the presumption found in the rules and in the policy instruction, the
company practice indicates that the monthly salaries of the employees are so computed as to include
the holiday pay provided by law. The petitioner contends otherwise.
One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in computing
overtime compensation for its employees, employs a "divisor" of 251 days. The 251 working days
divisor is the result of subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total
number of calendar days in a year. If the employees are already paid for all non-working days, the
divisor should be 365 and not 251.
In the petitioner's case, its computation of daily ratio since September 1, 1980, is as follows:
monthly rate x 12 months

251 days
Following the criterion laid down in the Chartered Bank case, the use of 251 days' divisor by respondent
Filipro indicates that holiday pay is not yet included in the employee's salary, otherwise the divisor should
have been 261.
It must be stressed that the daily rate, assuming there are no intervening salary increases, is a constant
figure for the purpose of computing overtime and night differential pay and commutation of sick and
vacation leave credits. Necessarily, the daily rate should also be the same basis for computing the 10
unpaid holidays.
The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower daily
rate which is violative of the prohibition on non-diminution of benefits found in Article 100 of the Labor
Code. To maintain the same daily rate if the divisor is adjusted to 261 days, then the dividend,
which represents the employee's annual salary, should correspondingly be increased to incorporate the
holiday pay. To illustrate, if prior to the grant of holiday pay, the employee's annual salary is P25,100, then
dividing such figure by 251 days, his daily rate is P100.00 After the payment of 10 days' holiday pay, his
annual salary already includes holiday pay and totals P26,100 (P25,100 + 1,000). Dividing this by 261

days, the daily rate is still P100.00. There is thus no merit in respondent Nestle's claim of overpayment of
overtime and night differential pay and sick and vacation leave benefits, the computation of which are all
based on the daily rate, since the daily rate is still the same before and after the grant of holiday pay.
Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its use of 251 days as
divisor must fail in light of the Labor Code mandate that "all doubts in the implementation and interpretation
of this Code, including its implementing rules and regulations, shall be resolved in favor of labor." (Article 4).
Moreover, prior to September 1, 1980, when the company was on a 6-day working schedule, the divisor
used by the company was 303, indicating that the 10 holidays were likewise not paid. When Filipro shifted
to a 5-day working schebule on September 1, 1980, it had the chance to rectify its error, if ever there was
one but did not do so. It is now too late to allege payment by mistake.
Nestle also questions the voluntary arbitrator's ruling that holiday pay should be computed from November
1, 1974. This ruling was not questioned by the petitioner union as obviously said decision was favorable to
it. Technically, therefore, respondent Nestle should have filed a separate petition raising the issue of
effectivity of the holiday pay award. This Court has ruled that an appellee who is not an appellant may
assign errors in his brief where his purpose is to maintain the judgment on other grounds, but he cannot
seek modification or reversal of the judgment or affirmative relief unless he has also appealed. (Franco v.
Intermediate Appellate Court, 178 SCRA 331 [1989], citing La Campana Food Products, Inc. v. Philippine
Commercial and Industrial Bank, 142 SCRA 394 [1986]). Nevertheless, in order to fully settle the issues so
that the execution of the Court's decision in this case may not be needlessly delayed by another petition,
the Court resolved to take up the matter of effectivity of the holiday pay award raised by Nestle.
Nestle insists that the reckoning period for the application of the holiday pay award is 1985 when
the Chartered Bank decision, promulgated on August 28, 1985, became final and executory, and not from
the date of effectivity of the Labor Code. Although the Court does not entirely agree with Nestle, we find its
claim meritorious.
In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132 SCRA 663 [1984],
hereinafter referred to as the IBAA case, the Court declared that Section 2, Rule IV, Book III of the
implementing rules and Policy Instruction No. 9, issued by the then Secretary of Labor on February 16,
1976 and April 23, 1976, respectively, and which excluded monthly paid employees from holiday pay
benefits, are null and void. The Court therein reasoned that, in the guise of clarifying the Labor Code's
provisions on holiday pay, the aforementioned implementing rule and policy instruction amended them by
enlarging the scope of their exclusion. The Chartered Bank case reiterated the above ruling and added the
"divisor" test.
However, prior to their being declared null and void, the implementing rule and policy instruction enjoyed
the presumption of validity and hence, Nestle's non-payment of the holiday benefit up to the promulgation
of the IBAA case on October 23, 1984 was in compliance with these presumably valid rule and policy
instruction.
In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the Court discussed the
effect to be given to a legislative or executive act subsequently declared invalid:
xxx xxx xxx
. . . It does not admit of doubt that prior to the declaration of nullity such challenged legislative or
executive act must have been in force and had to be complied with. This is so as until after the judiciary,
in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have
acted under it and may have changed their positions. What could be more fitting than that in a
subsequent litigation regard be had to what has been done while such legislative or executive act was
in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its
being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that
precisely because the judiciary is the government organ which has the final say on whether or not a
legislative or executive measure is valid, a period of time may have elapsed before it can exercise the
power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its

quality of fairness and justice then, if there be no recognition of what had transpired prior to such
adjudication.
In the language of an American Supreme Court decision: "The actual existence of a statute, prior to
such a determination of [unconstitutionality], is an operative fact and may have consequences which
cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of
the subsequent ruling as to invalidity may have to be considered in various aspects, with respect to
particular relations, individual and corporate, and particular conduct, private and official." (Chicot County
Drainage Dist. v. Baxter States Bank, 308 US 371, 374 [1940]). This language has been quoted with
approval in a resolution in Araneta v. Hill (93 Phil. 1002 [1952]) and the decision in Manila Motor Co.,
Inc. v. Flores (99 Phil. 738 [1956]). An even more recent instance is the opinion of Justice Zaldivar
speaking for the Court in Fernandez v. Cuerva and Co. (21 SCRA 1095 [1967]. (At pp. 434-435)
The "operative fact" doctrine realizes that in declaring a law or rule null and void, undue harshness and
resulting unfairness must be avoided. It is now almost the end of 1991. To require various companies to
reach back to 1975now and nullify acts done in good faith is unduly harsh. 1984 is a fairer reckoning period
under the facts of this case.
Applying the aforementioned doctrine to the case at bar, it is not far-fetched that Nestle, relying on the
implicit validity of the implementing rule and policy instruction before this Court nullified them, and thinking
that it was not obliged to give holiday pay benefits to its monthly paid employees, may have been moved to
grant other concessions to its employees, especially in the collective bargaining agreement. This possibility
is bolstered by the fact that respondent Nestle's employees are among the highest paid in the industry. With
this consideration, it would be unfair to impose additional burdens on Nestle when the non-payment of the
holiday benefits up to 1984 was not in any way attributed to Nestle's fault.
The Court thereby resolves that the grant of holiday pay be effective, not from the date of promulgation of
the Chartered Bank case nor from the date of effectivity of the Labor Code, but from October 23, 1984, the
date of promulgation of the IBAA case.
WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED. The divisor to be used in
computing holiday pay shall be 251 days. The holiday pay as above directed shall be computed from
October 23, 1984. In all other respects, the order of the respondent arbitrator is hereby AFFIRMED.
SO ORDERED.
G.R. No. L-18353

July 31, 1963

SAN MIGUEL BREWERY, INC., petitioner, vs.DEMOCRATIC LABOR ORGANIZATION, ET

AL., respondents.
BAUTISTA ANGELO, J.:
On January 27, 1955, the Democratic Labor Association filed complaint against the San Miguel Brewery,
Inc. embodying 12 demands for the betterment of the conditions of employment of its members. The
company filed its answer to the complaint specifically denying its material averments and answering the
demands point by point. The company asked for the dismissal of the complaint.
At the hearing held sometime in September, 1955, the union manifested its desire to confine its claim to its
demands for overtime, night-shift differential pay, and attorney's fees, although it was allowed to present
evidence on service rendered during Sundays and holidays, or on its claim for additional separation pay
and sick and vacation leave compensation.1wph1.t
After the case had been submitted for decision, Presiding Judge Jose S. Bautista, who was commissioned
to receive the evidence, rendered decision expressing his disposition with regard to the points embodied in
the complaint on which evidence was presented. Specifically, the disposition insofar as those points
covered by this petition for review are concerned, is as follows:

1. With regard to overtime compensation, Judge Bautista held that the provisions of the Eight-Hour
Labor Law apply to the employees concerned for those working in the field or engaged in the sale of the
company's products outside its premises and consequently they should be paid the extra compensation
accorded them by said law in addition to the monthly salary and commission earned by them,
regardless of the meal allowance given to employees who work up to late at night.
2. As to employees who work at night, Judge Bautista decreed that they be paid their corresponding
salary differentials for work done at night prior to January 1, 1949 with the present qualification: 25% on
the basis of their salary to those who work from 6:00 to 12:00 p.m., and 75% to those who work from
12:01 to 6:00 in the morning.
3. With regard to work done during Sundays and holidays, Judge Bautista also decreed that the
employees concerned be paid an additional compensation of 25% as provided for in Commonwealth
Act No. 444 even if they had been paid a compensation on monthly salary basis.
The demands for the application of the Minimum Wage Law to workers paid on "pakiao" basis, payment of
accumulated vacation and sick leave and attorney's fees, as well as the award of additional separation pay,
were either dismissed, denied, or set aside.
Its motion for reconsideration having been denied by the industrial court en banc, which affirmed the
decision of the court a quo with few exceptions, the San Miguel Brewery, Inc. interposed the present
petition for review.
Anent the finding of the court a quo, as affirmed by the Court of Industrial Relations, to the effect that
outside or field sales personnel are entitled to the benefits of the Eight-Hour Labor Law, the pertinent facts
are as follows:
After the morning roll call, the employees leave the plant of the company to go on their respective sales
routes either at 7:00 a.m. for soft drinks trucks, or 8:00 a.m. for beer trucks. They do not have a daily time
record. The company never require them to start their work as outside sales personnel earlier than the
above schedule.
The sales routes are so planned that they can be completed within 8 hours at most, or that the employees
could make their sales on their routes within such number of hours variable in the sense that sometimes
they can be completed in less than 8 hours, sometimes 6 to 7 hours, or more. The moment these outside or
field employees leave the plant and while in their sales routes they are on their own, and often times when
the sales are completed, or when making short trip deliveries only, they go back to the plant, load again,
and make another round of sales. These employees receive monthly salaries and sales commissions in
variable amounts. The amount of compensation they receive is uncertain depending upon their individual
efforts or industry. Besides the monthly salary, they are paid sales commission that range from P30, P40,
sometimes P60, P70, to sometimes P90, P100 and P109 a month, at the rate of P0.01 to P0.01- per
case.
It is contended that since the employees concerned are paid a commission on the sales they make outside
of the required 8 hours besides the fixed salary that is paid to them, the Court of Industrial Relations erred
in ordering that they be paid an overtime compensation as required by the Eight-Hour Labor Law for the
reason that the commission they are paid already takes the place of such overtime compensation. Indeed,
it is claimed, overtime compensation is an additional pay for work or services rendered in excess of 8 hours
a day by an employee, and if the employee is already given extra compensation for labor performed in
excess of 8 hours a day, he is not covered by the law. His situation, the company contends, can be likened
to an employee who is paid on piece-work, "pakiao", or commission basis, which is expressly excluded
from the operation of the Eight-Hour Labor Law.1
We are in accord with this view, for in our opinion the Eight-Hour Labor Law only has application where an
employee or laborer is paid on a monthly or daily basis, or is paid a monthly or daily compensation, in
which case, if he is made to work beyond the requisite period of 8 hours, he should be paid the additional
compensation prescribed by law. This law has no application when the employee or laborer is paid on a
piece-work, "pakiao", or commission basis, regardless of the time employed. The philosophy behind this

exemption is that his earnings in the form of commission based on the gross receipts of the day. His
participation depends upon his industry so that the more hours he employs in the work the greater are his
gross returns and the higher his commission. This philosophy is better explained in Jewel Tea Co. v.
Williams, C.C.A. Okla., 118 F. 2d 202, as follows:
The reasons for excluding an outside salesman are fairly apparent. Such salesman, to a greater
extent, works individually. There are no restrictions respecting the time he shall work and he can
earn as much or as little, within the range of his ability, as his ambition dictates. In lieu of overtime
he ordinarily receives commissions as extra compensation. He works away from his employer's
place of business, is not subject to the personal supervision of his employer, and his employer has
no way of knowing the number of hours he works per day.
True it is that the employees concerned are paid a fixed salary for their month of service, such as Benjamin
Sevilla, a salesman, P215; Mariano Ruedas, a truck driver, P155; Alberto Alpaza and Alejandro Empleo,
truck helpers, P125 each, and sometimes they work in excess of the required 8-hour period of work, but for
their extra work they are paid a commission which is in lieu of the extra compensation to which they are
entitled. The record shows that these employees during the period of their employment were paid sales
commission ranging from P30, P40, sometimes P60, P70, to sometimes P90, P100 and P109 a month
depending on the volume of their sales and their rate of commission per case. And so, insofar is the extra
work they perform, they can be considered as employees paid on piece work, "pakiao", or commission
basis. The Department of Labor, called upon to implement, the Eight-Hour Labor Law, is of this opinion
when on December 9, 1957 it made the ruling on a query submitted to it, thru the Director of the Bureau of
Labor Standards, to the effect that field sales personnel receiving regular monthly salaries, plus
commission, are not subject to the Eight-Hour Labor Law. Thus, on this point, said official stated:
. . . Moreover, when a fieldman receives a regular monthly salary plus commission on percentage
basis of his sales, it is also the established policy of the Office to consider his commission as
payment for the extra time he renders in excess of eight hours, thereby classifying him as if he were
on piecework basis, and therefore, technically speaking, he is not subject to the Eight-Hour Labor
Law.
We are, therefore, of the opinion that the industrial court erred in holding that the Eight-Hour Labor Law
applies to the employees composing the outside service force and in ordering that they be paid the
corresponding additional compensation.
With regard to the claim for night salary differentials, the industrial court found that claimants Magno
Johnson and Jose Sanchez worked with the respondent company during the period specified by them in
their testimony and that watchmen Zoilo Illiga, Inocentes Prescillas and Daniel Cayuca rendered night
duties once every three weeks continuously during the period of the employment and that they were never
given any additional compensation aside from their monthly regular salaries. The court found that the
company started paying night differentials only in January, 1949 but never before that time. And so it
ordered that the employees concerned be paid 25% additional compensation for those who worked from
6:00 to 12:00 p.m. and 75% additional compensation for those who worked from 12:01 to 6: 00 in the
morning. It is now contended that this ruling is erroneous because an award for night shift differentials
cannot be given retroactive effect but can only be entertained from the date of demand which was on
January 27, 1953, citing in support thereof our ruling in Earnshaws Docks & Honolulu Iron Works v. The
Court of Industrial Relations, et al., L-8896, January 25, 1957.
This ruling, however, has no application here for it appears that before the filing of the petition concerning
this claim a similar one had already been filed long ago which had been the subject of negotiations
between the union and the company which culminated in a strike in 1952. Unfortunately, however, the strike
fizzled out and the strikers were ordered to return to work with the understanding that the claim for night
salary differentials should be settled in court. It is perhaps for this reason that the court a quo granted this
claim in spite of the objection of the company to the contrary.
The remaining point to be determined refers to the claim for pay for Sundays and holidays for service
performed by some claimants who were watchmen or security guards. It is contended that these
employees are not entitled to extra pay for work done during these days because they are paid on a

monthly basis and are given one day off which may take the place of the work they may perform either on
Sunday or any holiday.
We disagree with this claim because it runs counter to law. Section 4 of Commonwealth Act No. 444
expressly provides that no person, firm or corporation may compel an employee or laborer to work during
Sundays and legal holidays unless he is paid an additional sum of 25% of his regular compensation.
This proviso is mandatory, regardless of the nature of compensation. The only exception is with regard to
public utilities who perform some public service.
WHEREFORE, the decision of the industrial court is hereby modified as follows: the award with regard to
extra work performed by those employed in the outside or field sales force is set aside. The rest of the
decision insofar as work performed on Sundays and holidays covering watchmen and security guards, as
well as the award for night salary differentials, is affirmed. No costs.
[G.R. No. 121288. November 20, 1998]
ROLANDO DELA CRUZ, petitioner,
EMMANUEL LO, respondents.

vs. NATIONAL

LABOR RELATIONS

COMMISSION

and

DECISION
DAVIDE, JR., J.:*
In this special civil action for certiorari under Rule 65 of the Rules of Court, petitioner seeks to set
aside, on ground of grave abuse of discretion, the Decision [1] of 17 March 1995 of the National Labor
Relations Commission (NLRC) in NLRC Case No. V-0254-92 (RAB-06-09-50298-91) and its Resolution [2] of
19 May 1995 denying the motion for reconsideration. The former affirmed the 15 February 1994
Decision[3] of Labor Arbiter Rodolfo G. Lagoc ordering private respondent Emmanuel Lo to pay petitioner
separation pay but dismissing all other claims of petitioner.
In a complaint[4] filed on 5 September 1991 before Sub-Regional Arbitration Branch No. 6 of the NLRC,
situated in Iloilo City, petitioner charged private respondent Emmanuel Lo with unfair labor practice, illegal
dismissal, underpayment of salary, non-payment of overtime pay, legal holiday pay, premium pay for
holiday and rest day, and non-payment of wages or commission and separation pay. The case was
docketed as SRAB Case No. 06-09-50298-91.
Private respondent filed his Answer [5] on 9 October 1991. Petitioner and private respondent then filed
their position papers[6] on 4 November 1991 and 21 November 1991, respectively.
On 7 August 1992, after appropriate proceedings, Labor Arbiter Dennis D. Juanon rendered a
decision[7] dismissing the complaint for lack of merit due to the absence of an employer-employee
relationship between petitioner and private respondent.
Petitioner seasonably appealed to the NLRC on 9 September 1992. The appeal was docketed as
NLRC Case No. V-0254-92 (RAB-06-09-50298-91).
In its Resolution[8] of 22 October 1992, the NLRC granted petitioners appeal and remanded the case to
Labor Arbiter Juanon for appropriate proceedings. Upon petitioners motion, Labor Arbiter Juanon inhibited
himself from the case.[9] As such, the case was ultimately reassigned to Labor Arbiter Rodolfo G. Lagoc.
In his decision[10] of 15 February 1994, Labor Arbiter Lagoc found that petitioner was an employee of
private respondent and was illegally dismissed from the service, hence entitled to separation pay, but
rejected the charge of unfair labor practice and dismissed, for lack of merit, petitioners other monetary
claims. The dispositive portion of the decision read as follows:
WHEREFORE, premises considered judgment is rendered as follows:

Respondent Emmanuel Lo is hereby ordered to pay complainant the amount [of] P4,628.00 representing
his separation pay.
All other claims are hereby dismissed.
SO ORDERED.
Labor Arbiter Lagoc summarized the factual contentions of the parties, thus:
Complainant [petitioner herein] alleged in his position paper that he started working with respondent
Emmanuel Lo in June 1988 as ordinary crew and received wages in cash from the share of the catch of the
fishing boat of said respondent; that on January 1989, the complainant was promoted to light boat operator
and the wages was [sic] increased from one (1) share as a crew [member] to five (5) shares; that in March
1989 the complainant was again promoted to secondo patron with fixed salary of P200.00 in addition to five
(5) shares of the catch and P1.00/fish box commission; that in November 1989, complainant became a fullpledged patron (Captain of respondents fishing boat known as M/DCA Sheenly Joy 1); that as captain, the
complainant received a monthly salary of P450.00 and ten (10) shares of the fish catch plus P2.00/fish box
commission; that on December 2, 1990, the undersigned complainant was dismissed by the respondent
Emmanuel Lo illegally and unlawfully without notice and separation pay; that on December 13, 1990, the
complainant came to the office of the undersigned counsel and the latter wrote respondent a letter of
demand; that in 1988, when the complainant was employed by the respondent, the latter owned one fishing
boat and when the complainant was dismissed in 1990, the respondent had increased his fishing boat to
three (3) boats out of his profit from his first; that each of the respondents fishing boat[s] went fishing for 2223 days every month and all the fish catched [sic] on these days were sold everyday and the cash
proceeds were kept by the respondent; that at the end of every 22-23 days of fishing, the fishing boat was
cleaned by the crew, engine, net and light boat were repaired by the crew, helped and managed by the
officers including the complainant; that these cleaning and repair [sic] were charged to the gross income of
the month; that the monthly income of the crew would not be given unless these cleaning and repair [sic]
were all done; that the system of sharing of the monthly income of the fishing boat was done by the
respondent in the following manner:
1. From the monthly gross income, the respondent [would] deduct 25% for maintenance;
2. After deducting the 25%, the respondent and the officers/crew got 10% each (total 20%) from
the remaining 75% of the gross, known as sideline; the officers/crew (about 24 men) share[d]
the sideline (10%) as follows:
a. Captain 10 shares
b. Engineer 8 shares
c. Secondo Captain 8 shares
d. Encargado 8 shares
e. Light Boat Chief 6 shares
f. Secondo Chief 5 shares
g. Chief Lambatero 6 shares
h. Secondo Lambatero 4 shares
I. Lambatero 3 shares
j. Chief Swimmer 6 shares

k. Winch Operator 4 shares

l. Other crew 2 shares
3. Out of the remaining 55% of the remaining of the gross monthly earning, the expenses for the
repairs of boat, net, engine, and light boat, oil and fuel, and food and ropes were charged [to
the] remaining amount which expenses usually exceeded 55% of the monthly gross income
and left nothing to the officers and crew like the complainant.
4. The Officers and crew, including the complainant received monthly income on 10% sideline
aforementioned and commission P8.00/fish box sold every day which they shared, while the
respondent who kept the record of the income and expenses got 35% of the gross monthly
income, and free maintenance and repair of his fishing boat and equipment. He also control
[sic] the selling price of the daily fish catch and [sic] unknown to the officers and crew.
The respondent was the one who hired the complainant. He made all the job promotions, paid the salaries
and dismissed the complainant. The respondent directed personally the fishing operation, where to send
the light boat, where to fish and when to [go] ashore. In other words he had complete control of his fishing
boat, the officers and crew.
Respondent on the other hand, in [his] Answer and Position Paper, states that he is the owner and operator
of three (3) fishing boats operating in the province of Antique; that complainant used to work as patron of
one of the fishing vessels owned by the respondent; that the agreement between the complainant and
respondent was for the former to share with the members of the crew [sic] and the respondent the catch of
the fishing vessels with the respondent providing for fuel and oil, equipments [sic] and other [sic] which the
complainant and the crew needs [sic] for a particular voyage; that the fishing vessels go out fishing at the
initiative of the complainant and the crew members; that the respondent has no participation whatsoever in
so far as the decision when to go out is concerned; that the respondents only obligation is to provide for
fuel and oil and the equipments [sic] needed by the crew; that the complainant was not paid any salary and
his compensation consist [sic] only of his share in the catch of the fishing vessel everytime it goes out
fishing; that the fishing vessel does not go out everyday nor the whole year round; that it is not true that the
complainant receives [a] monthly salary of P450.00 per month because his only compensation is his share
in the catch of the fishing vessel; that there is no employer-employee relationship which exist [sic] between
the complainant and the respondent because as alleged patron of the respondents fishing boat, the
complainant is not under the orders of the respondent as regards his alleged employment; that the
complainant and the crew go out to sea not upon the direction of the boat owner but upon their own volition
as to when and how long and where to go fishing; that the latter perform no services for the boat owner but
for their benefit; that the undertaking therefore is a joint venture with the respondent as boat owner,
supplying the boat and its equipment and the patron (the complainant) and the crew members contributing
necessary labor and the parties getting specific shares for their respective contributions.[11]
In determining the existence of an employer-employee relationship, Labor Arbiter Lagoc meticulously
discussed the elements thereof, especially that of private respondents power of control over petitioner with
respect to the means and methods by which the work was to be accomplished, thus:
Complainants evidence that control and supervision is exercised by respondent, and certain amounts are
given to him aside from his fish share in the catch is his testimony on cross-examination:
Q. As patron you also decide when to set on [sic] to go out fishing and usually this happen [sic] when the
right start [sic]?
A. Yes, it depends upon the order of the owner, we just obey. (p. 3, TSN 6 August 1993)
xxxxx
and in the re-direct examination, viz:

Q. What about when you were patron of the fishing boat of Mr. Lo what you [would] get aside from your
share of fish catch monthly or any other compensations [sic]?
Labor Arbiter:
Your question is already stated in your Position Paper, paragraph 4
Atty. Pefianco:
Yes, Okey [sic] but I want to reiterate it now.
A. P200.00 every month and two pesos per box and there are 15 of us.
Q. That is in your position paper, you stated here P250.00 so which is correct Mr. Witness 250.00 or
500.00 a month?
Atty. Operiano:
I object that is not proper for re-direct.
A. P450.00
(p. 19, TSN 6 August 1993)
Respondents evidence on the same issue is his testimony, corroborated by Nismal and Tonding that it is
complainant who decides when to sail out to the [sic] sea, where to fish, how long they will stay fishing [at]
sea and when to go bank [sic] to the port.
Nismal is the fish dealer of Sheenly Joy 1 owned by respondent while Tonding work[s] as [a] crew member
of respondents boat Sheenly Joy 3.
No material inconsistencies were shown in all the witnesses [sic testmonies during cross-examination. We
are placed in a quandary since both parties may be assumed to be aware of the Supreme Courts ruling in
[the] Pajarillo and Ruga cases and adopted their respective positions to conform with the facts of those two
(2) cases.
But be that as it may, although respondents declaration that he does not have supervision and control over
the work of complainant is corroborated by witnesses Nismal and Tonding, We nevertheless find the
testimonies of the corroborating witnesses as wanting in probative value since there are ties between the
witnesses and respondent which under the natural course of things will cause them (witnesses) to take the
side of respondent.
There is more probative value in complainants testimony that respondent gave orders to set sail and that
the patron and crew [would] merely obey.
Respondent ha[s] been in the fishing business for years. He first had only one boat. He infused hundreds of
thousands, if not millions, as capital in the business and caused the acquisition of two (2) more boats.
This simply means that he is knowledgeable about the deep sea fishing business. Indeed, it is foolhardy for
a businessman to invest this kind of money in a fishing boat and let somebody operate it without him
exercising at the least the right to control the manner its [sic] going to be used in the work to be done
although not actually exercising such right.
Complainants testimony although uncorroborated is more [within] the realm of the actual facts surrounding
the circumstances of this case. Moreover, the positive allegations of complainant prevails over the denials
of respondent.

As to the issue concerning illegal dismissal, unfair labor practice and other money claims, Labor Arbiter
Lagoc held:
On the issue of illegal dismissal we find for the complainant. The charges of illegal dismissal was by
invoking no employer-employee relationship, not refuted by respondent. Thus we find that the severance of
[the] employer-employee relationship was caused by respondent. The dismissal not having been justified,
perforce the same is not one for just cause or authorized under the law. Since complainant seeks
separation pay as relief, then the same must be granted.
Complainant served from 1988 to 1990 or two (2) years. He is thus entitled to two (2) months separation
pay, this being a case of illegal dismissal. Since complainant failed to state his monthly income, the
separation pay is therefore computed at the minimum basis daily rate provided for my [sic] law at the time
of dismissal multiplied by the number of working days in a month, which according to complainant is 26
working days per month, and the result multiplied by 2 months. (P89.00/day x 26 working days x 2 months
separation pay = P4,628.00)
With respect to complainants charge of unfair labor practice the so-called unfair labor practice act was not
specified thus the same must perforce fail.
Regarding the issues of money claims, complainant as Patron of the boat is a managerial employee thus
he is excepted from the provision[s] of Book III, of the Labor Code.
Moreover, it is not disputed that complainant as Patron of the boat shares in the income of the sale fish
catch, and this sharing of income in the fish catch is even true when he was still a crew member of the
fishing boat owned by respondent. Persons who are given shares in the fish caught are not covered by the
Labor Standards Law which [complainant] charged herein [respondent] for violations [sic]. Thus, the herein
complainants money claims are likewise dismissed for lack of merit.
Both petitioner and private respondent appealed to the NLRC.
In its decision[12] of 17 March 1995, the NLRC dismissed both appeals for lack of merit. The NLRC
rejected petitioners claim for reinstatement and back wages because it appears in the complaint filed on
September 5, 1991 he only sought for the payment of his separation pay, among others, and under Section
3, Rule V of the Rules of the Commission, parties are not allowed to allege facts or present evidence to
prove facts not referred to and any cause or causes of action not included in the complaint or position
papers, affidavits and other documents.
Petitioner and private respondents separately moved for reconsideration of the decision, [13] which the
NLRC denied in its resolution[14] of 19 May 1995.
Before this Court, petitioner contends that the NLRC committed grave abuse of discretion in refusing to
award his monetary claims, including back wages and other monetary benefits, in light of his having been
dismissed without just cause.
The Office of the Solicitor General (OSG) filed a Manifestation In Lieu of Comment wherein it
recommends that back wages be awarded to petitioner, pursuant to Article 279 of the Labor Code and the
decisions in Torillo v. Leogardo,[15] Santos v. NLRC[16] and General Baptist Bible College v. NLRC.[17]
In its Comment which we required to be filed, the NLRC failed to address the issues raised in this
petition.
In his comment, private respondent supported the stand of the labor arbiter in that petitioner was a
managerial employee and, therefore, not covered by Book III of the Labor Code; hence, petitioner was not
entitled to back wages and the other monetary claims he sought.

The sole issue before us is whether the NLRC acted with grave abuse of discretion amounting to lack
or excess of jurisdiction when it dismissed petitioners claim for separation pay, back wages, allowances and
damages.
The petition is meritorious as to the issue of back wages.
Grave abuse of discretion attended the refusal of the labor arbiter and the NLRC to award back wages
to petitioner, simply because petitioner did not ask for such relief in his complaint. In so doing, the NLRC
relied solely on Section 3 of Rule V of the Rules of Procedure of the NRLC.
This is a patently erroneous conclusion.
First, in his complaint, petitioner charged private respondent with, inter alia, illegal dismissal. He
similarly prayed for back wages in his position paper and claimed back wages once more in his appeal
before the NLRC.
We have also observed that the complaint was a pro-forma mimeographed form and petitioner merely
put an X mark on the nature or description of the charge enumerated after the paragraph reading:
Complainant hereby charges respondent of:
Among those marked with an X were illegal dismissal and separation pay and/or retirement/resignation
benefit. It must be noted that back wages was not among those enumerated. It is thus reasonable to
suppose that petitioner was guided solely by what appeared in the pro-forma form when he did not
specifically pray for back wages. Therefore, it was entirely inaccurate for the NLRC to have held that
petitioner only sought separation pay.
Second, and more importantly, both the labor arbiter and the NLRC concluded that petitioner was
illegally dismissed. Conformably then with Article 279 of the Labor Code, he is entitled to an award of back
wages since the Article expressly mandates that an employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and other privileges and to full back wages,
inclusive of allowances, and to other benefits or their monetary equivalent computed from the time
compensation was withheld up to the time of actual reinstatement. The provision gives meaning to the
laborers constitutional guaranty of security of tenure and finds solid basis on the universal principles of
justice and equity. The grant of back wages allows the unjustly and illegally dismissed employee to recover
from the employer that which the former lost by way of wages as a result of his dismissal from employment.
It is evident that the award of back wages resulting from the illegal dismissal of an employee is a
substantive right. Thus, the failure to claim back wages in a complaint for illegal dismissal has been held to
be a mere procedural lapse which cannot defeat a right granted under substantive law.[18]
The present state of jurisprudence allows full recovery of back wages pursuant to the express
provisions of Article 279 of the Labor Code, i.e., without any deduction of income the employee may have
derived from employment elsewhere from the date of his dismissal up to his reinstatement.[19]
Petitioner would have, likewise, been entitled to reinstatement as a consequence of his illegal
dismissal from employment. However, by expressly asking for separation pay, he is deemed to have opted
for separation pay in lieu of reinstatement. This is the tenor of the holding in Reformist Union v. NLRC [20] to
the effect that separation pay is awarded as an alternative to reinstatement.
Corollary then to the foregoing is the matter of computing both the back wages and the separation pay
due petitioner. To be reckoned for the former is the period of putative service. This pertains to that period
from the date petitioner was dismissed from employment on 2 December 1990 until he could have been
reinstated which, taking into account the appeals separately interposed by petitioner and private
respondent from the decision of the labor arbiter, and the filing of this case, could have been done only
after the finality of this decision affirming the finding of the labor arbiter and the NLRC that petitioner was
illegally dismissed from his employment by private respondent.As regards separation pay, the same must

be computed from the time petitioner was first employed by private respondent until the finality of this
decision.
As to petitioners other monetary claims, significant to the resolution of said issue is Article 82 of the
Labor Code, which provides:
Article 82. Coverage. -- The provisions of this Title shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent on him for support, domestic helpers,
persons in the personal service of another, and workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
As used herein, managerial employees refer to those whose primary duty consists of the management of
the establishment in which they are employed or of a department or subdivision thereof, and to other
officers or members of the managerial staff.
xxx
A managerial employee is therefore excluded from the coverage of the law as regards conditions of
employment which include hours of work, weekly rest periods, holidays, service incentive leaves and
service charges.[21]
The labor arbiter classified petitioner as a managerial employee. We have not been provided with any
compelling reason to overturn this factual finding. As chief patron of the M/DCA Sheenly Joy 1, albeit an
unlicensed one,[22]petitioner was tasked to take complete charge and command of the vessel and perform
the responsibilities and duties of a ship captain.[23] Petitioner, an employee who falls squarely within the
category of officers or members of a managerial staff, is thus exempted from payment of overtime pay,
premium pay for holidays and rest days and service incentive leave pay.[24] Therefore, the labor arbiter was
correct in holding that petitioner was not entitled to overtime pay, legal holiday pay, premium pay for
holidays and rest days.
WHEREFORE, the instant petition is hereby GRANTED in part. The Decision of the National Labor
Relations Commission of 17 March 1995 and the Decision of the Labor Arbiter of 15 February 1994 in
NLRC Case No. V-0254-92 (RAB-06-09-50298-91) are hereby MODIFIED. As modified, private respondent
EMMANUEL LO is hereby ORDERED to pay back wages to petitioner ROLANDO DE LA CRUZ, for the
period from the date the latter was illegally dismissed from service until finality of this decision, with interest
at 6% per annum until this decision becomes final and executory, after which time, the interest rate shall be
12% per annum until the amounts due are actually paid or satisfied; and separation pay at the rate of one
(1) months pay for every year of service computed from the date he was first employed until the finality of
this decision, with interest at 12% per annum from the date of promulgation of this decision until actually
paid.
No pronouncement as to costs. SO ORDERED.